annual financial report as at 31 december...

ANNUAL FINANCIAL REPORT AS AT 31 DECEMBER 2016

www.tbsgroup.com

TBS Group SpaAREA Science Park

Padriciano 9934149 Trieste - Italy

tel. +39 040 92291fax +39 040 9229999

[email protected]

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Annual Financial Statements as at 31 December 2016Financial Statements as of 31.12.2016 approved by Shareholders’ Meeting on 27 April 2017

This document is an English translation of an Italian language Annual Financial Report. In the event of any inconsistency or interpretation difficulties reference should be made to the Italian language Annual Financial Report, which shall in any event prevail.

Table of ContentsAnnual Financial Report

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Table of Contents

7 GOVERNANCE BODIES

11 GROUP HIGHLIGHTS

13 Key figures

14 Financial Highlights

15 Group’s structure

17 DIRECTORS’ REPORT ON OPERATIONS

20 Performance and financial highlights 24 Group economic and financial management 28 Economic and financial management of the parent company 29 Business outlook 29 Productive activities 36 Investments 37 Research & development 38 Parent company shares owned by it or by subsidiaries 38 Financial instruments 45 Information on personnel and the environment 46 Intergroup transactions and with related parties 46 Information on corporate governance 55 Subsequent events 56 Proposal for resolution

Table of ContentsAnnual Financial Report

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57 Consolidated financial statements

57 Consolidated statement of financial position 58 Consolidated statement of income 59 Consolidated statement of comprehensive income 60 Consolidated cash flow statements 61 Summary statement of changes in consolidated shareholders’ equity 62 Consolidated statement notes 133 Auditors’ report

135 Financial statements

135 Statement of financial position 136 Income statement 137 Statement of comprehensive income 137 Cash flow statements 139 Statement of changes in shareholders’ equity 140 Notes to the Financial Statements 189 Report of the Board of Statutory Auditors 191 Auditors’ report

Annual Financial Report

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GOVERNANCE BODIES

Governance BodiesAnnual Financial Report

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Governance BodiesAnnual Financial Report

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BOARD OF DIRECTORS

Chairman Diego BravarCEO Paolo SalottoDirectors Laura Amadesi Dario Scrosoppi Carlo Solcia

BOARD OF STATUTORY AUDITORS Chairman Andrea FasanAuditors Renato Furlani Luciano Lomarini Alternate Auditors Alessandro Baldan Andrea Vucetti

INDEPENDENT AUDITORSErnst & Young Spa

GROUP HIGHLIGHTS

Group HighlightsAnnual Financial Report

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TBS Group

TBS Group was established at the end of the ‘80, resulting from research companies specialising in the management of multi-vendor clinical engineering services.

Working in harmony with technological developments, its growth followed the same path as the evolution in clinical engineering, which could no longer be defined as merely safe and efficient management of biomedical equipment, but instead more widely as integrated management of all the technology within healthcare facilities, from the simplest to the most complex, as well as all ICT systems, integrating and providing them also through outsourcing.

The Group developed and became international quickly, both internally and through acquisitions, and offers its services in numerious countries through over 20 companies.

Its offer adjusts to innovations in processes and is aimed at containing costs and updating expenses for the services provided. The references the Group has acquired both domestically and abroad confirm both the economic advantages and quality of the service provided.

All of the Group’s companies share in its skills, know-how and operating synergies in their approaches to individual targets, as well as knowledge about the processes used by various healthcare systems, allowing them to specifically identify the potential needs of customers and the most appropriate solutions, whether modular or personalised. The flexibility of the services it offers make it possible to satisfy the operating requirements of every type of customer, both through management of activities through full outsourcing, or by integrating and supporting activities performed by an internal service.

Today the TBS Group’s offerings include a wide range of services and solutions:• Clinical Engineering – integrated management of all healthcare technologies, throughout the entire lifecycle of

medical equipment supporting hospitals in planning, asset management, procurement, training, integrated care, refurbishment, disposal and replacement. In addition to ordinary technical services (inventories and test, safety checks, functional controls, preventive and corrective maintenance) the Group also offers specialised services such as consulting, training, support for managing the quality system certification process. Alongside traditional medical technology the services are extended to more complex equipment such as endoscopy, radiology, diagnostic imaging, surgical instruments as well as to biomedical realm (technical aids, energy management, etc.).

• ICT Solutions – design and implementation of modular and complete solutions, specialist skills and project ability for the complete management of all healthcare ICT, in terms of applications (SW) and technology (HW). Remote and onsite IT infrastructure management within a single service for the maintenance of all the technologies. Global IT services and System Integration allow the optimization of process and the maximization of the results related to the use of IT technologies.

• Telemedicine and Mobile Health – provision of telematic services to improve diagnostic and therapeutic continuity between hospitals and local community whilst reducing bed occupancy for clinical observation and to implement most advanced mobile health solutions for home-based healthcare assistance.


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Key figures

Group 1Business Unit 2Companies over 20Personnel 2,000 Internal workshops over 300 Regional operational centres 46 Competence centres or companies 23 Healthcare structures over 1,000 Medical equipment and devices managed 930,000 Maintenance activities 1,480,000 Telecare and telemedicine users 29,500

note: as at 31 December 2016


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Financial Highlights

Revenue EBITDA

Shareholders’ equity Net financial debt (NFD)

15 1614

192.

9

200.

3229.

5

15 1614

19.6 21

.3

23.9

15 1614

53.5

54.8

51.6

15 1614

84.5

66.9

62.5


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Group’s structure

INTERNATIONALITALY

Clinical engineering services andintegrated ICT solutions

Crimo Italia 55.7%

ERRE EFFE Informatica51%

TBS IT 100%

MSI MedServ International (Germany)100%

TBS BE (Belgium)100%

TBS ES (Spain)100%

TBS FR (France)100%

TBS GB (UK)96.13%

Surgical Technologies (The Netherlands)100%

TBS PT (Portugal)100%

100% TBS India (India)

TBS SE (Serbia)100%

Tunemedix (Portugal)51%

TBS Bohemia (Czech Republic)100%

EBM 100%

TBS Imaging 100%

TeSAN Televita 75.1%

Ing. Burgatti 65%

Crimo France (France)100%

100% Crimo Instrumentation Medicale (Spain)

note: as at 31 December 2016

DIRECTORS’ REPORT ON OPERATIONS

Directors’ Report on OperationsAnnual Financial Report

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Directors’ Management Report for the Financial Statements and the Consolidated Financial Statements as at 31 December 2016

Shareholders,We would like to submit the consolidated financial statements of the TBS Group as at 31 December 2016 for

your consideration. They were drawn up in accordance with the IAS/IFRS international accounting standards, and accompanied by this Report which serves to illustrate the performance of the Group as a whole both with respect to the year just ended and the future prospects for the current year. The considerations set out here below, in addition to the further information required under article 2428 of the Civil Code, also apply to the report on operations of the Parent Company, TBS Group S.p.A. In fact, the Company has decided to make use of the faculty provided under article 40, second paragraph, letter 2-bis) of Legislative Decree 127/1991 to present the report on operations for the financial statements for the year and the consolidated financial statements in a single document.

The consolidated financial statements comprise the financial statements of TBS Group S.p.A. and the subsidiaries over which it exercises direct and indirect control.

The list of companies included in the scope of consolidation as at 31 December 2016 is as follows:

Subsidiary Registered Office Share capital Type of Investment

Shareholding % Consolidation method

TBS Group Spa Trieste (Italy) EUR 4,142,137 Parent Company Parent Company

Tesan Televita Srl Udine (Italy) EUR 46,800 Indirect 75.1 Line by line

TBS FR Telematic & Biomedical Services Sarl Lyon (France) EUR 1,690,500 Direct 100 Line by line

TBS BE Telematic & Biomedical Services BVBA Loncin (Belgium) EUR 150,000 Direct 100 Line by line

TBS G.B. Telematic & Biomedical Services Ltd.

Southend on Sea (United Kingdom) GBP 500,000 Direct 96.13(1) Line by line

Telematic & Biomedical Services SL (single-member Company) Barcelona (Spain) EUR 650,000 Direct 100 Line by line

STB Servicios Telematicos e Biomedicos Lda Unipessoal Dafundo (Portugal) EUR 100,000 Direct 100 Line by line

Surgical Technologies BV Didam (The Netherlands) EUR 18,200 Direct 100 Line by line

Crimo Italia Srl Gualdo Tadino (Italy) EUR 103,165 Direct 55.75 Line by line

Elettronica Bio Medicale Srl Foligno (Italy) EUR 1,897,765 Direct 100 Line by line

MSI MedServ International Deutschland GmbH Pfullendorf (Germany) EUR 321,000 Direct 100 Line by line

TBS IT Srl (single-member Company) Trieste (Italy) EUR 5,295,860 Direct 100 Line by line

TBS SE Telematic & Biomedical Services doo Belgrade (Serbia) RSD 467,000 Direct 100 Line by line

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Relazione degli Amministratori sulla gestioneRelazione finanziaria annuale

Subsidiary Registered Office Share capital Type of Investment


TBS INDIA Telematic&Biomedical Services Prv. Ltd. Bangalore (India) INR 5,000,100 Direct 100 Line by line

Erre Effe Informatica Srl Arezzo (Italy) EUR 41,280 Indirect 51(2) Line by line

TBS Imaging Srl Fisciano (Italy) EUR 100,000 Indirect 100 Line by line

Ing. Burgatti Spa San Lazzaro di Savena (Italy) EUR 312,000 Indirect 65(3) Line by line

TBS Bohemia Sro Prague (Czech Republic) CZK 200,000 Direct 100 Line by line

Crimo France Sas Ablon sur Seine (France) EUR 40,000 Indirect 100 Line by line

Crimo Instrumentation Medicale SL Castillon de la Plana (Spain) EUR 10,000 Indirect 100 Line by line

Tunemedix Lda Aldeia de Paio Pires (Portugal) EUR 5,000 Direct 51(2) Line by line

Neoim Srl Trieste (Italy) EUR 20,000 Direct 100 Line by line

(1) Following the valuation of final sale of the remaining 3.87% of the shares, the consolidation percentage is 100%.

(2) Following the valuation of a put and call option on the remaining 49% of the shares, the consolidation percentage is 100%.


PERFORMANCE AND FINANCIAL HIGHLIGHTS

The following significant events occurred in 2016. They are described in further detail in the press releases on the company’s website in the Investor Relations and News & Media section.

For aspects relative to corporate governance, we recall that on 4 May 2016, the Board of Directors of the TBS Group resolved to restructure the two current Business Units, based on the sectors in which they operate, into two Business Units based on the geographic location of their operations, known as Clinical Engineering Services and Integrated ICT Solutions, Italy, and Clinical Engineering and Integrated ICT Solutions, International.

The governance model is managed by two General Management structures, which answer to Chief Executive Officer Paolo Salotto, and which manage all the departments associated with their respective activities. Clinical Engineering Services and ICT Integrated Solutions - Italy and International - are led by Fabio Faltoni and Nicola Pangher, respectively.

The Corporate Business General Management area continues to be coordinated by Paolo Salotto, even after the organisational changes relative to the Corporate Departments. It coordinates the following departments:• Administration, Finance, Controlling and Investor Relations (Stefano Beorchia); • HR and Organisation (Nicola Seren); • Science, Technology and ICT (Alberto Steindler);• General, Corporate and Legal Affairs (Giovanni Krasna)• International Tenders and Procurement (Gianluca Marcaccioli)

Economic and financial information for financial year 2016 is reclassified on the basis of the new organisational structure. To ensure appropriate comparability, the figures for financial year 2015 were also reclassified.

Work continued on implementing the strategic lines for services to manage and maintain multi-vendors of medical-imaging equipment.

On this point, we note that on 7 March 2016 the TBS Group acquired Tunemedix Lda of Lisbon (Portugal), which specialises in supplying diagnostic imaging products and managing relative services.


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The investment to acquire 51% of the share capital came to euro 184,000 and there is also the possibility to exercise a call option in favour of the TBS Group and a put option in favour of the minority shareholders, to be exercised by 31 March 2021.

Relative to the convergence strategy relative to ICT and biomedical equipment services, the TBS Group signed an agreement with the GPI Group to achieve significant operating and commercial synergies.

This agreement, signed on 19 December 2016, followed by the closing on 29 December 2016, involved the sale of 55% of Insiel Mercato S.p.A. (IM) in Trieste, and 100% of Professional Clinical Software G.m.b.H. (PCS), based in Klagenfurt (Austria). The remaining 45% stake held in IM is subject to put and call options, which can be exercised over a three year period.

The payment made by GPI at closing in cash, amounted to: (i) approximately euro 12.5 million for PCS, which has a net financial position as taken on of around euro 1 million, which increased through an earn out of around euro 0.5 million; and (ii) around euro 1.8 million for the 55% stake in IM, involving the contractual assumption of net financial debt of around euro 8.7 million.

As a whole, the enterprise value of the two companies involved in the transaction is euro 23.5 million, to which the earn-out of euro 0.5 million was added, with guarantees and indemnities in line with the standard for transactions of this type.

We also note some significant events occurring during the year relative to certain important Group companies, broken down by the new Business Units.

Clinical Engineering Services and Integrated ICT Solutions Italy

Elettronica Bio Medicale S.r.l. (EBM) in Foligno (Italy) signed some important contracts, including: • Local maintenance services for biomedical technology and safety, operational and monitoring services during the

life cycle of the biomedical technologies, signed with A.O. Ospedali Riuniti Marche Nord; the five year period began on 1 June 2016, for a total value of almost euro 3.3 million.

• Maintenance of biomedical equipment for Policlinico Umberto I of Rome; the three year period began on 15 June 2016, for a total value of euro 11.6 million.

• Biomedical equipment maintenance service, including CAT and MRIs, at Fondazione IRCCS “Istituto Nazionale dei Tumori”; the three year period began on 1 July 2016 for a total value relative to the company of around euro 2.3 million.

• Biomedical technology management services for Azienda Ospedaliero-Universitaria di Cagliari and Sanitaria Locale di Lanusei; the seven year period began on 1 August, for a total value relative to the company of euro 8.3 and 3.9 million, respectively.

• Full technical management services for biomedical equipment for Azienda Ospedaliera Sant’Andrea di Roma; the three year period began at the end of September for a total value pertaining to EBM of euro 1.9 million.

• Teleaid and telemonitoring services (basic, for users with chronic heart failure and renal insufficiency) and specialised EBM teleconsulting for the Veneto Region; around 24,000 people are involved with the telecare programs, while 2,900 people make use of telemonitoring, relative to specific pathologies. The five year period began on 1 October 2016, for a total value of euro 23.5 million.

• Electromedical equipment management and maintenance services for INRCA (National Institute for the Hospitalisation and Treatment of the Elderly) in Ancona, the sole scientific hospitalisation and treatment institution (IRCCS) with a focus on geriatrics in Italy. The five year period began on 1 November 2016, for a total value of euro 2.7 million.


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Clinical Engineering Services and Integrated ICT Solutions International

On 16 February 2016, TBS GB was awarded two additional five year contracts with a total value of over £ 940,000 (euro 1,245,000) for the supply, through an operating lease, and management of biomedical equipment for Bedford Hospital NHS Trust. This British healthcare structure serves over 270,000 users in the province of Bedfordshire, north of London, in southern England.

On 22 March 2016, TBS FR signed an agreement to manage biomedical equipment for all the structures within the Medipole Partenaires group, a private company that is a leader in healthcare assistance in France. The three-year contract includes an option for a 2 year renewal at the end. The value of the agreement is euro 11.4 million. In the case the two-year renewal option is exercised, the amount would rise to euro 19 million.

On 25 March 2016, TBS BE saw the global management contract renewed for all biomedical equipment within the healthcare structures of Centre Hospitalier Chrétien (CHC) of Liège, the largest customer in Belgium. The value of the agreement is euro 1.83 million, which could rise to euro 2.7 million in the case of an additional 1 year renewal.

On 28 June 2016, the Spanish company TBS ES signed a strategic partnership with the Ferrovial group, the most important Spanish facility management company. The key aspects of the partnership are consulting, sales and operating leases of medical devices, support and maintenance for technological devices and overall management of the processes within healthcare technology management. The agreement is exclusive and has a three-year duration. Additionally, on 30 November 2016 the same company was awarded a contract to provide biomedical equipment maintenance services, including diagnostic imaging equipment, at Ospedale Universitario di Girona Doctor Josep Trueta. The contract is for 12 months, with a total value of almost euro 0.4 million. The services will begin at the start of January 2017.

We continue with our report, noting other significant news relative to the TBS Group during financial year 2016.On 26 May 2016, the Cerved Rating Agency, an Italian rating agency specialising in the valuation of the

creditworthiness of non-financial companies, confirmed the TBS Group’s A3.1 rating. This rating was confirmed, representing the sixth level in the Cerved risk scale that covers 13 classes (from A1.1, representing the first level with the least risk and rising to C2.1).

In June 2016, TBS Group was awarded the “Business International Finance Award 2016 - Digital Finance/Small and Medium Company category” for the Group’s project for innovation in its Administration, Finance and Controlling Area.

On 25 November 2016, TBS Group signed an agreement with Marsh, a global leader in insurance brokering and risk management. Through this agreement Marsh will assist TBS Group in defining and implementing its international insurance plans, identifying optimal coverage for the individual legal entities found in the various countries in which the companies of the TBS Group operate. In addition, Marsh will assist TBS Group throughout the three year period by providing risk management consulting in order to further strengthen the internal department responsible for the internal audit system.

We also recall that on 28 December 2016 the Bondholders’ Meeting was held at the Company’s registered office in Trieste, at which all those present unanimously voted in favour of the new Loan Regulations, known as “TBS Group S.p.A. 6.50% 2014 - 2019”, issued on 31 October 2014, for a nominal euro 15,000,000.00 (euro fifteen million/00), ISIN code IT0005058372, listed on the Extramot pro market.

The most significant amendments made in the new regulations involve lowering the interest rate applied to the loan from 6.5% to 5.2% and the extension of the duration to 31 December 2020, as well as eliminating the right to early repayment by the Company. Details of all the amendments were provided in a specific notification for bondholders, issued on 1 December 2016.

Additionally, we note our Group’s participation in certain events which occurred in 2016:• Medit 2016, now in its 6th edition, held at the Fiera di Vicenza, on 26 and 27 October 2016. Through the subsidiaries

EBM, with the TeSAN division, Erre Effe Informatica, TBS Imaging and Insiel Mercato, solutions were presented relative to home-based medicine, telecare, integrated clinical systems and management of healthcare, computer and biomedical technology resources.


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• Forum on Sustainability and Opportunity in the Healthcare Sector, held in Florence, at Stazione Leopolda, on 23 and 24 September 2016. In particular, TBS Group took part in the round table on “Ageing and obsolescence of technological resources: innovative solutions for management and renewal”, on Friday 23 September 2016, investigating critical issues relative to management of technological resources, as well as proposals for the best way to safely and appropriate use healthcare technologies.

• National Congress of the Italian Society of Radiology (SIRM), which is in its 47th edition. The event was held in Naples, at the Mostra d’Oltremare, from 15-18 September 2016 and was dedicated to the issue of “Imaging in Oncology ... and More: The Future is Today.” TBS Imaging was present, together with its subsidiary Ing. Burgatti of Bologna. They presented a wide range of new and refurbished radiology, CAT, MR and ultrasound equipment, accompanied by technical and maintenance assistance proposals, aimed at satisfying the full range of user needs in the area of diagnostic imaging.

• Forum on Healthcare Risk Management, held at Fortezza da Basso in Florence, from 29 November - 2 December 2016, and involved discussions of issues relative to the progressive obsolescence of biomedical devices, integration of new technology and the need for innovation in processes and services, to improve that offered to patients as a whole.


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GROUP ECONOMIC AND FINANCIAL MANAGEMENT

The table below presents a summary of the Group financial data for 2016 and a comparison with 2015, in accordance with IAS/IFRS, with further information on the interim EBITDA, corresponding to earnings before amortisation and depreciation, write-downs of fixed intangible and tangible assets, measurement of investment, net financial expenses and income taxes. Since the composition of the EBITDA, identified also with reference to the income statement of the separate financial statements of the Parent Company, is not regulated by the reference accounting standards, the calculation criterion the Company applies might not be homogeneous with that used by others, and therefore may not prove comparable.

(thousands of euro) 2016 2015(*)

Revenue from sales and services 198,371 191,765

Other income 1,951 1,165

Total revenue and income 200,322 192,930

Cost of materials 33,847 29,359

External services costs 69,624 70,471

Personnel costs 72,559 69,852

Other operating costs 4,249 4,961

Cost adjustments for in-house generation of non-current assets -1,480 -1,571

Other provisions 250 235

Total costs 179,049 173,307

EBITDA 21,273 19,623

EBITDA % 10.6% 10.2%

Depreciation, amortisation, write-downs and provisions 10,674 9,101

EBIT (operating profit) 10,599 10,522

EBIT % 5.3% 5.5%

Gains/(losses) from investments -93 35

Financial income 1,034 1,009

Financial expenses -5,246 -5,526

PROFIT BEFORE TAX 6,294 6,040

Income taxes -2,799 -2,768

PROFIT FOR THE PERIOD 3,495 3,272

Profit/(loss) from assets held for sale -766 -402

PROFIT FOR THE PERIOD 2,729 2,870

attributable to the Group 2,308 2,411

attributable to third parties 421 460

(*) 2015 figures restated pursuant to IFRS 5 - Discontinued Operations following loss of control over PCS and Insiel Mercato and in consideration of

the start of a process to dispose of TBS IT.

The consolidated financial statements of your Group closed as at 31 December 2016 with total revenues and other income of euro 200.3 million, an increase of euro 7.4 million over the euro 192.9 million of the previous year, up +3.8%.

TBS Group has therefore confirmed its capacity to grow, also thanks to new acquisitions, reinforcing its European leadership in clinical engineering outsourced services.

The evolution of revenues and income broken down by geographic area achieved by companies of the TBS Group in Italy (TBS Group Spa, EBM, Crimo Italia, Erre Effe Informatica, Tesan Televita, TBS Imaging and Ing. Burgatti), Germany (MSI), the UK (TBS GB), France (TBS FR and Crimo France), Spain (TBS ES), Belgium (TBS BE), Portugal (TBS


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PT and Tunemedix), Holland (ST NL), Serbia (TBS SE), and India (TBS India), can be summarised as follows for the last two years:

Revenue

(thousands of euro) 2016 2015(*) difference difference %

Italy 129,301 129,774 -473 -0.4%

United Kingdom 27,401 29,563 -2,162 -7.3%

France 19,878 15,699 4,180 26.6%

India 7,132 3,540 3,592 101.5%

Germany 3,363 2,902 461 15.9%

Spain 4,128 4,615 -488 -10.6%

Other European Union countries 7,001 5,939 1,062 17.9%

Other non-European Union countries 2,119 899 1,220 135.7%

TOTAL 200,322 192,930 7,390 3.8%

(*) 2015 figures restated pursuant to IFRS 5 - Discontinued Operations following loss of control over PCS and Insiel Mercato and in consideration of


Analysis of the revenues by geographical area confirms that Europe is the main market for the Group: Italy represents 64.5% of turnover (67.3% in 2015), other European countries 30.8% (compared to 30.4% in 2015), while non European countries fell due to international tenders, from 2.3% in 2015 to 4.6% in 2016.

In order to better understand the trends behind the increase in revenues, we analyse the results obtained in each of the business lines the Group has operations in.

The Clinical Engineering Services and Integrated ICT Solutions Business Unit Italy maintained stable revenues, going from euro 129.8 million in 2015 to euro 129.3 million in 2016, a decrease of euro 0.5 million (-0.4%).

The Clinical Engineering Services and Integrated ICT Solutions Business Unit International saw revenues rise from 63.2 million euro in 2015 to 71.0 million euro in 2016, an increase of +7.9 million euro (+12.5%).

Consolidated EBITDA was 21.3 million euro (+1.7 million euro, or +8.4%), compared to 19.6 million euro in 2015. The percentage impact on turnover went from 10.2% in 2015 to 10.6% in 2016 (+0.4 absolute).

EBITDA for the Clinical Engineering Services and Integrated ICT Solutions Business Unit Italy went from 14.6

million euro in 2015 to 13.2 million euro in 2016, a drop of 1.4 million euro (-9.7%). The EBITDA% over turnover went

from 11.3% to 10.2% (-1.1). EBITDA for the Clinical Engineering Services and Integrated ICT Solutions Business Unit

International rose from 5 million euro in 2015 to 8.1 million euro in 2016, an increase of 3.1 million euro (+61.3%). The

EBITDA% over turnover rose from 7.9% to 11.4% (+3.5).Please refer to the explanatory notes to the Group’s consolidated financial statements as at 31 December 2016

for additional details on the information concerning costs and investments, in addition to the results of the separate business segments.

The EBIT margin went from 10.5 million euro in 2015 to 10.6 million euro in 2016, with an increase of 0.1 million euro (+0.7%). The percentage impact on turnover went from 5.5% in 2015 to 5.3% in 2016.

The net financial income for the financial year improved to 5.2 million euro, compared to 5.5 million euro in the previous financial year. The improvement was due to lower costs for without recourse transfers to factoring companies (a total of 98.0 million euro in operations in 2016, compared to 93.2 million euro in 2015), also following the drop in the Euribor. Medium/long-term operations also benefited from a reduction in spreads generally applied by financial institutions, all with an average overall debt that was approximately 6.0 million euro higher than the previous financial year.


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Income taxes remained substantially stable at around 2.8 million euro.The result for financial year 2016 was positive with 2.7 million euro of profit, essentially in line with the previous

financial year.The table below presents a summary of the Group’s key financial data for 2016 and a comparison with 2015, in

accordance with IAS/IFRS:

(thousands of euro) 31/12/2016 31/12/2015

Intangible assets 48,100 62,871

Tangible assets 20,494 22,859

Other non-current assets 11,099 11,484

Non-current assets 79,693 97,214

Current assets 154,466 167,961

Assets held for sale 10,591 333

TOTAL ASSETS 244,750 265,508

Group Net Equity 52,253 51,083

Equity attributable to third parties 2,508 2,392

Net Equity 54,761 53,475

Non-current liabilities 63,796 71,608

Current liabilities 117,176 140,425

Liabilities held for sale 9,017 0

NET EQUITY AND LIABILITIES 244,750 265,508

Net financial debt (NFD) and operating working capital (OWC) were calculated starting from the summary of the statement of financial position.


Non-current financial liabilities -47,298 -50,608

Current financial liabilities -56,551 -71,080

Other financial assets 2,601 2,145

Current financial assets 4,896 9,879

Cash and cash equivalents 32,167 25,171

Debt in assets held for sale -2,799 0

Net financial debt -66,984 -84,493


Inventories 13,866 11,993

Trade receivables 87,800 105,518

Trade payables -38,583 -38,706

Net operating working capital 63,083 78,805

Net financial debt at 31 December 2016 amounted to 67 million euro, a decrease of 17.5 million euro with respect to 31 December 2015. The drop is mainly due to the operation to transfer PCS and Insiel Mercato, which involved the receipt of the relative payment and deconsolidation of the net debt of the two companies.

The decrease in net operating working capital relative to the previous year, for 15.7 million euro, is also associated with the extraordinary transfer operations. The impact net operating working capital has on revenues decreased, going from 33.7% at the end of 2015 to 31.5% at 31 December 2016.


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The financial movements are analysed in the summary elements from the cash flow statement, summarised below.

CONSOLIDATED CASH FLOW STATEMENT

(thousands of euro) 31/12/2016 31/12/2015(*)

CASH FLOW GENERATED (USED) BY OPERATING ACTIVITIES 10,941 7,198

CASH FLOWS PROVIDED BY (USED IN) INVESTMENT ACTIVITIES 1,633 -14,471

CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES -4,171 1,759

TOTAL CASH FLOW 8,403 -5,514

CASH AND CASH EQUIVALENTS (NET) AT THE START OF THE YEAR 25,171 30,763

Net foreign-exchange differences 137 -78

CASH AND CASH EQUIVALENTS (NET) AT THE END OF THE YEAR 33,711 25,171

(*) 2015 figures restated pursuant to IFRS 5 - Discontinued Operations following loss of control over PCS and Insiel Mercato and in consideration of the start of a process to dispose of TBS IT.

Cash flow from operating activities in 2016 had a positive balance of 10.9 million euro, profit before tax (+6.3 million euro), depreciation, amortisation and write-downs (+10.8 million euro), financial expenses (+4.2 million euro), flows from assets held for sale (-2.5 million euro), other changes (+0.4 million euro), the change in working capital for the year (-6.3 million euro) and taxes paid (-2.0 million euro).

Investment activities used cash flow totalling 9.7 million euro, compensated for by the flow of disinvestments totalling 11.3 million euro, for a balance of 1.6 million euro.

Cash flows from financing activities (balance between increase and decrease of financial liabilities, including interest payments) used 4.2 million euro.

The resulting total cash flow was 8.5 million euro.The key economic and financial indicators as at 31 December 2016 and 2015, deriving from the ratios between

certain data recorded in the income statement and balance sheet above, are shown below.

31/12/2016 31/12/2015

EBITDA/Total revenue and income 10.6% 10.2%

EBIT/Total revenue and income 5.3% 5.5%

EBT/Total revenue and income 3.1% 3.1%

Net profit for the year/Total revenue and income 1.4% 1.5%

Financial Expenses/Revenue 2.6% 2.9%

NFD/Group Net Equity 1.3 1.7

Total liabilities/Group Net Equity 4.7 5.2

NFD/EBITDA(*) 3.2 3.7

OWC/Total revenue and income(*) 31.5% 33.3%

(*) 2015 impact from 2015 financial statements, not calculated


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ECONOMIC AND FINANCIAL MANAGEMENT OF THE PARENT COMPANY

The table below summarises the evolution of the basic data of your Parent Company compared to the previous year as far as the income statement is concerned:

(thousands of euro) 2016 2015


Other income 356 289


Cost of materials 2,847 1,748



Other operating costs 323 564

Cost adjustments for in-house generation of non-current assets -254 -239


Total costs 12,155 11,298

EBITDA -1,088 -1,922

EBITDA % -9.8% -20.5%

Amortisation and write-downs on fixed assets 957 924

EBIT (operating profit) -2,046 -2,846

EBIT % -18.5% -30.4%

Gains/(losses) from investments -7,874 304

Dividends 4,166 6,210

Financial income 1,146 1,518

Financial expenses -2,787 -2,671

PROFIT BEFORE TAX -7,394 2,515

Income taxes 790 1,169

PROFIT/LOSS FOR THE PERIOD -6,605 3,684

The increase in revenues from 9.4 million euro in 2015 to 11.1 million euro 2016 is mainly due to the increase in turnover from international tenders, which led to a consequent improvement of EBITDA, which went from -1.9 million euro in 2015 to -1.1 million euro in 2016, also thanks to containment of central costs.

EBIT went from -2.8 million euro in 2015 to -2.0 million in 2016, a change of 0.8 million euro, similar to the change in EBITDA.

Dividends fell to 2.0 million euro, mainly due to lower dividends received by the subsidiary EBM.Lower dividends and the write-down of the stakeholdings in TBS IT (7.0 million euro) and in TBS ES (0.6 million euro)

brought the result for the year from the profit of 3.7 million euro seen in 2015 to the loss of -6.6 million euro in 2016.


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The table below, instead, summarises the processing of the basic data of your Company compared to the previous year as far as the equity/financial situation is concerned.


Non-current assets 83,710 92,910

Current assets 57,864 43,239

TOTAL ASSETS 141,574 136,148

Net Equity 67,332 73,983

Non-current liabilities 35,508 39,266

Current liabilities 38,734 22,900

NET EQUITY AND LIABILITIES 141,574 136,148

Non-current assets fell by 9.2 million euro due to the transfer of the stakeholdings in PCS and Insiel Mercato and the write-down on the stakeholding in TBS IT. Current assets increased due to changes in financial assets and cash and cash equivalents achieved through the above cited transfer.

Current liabilities increased by 15.8 million euro due to the increase in financial liabilities, above all relative to Group companies (increase of 12.1 million euro, due to the payable due to NeoIM for cash pooling).

BUSINESS OUTLOOK

In the course of 2017, the TBS Group will maintain its position in Italy and Europe, in a macro-economic situation which forecasts an improvement in the main economic benchmarks.

The TBS Group will continue its growth based on the implementation of the strategies set out in this document, both through internal and external lines, paying constant attention to their economic and financial sustainability.

Finally, the Group will continue its commitment to improving productivity, both by further consolidating legal entities operating in the same country, especially in Italy, and through the process of rationalising internal costs, aimed at maximising synergies with all Group companies.

PRODUCTIVE ACTIVITIES

The TBS Group offers integrated clinical engineering services to hospitals and healthcare facilities, both public and private, in Italy and abroad.

The Group’s vision is to propose innovative solutions that work towards reducing and upgrading healthcare expenses in the technological sector, through integrated management, in order to increase the efficiency and quality of social/healthcare and public administration services provided to citizens.

TBS Group’s mission is to develop and manage integrated clinical engineering services through outsourcing, to render the use of technology in hospitals, social/healthcare, public administration contexts and home-based care safe, effective and efficient in Italy.

TBS Group operates through Group Management, mainly concentrated in the parent company TBS Group S.p.A., and with two Business Units based on the geographical structure of their operations, known as Clinical Engineering Services and Integrated ICT Solutions Italy and Clinical Engineering Services and Integrated ICT Solutions International.


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Group Management

The Parent Company TBS Group S.p.A. with the Chairman and the CEO, the Corporate Departments, and the staff provide the Group companies with management and administrative assistance services, the supply of services in general, and consulting and coordination services for the companies, especially in the financial area.

In addition, it carries out control activities in the interest of the parent company TBS Group S.p.A. and management and development activities for the Group’s productive activities with the Group General Managers who operate within the two aforementioned Business Units (BU).

Finally, the TBS Group also develops project services, global supplies and maintenance of biomedical equipment for hospitals located in foreign countries.

Below we outline the production activities offered by your Group, broken down into the two BUs, Clinical Engineering Services and Integrated ICT Solutions Italy and Clinical Engineering Services and Integrated ICT Solutions International.

Clinical Engineering Services and Integrated ICT Solutions BU

TBS Group provides public and private healthcare structures with outsourced technology management services, in particular for medical devices, from the simplest to the most complex, with the highest levels of security, with a multivendor logic and an extensive network of engineers, technicians, biomedical engineers and IT experts, both on-site and locally. It also provides telemedicine and telecare solutions to favour diagnostic and therapeutic continuity between hospitals and regions and for the implementation of telematic services for home-based social/healthcare assistance.

The services offered by the TBS Group can be provided both in a selective manner and within the context of integrated services, with a high degree of flexibility based on the specific needs of the individual customer.

During the course of 2016, the Group’s productive activities relating to the BU were carried out, in the context of specific contracts, in roughly 1,000 Healthcare Facilities and/or Hospitals, public and/or private, in 9 different countries, directly or through its subsidiaries, outside of Italy: Austria, Belgium, France, Germany, India, Holland, Portugal, the United Kingdom, and Spain and in around 200 other public entities in Italy.

Specifically, to carry out technical activities and for integrated management of biomedical equipment, ICT systems for Telemedicine and Telecare and for other home-based technology, the Group made use of:• around 330 technical clinical engineering workshops located within healthcare structures, that operate with

specific first level contact centers and with national and Group level data centers;• 10 specialised workshops for the maintenance of endoscopy equipment, with specific contact centers;• 1 specialised workshop for the maintenance of ultrasound probes, with one specific contact centre;• 4 specialised workshops for the maintenance of surgical tools, with one specific contact centre;• 4 specialised workshops for diagnostic imaging, with one specific contact centre;• 1 specialised workshops for brachytherapy and cobalt therapy equipment, with one specific contact centre;• 3 specialised workshops for the management of maintenance for telecare and telemedicine systems, with 9

contact centers for the management of said services and with 4 data centers.As a whole, the BU’s productive activities were focused on the outsourced management and maintenance of:

• around 930,000 biomedical and endoscopy equipment and surgical instruments. For the machine fleet, management activities were provided including purchase consulting, analysis and evaluation of inventory with renewal plans, training of user personnel, risk evaluation, acceptance inspection and maintenance activities at our laboratories, with over 1,480,000 interventions, of which 940,000 schedule maintenance and safety checks, 540,000 maintenance interventions for malfunctions, of which around 200,000 for surgical instruments;


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• around 141,000 ICT systems, for which 74,000 maintenance interventions were carried out, of which: around 17,000 remotely, around 52,000 for corrective maintenance at the customer’s premises, around 5,200 IMAC (Install, Move, Add, Change) interventions, and around 440 corrective maintenance interventions at our workshops;

• around 29,500 telecare and telemedicine systems installed at patient residences, which led to around 16,700 technical maintenance interventions and/or equipment installation interventions. The service provided involved around 6.5 million telephone calls.We will now present the activities carried out by the companies in the BU Italy that are part of the Group’s General

Department of Fabio Faltoni (EBM, TBS IT, Tesan Televita, Crimo Italia, TBS Imaging and Ing. Burgatti). At the corporate level in 2016 the Group worked to consolidate its activities in the area of Diagnostic Imaging

among TBS Imaging (including the former Delta X) and Ing.Burgatti, strengthening the sales and operating network and specialising the two operating poles of Fisciano (Salerno, Italy) and San Lazzaro di Savena (Bologna, Italy) respectively in high tech activities and medium/low-tech for diagnostic imaging.

At the same time, technical and sales methods to increase cooperation and integration between the two companies and EBM were perfected in order to strengthen and optimise integration between this specialised world and the generalist world of global services activities.

Within EBM, the integration project continued relative to the business unit acquired from Mercury and the laboratories of the endoscopy division. This made it possible to begin a new management procedure for processing which during the year was also extended to the Trieste laboratories, achieving significant improvement in productivity and control over the same repairs.

During 2016, EBM continued its leadership role in the Italian market, continuing to propose new business models relative to Health Technology Management (HTM) and homecare, while maintaining its focus on the traditional public market during this time of change, now complete, to centralised tenders issued by individual regional central purchasing committees.

Additionally, the company continued to consolidate and expand the private customer base, more sensitive and attentive to global proposals, with the company seen as a single provider that can resolve all technical problems relative to assessment, design, supply and management of technology.

As is now well established, the services supplied are related to integrated and global management of electromedical equipment, providing all the necessary technical support to maintain all equipment (repairs, checks, safety inspections) as well as offering consulting support related to purchase management, technology HTA, personnel training and designing of systems and processes.

In 2016, EBM also continued to coordinate and define sales and operating strategies within the BU Italy, representing a reference point and development agent for all the “specialist” companies in said BU.

Participation in public tenders and commercial negotiations with private actors continued in 2016, with increasingly decisive efforts aimed at other commercial sectors (homecare, turnkey solutions) in accordance with the strategy defined in the Group’s business plan for several years.

EBM was involved in a total of 85 bid/tender opportunities, participating in 60 commercial initiatives, 19 of which were assigned during the year, with a satisfactory 12 awarded to EBM.

The decrease in the number of tenders is by now well correlated with the parallel structure of regional tenders which even if divided into lots reduce the average quantity seen in previous years by over 40%.

Specifically, most of the proposals were made against tenders/negotiations (45 new tenders or renewals) for maintenance of electromedical equipment (tenders/requests) for a total of around 430 million euro in tender value. Relative to this type of tender/negotiation, 19 were assigned during 2016 (for around 62 million euro in tender value), with 12 awarded to EBM.

Unfortunately, with respect to the original tender values, again in 2016 heavy discounts were seen, which on average reached 18/20%, with extremes frequently exceeding 30%. This phenomenon also affected EBM, which was forced to apply discounts to acquire new positions and to keep in step with the competition.


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In other sectors, tenders/bids for ventilotherapy and other home-based services played an important role. These numbered 16 for total tender values of over 206 million euro (multi-year), while there were 2 tenders relative to monitored CUP and Contact Centers, tenders which are of increasingly lower interest and are now overcome by the central CONSIP tender, which by itself is worth 132 million euro. EBM participated in 8 initiatives, excluding tenders specifically aimed at service cooperatives based on the costs foreseen for the staff and services requested, or for the supply of liquid oxygen (including the Lazio region and Palermo). At present, 9 tenders/offers have been awarded, including some from the previous year, of which 5 in favour of EBM. The most important acquisitions are found in west Sicily, the Lazio Region and a national INAIL contract.

In regards to telecare, teleaid and telemedicine, there were 17 opportunities for tenders/bids, including the important renewal with the Veneto region, for a total of over 31 million euro in tender value. EMB participated in all of these. During the year, 16 initiatives were awarded (including some tenders issued in previous years), of which 7 were awarded to EBM, including the renewal by the Veneto Region. This sector continues to show low unit volumes and healthcare and regional structures continue to have serious difficulties in developing an innovative market in the current situation caused by the economic crisis and spending review. Nonetheless, sizeable centralised financing aimed at dehospitalization of patients is being seen, also aimed at managing chronic illness which suggest that already this year there will be a notable reversal of trend for this specific market, which in any case will be part of a wider array of home-based multiservice offerings (auxiliary, ventilation, home equipment, service centers, etc.).

In 2016 a pleasing 23 tenders/projects were awarded to EBM (both public and private) for a total of around 65 million euro. The amounts for the full duration of an individual contract vary between 5-10 thousand euro (teleaid) to over 20 million euro for the Veneto Region and the AOU of Cagliari. To these contracts should also be added two notable tenders awarded with the framework agreement formula relative to supplies of home-based ventilotherapy and magneto-therapy for the AASSLLs of west Sicily and INAIL (awarded at the start of 2017), contracts with “open” revenue volumes, correlated to the quantity of patients acquired, which when fully operational could reach variable amounts of between 3-6 million euro per year.

Among the new awarded contracts, we note AOU of Cagliari, AO S. Andrea of Rome, AO Riuniti Marche Nord, Istituto Nazionale Tumori of Milan, and the important renewals from INRCA of Ancona, ASL of Salerno and of Pio Albergo Trivulzio of Milan.

The CONSIP SIGAE4 agreement, awarded in 2014 and the object of 18 appeals positively ruled on by the Lazio Regional Administrative Court in 2015, saw the Council of State issue a definitive ruling in 2016, which annulled the entire procedure.

Regardless of the final ruling on this affair, it should be recalled that the SIGAE4 tender had a negative influence on the clinical engineering market both in terms of lowering maintenance fees and in terms of the “commoditisation” of the sector, which due to the erosion in margins is eliminating the most qualified components with the highest added value from bidding.

During 2016, activities intended to reorganise and improve production process continued, involving all technical and operational sectors and leading to evident improvement in terms of control over spending and business.

All existing quality certifications were confirmed, as well as those for specific operating activities: Quality (ISO 9001), Medical devices (ISO 13485), Contact Center (ISO 15838) and Fluorinated Gases (DPR 43/2012) and the sectors of Environment (ISO 14001) and Health and Safety (ISO 18001) with the extension of the same to the former Tesan locations in Vicenza and Padua. In addition, additional certifications were granted involving Information Security Management (ISO 27001) and IT Service Management (ISO 20000). In addition the above, qualification as a Measuring Manufacturer (Fabbricante Metrico) was received, necessary to manage weighing activities.

The activation of home-based ventilotherapy contracts has led to strengthened cooperation with suppliers of equipment for this specific market sector.

During the year, the process of transferring business and skills relative to the management of diagnostic imaging equipment to TBS Imaging continued. The company is controlled by EBM. New access models for services were successfully experimented with, compatible with EBM global tenders.


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The acquisition of the business unit from Mercury made it possible to begin restructuring the internal EBM endoscopy lab and to activate new industrial processes that will involve serialization of technical activities, with a clear improvement in processing and production quality, as well as reducing operating costs. This is preparatory to a subsequent commercial relaunch of this sector in 2017.

During the year, the process continued of consolidating the specialist centres relative to assistance and management for specific classes of equipment correlated with high-level skills and notable management costs. This aspect, in addition to allowing containment and control of external costs, also supported an improvement in the management and qualifications of technical personnel. Special attention was paid to a new operational division relative to the design and creation of “turnkey” Operating Theatres. Numerous opportunities throughout Italy were identified, with notable interest from customers that led to a number of design offers that will already see revenues in 2017. Unfortunately, these processes, which in any case require a maturation time of several months, saw a slowdown in both the public and private sectors due to current economic problems.

Management control systems were reinforced through specific structures in the Industrialisation Department, in particular focused on production processes, in order to guarantee better monitoring of margins on work orders, above all in the case of innovative clinical engineering services that also include industrialisation activities for home-based and ICT aspects.

In regards to investments, those relative to development activities aimed at allowing the company to be able to obtain new production processes and new organisational structures continued, as well as new services to increase future revenues.

In compliance with that established in the Group’s strategic guidelines, during 2016 and supporting the historic TESAN “brand”, commercial projects in the home-based and telemedicine sectors intensified, as well as for management of IT systems and ICT in general. Therefore, actions aimed at the home-based technical services market continued, working to integrate and take advantage of the sector through the activities and skills coming from Tesan, in order to overcome the fragmentation which characterises this market.

To that end, we note the success with the new Veneto Region tender, which again confirmed the quality and professionalism of the services provided by the Vicenza structure, as well as consolidation of the Domino project at the ASL of Arezzo, with further extension to the other areas of ESTAV SE and growth in the Umbria region. Additional successes were seen in the area of home-based ventilotherapy, including the acquisition of significant areas including west Sicily and in Lazio (Rieti, Roma4).

Operating activities in the telecare sector in 2016 essentially involved the continuation of work orders and contracts from the previous year.

Tesan Televita, directly controlled by EBM during 2016, saw revenues and EBITDA remain essentially stable. As known, its activities focus exclusively on CUP and teleaid services for the FVG Region, as well as small intercompany activities. Tesan Televita operates in a very small geographical area, which exposes it to changes in the regional market and makes it increasingly necessary to develop a business plan in 2017 that foresees greater involvement with the Italy BU, considering that renewal of the aforementioned tenders will have an impact again this year.

No important changes were seen in the Teleaid-Telecontrol areas, or for Projects.TBS IT Srl was reclassified among assets held for sale, after the decision to sell the company.TBS IT Srl, which we recall was created from the 2012 acquisition of the former Agile business unit, is currently

focused on IT services (HW and SW technical support) and integration systems for PA and Healthcare customers. The TBS Group’s strategic plan once again confirmed the importance of developing Innovative Clinical Engineering

Services in Italy, in the context of the Global Service business model, which aims at integrating traditional Clinical Engineering Services with other IT/ICT services for Healthcare customers, while also diversifying within other customer segments (PA and Private). More specifically, the evolution towards a model of offerings that provides complete and integrated answers for the entire world of medical, telematic and IT technologies found in the Healthcare sector, using structures and process that have already been created and used within the Group for medical technologies.


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In the light of these considerations, management of TBS IT has always focussed on ensuring close sales, operational, administrative and financial coordination with EBM, to guarantee that all possible synergies with the healthcare world are fully developed.

In 2016, the company suffered from the overall market situation and the impossibility of maintaining the significant contract with the Ministry of Internal Affairs to manage Shengen. The contract was transferred to another supplier through a Consip agreement, which impeded the possibility of competing for contract renewal through a normal tender process.

At present, while awaiting completion of the reorganisation, in TBS IT we can state that the call centre and operation areas have been successfully integrated with EBM’s operating structures, while serious difficulties continue in terms of transferring healthcare domain expertise by the other companies of the Group.

Thanks to the specialised contribution provided by Sales Management and the support of some external consultants, in 2016 the first important contract continued, with Azienda Ospedaliera Niguarda of Milan, which entrusted TBS IT with maintenance of its current internal platform and subsequently development of the new version. This contract, based on a reuse norm, was extended to other areas in Lombardy (Istituto Besta, Policlinico of Milan) and is about to be extended to other areas in Lombardy and Italian regions.

Continuing that seen in previous years, TBS IT reconfirmed maintenance and systems contracts, with activation of services, at the ASSLLs of Rome H and Umbria 2. The decrease in revenues, associated with personnel costs, led to a significant decrease in EBITDA which led to another year of losses, also due to amortisation of investments carried out and under way.

During 2016, growth and development continued in the important sector of diagnostic imaging. This is a strategic choice for the Group at both the Italian and international level, aimed at developing and strengthening “innovative” Clinical Engineering services.

In terms of Diagnostic Imaging, EBM’s efforts were carried out in synergy with the subsidiary TBS Imaging, which during the course of the year completed the process of integrating with Ing. Burgatti S.p.A.

As in previous years, the specific activities continued for diagnostic imaging in the high tech area (CAT, RMN), and in traditional radiography and ultrasound, strengthening the internal operations organisation, also through the contribution provided by Ing. Burgatti S.p.A. and through transfer of the activities held by EBM through the global service contracts that it manages.

The new organisational model focussed technical activities in Fisciano (Italy), relative to high-tech aspects, while San Lazzaro di Savena (Italy) saw the concentration of historic activities associated with traditional radiography. Integration of the sales network throughout national territory made it possible to optimise sales of products from both lines.

Revenues from TBS Imaging, which also include those relative to the former Delta X, exceeded 15.3 million euro in 2016.

Ing. Burgatti S.p.A., acquired in January 2015, and at present held at 65% by TBS Imaging, contributed around 6.2 million euro to consolidated revenues. The company’s activities, which were traditionally focussed in Emilia Romagna, saw an additional increase in revenues with respect to 2015 (+10%).

The processes to integrate Ing. Burgatti Spa and the significant cooperation with EBM, even if not yet fully operational, have led to synergies in terms of revenues and market opportunities, transforming the new company TBS Imaging into an important source of skills related to diagnostic imaging, supporting the development of innovative Clinical Engineering in Italy, in this sector as well. A specialised entity that consolidates over 21 million euro in revenues, and is one of the most important services company in the diagnostic imaging sector in Italy.

Again in 2016, Crimo Italia worked in an area that deals with the specific repair of biomedical and endoscopy equipment and surgical instruments, and it provides clinical engineering services, especially for healthcare entities and private institutions. The results the company obtained in this specific market were positive and further established its position as an Italian leader, even in the face of a worsening economic crisis and heavy competition, which were a feature of certain specific sectors in which it operates.


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During the year, improvement of sales coverage throughout Italy continued, which nonetheless still has certain critical areas within the country.

In terms of the number of repairs, significant growth was seen in certain departments (flexible endoscopy and electromedical equipment), while others remained at the levels of previous years (drills, optical/tools). The strength of the company’s activities is most certainly customer satisfaction with the rapidity of service, quality of repairs, and efficiency of the part collection system, which in any case allows it to maintain its sales prices at satisfactory margins.

Integration with EBM within the BU Italy led to benefits felt in specific revenues, helping to stabilise the company’s turnover.

In regards to personnel management, Crimo Italia fulfilled all of the requirements envisaged in the regulations in effect and in addition to the risk evaluation document, has certified its Safety Management System in conformance with OHSAS 18001 norms and is currently creating its organisation, management and control model pursuant to article 6, paragraph 3 of Italian Legislative Decree no. 231 of 08/06/2001.

The companies falling under the BU International under the responsibility of the Group’s General Management, leaded by Mr. Nicola Pangher, are TBS GB, TBS FR, TBS ES, ST NL, TBS India, TBS BE, STB (TBS IT), MSI, Crimo France, Crimo Instrumentation Medicale and Tunemedix.

2016 was also a year of decisive growth, in which the foreign companies saw a 12% increase in turnover. The exchange rate effect relative to the British pound and the Indian rupee held growth back slightly.

The decision to focus on the Indian market was an excellent, testified to by the 110% increase in turnover and EBITDA in the local currency. In addition to normal growth associated with the traditional business mix of maintenance, distribution and leasing services and turnkey solutions provided to private chains, the awarding of the initial maintenance contract for over 1,400 structures within an entire Indian state (Andhra Pradesh) has been an important factor in growth. India is also a starting point for concluding a series of agreements in other English speaking emerging markets, in particular in Southeast Asia and Sub-Saharan Africa. In addition to supplying equipment and services in Nigeria, a strategic agreement has been signed relative to the Malaysian market.

The UK was again the second largest market for turnover after Italy, despite the fact that the English healthcare system is in the midst of a crisis, with turnover up by 5%. To deal with this difficult situation more decisively, a new Country Manager was appointed, who has significant experience in the sector. It should be noted that even in this difficult situation, the contracts with the two most important private clients were renewed, specifically HCA and BMI. The company has the aim of continuing to see growth in turnover and margins in 2017, increasing offerings for leased and rented equipment, as well as turnkey structures.

With the acquisition of Crimo France, the volume of turnover in France seen by the TBS Group exceeded 20 million euro. TBS France saw a 9% increase in turnover, while Crimo France provided 6.5 million euro to turnover.

TBS ES suffered from the crisis and political vacuum on the Iberian peninsula, which led to a decrease in tenders issued and a consequent worsening of turnover and EBITDA relative to 2015. Business in South America also contributed to the loss, and led to the decision to terminate activities in Peru and Chile.

A decision was made to find a strategic solution through a commercial alliance with the Ferrovial Group, one of the most important Spanish construction and facility management companies. This alliance has already shown the first signs of success, with the awarding of the Trueta tender. In Portugal, Tunemedix and STB provided positive contributions to the Group’s profitability.

These companies, which work exclusively in the area of endoscopy, provided a significant positive contribution to the Group. Specifically, MSI is a success story, both strategically and operationally. The decision to transform the company into a centre for trading second-hand endoscopy equipment on the global market has led to important results in terms of profits. In addition, it represents an important initial step towards the equipment management model after leasing or rental periods. This is genuine turnaround – until two years ago the company had significantly negative results, and this year ended with net profit and a 14% increase in turnover. In Holland, Surgical Technologies BV continues to maintain excellent profitability in the same sector, in line with previous years.


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INVESTMENTS

Investments in intangible fixed assets totalling 4,171 thousand euro were made in 2016, in the following areas:

Intangible assets with a finite useful life

(thousands of euro) Acquisitions during the year(*)

Development 190

Concessions, licenses, trademarks and similar rights 1,945

Other intangible fixed assets 260

Fixed assets in progress 1,776

Total 4,171

(*) including investments for changes in the scope of consolidation

The investments made mainly include:• Costs for software, patents and trademarks mainly includes software licenses and programs acquired externally for a

fee, costs incurred by EBM for software used relative to clinical engineering and administrative management, and costs incurred by the Parent Company to implement management software. Increases during the year were mainly acquisitions carried out by EBM (1,297 thousand euro), TBS Group (390 thousand euro) and TBS FR (106 thousand euro).

• Fixed assets in progress are mainly relative to costs deferred by the subsidiary EBM for 1,196 thousand euro (sustained during the year) to manage specialist centres created to limit corporate costs and internalise services; for costs deferred by the Parent Company to create management software (330 thousand euro).In 2016, investments in tangible fixed assets for 5,510 thousand euro were made during the year for the following

tangible assets:

Tangible assets

(thousands of euro) Acquisitions during the year(*)

Land and buildings 37

Plants and equipment 4,374

Other tangible fixed assets 1,099

Total 5,510

(*) including investments for changes in the scope of consolidation

Among the main investments, we note:• The item “Plants and equipment” mainly includes equipment for carrying out business of 4,374 thousand euro

and is mainly relative to equipment to be used for the execution of EBM’s activities for 2,182 thousand euro, for machines necessary for the execution of activities in the endoscopy and biomedical sectors for TBS GB for 1,193 thousand euro, and assets acquired by TBS Imaging (244 thousand euro), by TBS India (151 thousand euro) and by TBS FR (193 thousand euro).

• The item “Other tangible fixed assets” mainly includes electronic office equipment, furniture and furnishings, cars and motor vehicles. Investments made during the year amounted to 1,099 thousand euro (of which 460 thousand


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euro made by the subsidiary EBM, 245 thousand euro by Tunemedix, 109 thousand euro by TBS GB and 72 thousand euro by TBS India).

RESEARCH & DEVELOPMENT

In 2016, research and development continued to support the activities for Clinical Engineering and Integrated ICT Solutions, Italy and International.

The strategic objective pursued in 2016 and also planned for 2016-2017 was, in fact, the development and proposal to the market of new ICT platforms that allow, on one hand, innovative management of core business and, on the other, management of healthcare technology resources and clinical and molecular data in the area of big-data methods.

Below we summarise the R&D projects financed by regional entities, the Ministry of Research and the European Union. The parent company TBS Group was involved in the “eHealth Platform for Molecular Medicine” project, financed by

the Ministry of Universities and Research. The project involves a large number of participants, including two regional universities and other research institutes.

The subsidiary EBM, in regards to ICT, completed the project financed by the EU in the context of the 7th Framework Programme: CHROMED – Clinical tRials fOr elderly patients with MultiplE Disease, for which the company serves as the leader of an international consortia of companies and universities, has the objective of evaluating the impact of the adoption of a support system to manage the healthcare status and lifestyle of the elderly.

In addition, in 2016, the group consolidated its entry into HORIZON 2020, the new European Union Research and Development framework programme, moving forward with the project ENRICH_ME “Enabling robot and assisted living environment for independent care and health monitoring of elderly” project, as the leader of an international partnership, which includes important European research institutions such as the Universities of Liverpool (UK), Barcelona (Spain) and Uppsala (Sweden).

PARENT COMPANY SHARES OWNED BY IT OR BY SUBSIDIARIES, ALSO THROUGH TRUST COMPANIES OR THIRD PARTIES

The total amount of own shares held by TBS Group as of 31 December 2016 was 764,210 shares. The number of shares issued minus the total number of own shares held by TBS Group following the acquisitions at the end of 2015 communicated on today’s date is equal to 41,421,366 shares.

Subsidiaries do not have shares of the Parent Company, not even through trust companies or third parties.

FINANCIAL INSTRUMENTS: GROUP GOALS AND POLICIES AND DESCRIPTION OF THE RISKS

With reference to article 40 of Legislative Decree 127/1991, the main risks and uncertainties to which TBS Group is exposed are provided below, subdivided into the following categories:• External risks• Internal risks • Financial risks

The Parent Company, through its subsidiaries, and in relation to its management and coordination, also has to manage these risks and uncertainties, for which the information pursuant to article 2428, paragraph 1 is hereby provided.


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EXTERNAL RISKS

Risks connected to the current economic situation

The economic-financial situation of the Group may be influenced by the general economic situation of the country that it is operating in, since public spending, which affects the reference sector, is related to the performance of the gross domestic product of a country.

The most immediate consequence may be a requirement to reduce the prices of the service and products offered by your group, without having to reduce the activities, since quality and quantity levels of the services provided must be maintained.

The cost reduction policy may also be an opportunity to develop the services provided by your group to customers, since they have often promoted good cost reduction policies due to more efficient use of human resources and the benefits resulting from the economies of scale in purchasing processes and management of suppliers.

In any case, the healthcare and public administration sectors are characterised by a very low level of cyclicity, representing a typically defensive market which is less prone to decline than others in periods of crisis.

The United Kingdom’s exit from the EU (Brexit), the country where the subsidiary TBS GB operates, following the referendum held on 23 June 2016, could lead to negative effects on markets and require an intervention by the European Central Bank. There are also additional risks for the future of the EU and its market, as well as creating oscillations on the foreign exchange markets.

Risks connected to the laws and regulations for the sectors of activity

The constant growth of healthcare expenditure and the citizens’ increased awareness of healthcare with a resulting increase in expectations regarding the level and extent of healthcare services supplied lead hospital and social healthcare facilities on the one hand to improve quality and spectrum of services supplied, and on the other to increase their efficiency and cut waste.

The need to meet these market pressures is persuading hospital and social healthcare facilities, both public and private, to invest considerable resources in technologies that allow them to optimize processes so as to increase quality and reduce costs. It is nevertheless not easy to estimate the future permanence of these market trends and availability of adequate public financial resources for the purpose.

The Italian health market is highly regulated and influenced by the public sector, which conditions its spending dynamics. The allocation of public financial resources could in the future be limited by the parallel growth of private hospital and social healthcare facilities, and therefore the future development of the Group companies’ activities will also depend on their ability to continue to penetrate the private market.

The segment in which the Group operates is also marked by technological changes. The future development of the Group’s activity will therefore also depend on its ability to stay in step with technological development and keep a qualitatively high level of services.

The factors mentioned above could have negative impacts on the economic and financial position of the Group if they actually come into effect and are improperly managed.

An additional risk could be connected to the entry of new competitors on the market, especially for certain activities with lower added value, which could offer services at lower prices based on their streamlined organisational structures, even if potentially to the detriment of the quality of the services offered and continuity of the same.

The continuous growth of the Group over the last few years and the acquisitions carried out may work against the development of new competitors. In addition, the continuing difficulty of accessing capital markets is a greater obstacle for smaller companies.


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The approval of the new European Regulation on Privacy 2016/649, published in the EUOJ on 4 May 2016, which will take effect as of 25 May 2018, to render regulations on the issue uniform throughout the EU, will require investments to verify the level of adequacy for the regulations of all Group companies operating in Europe relative to making data secure, in consideration of the strengthening of sanctions envisaged for non-compliant entities.

Risks connected to activities carried out abroad

The Group continues to maintain its historical presence almost exclusively in European countries (around 95% of turnover); it has a strong presence of Central and Western Europe and in countries that were less affected by the crisis (France, the United Kingdom, Austria and Holland).

In the case the Group continues to significantly increase “trading” activities, it could be exposed to risks of various types, deriving, by way of example, from changes in the geopolitical situation, the local regulatory situation, the economic and social situation and by extraordinary events not currently foreseeable, such as difficulties in obtaining loan guarantees, liability connected with the delivery of goods supplied and at the time ownership of the same is transferred, as well as insurance for after-sales activity during the warranty period. In 2016, these activities remained constant with respect to the previous year, but the current strategy plans for an increase in these operations.

The probability that these events take place varies based on the geographic area considered. Nonetheless, one or more of these events could have a negative impact on the Group’s economic and financial situation.

Risks connected to compliance in regards to health, safety and the environment

The Group’s activities, in the various countries in which it operates, are subject to multiple local laws and regulations in regards to health, safety and the environment, which are all entirely respected. Within each company of the group, specific structures dedicated to the issue in question have been established.

INTERNAL RISKS

Risks connected to lacking or delayed implementation of the business strategy

The TBS Group intends to follow a growth and development strategy, focussed in particular on consolidating and increasing the market share it has acquired in each of the business areas in which it operates.

In the case the TBS Group is not able to effectively carry out its strategy, or achieve it according to schedule, or if the assumptions on which the strategy is based are unfounded, the capacity of the TBS Group to increase its revenues and profitability could be damaged and this could have a negative effect on the Group’s activities and its prospects for growth, as well as on its economic, equity and financial situation.

Risks connected to new acquisitions

The TBS Group, in consideration of the characteristics of the market in which it operates, pursues and intends to continue to pursue a strategy of growth through acquisitions. The success of this strategy is also dependent on the Group’s capacity to coordinate and integrate the individual managing procedures of recently acquired companies through the parent company’s organisational system, as well as for companies that may be acquired in the future. The


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Group cannot be sure that efforts related to integration and management will achieve the desired results. Therefore, in the case that the Group faces difficulties in integrating and managing recently acquired companies, or that may be acquired in the future, this could have a negative impact on the Group’s economic, equity and financial situation.

Risks connected with the suppliers of the produce and services the Group uses to carry out its business strategy

The Group companies are exposed to risks associated with the type of activities carried out and with the methods of supplying services.

In particular, both Business Units include medical IT services and products.Potential defects in carrying out these activities or in the products could generate liability of the Group companies

to customers or third parties and give rise to subsequent claims for compensation for damage. For this reason, and to cover these risks, the Group has stipulated appropriate insurance policies to cover third-party and employee liability, and product liability.

However, there can be no certainly that the insurance coverage is adequate for potential damage caused by the events listed above. The risk that the Group has to shoulder possible additional burdens and cost therefore cannot be ruled out, with consequent negative effects on the economic and financial situation.

Please note that in recent years there have never been events causing cases of Group Company liability for those risks following which the Group has had to sustain expenses. This is why the directors of the Group Companies have not deemed it necessary to make specific provisions for this purpose.

The Risk Management Committee, established in 2013, continued to carry out case analyses and evaluate possible actions to be taken in order to mitigate the risks to the business as a whole, in part through regular meetings.

Activities carried out in 2016, based on the risk catalogue that is constantly updated, continued through monitoring and controlling the adequacy of internal procedures to prevent and mitigate risks, with the formulation of proposals to improve processes, also in combination with audit activities. During 2016, insurance coverage was also optimised and work was done to limit spending on the same. A recent claim relative to the English subsidiary TBS GB made the issue of insurance policy adequacy relevant. To that end, through an internal selection recently completed, Marsh was identified as the new insurance broker for 2017-2019. It was assigned the task of managing the insurance portfolio for all Group companies, in order to optimise the same, also through the extension of new types of coverage (professional liability), as well as through the execution of a risk assessment during the period aimed at ensuring current insurance coverage levels are adequate.

Risks connected to belonging to a group of companies

During the last year, the companies of the Group had, and continued to have relationships of various natures with the other companies within the Group, as well as with other related parties, identified on the basis of the principles of IAS 24.

The Company works within the scope of a Group of companies, and acts as the Parent Company. More specifically, it provides consultancy and coordination services in the administrative, legal and tax areas on behalf of the Group companies. The reciprocal services and obligations between the subsidiaries and the Parent Company are governed by a specific framework service contract.

In addition, in the context of productive and commercial synergy, the companies of the Group have reciprocal relations based on which they purchase and sell intercompany products and services. Relations between Group companies are regulated according to market conditions, taking into account the quality of the goods and the services provided.


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Relations with related parties include transactions resulting from normal economic-financial relations with companies or key individuals as determined by the shareholders or directors of the Company or subsidiaries or who are linked by family relations. These transactions are governed on an arm’s length basis.

The TBS Group Board of Directors, having heard the favourable opinion of the independent director and the board of auditors, approved the Procedure for Related Parties at its meeting on 16 December 2010. The procedure took effect on 1 January 2011. Following the amendments made to the AIM Issuers’ Regulations by Borsa Italiana, in effect as of 1 March 2012, said procedure was reviewed by the Board of Directors on 29 March 2012 and the relative updates took effect immediately. Further amendments were approved by the Board of Directors at its meeting of 28 September 2012. Following additional changes to the AIM Issuers’ Regulations, which took effect on 1 July 2015, these Regulations were reviewed by the Board of Directors on 18 December 2015, with the relative changes taking effect on 1 January 2016.

The Internal Control and Risk Committee, chaired by the independent director, whose vote when negative is determinant, investigates all cases relative to relations with related parties and expresses an opinion which is submitted to the Board of Directors which resolves on the issue in question.

During the course of 2016, all the opinions were positive, sometimes with conditions or with recommendations, and were approved by the Board of Directors.

The information on relations with related parties requested by Consob communication no. 6064293 of 28 July 2006 is presented in note 36 to the consolidated financial statements and note 32 of the separate financial statements. Infra-group financing was also monitored and authorised using a similar procedure that is regulated within the Internal Control System.

Risks connected to dependence on certain key roles and concentration of powers granted to certain individuals

The companies of the Group partially depend on the contribution of skills and relationships offered by certain key roles. The possible loss of these individuals and a lack of speedy replacement with appropriate management, could determine, although to a lesser degree given the size the Group has now achieved, a reduction in the Group’s competitiveness, affect its planned growth objectives, as well as having a negative effect on the Group’s activities and results. Nonetheless, the review of the organisational structure which occurred in 2016, through extraordinary rationalisation and business combination operations involving the structures of certain Group companies and the simultaneous issuing of a new organisation chart for the parent company, have made it possible to mitigate this risk.

To that end, we recall that the Board of Directors of the TBS Group acted in 2016 to update its governance system, to optimise and simplify decision making and operational processes, reviewing the structure of the Business Units and rationalising the existing internal committees into a single Management Committee.

Risks of suspension or interruption of service.

In 2015, your company externalised operational management of IT infrastructure, networks and IT systems, entrusting them to the subsidiary Insiel Mercato. While maintaining supervision and control over the activities externalised through the parent company’s Corporate IT Systems and Solutions Department, it can be excluded that the transfer, management and maintenance of the IT services and data processing, also of third parties, could generate the risk of a suspension or interruption of the services provided to customers and/or breach of the obligations to comply with rules and regulations. Nonetheless, this risk appears to be mitigated by the adoption of procedures aimed at guaranteeing business continuity through disaster recovery procedures and tools.


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FINANCIAL RISKS

With reference to letter d) bis of paragraph 2 of article 40 of Italian Legislative Decree 127/1991, and article 2428, 6-bis of the Italian Civil Code for the Parent Company, please note that the main financial instruments used by the Group are trade receivables and payables, cash and cash equivalents and bank borrowing.

The Group’s financial management is handled and coordinated by the Parent Company TBS Group; in fact, the main bank credit lines, whether direct or in the form of guarantee, are chiefly concentrated at the Parent Company.

At 31 December 2016, there were no derivatives contracts, with the exception of seven interest rate swap contracts (three subscribed in 2016 and four in previous years, better described below), intended as hedges against the risk of changes in interest rates.

Risks relating to the payment terms of clients

The revenues generated by TBS Group come from services supplied to hospital and public social healthcare facilities and from consulting and coordination services.

A receivables write-down provision equal to approximately 3.5% of the gross amount of the trade receivables has been allocated to protect against residual doubtful debts.

Payments made by Group companies are affected, especially in Italy and Spain, by the long payment times associated with the public administration, with receipt times in Italy that from trade association figures (the payment times announced by Assobiomedica indicate an improvement of around 100 days between 2013 and 2015 and a further improvement of 15 days between 2015 and 2016).

Notable receivables in Italy regard the Public Administration, for which the risk of insolvency is connected to Country risk and is further reduced by transfers of credit without resource, carried out through specialised factoring companies.

Risks relating to the variation in exchange rates

This type of risk also did not show any notable changes with respect to 2015, because the presence of transactions outside of the eurozone is quite limited and in any case, characterised by economic and financial flows internal to the country in question, which further reduces the related risk. Residual risk remains connected to the transfer of financial flows between countries outside of the eurozone towards the parent company, even if at the end of the year there are not financial debts of the companies using currencies other than the euro in regards to TBS Group S.p.A.

The Group’s consolidated financial statements are stated in Euro. However, considering the fact that the separate financial statements of some Group companies are stated in currencies other than the euro, the economic and financial figures of the Group could be affected by changes in exchange rates between the respective currencies and the euro because of conversion into euro at the time of consolidation.

These companies are TBS GB (United Kingdom), which has an incidence of 13.8% on the Group’s 2016 consolidated revenues and TBS India, with an incidence of 3.6% of the Group’s 2016 consolidated revenues. However, both the revenues and costs of TBS GB and TBS India are stated and recognized in the same currency, thereby attaining a partial natural hedging.

In any case, exchange rate changes occurring during the year did not lead to significant profits or losses for the Group’s consolidated financial statements.

The Group’s growth strategy, which also envisaged development in areas that do not use the euro, could increase the effects indicated above that derive from oscillations in exchange rates. To this end, we want to in any case recall


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that the international tenders awarded as of today have mainly been in the euro and hence subject to potential risk only for the portion of acquisitions carried out in non-euro areas.

Risks related to financial debt and fluctuation of interest rates

The Group obtains its financial resources mainly through the traditional banking channel and with traditional instruments such as medium/long-term loans, mortgages, short-term bank credit lines, flows deriving from operating activities in the context of commercial relationships, including through transfers of credit without recourse for services rendered and creditors for the purchases of goods and services, through capital increases, convertible and non-convertible bond loans and, finally, through intercompany loans deriving from the operating activities of its subsidiaries.

Furthermore, with a view to generally reduce risks, the Group Companies concentrate their financial operations only on primary banks and on instruments that are easy to liquidate.

Net consolidated financial debt of TBS Group as at 31 December 2016 is equal to about 64.2 million euro (gross of net financial debt relative to assets held for sale, equal to 2.8 million euro). It is primarily due to working capital needs linked to the payment terms by its customers in several geographic areas and to financing acquisition transactions executed in previous years.

We also recall the issuing of a non-convertible bond loan, approved by the Shareholders’ Meeting of the TBS Group on 25 August 2014. Placement of the bond loan, called “TBS Group S.p.A. 6.5% 2014-2019” (ISINIT0005058372) was completed on 29 October for a five year period, at a nominal annual rate of 6.5%. On 28 December 2016, all those present at the Bondholders’ Meeting voted unanimously in favour of the new loan regulations. The most significant changes involved lowering the interest rate from 6.5% to 5.2%, extending maturity to 31 December 2020 and eliminating the company’s ability to repay it in advance. On 11 January 2017, the Company’s Board of Directors met and approved the changes. Insertion of the relative minutes of the Board of Directors meeting in the Register of Companies made the approved amendments effective, in particular reduction of the interest rate starting from the initial period of interest accrual, following coupon detachment on 31 January 2017.

In addition, we note that debt payable to other providers, mainly due to the valuation of put and call options, is around 4.7 million euro (short and medium/long term), while debt payable to leasing companies amounts to 2.3 million euro (short and medium/long-term).

Residual financial payables (net of cash and cash equivalents) refer to the banking system.As the Company’s gross financial debt is mainly characterised by variable interest rates in so far as they are linked to

the 3- and 6-month Euribor rates, financial expenses could rise if interest rates increase, leading to negative effects on the Group’s economic and financial position. This did not occur in 2016, with a decrease in the monthly average of around 0.24% for the 3-month Euribor rate and around 0.22% for the 6-month Euribor rate, relative to the same average in the previous year.

The Group’s strategy is aimed at reducing the risk associated with long-term debt, by balancing fixed rate and variable rate loans, assessing, both initially and periodically, if and to what degree variable rates should be converted to fixed rates, by monitoring market rate trends.

At 31 December 2016, the amount of non-current financial liabilities was 47 million euro. Of this, 14.7 million euro were fixed rate and relative to the already cited bond loan, while 28 million euro were relative to the portion of loan contracts subscribed coming due after 12 months. Of these, a portion equal to 19.1 million euro was subject to hedging through interest rate swap derivatives (IRS), all of which subscribed between 2015 and 2016, and designated as hedges against the risk of changes in interest rates. The conditions of the interest rate swap contracts were negotiated so as to coincide with the conditions of the underlying commitments. These contracts satisfy the hedging requirements indicated in IAS 39 and fair value changes are therefore recognised directly to shareholders’ net equity.


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Starting in 2015, at least all new medium/long-term loans taken out in the last two years, with an initial maturity exceeding 37 months and provided by well-established banking partners are hedged. The Group’s policy is to keep the total amount of net financial debt with a fixed interest rate above 30%.

For the portion relative to short-term debt, all regulated with the current Euribor variable rate, it is also necessary to consider that no recourse factoring operations for receivables create a partial natural hedge of over 50% of short-term debt on turnover in Italy.

As a consequence, there is a risk tied to a potential worsening of the general market conditions. It should also be stressed that the reference rate reached its maximum at 5% in the last 17 years, and an average value of about 2.2%.

The Parent Company and its subsidiaries took out several loans, which demand observance of specific financial indicators that are described in the explanatory notes to the financial statements. The Parent Company nevertheless deems that these financial indicators – to be calculated periodically – have no features or burdens dissimilar to those generally found in market practice. At the end of 2016, these parameters were all respected.

The risks of refinancing debt are managed through monitoring the maturities of credit lines and coordinating debt with types of investment, in terms of the liquidity of assets.

It should be understand that there is no guarantee that in the future the Group will be able to negotiate and obtain the loans necessary to develop its activities or to refinance those maturing, with the same methods, terms and conditions obtained. As a consequence, any worsening in terms of economic conditions for new loans and a possible future reduction in the credit capacity in terms of the banking system could have negative effects on the Group’s economic and financial situation and limit its ability to grow.

Relative to the risks connected to Public Administration payment times, please refer to that already stated above in this report.

INFORMATION ON PERSONNEL AND THE ENVIRONMENT

Total personnel operating within the context of the Group totalled 1,999 units at the end of 2016, an increase of 103 units with respect to 2015. Following deconsolidation of Insiel Mercato and PCS, over 260 employees left the Group.

The increase derived for the most part from the strengthening of the TBS India structure, in order to support the significant growth therein, as well as the acquisition of the Portuguese company Tunemedix SL.

Relative to M&A, we also note that in the initial months of 2017 the subsidiary EBM completed its acquisition of a 100% stake in the Easote business unit working in the clinical engineering services sector, adding 24 employees from the same to its staff.

In terms of training, in addition to the use of external providers, the wide array of internal offerings produced by the Group’s specialist companies continued, both through on the job training (also involving detachments), and through the production of specific training modules aimed at internal users.

Additionally, TBS Group continues to provide operational support for the specialist degree in Clinical Engineering at the Università degli Studi in Trieste and other universities, through its own teachers.

In regards to certifications, at the beginning of 2016 the subsidiary EBM obtained ISO 27001 certification (international standard to guarantee own data security, minimising the risks of unauthorised access or data loss and guaranteeing effective management of protective measures adopted), as well as ISO 20000 (international standard aimed at improving the provision of IT services, with the objective of achieving the utmost quality for services provided combined with cost containment).

In December 2016, the subsidiary Tunemedix received ISO 9001 and ISO 13485 certifications (international standards for the medical devices sector and specifying the requirements for the quality management system for organisations operating both relative to the design and production of medical devices and in design and supply of correlated services).


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Relative to organisational developments, we note that in 2016 actions aimed at optimising corporate governance and improving the Group’s organisational structure were approved.

In particular, the perimeter of the Business Units was redefined, shifting from the prior division based on activity sector – with the two BUs, “Integrated e-Health & e-Government Solutions” and “Medical Devices and ICT Systems” (the latter further divided into Italy and International) - to division based on the geographical location of operations, with the creation of the two BUs, “Clinical Engineering Services and Integrated ICT Solutions Italy” and “Clinical Engineering Services and Integrated ICT Solutions, International”.

Following organisational updates, the Corporate Activities General Management area coordinates the departments of Administration, Finance and Controlling & Investor Relations - Organisation and HR – Science, Technology and ICT – International Tenders and Procurement – General, Corporate and Legal Affairs.

We note that TBS Group S.p.A. continued to maintain the Corporate Privacy Manual (pursuant to DPS), taking into account i) the progressive implementation of the new instructions on privacy in the light of European Regulations 2016/679 which will apply as of 25 May 2018 ii) recent corporate reorganisations. The updated text of the Corporate Privacy Manual (pursuant to DPS), will be issued by the Board in order to align it with the new company hierarchy.

INTERGROUP TRANSACTIONS AND WITH RELATED PARTIES

The Company works within the scope of a Group of companies, and acts as the Parent Company. More specifically, it provides consultancy and coordination services in the administrative, legal and tax areas on behalf of the Group companies. The reciprocal services and obligations between the subsidiaries and the Parent Company are governed by a specific framework service contract.

In addition, in the context of productive and commercial synergy, the companies of the Group have reciprocal commercial relations by which they sell products and services to some Group companies and acquire products and services from the same Group companies. Relations between Group companies are regulated according to market conditions, taking into account the quality of the goods and the services provided.

Relations with related parties include transactions resulting from normal economic-financial relations with companies or key individuals as determined by the shareholders or directors of the Company or subsidiaries or who are linked by family relations. These transactions are governed on an arm’s length basis.

The information on relations with related parties requested by Consob communication no. 6064293 of 28 July 2006 is presented in note 36 to the consolidated financial statements and note 32 of the separate financial statements.

Infra-group financing was also monitored and authorised using a similar procedure that is regulated within the Internal Control System.

REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE

Report approved by the Board of Directors on 23 March 2017.Website: www.tbsgroup.comThe Company has a traditional corporate governance system. The board of directors is elected by the Shareholders’

Meeting and the Board of Statutory Auditors performs the tasks required by article 2403 of the Italian Civil Code.The Company is listed on AIM Italy/Italy Alternative Capital Market, managed by Borsa Italiana. In 2011, the

Company obtained the necessary requirements envisaged in article 116 of the TUF to be considered an issuer of financial instruments distributed among the public in a significant manner.


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The TBS Group has issued ordinary shares and convertible bonds, for which the possibility of conversion has passed without the bondholder having exercised said option, as well as a non-convertible bond loan reserved for professional investors, based on that indicated below.

Share capital amounts to 4,218,557.60 euro, fully paid up, divided into 42,185,576 shares of a nominal value of 0.10 euro each. Number of own shares: 764,210, equal to 1.812% of share capital.

The convertible bond loan held by Fondo Italiano di Investimento SGR S.p.A. was repaid by the TBS Group on 30 July 2015, making use of the right foreseen in the loan regulations that allowed early repayment in advance of the original maturity date in February 2016.

On 31 October 2014, the bond loan “TBS Group S.p.A. 6.50% 2014- 2019” for a nominal 15,000,000.00 euro, code ISIN IT0005058372, consisting of 150 bearer bonds of a nominal value of 100,000.00 euro each, non divisible, on the multilateral trading facility for bonds organised and managed by Borsa Italia, known as EXTRAMOT, and reserved for professional investors.

On 28 December 2016, the Bondholders’ Meeting approved the amendments to the Bond Loan Regulations, including those relative to the interest rate applied to the loan and its duration. The bond loan therefore took on the new name TBS Group S.p.A. 5.20% 2014 –2020 of a nominal value of 15,000,000.00 euro, ISIN code IT0005058372.

Article 8 of the Articles of Associations sets the threshold beyond which transfer of shares or changes in voting right options must be communicated at 5%, in compliance with the AIM Italia Regulations, which identify the category of shareholders classified as significant pursuant to the equity investments rules established in the Consolidated Law on Finance at 5% or higher. The violation of this communication obligation leads to suspension of voting rights for a year, as envisaged in the Articles of Association.

The same article of the Articles of Association envisages applicability to the Company, even if not listed on a regulated market, of articles 106-109 of the TUF in regards to takeover and public swap offers, and implemented the establishment of the Panel of Arbitrators as suggested and envisaged in the AIM Italy/Alternative Capital Market Issuers’ Regulations, organised and managed by Borsa Italiana S.p.A.”

At present there are no shareholder agreements within the Company. The Company’s website contains a list of significant shareholders, or those holding a stake of no less than 5%, as well as an indication of the most recent update.

The Company has adopted almost all of the institutions and procedures foreseen and suggested in the Borsa Italiana Code of Conduct, compatible with the size of the Company itself and the institutions foreseen in the AIM Italia/Alternative Capital Market Issuers’ Regulations.

The Company has an Internal Control System, a Procedure for Related Parties, Significant Transactions, Reverse Take-Overs and Substantial Changes of Business, a Procedure Regarding Internal Management and External Communication of Privileged information, which also foresees procedures regarding corporate information in general, and a Procedure Regarding Transactions Made by Directors and Other Key Figures.

The operations of the Bondholders’ Meeting is governed by the Italian Civil Code, the Articles of Association, and the Bondholders’ Meeting Regulations. The Bondholders’ Meeting Regulations can be found on the Company’s website, and a copy of them are provided to each participant at the time of the Meeting, together with other relevant documents.

During 2013, the Company, completing the corporate procedure in regards to privileged information, established, pursuant to article 115-bis of Legislative Decree 58/98 and articles 152-bis and subsequent of Issuers’ Regulation no. 11971, the Register of individuals that have access to privileged TBS Group S.p.A. information, ensuring in this way improved traceability of access to market-sensitive information, so as to allow subsequent verification. Management of the same has been entrusted to the Secretary of the Board who, supervising the completeness of the pre-board disclosure, also preserves the privacy of the data and information provided. The Insider Registry was then adapted during 2016 to render it compliant with new regulations, in particular EU Regulation 596/2014 of the European Parliament and Council, issued on 16 April 2014 (MAR).


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The current Board of Directors was appointed by the same Shareholders’ Meeting on 28 April 2015, using the methods foreseen in article 21 of the Articles of Association, and their terms will expire as of the Shareholders’ Meeting to approve the financial statements for 2017. On the basis of the cited article 21 of the Articles of Association, when electing the Directors each shareholder holds a number of votes equal to the product of the number of shares they hold or represent multiplied by the number of those to be elected. These can be assigned to a single candidate or be distributed among several candidates, but each individual vote held by only be expressed in favour of a single candidate. Those who received the greatest number of total votes are elected. In the case of a tie, the older of the candidates shall prevail. If fewer candidates receive votes than the number of candidates to be elected, no one shall be considered to have been elected and the voting must be immediately repeated.

The Board is as follows:• Diego Bravar, Chairman, born in 1948, initially appointed in 1996, in office since 2015, with his term expiring as of

the Shareholders’ Meeting which approves the financial statements for 2017, executive with powers, other roles: Vice President of Confindustria VG, Chairman of Biovalley Investments S.p.A., Sole Director of Biovalley Investments Partners S.r.l., Director of CE &IT S.p.A., Vice President of FIT (Trieste International Foundation for Scientific Progress and Freedom), Director of the Istituto Scientifico Biomedico Euro Mediterraneo (ISBEM S.C.P.A.), Director of the MIB School of Management, Director of the Università degli Studi di Trieste, Member of the Board and Committee of the Venezia Giulia Chamber of Commerce, Member of the Steering Committee for Fondazione Italiana Fegato - ONLUS, Director of O3 Enterprise S.r.l., Chairman of the Technical/Scientific Committee for Fondazione ITS A. Volta, member of the Technical/Scientific Council for Area Science Park, Chairman of Formindustria, member of the Assonime Committee;

• Paolo Salotto, Chief Executive Officer, born in 1967, initially appointed in 2005, in office since 2015, with his term expiring as of the Shareholders’ Meeting which approves the financial statements for 2017, executive with powers, other roles: Director of Insiel Mercato S.p.A., Chairman and CEO of Seges S.r.l., Chairman of Elettronica Bio Medicale S.r.l., Chairman of NEOIM S.r.l., Chairman of Fra-Ser S.p.A., director of TBS GB Telematic & Biomedical Services Ltd., director of TBS INDIA Telematic and Biomedical Services Private Ltd., Chairman of Framis USA Ltd., Auditor of Impresa di Costruzioni Mari & Mazzaroli, Auditor of EMK S.p.A.;

• Laura Amadesi, Non-Executive Director, born in 1968, initially appointed in 2012, in office since 2015, with her term expiring as of the Shareholders’ Meeting which approves the financial statements for 2017, other roles: Director of Interporto Bologna S.p.A., member of the Internal Risk and Audit Committee and Appointments, Remuneration and Governance Committee;

• Dario Scrosoppi, Non-Executive Director, born in 1955, initially appointed in 2003, in office since 2015, with his term expiring as of the Shareholders’ Meeting which approves the financial statements for 2017, non-executive, member of the Internal Control and Risks Committee and the Appointments, Remuneration and Governance Committee;

• Carlo Solcia, Non-Executive Director, born in 1966, initially appointed from 2007 to 2009, in office since 2015, with his term expiring as of the Shareholders’ Meeting which approves the financial statements for 2017, independent pursuant to the Code of Conduct and the Consolidated Law of Finance, other roles: Chairman of MS Growth Ventures S.r.l., Chairman of Terra Nova Capital S.r.l., director of LGH S.r.l., director of Lipogems International S.p.A., director of Resono Ophthalmic S.r.l., Chairman of the Internal Control and Risk Committee and of the Committee for Appointments, Remuneration and Governance.The process of updating corporate governance, begun in 2013, continued and at its meeting on 30 April 2015, the

Board of Directors of the Company, implementing the recommendations found in the Code of Conduct, maintained separation between the roles of Chairman and Chief Executive Officer.

During the same meeting, the Board of Directors established that the ordinary and extraordinary administrative powers remain fully assigned to the Board, with the exception of those powers expressly granted to the Chairman and Chief Executive Officer as identified below, with the additional exception of mandates expressly granted by the Board of Directors for specific single actions or categories of actions and without prejudice to the responsibilities assigned exclusively to the Shareholders’ Meeting.


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During the same meeting, the Chairman was granted the following powers:The Chairman is responsible for legally representing the Company, pursuant to article 28 of the Articles of Association

and is identified as the employer for the Company itself, through granting of all decision making and spending powers pursuant to article 2 of Legislative Decree 81/2001, as amended, to protect health and safety in the workplace.

In addition, the Chairman is responsible for supervising the functioning of the Internal Control System, the adequacy of which is nonetheless assessed by the Board, and to periodically inform the BoD about the activities of the Internal Auditor, in order to ensure effective implementation of the control system (procedures foreseen and regularity of behaviour) ensuring compliance with internal and external rules (respectively procedures and laws).

The Chairman is assigned the following powers:• Representing the Company, in general, with third-parties and judicial authorities;• Representing the Company with public entities and offices, including Customs, private offices, Chambers of

Commerce, Stock Exchanges, National Commissions for Companies and the Stock Market, as well as all other Public Administrations or authorities;

• Representing the Company with any tax authority, national or local, and signing the fiscal and tax declarations envisaged under the law (IRPEF, IRAP, VAT, etc.);

• Designating the manager of the prevention and protection service in conformance with that envisaged in article 31 and subsequent of Legislative Decree 81/2001, as amended;

• Carrying out risk evaluations according to that envisaged in the regulations in effect from time to time, in cooperation with the manager of the prevention and protection service and the company doctor and adopting, without limits on spending, all the necessary and appropriate measures for the protection of workplace health and safety, with the right to delegate, pursuant to that envisaged in article 16 of Legislative Decree 81/2001;

• Presenting allegations to the legal authorities and the police;• Representing the Company, without spending limits, also in executive venue, in front of any judicial, administrative,

tax, ordinary or special authority, of any level, country or office and hence, also in the Council of State and in front of the Court of Cassation;And the CEO:

• Representing the Company, in general, with third-parties and judicial authorities;• Representing the Company with customers, suppliers, agents and distributors;• Representing the Company with public entities and offices, including Customs, private offices, Chambers of

Commerce, Stock Exchanges, National Commissions for Companies and the Stock Market, as well as all other Public Administrations or authorities;

• Representing the Company with the national and international financial community;• Managing the requirements and all communications with the Chamber of Commerce, the Register of Companies, the

Tax And Revenue Office and the VAT Offices; signing all the documentation required in order to execute individual cases, including the requirements necessary to obtain concessions, licenses and authorisations, permits, registrations and certificates;

• Representing the company in the execution of all the actions relevant to import and export operations including the possibility of executing all the customs operations (including certificate requests from the Chamber of Commerce and/or other relevant authorities and offices);

• Representing the Company with the financial administration and any tax authority, national or local, and signing the fiscal and tax declarations envisaged under the law;

• Appealing roles, presenting claims, complaints, grievances, memos and documents to any tax office or commission; depositing reimbursements and interest, providing receipts;

• Collecting sums;• Granting extensions on payment;• Giving and releasing security deposits;


49

• Stipulating, amending and terminating contracts to open credit lines, leasing safety deposit boxes and deposit contracts with credit institutions, including agreements for the activation of electronic banking products;

• Requesting non-security backed loans and financing for amounts of up to 5,000,000 euro;• Requesting credit lines, credit facilities and guarantees for amounts of up to 15,000,000 euro;• Filing protests;• Requesting and receiving chequebooks; Issuing cheques, including overdrafts, as long as they are within the limits

of the credit lines granted;• Executing and receiving bank transfers, making payments;• Carrying out all the operations relevant to safety deposit boxes at credit institutions and other entities;• Arranging the payment of salaries and compensation subject to tax withholding, as well as the payment of taxes

due by the Company (VAT, obligatory social security and insurance payments, withholdings);• Executing debit and credit operations for the Company’s accounts with credit institutions and post offices;• Executing bill discounting signed by third parties, giving provisions to extinguish and withdraw bills of exchange and

RIBAs in the company’s name, deposit and issue receipts for cheques, promissory notes and postal bills;• Executing the granting of credit through securitisation and assignment deals with factors for amounts of up to

15,000,000 euro;• Executing deeds recognising debts for amounts of less than 500,000 euro;• Signing compromises;• Advancing and supporting legal actions at any level and in any jurisdiction, both civil and criminal;• Presenting allegations to the legal authorities and the police;• Representing the Company, without spending limits, also in executive venue, in front of any judicial, administrative,

tax, ordinary or special authority, of any level, country or office and hence, also in the Council of State and in front of the Court of Cassation;

• Representing the Company, without spending limits, in employment disputes, at every level of court and jurisdiction, in front of the judicial authority responsible for employment issues, as well as in front of the Conciliation Commissions established at the Provincial Directorates and at Union Organisations in conciliation procedures;

• Settling disputes, conciliating tax, fiscal and employment law disputes, accepting or refusing settlement agreements;

• Settling civil disputes and conciliating disputes, accepting or refusing settlement agreements;• Defining the liquidation of damages and claims, for amounts less than 500,000 euro;• Deferring and reporting oaths, deferring and responding to queries and questions also in regards to civil claims,

bringing civil actions in criminal processes, electing domicile;• Discontinuing trial proceedings;• Hiring, dismissing, amending contractual conditions for employees and directors, disputing infractions, deciding

in regards to any disciplinary sanctions, deciding on promotions and transfers of personnel - exclusive of those with strategic functions (General Managers, Directors of Administration, Finance and Control), and also excluding personnel with gross annual remuneration, not including variable elements and benefits, exceeding 120,000 euro;

• Stipulating collective labour contracts;• Representing the Company in its relations with employer associations, unions in general and workers’ representatives;

defining and signing union agreements;• Social security and insurance requirements: releasing payroll extracts and certifications regarding personnel,

for social security, insurance or health insurance entities, for both public and private entities; supervising the observance of the requirements pertaining to the Company in regards to withholding;

• Executing guarantees;• Establishing, writing, renewing, extinguishing, cancelling pledges and privileges regarding third parties and to the

benefit of the Company; accepting cancellations, restrictions and reductions in the level of mortgages regarding


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third parties and to the benefit of the Company; waiving mortgages; executing any other mortgage operation regarding third parties and to the benefit of the Company;

• Providing goods and services, in Italy and abroad, for any reason and for amounts lower than 30,000,000 euro net of taxes; participating, also in temporary associations of businesses, in consortia, tenders, projects with public financing, bids, private requests for the execution of work orders and suppliers for amounts of less than 30,000,000 euro net of taxes. Signing any deed necessary for the participation in said tenders, projects, competitions under the indicated threshold, as well as stipulation of the relative contracts and every action consequent to the awarding, including the possibility to issue sureties, guarantees, performance bonds, and to commit the company in all legal negotiation regarding execution of the contract;

• Signing of contracts to purchase and sell raw materials, semi-processed products, goods, equipment and more generally moveable and/or registered assets necessary for normal execution of company operations, also able to issue the relative purchase orders and stipulate supply contracts, with a unit cost, net of taxes, equal or lesser than 500,000 euro;

• Signing of contracts to obtain consulting or professional services, for maintenance or services on own goods or held for whatever purpose, for a value per single contract, net of taxes, equal or lesser than 250,000 euro;

• Stipulating leasing, sub-leasing and free loan contracts for real estate for leasing costs of less than 300,000 euro per individual financial year for a period equal to or less than six years;

• Stipulating leasing, sub-leasing or free loan contracts, also financial or operating leases, involving moveable assets, including registered assets, whether owned or pertaining to third-parties, with the exclusion of assets relative to the company’s activities, in amounts of less than 300,000 euro;

• Stipulating leasing – including financial or operating – contracts, subleasing and free loan contracts involving assets relative to the company’s activities for amounts less than 3,000,000 euro;

• Stipulating agency and business procurement contracts, and contracts for any other intermediation, commission and distribution relationship;

• Stipulating confidentiality agreements;• Stipulating sponsorship contracts and agreements and connected deeds for amounts of up to 30,000 euro, net of

taxes;• Registering trademarks and filing patents;• Appointing and revoking proxies for individual deeds within the limits of the powers granted;• Carrying out any action, even if not specifically listed above, with a spending threshold up to 300,000 euro; • Exercising any power falling to the Board of Directors with an expenditure threshold equal to 2,500,000 euro

should the nature of urgency so require, with the qualification that in said case, the CEO himself shall determine the nature of the operation’s urgency and upon its completion he must report on it at the first call of the Board meeting subsequent to execution of the urgent action.

During the course of 2015, the process of implementing the Governance within the Companies of the TBS Group continued, on the basis of the guidelines issued by the Parent Company. This process is still under way, above all relative to newly acquired Companies.

The Chief Executive Officer is the main individual responsible for managing the Company, but always acts within the strategic guidelines approved by the Board of Directors to which he reports in advance, even in the case of significant operations carried out by subsidiaries, except in rare cases of urgency, in which case he immediately brings his decisions to the Board for ratification.


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In any case, the Board examines and approves the strategic and financial guidelines for the Company and monitors subsequent execution and any risks, while also verifying the adequacy of the organisational structure and annually setting the calendar for corporate events, which is as follows for 2017:

Date Event Purpose

Thursday 23 March – 11:00 a.m. Board of Directors Approval of the consolidated financial statements and draft financial statements at 31 December 2016

Thursday 27 April – 10:00 a.m. Shareholders' Meeting Approval of the 2016 consolidated financial statements and financial statements

Thursday 11 May – 11:00 a.m. Board of Directors Approval of the Interim Management Report at 31 March 2017

Thursday 10 August – 11:00 a.m. Board of Directors Approval of the Half-Year Financial Report at 30 June 2017

Tuesday 14 November – 11:00 a.m. Board of Directors Approval of the Interim Management Report at 30 September 2017

The frequency of the meetings of the Board of Directors allows for continuous updates on operating results.An independent director is also a member of the Board of Directors. Taking the provisions of the Borsa Italiana Code

of Conduct and the criteria set forth in the T.U.F. as guidelines, his requisites are checked by the Board of Directors and Board of Statutory Auditors each year.

During 2016, there were eight meetings of the Board of Directors; the average duration of these meetings was around six hours.

The CFO is always present and invited to report at Board meetings, while the General Managers and other Central Managers are invited on the basis of the issues on the agenda.

It is the consolidated practice of the Company to provide the members of the Board and the Board of Statutory Auditors with the documentation for committee works in advance and in a timely manner. In the case of lengthy documents, the Regulations envisage the preparation of an executive summary. The Secretary of the Board is responsible for the disclosure necessary for implementation of Board resolutions.

The Board of Directors appointed an Internal Control Committee, currently made up of two non-executive directors and chaired by the independent director, and a Nomination, Remuneration and Governance Committee made up of three non-executive directors, one of whom is the independent director and chairs it.

To optimise and simplify the decision making and operational processes through rationalisation of the existing Committees into a single structure, the Board of Directors continues to make use of the Management Committee, which is responsible for monitoring the economic/financial performance of activities in regards to objectives, making assessments of the implementation of development programs, analysing market trends and proposing actions to take advantage of potential opportunities.

The fixed members of this Committee, who are considered key people, are Chief Executive Officer, who serves as chairman, the Business Unit General Managers, the Manager of Administration, Finance and Controlling, the Manager of Human Resources, Organisation and Quality, the Manager of Industrialisation and the Manager of Legal and Corporate Affairs, as well as the Internal Auditor.

It was decided not to appoint a Director given that the internal control system answers to the Chairman and given that the Internal Control and Risk Committee is chaired by the independent Director.

A succession plan for the executive directors was not adopted.The Company has an internal control system with the purpose of ensuring effective running and management of

the Company’s activity through mapping, verification and assessment of the major risks.The Board supervises the functionality of the internal control system, which has been held adequate by said Board.


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The Internal Control and Risk Committee carries out the internal control preliminary checking activity, collaborates in managing and maintaining the system, examines the Internal Auditor’s work plans, and expresses its opinion on the subject of transactions with related parties. Expertise in accounting, financial and risk management aspects is ensured within the Committee. Minutes are drawn up for all Committee meetings.

The Internal Control and Risk Committee and the Board of Statutory Auditors work in close contact and often call joint meetings.

The Internal Audit & Compliance function also includes the Internal Control Supervisor, who reports directly to the Board of Directors. During 2016, the Supervisor completed the Audits foreseen in the Plan, with the exception of a few which are planned for the initial months of 2017, as well as additional “on demand” tasks assigned by the Directors of the Group companies. Audits are mainly done through on site inspections done at the Group companies. The Supervisor may access all information necessary to carry out these tasks.

The internal audit system at the TBS Group also includes the Board of Statutory Auditors, Internal Audit, the Risk Manager, Supervisory Body and the Chief Financial Officer. In exercising its responsibilities, the Internal Audit and Risk Committee may count on cooperation from all Company functions and, in particular, Human Resources, Privacy, Safety and the Environment, Quality and Information Technology.

The Nomination, Remuneration and Governance Committee works to create a policy relative to the nomination of administrative bodies and key people in the context of the Group and for the creation of a coherent remuneration policy. In addition, it expresses a preventive opinion on nominations for administrative bodies and Group key people and for the relative compensation. During the course of 2016, it expressed 17 opinions, delivered in advance to directors and read during the course of the meetings. The meetings that did not end with the preparation of an opinion had minutes drawn up.

The Shareholders’ Meeting held on 28 April 2015 resolved to allocate a maximum gross total amount per year of 500,000 (five hundred thousand) euro to the Board of Directors, as well as reimbursement for travel expenses, including remuneration of directors assigned special tasks, giving the BoD the mandate to determine the amount of said fees.

Considering that the Board has, in addition, set remuneration only for the Chairman, the CEO and for the independent director because of the commitment demanded of him in the governance institutions of the Company, the Committee has expressed its favourable opinion for these cases of compensation and in any case voiced its opinion in the absence of the interested party.

The variable component of the CEO’s remuneration and that relative to key management personnel is subordinate to the achievement of specific annual performance objectives.

No indemnities of any type are foreseen in the case of a public swap and there are no special agreements regulating treatments at the conclusion of employment for directors or key people within the Group, except for the General Manager for corporate activities of TBS Group S.p.A. and for the Chief Executive Officer of EBM S.r.l.

For the General Manager of corporate activities for TBS Group S.p.A., if the right to withdraw from the contract is exercised by TBS Group between 31/10/2016 and 01/05/2018, a termination indemnity will be paid falling within a range of between 67.5% and 137.5% of the annual gross salary agreed on and defined on the basis of the date of withdrawal.

In the case of an unjustified lack of approval by the BoD of the Business Plan, the draft financial statements or the company organisation chart, as well as in the case or revocation of the mandates (while maintaining his position as the Director), the General Manager for corporate activities may withdraw from the contract for just cause and in this case, the TBS Group will pay an employment termination indemnity equal to 125% of the gross annual fees agreed upon.

In the case of dismissal for just cause, the Chief Executive Officer of EBM S.r.l. will receive compensation equal to the amount that would have been received up to the natural expiry of the current mandate.

The Board of Statutory Auditors, Internal Control and Risk Committee, Internal Auditor and Supervisory Body may access corporate information necessary for performing the tasks assigned to them.


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The current Board of Statutory Directors was appointed by the Shareholders’ Meeting on 28 April 2015, using the methods foreseen in articles 21 and 30 of the Articles of Association, and their terms will expire as of the Shareholders’ Meeting to approve the financial statements for 2017. In appointing its members, the Board of Statutory Auditors applies the same methods and procedures pursuant to the above cited article 21, as described for the election of the Directors.

The Auditors meet the independence requirements envisaged by law.They met five times during 2016, of which three with the Internal Control Committee. The meetings of the Board

of Statutory Auditors have an average duration of at least two hours and minutes are prepared for each meeting.The Board of Statutory Auditors includes:

• Andrea Fasan, Chairman, born in 1962, initially appointed in 2012, in office since 2012, term expiring as of the Shareholders’ Meeting which approves the financial statements for 2017, independent pursuant to the Code of Conduct, Chairman of the Board of Auditors of VIP Ceramica S.p.A., in liquidation, Chairman of the Board of Auditors of International Sports Capital S.p.A, Chairman of the Board of Auditors of FDAH S.p.A, Chairman of the Board of Auditors of S.P.A.M.I. S.r.l., Chairman of the Board of Statutory Auditors of Autoscout24 Italia S.r.l., Chairman of the Board of Statutory Auditors of Geberit Service S.p.A., Chairman of the Board of Statutory Auditors of Hoffmann Italia S.p.A., Chairman of the Board of Statutory Auditors of Pittarosso S.p.A., Chairman of the Board of Auditors of Forno D’Asolo S.p.A., Chairman of the Board of Statutory Auditors of GN Hearing S.r.l., Chairman of the Board of Auditors of IAMCO – International Aerospace Management Company Scarl, Chairman of the Board of Auditors of Gavioli S.p.A., Chairman of the Board of Auditors of Forall Confezioni S.p.A., Chairman of the Board of Statutory Auditors of PM S.r.l., Chairman of the Board of Statutory Auditors of Punto Scotta S.r.l., Auditor of Capitolo V. S.r.l. in liquidation, Auditor of Parcheggio e Immobiliare Prato della Valle S.r.l., Auditor of GN Hearing S.r.l., Auditor of Carel Industries S.p.A., Auditor of Semperflex Roiter S.r.l., Auditor of Airest S.p.A., Auditor of Allnex Italy S.r.l., Auditor of BKB Italia S.r.l., Auditor of 3V S.p.A., liquidator of Tacchificio 3C – of F.lli Cesarato S.n.c., liquidator of Gottardo S.r.l., liquidator of Lifet S.a.s. di Sgabarosso Stefano & C., liquidator of Chiara Europa S.r.l., liquidator of Consorzio Edile Nordest, liquidator of Seven S.r.l. in liquidation, liquidator of Consorzio Planet Costruzioni, liquidator of Reenergy S.r.l., liquidator of Euroslot S.r.l. in liquidation, liquidator of Fintex S.r.l. in liquidation, legal administrator of Consul Media Service S.r.l.;

• Renato Furlani, Auditor, born in 1962, initially appointed in 2015, in office until the Shareholders’ Meeting to approve the financial statements for 2017, independent as in the Code of Conduct, Auditor of VGH S.p.A., Auditor of Alder S.p.A., Auditor of Bruno Pacorini S.r.l., Auditor of Cerere S.p.A., Auditor of Colombin & Figlio S.p.A., Auditor of Park San Giusto S.p.a., Auditor of Della Venice European Investment (VEI) Capital S.p.A., independent auditor of Interland – Consorzio per integrazione e lavoro Società Cooperativa Sociale; independent auditor of Ordine Regionale Psicologi;

• Luciano Lomarini, Auditor, born in 1955, initially appointed in 2009 until 2012, in office since 2015 and until the Shareholders’ Meeting to approve the financial statements for 2017, independent as in the Code of Conduct, Chairman of the Board of Auditors of Elettronica Biomedicale S.r.l., Chairman of the Board of Auditors of TBS IT, Auditor of TBS Imaging S.r.l., Auditor of Burgatti S.p.A., Managing Director of Lomarini & Lomarini Consultant S.a.s., Sole Director of Redata S.r.l., Sole Director of Bunker S.r.l., Sole Director of Kell S.r.l.The independent auditing firm, Ernst & Young S.p.A., was appointed by the Shareholders’ Meeting on 21 June 2011,

and its mandate will expire as of the Shareholders’ Meeting called to approve the financial statements for 2019.In accordance with Law 231/2001, the Company updated its Organisation, Management and Control Model,

approved the Code of Ethics and nominated the Supervisory Body.Activities relative to updating the Model are continuous.It gave precise instructions to the Italian companies of the Group to ensure that they proceed in the same way, as

well as to the foreign companies to ensure that they adopt the Code of Ethics.The Company and its subsidiaries continue to map corporate risks and continue the subsequent reviewing and

completion of the procedures.


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The Internal Audit and Risk Committee examined thirty cases of relations with related parties during 2016 and reported the results of the preliminary check to the Board of Directors; a copy of the opinion is delivered to all directors before the meeting.

The Shareholders’ Meeting did not authorise derogations to the prohibition of competition and to that end no problems were brought to the attention of the Board of Directors.

The CFO, Stefano Beorchia is the Investor Relator (e-mail [email protected]). He carried out the activities described below, aimed at facilitating better communication between the listed company and the financial community in both directions, to ensure the security is properly priced.

To achieve this objective, in 2016 the TBS Group participated in the following events:• Lugano Mid&Small Investor Day, organised in Lugano on 23 September 2016 by IR Top in partnership with

Intermonte and with the support of Borsa Italiana. This year was the VII edition. The event was an interesting opportunity to present the TBS Group, through a plenary presentation of around 15 minutes, and to meet the Swiss financial community, in particular family offices, asset managers and fund managers (over 100 present). During the event, one on one meetings with investors also occurred;

• Small Cap Conference 2016, organised in Milan by Borsa Italiana on 29 November 2016, with over 30 AIM Italia companies and over 60 investors. This event also saw one on one meetings with qualified investors.

• European Midcap Event, organised by CF&B in partnership with Intermonte, in Geneva on 1 December 2016. This was the eighth year for the event, and saw the presence of around 150 investors and 60 listed companies. In this case, activities mainly involved one on one meetings, with some meetings with investors. Shareholders were informed of these meetings and the relative presentations were made available on the company

website in the IR section.In cooperation with Corporate Affairs and Marketing and Communication functions, 33 press releases were prepared

relative to privileged information, which were published on the Borsa Italian Network Information System (NIS), which connects Borsa Italiana and Consob to listed companies and press agencies via internet.

The most significant annual events, which play an important role relative to the communication of economic and financial results, are the subject of dedicated conference calls and the sending of supporting documentation to a dedicated email list, which including financial writers and investors includes over 250 names both within Italy and abroad.

When preparing this information, the Investor Relations function has kept its nominated adviser constantly informed, including through dedicated conference calls, to ensure proper execution of assistance and support activities, as foreseen in the regulations for companies listed on the AIM.

A final activity carried out, again in close cooperation with the Marketing & Communication function, was updating the website, specifically the investor relations section.

SUBSEQUENT EVENTS

The following significant events occurred in early 2017. They are described in further detail in the notices on our website in the Investor Relations section.

On 3 February 2017, EBM completed its acquisition of the Esaote business unit which works in the clinical engineering services sector and, with it, 26 contracts to manage and maintain biomedical equipment. Specifically, the portfolio of contracts acquired has an estimated value of approximately 26 million euro over the next three years. Through this operation, EBM has strengthened its market presence, in particular in Tuscany, Liguria, Lazio, Piedmont, Lombardy and Sicily. The investment made by the TBS Group amounted to 4.1 million euro.


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EBM was also awarded the tender issued by INAIL for leasing of home-based magneto-therapy devices for its patients located throughout Italy. The framework agreement signed has a duration of three years, beginning on 13 March, with a total estimated value of 12 million euro.

PROPOSAL FOR RESOLUTION BY THE SHAREHOLDERS’ MEETING

The Board, after an in-depth discussion, unanimouslyresolved

• to approve the Draft Annual Financial Statements for ITAL TBS Telematic & Biomedical Services S.p.A. as at 31 December 2016, together with Management Report on Operations and with Draft Consolidated Financial Statements as at 31 December 2016, drawn up in accordance with the IAS/IFRS international accounting standards;

• to propose to cover the loss of 6,604,853.41 euro seen in the 2016 financial statements by using available reserves;

• to propose a total of 497,056.39 euro for the distribution of a dividend of 0.012 euro per share, excluding the own shares, delegating the CEO to identify the coupon detachment date and payment date.

Trieste, 23 March 2017

On behalf of the Board of Directors Chief Executive Officer Paolo Salotto


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57

Consolidated Financial Statements as at 31 December 2016Annual Financial Report

Consolidated financial statements as at 31 December 2016

Drawn up in accordance with the International Financial Reporting Standards (IFRS)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(thousands of euro) Notes 31/12/2016 31/12/2015

ASSETS

NON-CURRENT ASSETS

- Assets with indefinite useful life (goodwill) 32,430 36,943

- Intangible assets with finite useful life 15,670 25,928

Intangible assets 8 48,100 62,871

- Land and buildings 5,957 7,667

- Plants and equipment 12,163 12,341

- Other tangible assets 2,374 2,850

Tangible assets 9 20,494 22,858

- Investments in associated companies 10 2,302 1,084

- Investments in other companies 10 168 286

- Other financial assets 16 2,602 2,145

- Other non-current assets 10 394 624

- Prepaid tax assets 35 5,634 7,345


NON-CURRENT ASSETS 79,694 97,213

Inventories 11 13,866 11,993

Trade receivables 12 87,800 105,519

Other current assets 13 13,296 12,387

Income tax receivables 14 2,441 3,014

Current financial assets 16 4,895 9,879

Cash and cash equivalents 16 32,167 25,171

CURRENT ASSETS 154,465 167,962

Assets held for sale 7 10,591 333

TOTAL ASSETS 244,750 265,508

NET EQUITY

- Share capital 4,142 4,142

- Reserves 48,111 46,941

GROUP NET EQUITY 52,253 51,083

NET EQUITY ATTRIBUTABLE TO THIRD PARTIES 2,508 2,392

CONSOLIDATED NET EQUITY 15 54,761 53,475


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LIABILITIES

Non-current financial liabilities 16 47,298 50,608

Employee severance indemnity [Italian TFR] 17 7,136 9,074

Deferred tax provision 34 7,540 10,161

Provisions for risks and charges 18 1,639 1,459

Other medium/long-term liabilities 19 183 306

NON-CURRENT LIABILITIES 63,796 71,608

Trade payables 20 38,583 38,706

Other current liabilities 21 19,953 29,171

Current financial liabilities 16 56,550 71,080

Income tax payables 14 2,089 1,468

CURRENT LIABILITIES 117,177 140,425

TOTAL LIABILITIES 180,973 212,033

Liabilities held for sale 7 9,017 0


Consolidated Income Statement

(thousands of euro) Notes 2016 2015(*)

Revenue from sales and services 23 198,371 191,766

Other income 24 1,951 1,165


Cost of materials 25 33,847 29,359

External services costs 26 69,625 70,471

Personnel costs 27 72,559 69,852

Other operating costs 28 4,250 4,961

Cost adjustments for in-house generation of non-current assets 29 -1,480 -1,571

Amortisation, depreciation, write-downs on fixed assets and provisions 30-31 10,674 9,101

Other provisions 31 250 235

Total operating costs 189,725 182,408

OPERATING PROFIT 10,597 10,523

Gains/(losses) from investments 32 -93 35

Financial income 33 1,034 1,009

Financial expenses 33 -5,246 -5,527


Income taxes 34 -2,799 -2,768

PROFIT/(LOSS) FOR THE YEAR deriving from continuing operations 3,493 3,272

Profit/(loss) from assets held for sale 7 -766 -402

PROFIT/(LOSS) FOR THE PERIOD 2,727 2,870

(Profit)/loss attributable to minority interests -421 -460

PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO THE GROUP 2,306 2,410

Earnings per share attributable to ordinary shareholders of the Parent Company (in euro)

- base 6 0.056 0.059

- diluted 0.056 0.059

(*) 2015 figures restated pursuant to IFRS 5 – Discontinued Operations following loss of control over PCS and Insiel Mercato and in consideration of



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Consolidated comprehensive income statement


Profit/(Loss) for the period (A) 2,727 2,870

Other items of the comprehensive income statement that will be subsequently reclassified to profit/(loss) for the period

Fair value change in hedging derivatives -81 -165

Tax effect on fair value change in hedging derivatives 12 45

Net foreign-exchange differences of foreign financial statements -331 142

Other items of the comprehensive income statement that will not be subsequently reclassified to profit/(loss) of the period

Actuarial gains/(losses) -436 552

Tax effect on actuarial gains/(losses) 96 -92

Actuarial gains/(losses) net of tax effect -340 460

Total other comprehensive income statement items (B) -740 482

Total profit/(loss) of the period (A)+(B) 1,987 3,352

Total profit for the period attributable to:

- Minority interests 386 478

- Group 1,601 2,874

Total 1,987 3,352


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CONSOLIDATED CASH FLOW STATEMENT

(thousands of euro) Notes 31/12/2016 31/12/2015(*)

Profit before tax from continuing operations 6,292 6,040

- Depreciation, amortisation and write-downs of intangible and tangible fixed assets and other provisions 10,674 9,102

- Write-downs/(write-backs) on investments 93 -35

- Net increase/(decrease) in the Employee Severance Indemnity provision and other personnel funds 201 506

- Net increase/(decrease) in provisions for risks and charges 251 255

- Interest and other financial income -1,034 -747

- Financial expenses 5,246 5,264

- Costs for share-based payments 0 0

Flow from operating activities of assets held for sale 7 -2,522 3,193

Total 19,201 23,578

Net change in working capital for the period

(Increase)/decrease in inventories -2,007 -1,287

(Increase)/decrease in trade receivables -5,731 8,753

Increase/(decrease) in trade payables 6,156 -1,368

Increase/(decrease) in other receivables and payables -5,833 -16,733

Changes in operating capital of assets held for sale 7 1,101 -1,514

Total -6,314 -12,149

Interest income and other financial income received 0 0

Income taxes paid -2,709 -3,693

Income taxes paid on assets held for sale 7 763 -538

CASH FLOW GENERATED BY OPERATING ACTIVITIES 10,941 7,198

- Purchases of intangible assets -4,171 -2,577

- Purchases of tangible assets -5,510 -5,708

- Acquisitions of other investments -6 0

- Disposal of investments 0 94

- Disposal of intangible assets 4 93

- Disposal of tangible assets 851 244

- Acquisition of subsidiaries, net of financial resources -234 -4,805

Flow from investment activities of assets held for sale -1,004 283

Flow from investment activities from disposed assets 7 11,703 -2,095

CASH FLOW USED BY INVESTMENT ACTIVITIES 1,633 -14,471

CASH FLOWS FROM FINANCING ACTIVITIES

- Net Increase/(decrease) in current financial liabilities -2,395 -2,145

- Net Increase/(decrease) in non-current financial liabilities -2,742 13,699

- Net change in financial receivables and other financial assets 3,477 -7,186

Dividends distributed to third parties -380 -1,151

- Interest and other financial expenses paid -5,143 -4,991

- Interest receivable and other financial income received 616 699

Flow from financing activities of assets held for sale 7 2,396 2,834

CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES -4,171 1,759

CASH FLOW from ordinary assets -4,034 -7,677

CASH FLOW from disposed of assets 7 11,703 283

CASH FLOW from assets held for sale 7 734 1,880

CASH AND EQUIVALENTS AT THE START OF THE YEAR 24,361 28,384

CASH AND CASH EQUIVALENTS AT THE START OF THE PERIOD of assets held for sale 7 810 2,379

- Net foreign-exchange differences 137 -78

CASH AND EQUIVALENTS AT THE END OF THE PERIOD 32,167 20,912

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD of assets disposed/held for sale 7 1,544 4,259

CASH AND EQUIVALENTS AT THE END OF THE PERIOD, TOTAL 33,711 25,171

(*) Data restated as a result of the application of IFRS 5


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SUMMARY STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

(thousands of euro) Share capital

Reserve, Share

premium

Foreign currency

transl. reserve

Other reserves

and retained

earnings/(losses)

Profit/(loss) for

the period

GROUP NET EQUITY

Minority interests

and reserves

Profit/(loss) attributable

to third parties

NET EQUITY ATTRIBUTABLE

TO THIRD PARTIES

CONSOLIDATED NET EQUITY

Consolidated shareholders’equity 31/12/2014 IAS/IFRS 4,142 42,832 -597 765 1,896 49,038 2,235 381 2,616 51,654

Allocation of 2014 profit 0 1,896 -1,896 0 381 -381 0 0

Changes in foreign currency translation reserve 142 142 0 142

Net profit at 31 December 2015 2,410 2,410 460 460 2,870

Actuarial gains/(losses) net of tax effect 442 442 18 0 18 460

Fair-value measurement hedging derivatives net of tax effect -120 -120 -120

Total profit/(loss) of the period 0 0 142 322 2,410 2,874 18 460 478 3,352

Dividends resolved -704 -704 -351 -351 -1,055

Other changes 17 17 0 17

Distribution of dividends to fully consolidated companies due to call and put option contracts -142 -142 0 -142

Sale of subsidiary stakeholding -336 -335 -335

Subsidiary purchase 0 0 0 -15 -15 -15

Consolidated shareholders’equity 31/12/2015 IAS/IFRS 4,142 42,832 -455 2,154 2,410 51,083 1,933 460 2,393 53,476

Allocation of 2015 profit 0 2,410 -2,410 0 460 -460 0 0

Changes in foreign currency translation reserve -331 -331 0 -331

Net profit at 31 December 2016 2,306 2,306 421 421 2,727

Actuarial gains/(losses) net of tax effect -305 -305 -35 0 -35 -340

Fair-value measurement hedging derivatives net of tax effect -69 -69 -69

Total profit/(loss) of the period 0 0 -331 -374 2,306 1,601 -35 421 386 1,987

Dividends resolved 0 0 -286 -286 -286

Other changes -93 -93 0 -93

Distribution of dividends to fully consolidated companies due to call and put option contracts -338 -338 0 -338

Acquisition of minority stakeholdings in subsidiaries 0 0 15 15 15

Consolidated shareholders’equity 31/12/2016 IAS/IFRS 4,142 42,832 -786 3,759 2,306 52,253 2,087 421 2,508 54,761


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Notes to the Financial Statements

NOTE 1 – General information, layout and content of the Consolidated Financial Statements, IFRS compliance and scope of consolidation

General information

TBS Group S.p.A. (hereafter, also “TBS Group” or “the Parent Company”) and the companies in which it holds a stake, directly or indirectly (hereafter, jointly, “the TBS Group” or “the Group”), supply products and above all services to healthcare facilities, both public and private, in the sector of Clinical Engineering Services and Integrated ICT Solutions, in Italy and abroad. This includes: preventive and corrective maintenance of all biomedical equipment, of endoscopic devices at a public or private hospital, safety and operational quality checks on the same, IT-based management, purchasing consultation, testing, training, telecare, telemonitoring, telediagnostics and teleconsulting for all public and private healthcare structures and public social-healthcare structures, with an eye to authentic social/healthcare integration.

TBS Group S.p.A. is a company listed in AIM Italia, a market organised and managed by Borsa Italiana.The registered office of TBS Group S.p.A. is at the AREA Science Park in Padriciano (Trieste), Italy. The Group has

grown internally and through a series of key acquisitions in Italy and Europe, and now operates in eleven European countries, as well as in India.

These consolidated financial statements were approved with a resolution of the Board of Directors on 23 March 2017.

Layout and content of the Consolidated Financial Statements and IFRS compliance

The consolidated financial statements of the TBS Group were drawn up in compliance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and approved by the European Commission at the date of the financial statements. The IFRS are also intended to include all the main revised international accounting standards (IAS), all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) previously known as the Standing Interpretations Committee (SIC).

The consolidated financial statements are based on the historical cost principle, except for the financial derivative instruments that are recorded at fair value.

The consolidated financial statements of the TBS Group are stated in euro, which is the functional currency of the economies in which the Group mainly operates.

The values shown in the account schedules and explanatory notes are, if not otherwise specified, shown in thousands of euro, meaning that the sum of rounded figures may not always coincide with the rounded total.

The TBS Group has adopted the following financial statements:1. Consolidated statement of financial position: assets and liabilities are distinctly classified between current and

non-current.2. Consolidated Income Statement: classification by type.3. Consolidated comprehensive income statement.4. Statement of changes in consolidated net equity5. Consolidated cash flow statement: the indirect method was adopted for stating the cash flows.


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The accounting standards adopted are comparable to those used as at 31 December 2015, apart from the adoption of the following new or revised IFRS or IFRIC standards which were applied for the first time by the Group starting from 1 January 2016.

Changes to IAS 19 Defined contribution plan: employee contributions

IAS 19 requires entities to consider employee or third-party contributions in recording Defined Benefit Plans. When contributions are associated with the service rendered they should be allocated to the periods of service as a negative benefit. This amendment clarifies that, if the amount of the contributions is independent of the number of years of service, the entity can recognise these contributions as a reduction to the cost of service during the period in which the service is provided, rather than allocating the contributions to the periods of service. The change came into effect for the financial periods starting from 1 February 2015 or afterwards. This amendment is not relevant to the Group.

Annual improvements to IFRS- 2010-2012 cycle

These improvements are in effect as of 1 July 2015 and include:

IFRS 2 Share-based payments

This improvement is applied prospectively and clarifies a number of points relative to the definition of performance and service conditions that represent conditions for accrual, including:• A performance-based condition must contain a service condition;• A performance-based objective must be achieved while the counterparty provides the service;• A performance-based objective can refer to operations or activities of an entity, or to those of another entity

within the same Group;• A performance-based objective can be a market condition or non-market-related condition;• If the counterpart ceases providing service during the accrual period, irrespective of the reason, the service

condition is not satisfied.These improvements had no effect on the Group’s accounting standards.

IFRS 3 Business Combinations

The change applies prospectively and clarifies that all agreements for potential payments classified as liabilities (or assets) arising from a business combination must be subsequently measured at fair value with a contra entry to the income statement, whether or not they fall within the scope of IFRS 9 (or IAS 39, whichever is applicable). This is in line with the accounting standards applied by the Group, meaning this amendment had no impact.


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IFRS 8 Operating segments

The amendment applies retrospectively and clarifies that:• an entity should disclose information about the measurements made by management in applying the aggregation

criteria foreseen in section 12 of IFRS 8, including a brief description of the operating segments that have been combined and the economic characteristics (for example, sales or gross margin) used to determine whether the sectors are “similar”;

• it is necessary to present a reconciliation of the assets in the segment and total assets only if the reconciliation is presented to the highest decision-making authority, as required for liabilities in the segment;

• the Group did not apply the aggregation criteria foreseen under IFRS 8.12. In previous periods, the Group presented a reconciliation of business within segments relative to total business, and continues to present it.

IAS 16 Property, plant and equipment and IAS 38 Intangible assets

The amendment applies retrospectively and clarifies that in IAS 16 and IAS 38 an asset can be revalued with reference to observable data either by adjusting the asset’s gross and net book value, and by calculating the accounting market value, and adjusting the gross book value proportionately so that the book value is the same as the market value. In addition, accumulated amortisation and depreciation is the difference between the gross and book value of the asset. The Group did not recognise any adjustment based on revaluation during the interim reference period.

IAS 24 Related party disclosures

The amendment applies retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related-party disclosure requirements. In addition, an entity that seeks recourse to a management entity must disclose the costs sustained for the management services. This amendment is not relevant to the Group.

Amendments to IFRS 11 Recognition of acquisitions of minority interests in joint ventures

The amendments to IFRS 11 require that a joint operator that recognises the acquisition of a stakeholding in a joint operation that is a business must apply the relevant standards under IFRS 3 Business Combinations in regards to accounting for business combinations. The amendments also clarify that, in the case joint control is maintained, the previously held stakeholding in a joint operation is not subject to revaluation at the time an additional equity interest is acquired within the same joint operation. In addition, an exclusion was added to the scope of IFRS 11 to clarify that the amendments do not apply when the parties that share the control, including the entity that prepares the financial statements, are both under the control of the ultimate parent.

The amendments apply both at the time the initial stakeholding is acquired in a joint operation and each time an additional portion of the same joint operation is acquired. They must be applied prospectively. These amendments had no impact on the Group in that during the period there were no acquisitions of interests in joint ventures.


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Amendments to IAS 16 and IAS 38 Clarifications on acceptable methods of amortisation and depreciation

The amendments clarify the principle contained in IAS 16: Property, Plant and Equipment and in IAS 38: Intangible fixed assets, that revenues reflect a model of economic benefits that are generated through the management of a business (which the asset is part of), rather than the economic benefits that are consumed through use of the asset. It follows that a revenue-based method cannot be used for depreciation and amortisation of Property, Plant and Equipment and can only be used in very limited circumstances for the amortisation of intangible assets. These amendments must be applied prospectively, but had no impact on the Group, given that the Group does not use revenue-based methods to amortise or depreciate its non-current assets.

Amendments to IAS 27 Equity method in separate financial statements

The amendments will allow entities to use the equity method to recognise investments in subsidiaries, joint ventures and related companies in their separate financial statements. Entities that are already applying the IFRS and decide to change the accounting criteria, passing the equity method in their separate financial statements, must apply the change retrospectively. These amendments had no impact on the Group’s consolidated financial statements.

Annual improvements to IFRS- 2012-2014 cycle

These improvements include:IFRS 5 Non-current assets held for sale and discontinued operating activitiesAssets (or groups of assets) held for sale are generally transferred through sale or distribution to shareholders. The

amendment clarifies that switching from one method of transfer to the other should not be considered a new transfer plan but, rather, a continuation of the original one. Hence there is no interruption in the application of requirements under IFRS 5. This amendment must be applied prospectively.

IFRS 7 Financial instruments: disclosure

(i) Servicing contracts The amendment clarifies that a servicing contract that includes payment may constitute continuing involvement in

a financial asset. An entity must define the nature of the payment and the agreement using the guidance found in IFRS 7 on continuing involvement, to determine whether disclosure is required. The determination of which servicing contracts involve continuing involvement must be carried out retrospectively. In any case, the disclosure required does not need to be presented for financial years prior to that in which the amendment was initially applied.

(ii) Applicability of IFRS 7 amendments to condensed interim financial statements The amendment clarifies that the payment disclosure requirements do not apply to condensed interim financial

statements, unless the disclosure would provide a significant update to the information provided in the most recent annual financial statements. This amendment must be applied retrospectively.


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IAS 19 Employee benefits

The amendment clarifies that the market depth for high quality corporate bonds must be defined with respect to the currency in which the bond is denominated, rather than the country in which the bond is located. When there is no active market for high quality corporate bonds in that currency, rates relative to government securities must be used. This amendment must be applied prospectively.

Amendments to IAS 1 Disclosure initiative

The amendments to IAS 1 clarify, rather than significantly amend, some of the already existing requirements established under IAS 1. The amendments clarify:• The materiality requirement in IAS 1• The fact that specific items in the table indicating profit/(loss) of the financial statements or other components of

the comprehensive income statement or the statement of financial position may be disaggregated• That entities are not held to present the notes to the statements in a specific order• That the portion of other components of the comprehensive income statement relative to associates and joint

ventures measured using the equity method must be presented in aggregate form in a single line, and classified among the items that are not subsequently reclassified in the income statement.

Moreover, the amendments also clarify that the requirements that apply when sub-totals are presented in the profit/(loss) statements for the period or in other components of the comprehensive income statement or the statement of financial position. These amendments had no impact on the Group.

Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28)

The amendments deal with issues which arose in applying the exception relative to investment entities, foreseen in IFRS 10 Consolidated Financial Statements. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent company that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

The amendments to IFRS 10 also clarify that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated. All the other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28: Investments in Associates and Joint Ventures, allow the investor to maintain, when applying the equity method, the fair-value measurement applied by associated or joint venture companies of an investment entity in the valuation of its own investment in subsidiary companies.

These amendments must be applied retrospectively and had no impact on the Group.

International accounting standards and/or interpretations approved by the relevant European Union bodies in 2016 but not yet applicable

On 22 September 2016, with Regulation 2016/1905, the European Commission approved IFRS 15 Revenue from Contracts with Customers.

The new standard provides a guide, consisting of five steps, for the handling of all contracts with customers, with the exception of leasing contracts, insurance contracts, financial instruments and non-monetary exchanges.


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The five steps are: identifying the contract, identifying performance obligations, determining the transaction price, allocating price to performance obligations, recognising revenue.

The standard establishes that revenues must be recognised at the moment when (or as) an obligation is met, or when the good (or service) promised is transferred to the customer.

The price promised in the contract with the customer may include fixed amounts, variable amounts or both. In the case of variable components, the price must be appropriately estimated taking all reasonably available information into account (historic, current and predicted).

Amounts due for royalties are an exception to the general rule for revenue recognition. These must be recognised only after the underlying sale or use has occurred.

The standard provides specific indications relative to dividing the transaction prices between performance obligations, changes to the transaction price and definition of incremental costs of obtaining a contract.

Additionally, the operating guide, which is an integral part of the standard, discusses in detail various issues such as sales with rights of return, consignment arrangements and bill and hold arrangements.

With Regulation 2016/2067 of 22 November 2016, the European Commission adopted IFRS 9 Financial Instruments, which introduces new requirements for the classification and measurement of financial assets, previously handled using IAS 39.

The new standard establishes that financial assets must be classified relative to the measurement criteria in two categories, specifically: assets measured at amortised cost and assets measured at fair value.

Financial assets which meet two conditions are measured at amortised cost: the objective of the entity’s business model is to hold the financial asset to collect the contractual cash flows and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets must be measured at fair value, recognised among other components of the comprehensive income statement or recognised in the profit (loss) for the year.

The changes introduced in the above cited Regulations will apply to the first financial year starting on or after 1 January 2018.

The Group has not adopted in advance any new standards, interpretations or amendments approved but not yet in force.


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Scope of consolidation

The consolidated financial statements comprise the financial statements of TBS Group S.p.A. and the subsidiaries over which it exercises direct and indirect control.

The companies included in the scope of consolidation as at 31 December 2016 are listed below:

Subsidiary Registered Office

Share capital Type of Investment


TBS Group Spa Trieste (Italy) EUR 4,142,137 Parent Company Parent Company

Tesan Televita Srl Udine (Italy) EUR 46,800 Indirect 75.1 Line by line

TBS FR Telematic & Biomedical Services Sarl Lyon (France) EUR 1,690,500 Direct 100 Line by line

TBS BE Telematic & Biomedical Services BVBA Loncin (Belgium) EUR 150,000 Direct 100 Line by line

TBS G.B. Telematic & Biomedical Services Ltd. Southend on Sea (United Kingdom) GBP 500,000 Direct 96.13(1) Line by line

Telematic & Biomedical Services SL (single-member Company) Barcelona (Spain) EUR 650,000 Direct 100 Line by line

STB Servicios Telematicos e Biomedicos Lda Unipessoal

Dafundo (Portugal) EUR 100,000 Direct 100 Line by line

Surgical Technologies BV Didam (The Netherlands) EUR 18,200 Direct 100 Line by line

Crimo Italia Srl Gualdo Tadino (Italy) EUR 103,165 Direct 55.75 Line by line

Elettronica Bio Medicale Srl Foligno (Italy) EUR 1,897,765 Direct 100 Line by line

MSI MedServ International Deutschland GmbH

Pfullendorf (Germany) EUR 321,000 Direct 100 Line by line

TBS IT Srl (single-member Company) Trieste (Italy) EUR 5,295,860 Direct 100 Line by line

TBS SE Telematic & Biomedical Services Doo Belgrade (Serbia) RSD 467,000 Direct 100 Line by line

TBS INDIA Telematic&Biomedical Services Prv. Ltd Bangalore (India) INR 5,000,100 Direct 100 Line by line

Erre Effe Informatica Srl Arezzo (Italy) EUR 41,280 Indirect 51(2) Line by line

TBS Imaging Srl Fisciano (Italy) EUR 100,000 Indirect 100 Line by line

Ing. Burgatti Spa San Lazzaro di Savena (Italy) EUR 312,000 Indirect 65(3) Line by line

TBS Bohemia Sro Prague (Czech Republic) CZK 200,000 Direct 100 Line by line

Crimo France Sas Ablon sur Seine (France) EUR 40,000 Indirect 100 Line by line

Crimo Instrumentation Medicale SL Castillon de la Plana (Spain) EUR 10,000 Indirect 100 Line by line

Tunemedix Lda Aldeia de Paio Pires (Portugal) EUR 5,000 Direct 51(2) Line by line

Neoim Srl Trieste (Italy) EUR 20,000 Direct 100 Line by line

(1) Following the valuation of final sale of the remaining 3.87% of the shares, the consolidation percentage is 100%.



The scope of consolidation at 31 December 2016 has changed since 31 December 2015, following:• the purchase, on 7 March 2016, of 51% of the stakeholding in Tunemedix Lda for 184,000 euro;• the acquisition on 16 March 2016 of an additional 20.2% of Crimo Instrumentation Medicale shares (previously

79.8% held) at a price of 6,000 euro;


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• the sales on 29 December 2016 of 55% of the shares of the subsidiary Insiel Mercato and 100% of the shares of the subsidiary PCS which leave the scope of consolidation. The price paid was 13 million euro for PCS and 1.8 million euro for Insiel Mercato. The results of the two companies up to the transfer date are reclassified among the item result of assets sold. As required under IFRS 5, the consolidated income statement and the consolidated cash flow statement for the previous period have been appropriately reclassified;

• the establishment of Neoim, resulting from the demerger of Insiel Mercato prior to the disposal, held 100% by the TBS Group.Note that at 31 December 2016, the subsidiary TBS IT is classified among assets held for sale, following the

decision to sell the associated stakeholding. Consequently, the consolidated income statement and the consolidated cash flow statement for the previous period were appropriately revised as foreseen under IFRS 5.

On 22 September 2016, the sale of the stakeholding in Sinopharm TBS was completed, classified at 31 December 2015 among assets held for sale (333,000 euro), with receipt of the relative payment.

NOTE 2 – Accounting standards

Consolidation principles

The consolidated financial statements include the financial statements of TBS Group S.p.A. (Parent Company) and its subsidiaries, prepared at 31 December of each year. The financial statements of the subsidiaries are drawn up adopting the same accounting standards as the Parent Company. Any consolidation adjustments are introduced to make the items affected by application of different accounting standards homogeneous.

All balances and intergroup transactions, including any unrealised profits deriving from relations between Group companies, are completely eliminated. Unrealised profits and losses with associated companies are eliminated for the Group portion. Unrealised losses are eliminated, except for the case in which they represent permanent losses.

The subsidiaries are fully consolidated starting from the date of acquisition, or from the date when the Group acquires control, and they stop being consolidated on the date when control is transferred outside the Group.

The losses are attributed to the minority shareholders, even if this implies that the minority interests have a negative balance.

The changes in the equity investment of the parent company in a subsidiary that do not entail loss of control are recorded as capital transactions. In particular in acquisitions of minority interests, the difference between the price paid and the book value of net assets acquired is recognised directly in net equity.

If the parent company loses control of a subsidiary, it:• eliminates the assets (including any goodwill) and liabilities of the subsidiary;• eliminates the book values of any minority interest in the former subsidiary;• eliminates the foreign exchange differences recorded in shareholders’ net equity;• records the fair value of the consideration received;• records the fair value of any amount of stakeholding in the former subsidiary;• records all gains and losses in the income statement;• reclassifies the parent company’s interest of the components previously recorded in the consolidated comprehensive

income statement to the income statement or to retained earnings, as appropriate.


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Foreign currency transactions and translation of financial statements of subsidiaries prepared in currencies other than the euro currency

The consolidated financial statements are stated in euro, which is both the functional and presentation currency adopted by the Parent Company. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded at the functional exchange rate at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are then converted at the financial statements

reference date using the closing exchange rate. All foreign exchange differences are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to net equity until the disposal of the net investment, at which time they are recognised in profit or loss. Tax effects attributable to foreign exchange differences on those borrowings are also dealt with in net equity. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

The functional currency used by the British subsidiary TBS G.B. Telematic & Biomedical Services Ltd. is the British pound.

The functional currency used by the Serbian subsidiary TBS SE Doo is the Serbian dinar, that used by the Indian subsidiary TBS India Ltd. is the Indian rupee, that used by Czech subsidiary TBS Bohemia is the Czech koruna.

At the closing date of the financial statements, the assets and liabilities of subsidiaries, including any goodwill arising on acquisition of a foreign operation, are translated into the Group presentation currency (the euro) at the exchange closing rate, while the income statements are translated at the average exchange rate for the reference period. The foreign exchange differences arising on the translation at a different rate than the closing one, and those generated by the translation of the opening shareholders’ equities at an exchange rate different from the closing one, are taken directly to a separate component of net equity, in an appropriate reserve.

On disposal of a foreign entity, the differences in foreign exchange rates recorded in shareholders’ net equity relating to that particular foreign entity are recognised in profit or loss.

The exchange rates applied as at 31 December 2016 for translating financial statements in foreign currency are as follows (1 euro=foreign currency) and corresponding to those made available by the Italian Foreign Exchange Office:

Currency Average exchange rate 2016

Exchange rate as at 31/12/2016

Average exchange rate 2015

Exchange rate as at 31/12/2015

Pound Sterling (GBP) 0.81948 0.85618 0.72585 0.73395

Serbian dinar (RSD) 123.10615 123.40300 120.68667 121.45100

Indian rupee 74.37169 71.59350 71.19561 72.02150

Czech koruna 27.03429 27.02100 27.27918 27.02300


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Valuation criteria

Intangible assets with indefinite useful life

Business combinations and goodwill

Business combinations are recorded using the acquisition method. The cost of an acquisition is measured as the sum of the transferred consideration measured at fair value as at the date of acquisition and the amount of any minority stakeholding in the acquisition. For each business combination, the buyer must measure any minority stakeholding in the acquisition at fair value or in proportion to the amount of the minority stakeholding in the identifiable net assets of the acquisition. The acquisition costs are paid and classified as administrative expenses.

When the Group acquires a business, it must classify or designate the acquired financial assets or liabilities assumed according to the contractual terms, economic conditions and other pertinent conditions existing on the acquisition date. This includes a verification to determine if an incorporated derivative must be separated from the primary contract.

If the business combination is carried out in two or more stages, the purchaser must recalculate the fair value of the stakeholding previously held and measured with the equity method and record any resulting profit or loss in the statement of income.

The buyer must record all potential considerations at fair value as at the acquisition date. The change in fair value of the potential consideration classified as asset or liability must be recorded in the statement of income or statement of the other consolidated statement of comprehensive income components pursuant to the instructions set forth in IAS 39. If the potential considerations are classified in the shareholders’ net equity, its value must not be recalculated until its extinction is recorded against shareholders’ net equity.

Goodwill is initially measured at the cost that arises as an excess of the summation of the consideration paid and the amount recognised for the minority interests with respect to the identifiable acquired assets and liabilities taken on by the Group. If the consideration is less than the fair value of the net assets of the acquired subsidiary, the difference is recorded in profit and loss.

Following initial recognition, goodwill is no longer amortized and is measured at the reduced cost of the accumulated losses of value calculated with the methods described hereunder. In order to verify reduced value, the goodwill acquired in a business combination must, from the date of acquisition, be allocated to every Group cash generating unit that anticipates benefits from the combination, regardless of the fact that other assets or liabilities of the acquired entity are assigned to said units. Goodwill is tested for impairment annually and whenever circumstances indicate that its carrying value may be impaired, as provided for in IAS 36 – Impairment of assets.

Any impairment is identified through measurement of the capacity of single units to generate cash flows meant to recover allocated goodwill through the procedure indicated below in the “Impairment” section. When the recoverable amount of the cash generating unit is less than its carrying amount, an impairment loss is recognised in profit and loss. Should the causes having generated the impairment cease to exist, impairment losses are not reversed.

If the goodwill was allocated to a cash generating unit and the entity divests itself of part of the assets of that unit, the goodwill associated with the divested asset must be included in the book value of the asset when the profit or loss deriving from the divestment is determined. The goodwill associated with the divested asset must be determined based on the relevant values of the divested asset and of the part kept by the cash generating unit.


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Intangible assets acquired separately are measured on initial recognition at cost, while those acquired in a business combination are measured at fair value as at the date of acquisition.

Following initial recognition, intangible assets with finite useful life are carried at cost less any accumulated amortisation and any impairment determined in accordance with the methods detailed in the “Impairment” section.

Intangible assets owned by the Group and acquired exclusively to manage specific contracts, are amortised over the shortest period between the intangible asset’s residual useful life and the residual duration of the underlying contract (three years on average).

For the remaining owned intangible assets with finite useful life, amortisation is calculated on a straight-line basis over an average period of five years, corresponding to the estimated useful life.

The useful life of an intangible asset is reviewed annually.The Group applies the following policies to intangible assets:

Development Costs Software, licenses and trademarks

Other intangible fixed assets

Useful lives Finite Finite Finite

Amortisation method used Amortised on a straight-line basis over a period of 5 years

Amortised on a straight-line basis over a period of 3/5 years

Amortised on a straight-line basis over a period of 3/10 years

Internally generated or acquired Internally generated/Acquired Internally generated/Acquired Acquired

Impairment test for recognition of impairment

Annually or more frequently if indicators of impairment exist



Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statements of income upon disposal.

Property, plant and equipment – Owned assets

Property, plant and equipment is stated at purchase or production cost. The cost of the assets includes directly attributable costs and those necessary for putting the asset into operation for the use for which it was acquired, in addition to the present value of the estimated cost for dismantling and removing the asset, where applicable and in presence of current obligations.

Improvements to leased assets are recognised at cost under tangible fixed assets coherently with the nature of the cost incurred.

The expenses incurred for ordinary and/or cyclical maintenance and repairs are directly recognised in the statements of income as incurred. The capitalization of costs related to the enlargement, updating or improvement of an asset owned or in use by third parties is carried out exclusively within the limits in which they meet the requirements for being separately identified as an asset or part of an asset.

The cost of property, plant and equipment is reduced by depreciation, calculated on a straight-line basis over the estimated useful life of the asset, and by any accumulated impairment, determined in accordance with the methodology detailed in the “Impairment” section.


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For owned assets, the depreciation rates which correspond to the estimated useful lives are as follows:

Description Rate

Buildings 3%

Plants and equipment 15% and 25%

Industrial and commercial equipment 15% and 25%

Furnishings 15%

Office equipment 12%

Office electronic machines 20%

Motor vehicles 25%

Assets owned but acquired specifically to manage specific contracts are amortised over the shortest period between the tangible fixed asset’s residual useful life and the residual duration of the underlying contract (three years on average).

The above depreciation rates are reviewed at least annually; any adjustments, as deemed appropriate, are applied prospectively.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and residual carrying amount of the asset) is included in the statement of income in the year the asset is derecognised.

Property, plant and equipment – Leased assets

Assets held under finance leases, which substantially provide the Group with all the risks and rewards of ownership, are recognised as assets and liabilities at their fair value or, if lower, at the present value of the minimum lease payments including any sum to be paid for exercising the purchase option. The corresponding liability due to the lessor is recorded under financial liabilities.

Lease payments are apportioned between interest expense and reduction of financial liabilities so as to achieve a constant periodic interest rate on the outstanding balance of the liability. Financial expenses are included in statements of income.

Assets held under finance leases are depreciated using the following depreciation rates:

Description Rate

Buildings 3%

Industrial and commercial equipment 15% and 25%

Motor vehicles 25%

Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as operating leases. Operating lease expenditures are charged to the statement of income over the lease term.

Impairment of assets

At the balance sheet date and if there are any indicators of impairment, an assessment is carried out to determine the recoverable value of the intangible assets or property, plant and equipment, or group of intangible assets or


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property, plant and equipment (Cash Generating Units, hereinafter also referred to as CGUs), net of sale costs and value in use. When the asset’s carrying amount exceeds its recoverable amount the asset is written down to its recoverable amount.

The recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the cost of money over time and the risks specific to the asset. For an asset that does not generate independent cash inflows, the recoverable amount is determined for the cash-generating unit to which it has been allocated. Impairment losses are recognised in the statement of income with the costs for depreciation, amortisation and write-downs. Said impairment is reversed in the case that the reasons behind them cease to exist, with the exception of impairment relative to goodwill.

Investments in associated companies and joint ventures

The Group’s investment in its associates or joint ventures is accounted for using the equity method of accounting. An associate or joint venture is an entity in which the Group has significant influence and which cannot be classified as a subsidiary.

Under the equity method, the stakeholding in the associate or joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the stakeholding and is not amortised.

After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate.

The consolidated statement of income reflects the Group’s share in the results of operations of the associate. When there has been a change recognised directly in the net equity of the associate, the Group recognises its share of any such change and discloses those, when applicable, in the consolidated statements of changes in shareholders’ net equity.

The income statement reflects the share of the results of operations of the associate. The associated companies’ fiscal year and accounting policies used by the associated companies are the same as the

Group for similar transactions and events in similar circumstances.

Investments in other companies

Investments in other companies for which fair value cannot be reliably assessed are stated at the acquisition or subscription cost less any distribution of share capital and reserves and after any impairment, determined by the same methods indicated previously for property, plant and equipment. Should the reasons for the impairment cease to exist, the original value shall be restored in subsequent years.

Financial assets and other non-current assets

Receivables and other non-current assets to be held to maturity are recognised at cost, represented by the fair value of the initial consideration given, including transaction costs. The initial measurement is subsequently adjusted in order to reflect capital repayments, any write-downs and the amortisation of the difference between the repayment value and the valuation on initial recognition. Amortisation is recorded on the basis of the effective internal interest rate, represented by the rate which equals, at the time of the initial recognition, the present value of the estimated cash flows and the measurement of initial recognition (amortised cost method).


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Inventories

Inventories are valued at the lower of the purchase or manufacturing cost and net realisable value, represented by the amount that Group companies expect to receive from sale in the ordinary course of the business, less costs of completion and estimated selling costs.

The purchase cost, which also includes direct accessory costs (including shipping, handling, etc.), is calculated for raw materials and for finished products using the FIFO method. Service contracts in progress at the end of the year for which is not possible to reliably measure the accrued margin, are valued based on the specific costs incurred at the closing date of the balance sheet.

Slow-moving and obsolete stock is written-down according to its potential use or sales value.

Trade receivables and other receivables

Trade receivables are recognised at their estimated realisable value, which corresponds to nominal value less write-downs reflecting the estimated losses, if any.

A provision for doubtful account is made when there is an objective indication (such as a probable insolvency or the debtor facing significant financial difficulty) that the Group is unable to recover all the amount due on the basis of original invoicing conditions. The book value of the receivable is reduced through a provision. Receivables subject to impairment are removed from the accounts when it is ascertained that they are not recoverable.

Any medium and long-term loans containing an implicit interest component are discounted using an appropriate market interest rate.

Current financial assets

Financial assets kept for negotiation purposes are recorded on the basis of the negotiation date and, at the time of the initial entry on the balance sheet, are valued at the purchase price, represented by the fair value of the initial consideration given in exchange, net of transaction costs. Following the initial recognition, current financial assets are assessed at fair value and corresponding variation in fair value are included in profit and loss. The fair value of these instruments is determined by referring to the market value at the closing date of the period in which the instrument is recorded; the fair value of financial instruments not listed in an active market is determined by using valuation techniques commonly in use.

Treasury shares

Own shares are deducted from shareholders’ net equity. No gain or loss is recognised in the statements of income upon the purchase, sale, issue or cancellation of the own shares.

Share-based payments

Stock options are estimated at fair value using the model based on the Black and Scholes formula, determined by the date of assignment. The relevant cost is recognised in the statement of income under personnel costs (if concerning employees) or under service costs (if concerning directors) during the period in which the conditions for


76

exercising them mature and a contra entry is recognised in an equivalent increase of the shareholders’ equity. The changes in the present value of the shares after the date of assignment have no effect on the initial valuation. Any effect of dilution of options not yet exercised is reflected in the calculation of the diluted earnings per share.

Cash and cash equivalents

Cash and cash equivalents include deposits held at call or available in a very short period for which no expenses for collection have to be incurred. They are recorded at their nominal value.

For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents is presented gross of bank overdrafts at the Financial Statements closing date.

Termination indemnities

Employee benefits paid on or after termination of the employment through defined benefit programmes (Employee severance indemnity [Italian TFR]) or other long term benefits (Termination Indemnities) are recognised on an accrual basis.

The liability relating to defined benefit plans, net of any related plan asset, is determined on the basis of actuarial assumptions and is recognised on an accruals basis, in line with services rendered in order to obtain the benefits; liabilities are measured by an independent actuary. The part of actuarial profits and losses that must be recognised for each defined benefit plan, following the amendment to IAS 19 in effect as of 1 January 2013, is systematically booked directly to an item in the shareholders’ net equity, and will not be reclassified to the income statement in successive years.

Following amendments made to the Employee Severance Indemnity by law No. 296 of 27 December 2006 (Financial Law 2007) and subsequent Decrees and Regulations issued in early 2007, the Employee Severance Indemnity of Italian companies matured as at 1 January 2007 or at the date the option to be exercised by employees was selected is included in the category of programmes with defined contribution, both in the case of supplementary allowance as well as of allocation to the Treasury Fund of the INPS. The accounting of this Employee Severance Indemnity is therefore assimilated with other types of contribution deposits.

Provisions

Provisions for risks and future charges are recognised when the Group has a present obligation (legal or implicit) resulting from a past event, when it is probable that an outflow of Group’s resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Changes in the assessment are reflected in profit and loss of the period during which the change occurred. If the potential discount effect is significant, the provisions are discounted using a pre-tax discount rate that reflects the specific risks of the liabilities. Once the discount is carried out, the increase of the provision due to the passing of time is recognised as a financial expense.


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Loans

All long-term loans are initially recognised at fair value of consideration received less directly attributable transaction costs.

After initial recognition, long-term debts are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

Derivatives

The Group uses financial derivative instruments such as interest rate swaps to hedge against risks resulting from interest rate fluctuations.

These derivative instruments are initially recognised at fair value at the date on which they are entered into; the fair value is then periodically measured and recorded in relation to the characteristics and to the subsequent classification of the instrument.

For the purposes of hedge accounting, hedges are classified as:• fair-value hedges, if they refer to the exposure to the risk of changes in the fair value of the underlying asset or

liability; or to an irrevocable commitment (with the exception of exchange risks);• cash flow hedges, if they refer to the exposure to the risk of fluctuation in cash flows attributable to a specific asset

or liability or to a highly probable planned transaction or to the exchange rate risk of an irrevocable commitment;• hedge of a net investment in a foreign entity.

On entering into a hedge transaction, the Group designates and officially records the hedge ratio to which hedge accounting will be applied, its risk management strategy and objectives. The documentation includes details of the hedge instrument, the element or transaction being hedged, the type or risk and the method through which the company intends to measure hedge efficiency in offsetting exposure to changes in fair value of the element hedged or of the financial flows attributable to the hedged risk. These hedges are expected to be highly efficient in offsetting exposure of the element hedged from changes in fair value or of financial flows attributable to the hedged risk; valuations showing that the hedges are effectively highly efficient are carried out on an ongoing basis throughout the reporting periods to which they apply.

The fair value of interest rate swap contracts is determined by referring to the market value of similar instruments.Cash flow hedges are recorded as assets when the fair value is positive and as liabilities when it is negative; in these

cases the derivative is measured at fair value and changes in value are recorded directly in a shareholders’ net equity reserve that is posted to the profit and loss account in the accounting periods in which the underlying cash-flows are manifested.

Any profit or loss deriving from changes in the fair value of derivatives not suited for hedge accounting is posted directly to profit and loss.

Trade payables and other debts

Trade payables with a due date within the standard commercial terms are not discounted and are recognised at cost (identified by the nominal value).

Other liabilities are entered at cost (identified by nominal value).


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Assets held for sale (Discontinued operations)

Assets held for sale refers to those assets (or groups of assets held for sale) whose book value will be mainly recovered through sale rather than through continuous use. Assets held for sale are carried at the lesser of the net book value and the fair value, net of sales costs.

The condition for classification as held for sale is considered to be met only if the sale is highly probable and the asset or group held for sale is available for immediate sale in its current conditions. The actions required to complete the sale should indicate that it is improbable that significant changes could arise in distribution or that distribution is cancelled. Management must be committed to its sale, the completion of which must be envisaged within one year of the date of classification.

Revenue recognition

Revenues are recognised when it is probable that the economic benefits will flow to the Group and the revenues can be reliably measured.

Revenue is shown net of discounts, reductions, returns and other sales taxes.In particular, revenue from the sale of goods is recognised according to the contractual terms when the significant

risks and rewards of ownership relating to the goods are transferred to the buyer. Rendering of services revenues are recognised by stage of completion. This is measured as the percentage of the

incidence of costs incurred with respect to the total costs estimated for each contract. When the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses incurred that are recoverable.

Financial revenue is recorded on an accrual basis.

Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all underlying conditions will be met.

When a grant relates to cost components, it is recognised as revenue over the proper period in order to be correlated to the costs that it is intended to compensate.

When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the statement of income over the expected useful life of the relevant asset.

Accounting for costs and expenses

Costs and expenses are recorded when they relate to goods and services sold or consumed during the year or by systematic allocation when their future utility cannot be identified.


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Interest

Interest revenue and expense are recognised as the interest accrues on the net carrying amount of the underlying value of financial asset or liability, using the effective interest rate.

Dividends

Dividends are recognised when the right of shareholders to receive payment is established. This right arises following the decision made on distribution made (by 31 December each year) by the subsidiary.

Income taxes

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date and in those countries in which the Group operates.

Current taxes relating to items recorded directly to equity are recognised directly to equity and not to the profit and loss.

Deferred taxes

Deferred income tax is provided using the liability method on temporary differences at the balance-sheet date between the reference fiscal values for assets and liabilities and the values recorded in the financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences, except:• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction

that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.Prepaid tax is recognised for all deductible temporary differences, carry-forward of tax losses, to the extent that

it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of deductible temporary differences and tax losses, can be utilised, except:• where the deferred income tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.


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In assessing the probability of the availability of a future income against the entry of deferred assets for tax losses one considers: • there must exist sufficient temporary differences with regard to the same tax authorities and the same tax subject

that will turn into taxable amounts against which tax losses may be used prior to their expiration;• that unused tax losses result from identifiable causes that are unlikely to be repeated;• that there exist opportunities for tax planning on the basis of which there will be taxable income during the year in

which tax losses may be used.The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the

extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and liabilities relating to items recognised directly in net equity are recognised in net equity and not in the statement of income.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set offering of current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Earnings per share

Earnings per share are calculated by dividing the net profit for the period attributable to the shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, net of own shares.

In order to calculate the diluted earnings per share, the weighted average number of shares outstanding, net of own shares, is modified assuming the conversion of all the potential shares with dilutive effect. Even the net profit of the Group is adjusted in order to consider the effects of the conversion, net of the relative taxes.

Use of estimates

The preparation of the Group financial statements requires the directors to make estimates and assumptions that affect the reported amounts of the assets and liabilities and the disclosure of information on contingent assets and liabilities at the date of the financial statements. Nonetheless, the uncertainty of these assumptions and estimates may determine impacts requiring a significant adjustment to the accounting value of these assets and/or liabilities at a future date.

The estimates are essentially used to recognize provisions for doubtful account, inventory obsolescence, amortisation, depreciation and write-downs of non-current property, plant and equipment and intangible assets, employee benefits, deferred income taxes and other provisions for risks and charges. Estimates and assumptions are revised periodically and the effects of every variation are immediately reflected on the profit and loss.

Specifically, goodwill is verified for any losses of value at least once a year; this test requires an estimate of the value in use of the CGU to which the goodwill is attributed, based in turn on an estimate of the cash flow expected from the unit and its discounting at an appropriate discount rate. As at 31 December 2016, the carrying value of goodwill was 32,430 thousand euro (2015: 36,943 thousand euro). Further details are provided in Note 8.


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NOTE 3 – Segment reporting

On 4 May 2016, the TBS Group Board of Directors resolved to restructure the two Business Units based on operating sectors, respectively known as Medical Devices and ICT Systems and Integrated e-Health & e-Government Solutions into two Business Units based on their geographic locations, known as Clinical Engineering Services and Integrated ICT Solutions Italy and Clinical Engineering Services and Integrated ICT Solutions, International.

This change in the determination of the Business Units made it necessary to reclassify the comparative figures from the previous year.

Management separately monitors the operating profit of each business unit in order to make decisions on resource allocation and performance appraisal. The results of financial management and income taxes are managed at group level and are not therefore allocated to individual operating segments.

Prices for transferring items between operating segments are determined under the same conditions as those applied to third party transactions.

Operating segments

The table below presents data on Group revenues and results for the financial years ended 31 December 2016 and 2015 respectively.


Clinical Engineering Services and

Integrated ICT Solutions ITALY


Integrated ICT Solutions

INTERNATIONAL

Total Clinical Engineering Services and




INTERNATIONAL

Total

Revenue

Revenue from third parties and other revenue 129,301 71,021 200,322 129,775 63,156 192,931

Total revenue 129,301 71,021 200,322 129,775 63,156 192,931

Operating profit by business segment 6,550 4,047 10,597 8,181 2,342 10,523

Gains/(losses) from investments -93 35

Financial income (expenses) -4,212 -4,517

Profit before tax 6,292 6,040

Taxes 2,799 2,768

Profit/(loss) for the period 3,493 3,272

Result of assets held for sale -766 -402

Total 2,727 2,870


In the Clinical Engineering Services and Integrated ICT Solutions, Italy sector, revenues remained substantially stable, going from 129,775 thousand euro in 2015 to 129,301 thousand euro in 2016, with an absolute decrease of 474 thousand euro.


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The operating profit of the segment fell, in absolute terms, by euro 1,631 thousand, from euro 8,181 thousand to euro 6,550 thousand, with the incidence on revenue equal to 5.0% against 6.0% the previous year.

Revenue rose from euro 63,156 thousand in 2015 to euro 71,021 thousand in 2016 in the Clinical Engineering Services and Integrated ICT Solutions, International segment, with an absolute increase of euro 7,865 thousand and a percentage increase of 12.0%. This increase is mainly due to the increase in revenues from the subsidiary of TBS India, following the awarding of an important tender for euro 3,592 thousand, an increase in revenues due to the change in the scope of consolidation, following the acquisition of Crimo France in August 2015, for euro 3,692 thousand, and the acquisition of the subsidiary Tunemedix on 7 March 2016 for euro 925 thousand, partially compensated for by the reduction in revenues from other group companies.

Operating profit, at euro 4,047 thousand, showed an improvement in absolute terms of euro 1,705 thousand. This increase can be ascribed to the subsidiary TBS India, following an increase in its revenues.

The table below shows assets and investments relating to the Group’s individual operating segments as at 31 December 2016 and 2015:

(thousands of euro)

31/12/2016 31/12/2015





INTERNATIONAL





INTERNATIONAL

Total

Assets and liabilities

Assets by segment 182,775 48,580 231,689 212,306 51,832 263,805

Equity investments 2,244 226 2,470 1,124 246 1,370

Non-allocated assets 0 0 0 0 0 0

Assets held for sale 10,925 0 10,591 0 333 333

Total assets 195,944 48,806 244,750 213,430 52,078 265,508

Liabilities by segment 153,153 27,820 180,973 180,671 31,362 212,033

Non-allocated liabilities 0 0 0 0 0 0

Liabilities held for sale 9,017 0 9,017 0 0 0

Total liabilities 162,170 27,820 189,990 180,671 31,362 212,033






INTERNATIONAL





INTERNATIONAL

Total

Other information

Investments in fixed assets 7,607 3,251 10,858 10,998 7,031 18,029

Depreciation and amortisation 6,638 3,352 9,990 3,352 5,749 9,101

Other non-monetary costs 3,320 964 4,283 3,208 51 3,258



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The following table shows Group revenue by geographic area as at 31 December 2016 and 2015:


Italy European Union

Other Total Italy European Union

Other Total

Revenue

Revenue from third parties 129,301 61,770 9,250 200,322 129,774 58,718 4,439 192,931

Infra-sector Sales - - - -

Total revenue 129,301 61,770 9,250 200,322 129,774 58,718 4,439 192,931


The increase in revenues seen in the other European Union countries is mainly due to the acquisition of Tunemedix in 2016 and Crimo France in 2015.

The increase in revenues achieved in the other non-EU countries is mainly due to the subsidiary TBS India.

NOTE 4 – Business combinations

Acquisition of Tunemedix Lda

On 7 March 2016, the Parent Company acquired 51% of the shares of Tunemedix Lda of Lisbon, Portugal. The company specialises in supplying diagnostic imaging products and managing relative services. The purchase price for 51% of the share capital was euro 184 thousand. The parties also established a contractual put & call option for the purchase/sale of the entire residual stakeholding, to be exercised by 31 March 2021.

The Directors assessed the put & call option to purchase the remaining portion of the share capital at euro 177 thousand. This amount was recorded among the non-current financial payables.

The fair value of assets and liabilities identified at the date of acquisition is as follows:

(thousands of euro) Fair value recorded in the financial statements at

acquisition

Carrying value

Total current assets 642 642

Total non-current assets 170 170

TOTAL ASSETS 812 812

Total current liabilities 410 410

Total non-current liabilities 453 453

TOTAL LIABILITIES 863 863

Fair value of net assets -51 -51

Goodwill 412

Price 361

Cash acquired 40

Note that the price for the acquisition was greater than the net fair value of the Company’s net assets as of the acquisition date. For said difference, goodwill was recognised in the amount of euro 412 thousand.

Note that the contribution to the Group’s result made by the companies equals a profit of euro 127 thousand, and their contribution to consolidated revenue is euro 924 thousand.


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Additionally, on 6 April 2016, Crimo Italia acquired the Kymed business unit for euro 85 thousand.

NOTE 5 – Financial risk management

The main financial liabilities of the Group include bond loans, trade payables and miscellaneous payables and financial guarantees. The main objective of these liabilities is to finance the Group’s operating activities and its associated investment plans, including for entities external to the Group. The Group has financial receivables and other trade and non-trade receivables, cash and cash equivalents and short-term deposits directly originating from operating activities.

The assessment of interest rate risk, credit risk, liquidity risk and foreign exchange rate risk is a responsibility the Group Management is entrusted with, and the relevant information is given below.

Interest rate risk

The Group is exposed to interest rate risk in that the existing financial debt is variable rate (Euribor, plus a margin which varies based on the line of financing in question), with the exception of the mini-bond loan which has a fixed interest rate of 5.2%, renegotiated in December 2016. Fluctuations in market interest rates influence the cost of the various types of financing directly affecting financial expenses at Group level.

Nonetheless, starting in 2015 the Group began using a strategy aimed at controlling and covering interest rate risk. This led to at least all new medium/long-term loans obtained during the last two financial years with an initial maturity exceeding by 37 months and provided by well-established banking partners being hedged. The Group’s policy is to keep the total amount of financial debt with a fixed interest rate between 30% and 60%.

Sensitivity analysis

The Company’s financial structure consists mainly of variable rate financial instruments. As a result, the sensitivity analysis is conducted solely for this type of instrument.

By virtue of the above, a hypothetical, instant and unfavourable 100 bps change in the short term interest rate, applicable to the variable rate of financial assets and liabilities, would increase net annual pre-tax charges by approximately euro 245 thousand.

Liquidity risk

The Group continuously maintains balance and flexibility between funding sources and uses. Two primary factors that influence the Group’s liquidity are, on the one hand, resources generated or used by operating activities or investments, and on the other hand, the expiry and renewal of debts. The breakdown of financial payables as at 31 December 2016 is presented under Note 17.

In any event, it is felt that liquidity from operations should be sufficient to cover requirements. It should however be emphasized that considering the fact that the customers primarily consist of public bodies, with significantly extended payment terms and anyway subject to the availability of financial resources, even linked to public debt management policies, the leading Italian Group companies have assigned credit to factoring companies in order to boost cash flows. Specifically, during 2016 receivables (and relative benefits and risks) were transferred for a total amount of euro 88.4 million, without the disposals made by Insiel Mercato and TBS IT (euro 93.2 million at 31 December 2015).


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Exchange rate risk

The Group operates primarily in the eurozone. There is therefore no significant exposure to exchange rate risk.The main currency fluctuations relate to the translations into euro of the financial statements of its English

subsidiary, which are presented in pounds sterling, its Indian subsidiary, presented in Indian rupee, its Serbian subsidiary, presented in Serbian dinars and the Czech subsidiary, expressed in Czech koruna.

Capital Management

The Group’s primary capital management objective is to guarantee that a solid credit rating and appropriate levels of capital indicators are maintained in order to support its business and maximize shareholder value.

The Group manages the capital structure, making changes to it in line with changes in economic conditions.The Group may adjust the dividends paid to shareholders, reimburse capital or issue new shares in order to maintain

or adapt the capital structure. The Group monitors its capital via the net financial debt / Group shareholders’ net equity ratio.This ratio for each period considered is shown below:


Non-current financial liabilities 47,298 50,608

Current financial liabilities 56,550 71,080

Non-current financial assets -2,602 -2,145

Current financial assets -4,895 -9,877

Cash and cash equivalents -32,167 -25,171

Net financial debt 64,184 84,495

Net financial debt assets held for sale 2,799

Total net financial debt 66,983 84,495

Group shareholders’ net equity 52,253 51,083

Ratio net financial debt/Group shareholders’ net equity 1.23 1.65


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Fair value valuation and the relative hierarchical levels of valuation

The following statement indicates the categories of financial instruments held by the Group:

at 31/12/2016

(thousands of euro) Notes Borrowings and

receivables

Financial assets at fair value

recognised in the income statement

Derivatives Investments held to

maturity

Total Fair value

Financial assets as in the balance sheets

Other non-current financial assets 17 2,602 2,602 2,602

Other non-current assets 10 394 394 394

Trade receivables 12 87,800 87,800 87,800

Other current assets 14 13,296 13,296 13,296

Current financial assets 17 4,895 4,895 4,895

Cash and cash equivalents 17 32,167 32,167 32,167

Total financial assets 141,154 0 0 0 141,154 141,154

at 31/12/2016


receivables




maturity

Total Fair value

Financial liabilities as in the balance sheets

Non-current financial liabilities 17 47,051 247 47,298 47,298

Other medium/long-term liabilities 20 183 183 183

Trade payables 21 38,583 38,583 38,583

Other current liabilities 22 19,953 19,953 19,953

Current financial liabilities 17 56,550 56,550 56,550

Total financial liabilities 162,320 0 247 0 162,567 162,567


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at 31/12/2015


receivables




maturity

Total Fair value


Other non-current financial assets 17 2,145 2,145 2,145




Current financial assets 17 9,852 26 9,878 9,878



at 31/12/2015


receivables




maturity

Total Fair value



Other medium/long-term liabilities 20 306 306 306

Trade payables 21 38,706 38,706 38,706




All the financial instruments recognised at fair value are classified in the three categories shown below:Level 1: market quotationLevel 2: evaluation techniques (based on observable market data) Level 3: evaluation techniques (not based on observable market data) During the year, following the disbursement of new loans by major banking institutions to TBS Group S.p.A. and its

subsidiaries, three new interest rate swap derivatives (IRS) were subscribed for a notional value of euro 13.4 million, with an eye to keeping a certain percentage of financial debt at fixed rates. The conditions of the IRS contracts were negotiated to coincide with the conditions of the underlying commitments. These contracts fulfil the hedging requirements set in IAS 39 and fair value changes are therefore recognised directly to net equity.


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Below are the main elements of the IRS contracts signed and active as at 31 December 2016:

(thousands of euro)

1) Date signed 30/09/2015

Date of maturity 28/06/2019

Initial notional value 13,196

Residual value 9,526

Fixed rate 0.28

Variable rate Euribor 3M

Fair value - 74

(thousands of euro)





Fixed rate 0.2


Fair value - 11

(thousands of euro)





Fixed rate 0.49


Fair value - 36

(thousands of euro)





Fixed rate 0.38


Fair value - 29

(thousands of euro)





Fixed rate 0.25


Fair value - 5


89

(thousands of euro)





Fixed rate 0.29


Fair value - 56

(thousands of euro)





Fixed rate 0.1


Fair value - 35

From among said financial instruments, the Group values financial assets available for sale at fair value, the characteristics of which are detailed in Note 7. Financial assets available for sale as at 31 December 2016 can be classified as level 3 in the classification of fair-value evaluation.

For all financial instruments, the relative nominal recognition value is the same as the fair value. Finally, note that there were no transfers from Level 1 to Level 2 or to Level 3 and vice versa.

NOTE 6 – Earnings per share

As required by IAS 33 – Earnings per share, information pertaining to the data used in calculating the basic and diluted earnings per share is provided.

Basic earnings per share are calculated by dividing the net profit for the period attributable to the ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, net of weighted treasury shares.

It is further highlighted that there are no preference dividends, conversions of preference shares or other similar effects that affect the financial results attributable to the holders of ordinary capital instruments.


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The results and the number of ordinary shares used in the calculation of basic and diluted earnings per share are presented below.

Basic and diluted earnings per share (in euro) 31/12/2016 31/12/2015

Net profit/(loss) attributable to ordinary shareholders of the parent company for the purposes of calculating basic and diluted earnings per share 2,306,328 2,410,666

Average weighted number of ordinary shares, including own shares, for the purposes of calculating basic and diluted earnings per share 41,591,969 41,591,969

Average weighted number of own shares -764,210 -764,210

Average weighted number of ordinary shares, excluding own shares, for the purposes of calculating basic and diluted earnings per share 40,827,759 40,827,759

Effect of dilution:

- share options

- conversion of convertible bond loan

Weighted average number of ordinary shares, excluding own shares, for the purposes of calculating diluted earnings per share 40,827,759 40,827,759

Earnings per share

- basic, per period income appertaining to ordinary shareholders of the parent company 0.056 0.059

- diluted, per period income appertaining to ordinary shareholders of the parent company 0.056 0.059

NOTE 7 – IFRS 5 – Assets sold and/or held for sale

On 29 December 2016, the sale of the stakeholdings in Insiel Mercato and PCS was completed. The price paid in cash by GPI was:• euro 13 million for 100% of the shares of PCS, whose net financial position as contractually obtained was euro 1

million;• euro 1.8 million for 55% of the shares of Insiel Mercato, whose net financial debt as contractually obtained was

euro 8.7 million.Therefore, as a whole the enterprise value of the two companies involved in the transaction was euro 24 million. The residual stakeholding in Insiel Mercato, amounting to 45% of the capital, was classified in the balance sheet

among investments in associated companies and measured at fair value.


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The economic situation of PCS and Insiel Mercato at the transfer date, compared with the previous year, is as follows:

PCS



Other income - -


Cost of materials 641 860




Cost adjustments for in-house generation of non-current assets - -

Amortisation, depreciation, write-downs on fixed assets and other provisions 332 333

Other provisions - 45


OPERATING PROFIT 1,777 1,061

Gains/(losses) from investments - -

Financial income 18 34

Financial expenses 34 52


Income taxes 451 266

PROFIT/(LOSS) FOR THE PERIOD 1,310 778

Capital gains, disposal of 100% stakeholding 8,286

Other deconsolidation effects 33

Profit/(loss) from assets disposed/held for sale 9,629 778


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INSIEL MERCATO



Other income 153 168






Cost adjustments for in-house generation of non-current assets - 1,099 - 1,112

Amortisation, depreciation, write-downs on fixed assets and other provisions 1,564 1,417



OPERATING PROFIT - 461 305

Gains/(losses) from investments - - 63



PROFIT BEFORE TAX 142 403

Income taxes - 37 204

PROFIT/(LOSS) FOR THE PERIOD 180 199

Capital losses, disposal of 55% stakeholding - 3,785

Write-down, stakeholding held at 45% - 3,097

Other deconsolidation effects -897 - 779

Profit/(loss) from assets disposed/held for sale - 7,599 - 580


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Details of the assets and liabilities at the transfer date and at 31/12/2015 are as follows:

PCS


ASSETS

NON-CURRENT ASSETS

- Assets with indefinite useful life (goodwill) 948 948

- Intangible assets with finite useful life 129 391


- Land and buildings 816 825

- Plants and equipment 2 3

- Other tangible fixed assets 82 45

Tangible assets 899 873

- Stakeholdings 132 -

- Other non-current assets 81 65

- Prepaid tax assets 85 73

Other non-current assets 298 138


Inventories 501 185


Other current assets 83 -

Current financial assets 750 763

Cash and cash equivalents 292 62


TOTAL ASSETS 6,331 6,129

NET EQUITY


- Reserves 1,921 1,396

NET EQUITY 3,151 2,626

LIABILITIES

Non-current financial liabilities 421 485

Employee severance indemnity [Italian TFR] 531 478

Deferred tax provision 254 254

Provisions for risks and charges 14 45


Trade payables 848 922

Other current liabilities 1,041 1,095

Current financial liabilities 71 224



TOTAL SHAREHOLDERS’ NET EQUITY AND LIABILITIES 6,331 6,129


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INSIEL MERCATO


ASSETS

NON-CURRENT ASSETS

- Assets with indefinite useful life (goodwill) 1,814 1,814



- Land and buildings 653 676

- Plants and equipment 0 2



- Stakeholdings 212 4,048



Other non-current assets 702 4,476


Inventories - -


Other current assets 322 774

Income tax receivables 433 413

Current financial assets 954 842



Assets held for sale - -


NET EQUITY


- Reserves 5,204 7,855

NET EQUITY 8,451 11,102

LIABILITIES

Non-current financial liabilities 286 371

Employee severance indemnity [Italian TFR] 1,815 1,926

Deferred tax provision 73 151


Other medium/long-term liabilities 110 115


Trade payables 4,696 5,788



Income tax payables 77 -




Additionally, following the decision to dispose of TBS IT, its economic and equity situation at 31/12/2016 was reclassified among assets held for sale.


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The economic situation of TBS IT at 31 December 2016, compared with 31 December 2015, is as follows:



Other income 0 0






Cost adjustments for in-house generation of non-current assets - 830 - 635

Amortisation, depreciation, write-downs on fixed assets and other provisions 733 683


OPERATING PROFIT - 3,255 - 776



PROFIT BEFORE TAX - 3,493 - 1,333

Income taxes - 699 - 183

PROFIT/(LOSS) FOR THE PERIOD - 2,795 - 1,150

Profit/(loss) from assets disposed/held for sale - 2,795 - 1,150


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The equity situation of TBS IT at 31 December 2016, compared with 31 December 2015, is as follows:


ASSETS

NON-CURRENT ASSETS

- Assets with indefinite useful life (goodwill) 41 97



- Land and buildings - -

- Plants and equipment - 32



- Stakeholdings - -





Inventories 100 156


Other current assets 1,146 787

Income tax receivables 91 141

Current financial assets 35 -

Cash and cash equivalents 1,544 810



NET EQUITY


- Reserves - 3,731 - 937

NET EQUITY 1,564 4,359

LIABILITIES

Employee severance indemnity 5 4


NON-CURRENT LIABILITIES 6 5

Trade payables 2,618 1,396



Income tax payables - 7





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The financial flows of TBS IT in 2016 and 2015 are as follows:


CASH FLOW GENERATED (USED) BY OPERATING ACTIVITIES -658 -1,188

CASH FLOWS PROVIDED BY (USED IN) INVESTMENT ACTIVITIES -1,004 -852

CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,395 2,151

TOTAL CASH FLOW 734 111

CASH AND CASH EQUIVALENTS (NET) AT THE START OF THE YEAR 810 699

CASH AND CASH EQUIVALENTS (NET) AT THE END OF THE YEAR 1,544 810

Additionally, we recall that on 27 December 2015, the TBS Group stipulated a contract that envisaged the sale of all the shares held in Sinopharm TBS, equal to 50%, for the price of euro 333 thousand. The stakeholding, the price for which was received on 22 September 2016, was classified among assets at 31 December 2015, under the item assets held for sale, in the amount of euro 333 thousand.

The total profit/(loss) from assets held for sale can be broken down as follows:


SINOPHARM TBS - 86

SLT 637

INSIEL MERCATO - 7,599 - 580

PCS 9,629 778

TBS IT - 2,795 - 1,150

Total profit/(loss) from assets held for sale/disposed of - 766 - 402


NOTE 8 – Intangible assets

Goodwill

Goodwill refers to cost of the business combination paid by the Group in excess allocation of merger deficits or for the acquisition of controlling interests in certain subsidiaries.

Goodwill posted prior to 31 December 2015 refers to the surplus paid by the Group as broken down below:• in 2015 for the acquisition of Ing. Burgatti Spa and Crimo France Sas;• in 2014 for the acquisition of the REM business unit, now TBS Imaging; • in 2012 for the acquisition of the HiWeb business unit through the subsidiary Insiel Mercato; • in 2011 for the acquisition of a controlling interest in EBME;• in 2010 for the acquisition of controlling interests in TBS India and Erre Effe Informatica;• in 2009 for acquisition of controlling interests in MSI and Insiel Mercato and of recognition of the Put & Call option

regarding purchase of the minority interest of EBM and Caribel Programmazione (merged with Insiel Mercato in 2014);

• in 2008 for the acquisition of a controlling interest in Caribel Programmazione (merged with Insiel Mercato in 2014) and in EBM, for the acquisition of a further interest in Tesan and SLT, the Panacea Group and in 2013 for the acquisition of a further interest in Caribel Programmazione;

• in 2007 for acquisition of controlling interests in SLT, the Spanish NCA Group (then merged by incorporation by parent company TBS ES at the end of 2007) and the Panacea Group;


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• in 2005 for acquisition of controlling interests in Surgical Technologies BV, Surgical Technologies Italia Srl and STI Deutschland GmbH (the latter then merged by incorporation by the respective parent companies TBS Group and TBS DE during 2007);

• in 2004 for the acquisition of the Clinical Engineering’s segment of General Electric Medical Systems;• in fiscal years prior to 2004 following Parent Company’s acquisition of various Business lines, even in several stages,

in the sectors of the former Clinical Engineering Italy, e-Health Telemedicine and Telecare and of e-Health Patidok.The following table details the goodwill value allocated to the respective cash generating units (“CGU”):


Clinical Engineering Italy 23,033 18,778

Clinical Engineering Europe 6,371 6,098

Diagnostic Imaging 0 4,120

e-Health& e-Government software production 0 4,921

Clinical Engineering India 3,026 3,026

Total goodwill 32,430 36,943

The book value of goodwill as at 31 December 2016 amounted to euro 32,430 thousand. The difference compared to the value as at 31 December 2015, equal to euro 4,513 thousand, derives from:• Insiel Mercato and PCS leaving the scope of consolidation, which included a goodwill value of euro 4,814 thousand.

At 31 December 2015, this goodwill was recognised in the e-Health & e-Government software production CGU;• recognition within the Clinical Engineering Europe CGU:

– of goodwill for euro 412 thousand following the business combination relative to Tunemedix;– of goodwill for euro 22 thousand following the acquisition of the additional 20.2% interest in Crimo

Instrumentation Medicale;– of the revision of goodwill for Crimo France of euro 18 thousand;

• of the recognition of the TBS GB EUR/GBP negative foreign exchange rate translation difference of euro 179 thousand attributed to the Clinical Engineering Europe CGU. Following the new designation of Business Units by geographic area (Italy and International), the Diagnostic

Imaging CGU, which included the companies Ing. Burgatti and TBS Imaging, was reclassified within the goodwill of the Clinical Engineering Italy CGU.

Goodwill relative to the acquisition of Erre Effe Informatica of euro 107 thousand was also reclassified to the Clinical Engineering Italy CGU, from the e-Health & e-Government software production CGU.

Goodwill impairment test

The residual goodwill recorded in the financial statements and detailed above was allocated to a number of CGUs in both business segments.


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In particular, goodwill was allocated as follows (broken down by legal entity/business branch and reference CGU):

CGU – Cash Generating Units Goodwill for acquisition of business branches and/or companies

Clinical Engineering Italy EBM, Tecse, Serisia, DMS, Amplisim, General Electric, Surgical Technologies Italia, GS Service, Tecnobiopromo, Asic, SLT, Crimo Italia, Pancli, MD, TBS IT, Finter, Medicall, Gesan, Comtel, Tesan, Tesan Televita, Erre Effe Informatica, Ing. Burgatti, TBS Imaging (formerly REM DI)

Clinical Engineering Europe TBS FR, TBS GB, TBS PT, TBS BE, TBS ES, Surgical Technologies BV, MSI, EBME, Crimo France, Tunemedix

Clinical Engineering India TBS India

The above CGUs were created by combining business activities based on the type of service provided and the areas in which cash flows are generated through the provision of such services.

As stated in IAS 36 – Impairment of assets, the impairment test was fully performed by comparing the recoverable amount of the goodwill with the corresponding carrying amount of the individual CGUs as at 31 December 2016.

Value in use was used for the recoverable amount as it is deemed reasonably higher than the fair value net of sale costs. Cash flow projections for 2017-2019, as taken from the financial plans prepared by the Parent Company and approved

by its Board of Directors and by the Boards of Directors of the single subsidiaries, were normally used to calculate the value in use. Cash flows for years subsequent to the last year included in the plan were discounted on the assumption of an indefinite time frame for the various CGUs at an annual growth rate of 1% (3% for Clinical Engineering India CGU).

The main parameters used for calculating the discount rate (WACC) were:

CGU – Cash Generating Units Risk free Market premium

Unlevered Beta

Risk premium

Debt/equity ratio

Cost of debt

WACC

Clinical Engineering Italy 1.76% 5.50% 0.61 0.00% 1.16 5.00% 5.78%

Clinical Engineering Europe 1.19% 5.50% 0.61 0.00% 1.16 5.00% 5.46%

Clinical Engineering India 7.80% 5.50% 0.61 0.00% 1.16 5.00% 8.10%

As regards the risk free rate, the average of the return rates for the last 6 months with respect to the start of the reference period for the budget (31/12/2016) for ten-year state securities for reference nations was used.

The unlevered Beta used in the various CGUs considered is the one which better reflects the information about the segment in which they operate.

To calculate the WACC for individual CGUs, the beta coefficient was used and redetermined considering the leverage arising from the Group’s debt/equity ratio very near to that resulting at 31 December 2016, a ratio deemed representative for the future years of the plan as well. This approach was adopted as the Parent Company manages its own financial debt and that of its subsidiaries through the disbursement of intercompany loans, based on individual company needs.

Impairment tests did not indicate that discounted cash flows for the various CGUs exceeded the relative carrying values, therefore no impairment was necessary.

The value in use with reference to the CGUs is significantly greater than the book value of the capital invested. The results obtained were subjected to sensitivity tests, in order to determine how the result of this assessment

process would change as a function of the change in the growth rate considered for the projections beyond the plan period, or changes in the rate used for discounting of the flows themselves. In reference to the CGUs for which the value in use was not significantly higher than the book value of the capital invested, we provide the results of the sensitivity analysis below:• Clinical Engineering Italy and Clinical Engineering Europe CGUs: with a growth hypothesis (rate g) of 0 (with respect

to the 1.0% used in the test), and a WACC higher by one percentage point, in any case no write-downs would be necessary.


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• Clinical Engineering India CGU: with a growth hypothesis (rate g) of 2.0% (with respect to the 3.0% used in the test), and a WACC higher by one percentage point, in any case no write-downs would be necessary.


The table below provides a breakdown “Intangible assets with a finite useful life” as they appear in the Balance Sheet:


Development 1,664 2,326

Industrial patents, licenses, trademarks and similar rights 3,217 6,449

Other intangible fixed assets 9,282 13,646

Intangible fixed assets in progress and advances 1,508 3,507

Total intangible fixed assets 15,670 25,928

Changes in the period for “Intangible assets with a finite useful life” are shown below:

(thousands of euro) Development Industrial patents, licenses,

trademarks and similar rights


Intangible investments in

progress and advances

Total Intangible fixed assets

Cost at 1 January 2016 net of provisions 2,326 6,449 13,646 3,507 25,928

Net increases 190 1,945 260 1,776 4,171

Net increases, assets held for sale 635 164 195 994

Net disposals - - 5 - 5

Reclassification of assets held for sale -1,184 -288 -127 -830 -2,429

Change in the scope of consolidation - -3,874 -1,818 -1,595 -7,287

Depreciation for the period 842 1,570 2,657 - 5,069

Depreciation for the period of assets held for sale 571 32 5 608

Foreign exchange differences - -13 -12 - -25

Reclassifications and other 1,110 417 - -1,527 -

At 31 December 2016 1,664 3,198 9,282 1,526 15,670

(thousands of euro) At 1 January 2016

Cost or fair value 7,324 22,891 34,382 3,507 68,104

Amortisation provisions and impairment -4,998 -16,442 -20,736 0 -42,176

Residual net value 2,326 6,449 13,646 3,507 25,928


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(thousands of euro) At 31 December 2016

Total

Cost or fair value 8,075 21,242 32,680 1,526 63,523

Amortisation provisions and impairment -6,411 -18,044 -23,398 0 -47,853

Residual net value 1,664 3,198 9,282 1,526 15,670

Development costs mainly include expenses incurred by EBM and Ing. Burgatti for the development of software to be used for the execution of their activities and to improve company processes. Investments for the year mainly refer to projects for the company EBM to achieve new production processes and more efficient organisation structures.

Costs for software, patents and trademarks mainly includes software licenses and programs acquired externally for a fee, costs incurred by EBM for software used relative to clinical engineering and administrative management, and costs incurred by the Parent Company to implement management software. Increases during the year were mainly acquisitions carried out by EBM (euro 1,307 thousand), TBS Group (euro 390 thousand) and TBS FR (euro 106 thousand).

Amortisation is calculated on a straight-line basis over a period of 3/5 years.The other intangible fixed assets item mainly included “portfolio orders” and “relations with customers” acquired

through business combinations. Decreases due to changes in the scope of consolidation were relative to the reversal of relations with customers of Insiel Mercato (euro 1,756 thousand) and of Caribel Programmazione (euro 74 thousand). Increases related to costs incurred for improvements by TBS GB (euro 189 thousand) thousand and by EBM (euro 53 thousand)

In particular, the item included net book values of:• euro 18 thousand for the net book value of the customer relations which arose in 2007 following purchase of the

NCA Group, subsequently merged into TBS ES. The amortisation of the customer relations is on a straight-line basis over a 10-year period;

• euro 104 thousand relating to the net book value of relations with customers arising from the acquisition of the Panacea Group in August 2007; this asset is amortised on a straight-line basis over a period of 10 years;

• euro 1,426 thousand relating to the net book value of relations with customers arising from the acquisition of EBM in December 2008; this asset is amortised on a straight-line basis over a period of 10 years;

• euro 1,010 thousand relating to the net book value of relations with customers arising from the acquisition of TBS India in April 2010; this asset is amortised on a straight-line basis over a period of 10 years;

• euro 448 thousand relating to the value of relations with customers arising from the acquisition of Erre Effe Informatica in December 2010. Relations with customers is amortised on a straight-line basis over a period of 10 years;

• euro 1,455 thousand relating to the value of relations with customers arising from the acquisition of EBME in August 2011. The amortisation is on a straight-line basis over a period of 10 financial periods;

• euro 295 thousand relating to the value of relations with customers arising from the acquisition of the REM business unit in December 2014. The amortisation is on a straight-line basis over a period of 5 financial periods;

• euro 1,084 thousand relating to the value of relations with customers arising in January 2015 following the acquisition of Ing. Burgatti. The amortisation is on a straight-line basis over a period of 5 financial periods;

• euro 3,248 thousand relating to the value of relations with customers arising in August 2015 following the acquisition of Crimo France. The amortisation is on a straight-line basis over a period of 10 financial periods.

Assets under construction primarily relate to:• costs deferred by the subsidiary EBM for euro 1,196 thousand (incurred during the financial year) for the

management of specialised centres created to limit corporate costs and internalise services;• costs deferred by the Parent Company for the creation of management software (euro 330 thousand).


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Reclassifications from “Assets under construction” mainly refer to transfers: • to the category “Industrial patents, intellectual property rights and works, licenses and trademarks” of costs incurred

by the Parent Company for software to manage clinical engineering activities and other applications (euro 387 thousand) and by TBS FR (euro 30 thousand) for software;

• to the category of “Development” for costs of euro 1,110 thousand, incurred by EBM (euro 821 thousand) and by Ing. Burgatti (euro 289 thousand) for research.The amortisation of capitalised costs is based on the useful life estimated at three or five years.

NOTE 9 – Tangible assets

The table below presents the net balances for fixed tangible assets:


Land and buildings 5,957 7,667

Plants and Equipment 12,163 12,341

Other tangible fixed assets 2,374 2,850

Total tangible fixed assets 20,494 22,858

Changes in the period are shown below:

(thousands of euro) Land and buildings

Plants and Equipment

Other tangible fixed assets

Total tangible fixed assets

Cost at 1 January 2016 net of provisions 7,667 12,341 2,850 22,858

Net increases 37 4,374 1,099 5,510

Net increases, assets held for sale 10 10

Disposals (historical cost) 0 1,893 324 2,217

Disposals (amortisation provision) 0 -1,128 -240 -1,368

Change in the scope of consolidation, increase 0 124 49 173

Change in the scope of consolidation, decrease (cost) 2,252 303 1844 4,399

Change in the scope of consolidation, decrease (provision) -750 -298 -1,559 -2,607

Reclassification of assets held for sale 0 -107 -107

Depreciation in the period 245 3,566 1,110 4,921

Depreciation for the year of assets held for sale 0 33 36 69

Foreign exchange differences 0 -307 -12 -319

Reclassifications and other 0 0 0 0

At 31 December 2016 5,957 12,163 2,374 20,494


Cost or fair value 9,756 35,414 8,648 53,818

Amortisation provisions and impairment -2,089 -23,073 -5798 -30,960

Residual net value 7,667 12,341 2,850 22,858


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(thousands of euro)At 31 December 2016

Total

Cost or fair value 7,541 37,409 7,519 52,469

Amortisation provisions and impairment -1,584 -25,246 -5,145 -31,975

Residual net value 5,957 12,163 2,374 20,494

Land and buildings

Buildings owned or leased are those relative to the parent company (euro 1,037 thousand) and the subsidiaries Crimo Italia (euro 1,325 thousand), EBM (euro 1,873 thousand), Erre Effe Informatica (euro 361 thousand), TBS Imaging (euro 460 thousand) and Crimo France (euro 901 thousand).

These are amortised at an annual rate of 3%. Decreases due to change in the scope of consolidation of euro 1,502 thousand is relative to the value of the

buildings owned by PCS and Insiel Mercato.


The item mainly includes equipment for carrying out business of 4,374 thousand and is mainly relative to equipment to be used for the execution of EBM’s activities for euro 2,182 thousand, for machines necessary for the execution of activities in the endoscopy and clinical engineering sectors for TBS GB for euro 1,193 thousand, and assets acquired by TBS Imaging (euro 244 thousand), by TBS India (euro 151 thousand) and by TBS FR (euro 193 thousand).


This item primarily relates to electronic office equipment, furniture and furnishings, cars and motor vehicles. Investments made during the year amounted to euro 1,099 thousand (of which euro 460 thousand made by the subsidiary EBM, euro 254 thousand by Tunemedix, euro 109 thousand by TBS GB and euro 72 thousand by TBS India).

Financial leased assets mainly refer to the equipment, vehicles, plants and machinery, and buildings of consolidated companies; minimum payments, present value and the presumed repayment period of these leased assets are detailed in the table below.

(thousands of euro) Minimum payment

Present value Minimum payment

Present value

Within 1 year 446 392 818 694

Between 1 and 5 years 1,796 1,599 2,086 1,784

Over 5 years 333 299 651 623

Total minimum payments 2,575 2,290 3,555 3,101

Financial expenses - 285 0 - 455 0

Total minimum payments present value 2,290 2,290 3,100 3,101

Present value was determined based on the amortisation schedules communicated by finance leasing companies and does not significantly diverge from the present value of minimum payments calculated by discounting cash flows due to the instalment payments as indicated in the schedule at the same interest rate of the finance lease contract.


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NOTE 10 – Other non-current assets

Investments in associated companies

The table summarises the breakdown of investments in associated companies:

(thousands of euro) 31/12/2016 % held 31/12/2015 % held

TH MED - 40.00% - 40.00%

O3 Enterprise na 35 20.00%

Easy Care Foundation 16 25.00% 16 25.00%

SIGE Consortium 10 33.33% 10 33.33%

Care Expert Social Consortium 2 25.00% 2 25.00%

Saim - na 236 46.50%

Insiel Mercato(*) 1,488 35.00% 0 50.00%

SLT 785 40.00% 785 40.00%

Total investments in associated companies and joint ventures 2,302 1,084

(*) Value of the stakeholding reclassified among assets held for sale in compliance with IFRS 5. See NOTE 7 for more details

None of the companies mentioned are listed on any regulated or organised market.Insiel Mercato, which was a subsidiary until 29 December 2016, was recognised among associated companies after

the sale of 55% of the shares, given that the percentage stake held in the company fell to 45%.Stakeholdings in Saim and O3 were held by PCS and Insiel Mercato which left the scope of consolidation.The following table summarises the essential information on these investments on the basis of the last approved

financial statements as at 31 December 2015:

(thousands of euro) 2015

Care Expert Social

Consortium

SIGE Consortium

Easy Care Foundation

SLT

Current assets 265 13,751 158 1,782

Non-current assets 2 0 58 61

Current liabilities -212 -13,717 -262 -838

Non-current liabilities 0 0 0 -148

Net assets (liabilities) 55 34 -46 857

Revenue 434 3,228 464 3,809

Operating result 3 1 9 362

Note that figures for the subsidiary TH Med are not available.


105

Other investments

Interests held by the Group in other companies are summarized below:

(thousands of euro) 31/12/2016 % held 31/12/2015 % held

Medic4All AG 50 2.37% 50 2.37%

Molecular Biology Consortium 2 2.00% 2 2.00%

ISBEM 30 7.96% 30 7.96%

UTE (ES) 5 n.a. 25 n.a.

ReMedia Consortium 1 n.a. 1 n.a.

Ancitel 46 7.13% 133 7.13%

Venice Research Consortium 0 n.a. 0 n.a.

IRCAB Foundation 0 n.a. 17 n.a.

Sanitanet 12 10.00% 12 10.00%

Polo meccatronico umbro 1 n.a. 1 n.a.

ITS Foundation 15 n.a. 15 n.a.

BioHighTech NET 6 n.a. n.a.

Total investments in other companies 168 286

The Ancitel stakeholding was written down for euro 87 thousand.

Other non-current assets



Total other non-current assets 394 624

Other non-current assets as at 31 December 2016 almost entirely relate to deposits and guarantees.

NOTE 11 – Inventories

The breakdown of inventories as at 31 December 2016 and 2015 is as follows:


Work in progress on order

Cost 36 815

Work in progress on order write-down provision 0 -552

Net realisable value 36 263

Inventories consumables, spare parts and goods

Cost 15,254 13,000

Inventory write-down provision -1,424 -1,270

Net realisable value 13,830 11,730

Advances 0 0

Total 13,866 11,993


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Raw materials mainly consisted of consumables and spare parts for endoscopy and clinical engineering activities, mainly stored at contracting parties’ premises. They are valued at the purchase cost calculated using the FIFO method, adjusted by the inventory write-down provision of euro 1,424 thousand at 31 December 2016 (euro 1,270 thousand at 31 December 2015).

Overall changes in the inventory write-down provision for the two financial periods are shown below:


Inventory write-down provision at start of the period 1,270 969

Utilization in the year -38 -44

Change in the scope of consolidation 177

Provisions of the period 192 168

Inventory write-down provision at end of the period 1,424 1,270

NOTE 12 – Trade receivables

The table below provides a breakdown of trade receivables:



Receivables write-down provision -3,172 -4,203

Total 87,800 105,519

Trade receivables as at 31 December 2016 amount to euro 87,800 thousand (euro 105,519 thousand as at 31 December 2015), net of a receivables write-down provision of euro 3,172 thousand (euro 4,203 thousand as at 31 December 2015). As in previous years, even in 2016 some Group companies entered into non-recourse factoring deals, resulting in receivables assigned totalling euro 88.4 million being removed from the balance sheets (euro 93.2 million in 2015).

The decrease in receivables is due to Insiel Mercato and PCS leaving the scope of consolidation and the reclassification of TBS IT trade receivables among assets held for sale.

Changes in the receivables write-down provision in the two periods under consideration are as follows:


At the start of the period 4,203 3,833

Change in the scope of consolidation -1,691 207

Provisions 700 783

Provisions, assets held for sale 55

Utilisation -30 -620

Reclassifications assets held for sale -65

At the end of the period 3,172 4,203


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The analysis of the past-due loans and those to mature as at 31 December 2016 is as follows:

(thousands of euro) Total Not overdue

< 30 days 30-60 days

60-90 days

90-180 days

Over 180 days

Trade receivables at 31/12/2016 90,972 53,605 1,438 4,592 2,216 5,332 23,790



60-90 days

90-180 days

Over 180 days

Receivables write-down provision at 31/12/2016 3,172 3,172

The analysis of the receivables write-down provision at 31 December 2015 was the following:



60-90 days

90-180 days

Over 180 days

Trade receivables at 31/12/2015 109,722 63,230 4,038 4,897 5,610 6,839 25,108



60-90 days

90-180 days

Over 180 days

Receivables write-down provision at 31/12/2015 4,203 4,203

The high total for overdue receivables is justified by the fact that the Group works primarily with public bodies, which are known for their extended repayment time frames. Despite payments being received with significant delays compared to contractual repayment terms, this does not expose the amounts shown to any repayment risk, apart from those amounts already presented in the financial statements.

NOTE 13 – Other current assets

The table below provides a breakdown of other current assets:


Social security receivables 56 464

Receivables for contributions to public entities 188 159

Receivables from employees 115 184

Other prepaid expenses and accrued income 1,192 973

Other tax receivables 4,004 3,313

Other receivables 7,741 7,293

Total other current assets 13,296 12,387

Receivables from employees mainly consist of advances paid to employees against expenses incurred for performing their work and of cash given to employees who travel at the time of their recruitment and withheld when the employee leaves the company.

Other tax credits mostly include VAT credits.Receivables from other mainly include receivables from temporary associations of businesses for rebilling the

subsidiary EBM for euro 5,296 thousand.


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NOTE 14 – Income taxes payable and receivable


Income tax receivable 2,441 3,014

Total income tax receivables 2,441 3,014

Income tax receivables refers to amounts receivable from individual countries for direct taxes (IRES – corporate income tax and income tax of various countries) which should be recovered within the following year, as well as amounts receivable for tax withheld by companies on interest receivable.


Income tax payables 2,089 1,468

Total income tax payables 2,089 1,468

Income taxes payable refer to current taxes for the year still to be paid and record the amounts that the individual companies must pay to the financial administrations of the individual countries. Such payables are calculated in accordance with the tax rates currently in force in the individual countries.

NOTE 15 – Consolidated net equity

As at 31 December 2016, the item amounted to euro 54,761 thousand as opposed to euro 53,475 thousand as at 31 December 2015. For changes in net equity, please refer to the relevant “Statement of changes in consolidated net equity”.

Share capital

The subscribed and paid-up share capital of TBS Group at 31 December 2016 consists of 41,421,370 shares, entirely subscribed and paid up (net of own shares), with a nominal value of euro 0.10 each.

The total amount of own shares held by the Company as at 31 December 2016 amounts to 764,210. The value shown in the financial statements is net of the own shares held by the company, for the part attributable

to capital (euro 76 thousand).

Share premium account

The share premium account, set up following a number of Parent Company capital increases, amounted to euro 42,832 thousand at 31 December 2016.

Foreign currency translation reserve

The foreign currency translation reserve as at 31 December 2016 showed a loss of euro 786 thousand (loss of euro 455 thousand as at 31 December 2015) and was generated by including the following into the consolidated statements: the subsidiary TBS GB, whose functional currency is the British pound, TBS SE, whose functional currency is the Serbian dinar, TBS India, whose currency is the Indian rupee and TBS Bohemia, whose currency is the Czech koruna.


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Other reserves and retained earnings

Other reserves include:• the First-time Adoption (FTA) reserve deriving from the first-time application of the international accounting

standards as at 1 January 2004;• retained earnings: the item includes the retained results achieved by the consolidated companies and their

consolidation adjustments;• the item also includes actuarial gains/(losses) net of the relative tax effects, following the amendment to IAS 19

entering into force; • measurement net of the relative tax effect at the fair value of the hedging derivatives.

Minority interests and reserves

As at 31 December 2016, the item amounted to euro 2,508 thousand as opposed to euro 2,392 thousand as at 31 December 2015.

This change, and the profits in the period attributable to minority interests, is primarily attributable to:• dividends distributed by Tesan Televita to minority interests (euro 65 thousand);• dividends distributed by Crimo Italia for minorities (euro 221 thousand);• acquisition of the residual stake in Crimo Instrumentation Medicale SL for euro 15 thousand;• actuarial gains/(losses) net of the relative tax effect, booked following the amendment to IAS 19 entering into

effect, attributable to minority interests.For the changes in net equity attributable to minority interests, please refer to the “Summary statement of changes

in consolidated net equity.”

NOTE 16 - Net financial debt

The Group’s net financial debt can be broken down as follows:


A. Current financial assets 4,895 9,878

B. Cash and cash equivalents 32,167 25,171

C. Liquidity (A. + B.) 37,062 35,049

D. Non-current financial assets 2,602 2,145

E. Non-current financial liabilities 47,298 50,608

F. Current financial liabilities 56,550 71,080

G. Net financial debt (C. + D. – E. – F.) -64,184 -84,494

Net financial debt assets held for sale -2,799 0

Total financial debt -66,983 -84,494

For further information on the breakdown of financial assets and liabilities, please refer to the paragraphs below.


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The table below provides a breakdown of the current financial assets:


Short-term financial receivables 4,895 9,854

Marketable securities 0 24

Total current financial assets 4,895 9,878

Short-term financial receivables, totalling euro 4,895 thousand, are mainly associated with receivables transferred without recourse and not collected as at 31 December 2016 by certain Group companies for euro 2,351 thousand, to financial receivables associated with Cash Pooling for euro 1,865 thousand by TBS Group S.p.A. and to residual financial receivables for euro 679 thousand.

Securities in 2015 were held by Insiel Mercato.


The table below provides a breakdown of cash and cash equivalents on hand:



Total cash and cash equivalents 32,167 25,171

This relates to temporary cash on hand at banking institutions and liquid assets normally on hand at company offices.

Other non-current financial assets

The table below provides a breakdown of the non-current financial assets:


Other non-current financial assets 2,602 2,145

Total other financial assets 2,602 2,145

Other non-current financial assets mainly refer to receivables for TBS India associated with interest-bearing bank deposits held by the company, following the awarding of tenders, and to a policy held by EBM, which partially covers severance and end-of-term indemnities for directors, as well as TBS GB receivables for financial leasing.


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Non-current financial liabilities

The table below provides a breakdown of the non-current financial liabilities:


within 5 years over 5 years Total within 5 years over 5 years Total

Bond Loans 14,556 14,556 14,449 14,449

Leasing contracts debts 1,599 299 1,898 1,784 623 2,407

Medium/long term bank loans 28,420 28,420 30,856 225 31,081

Payables to other lenders 2,424 2,424 2,671 2,671

Total non-current financial liabilities 46,999 299 47,298 49,760 848 50,608


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Non-current financial liabilities are detailed in the following table:

(thousands of euro) Non-current liabilities

31/12/2016 31/12/2015

Mini bond loan 14,556 14,449

Euro 6 million loan granted to TBS Group by Monte dei Paschi in February 2016 4,619 -

Euro 0.8 million loan granted to TBS Group by Banca Popolare in September 2016 159 -

Euro 1 million loan granted to TBS Group by Popolare di Vicenza in December 2016 196 -

Euro 3 million loan granted to TBS Group by Banca Popolare in January 2015 965 1,712

Euro 3.5 million loan granted to TBS Group by Friuladria Credit Agricole in May 2015 1,778 2,465

Euro 15 million loan granted to TBS Group by Banca Popolare di Milano in June 2015 5,752 9,478

Euro 4 million loan granted to TBS Group by BNL in October 2015 1,327 2,652

Loan granted to TBS Group by FVG in July 2015 for the original amount of euro 1.5 million 267 780

Euro 3 million mortgage granted to TBS Group by UniCredit in July 2015 1,689 2,276

Loan granted to TBS Group by Mediocredito del Trentino in September 2015 for the original amount of euro 500 thousand 169 334

Euro 3 million mortgage granted to TBS Group by Banca Raiffeisen in December 2015 1,837 2,418

Euro 3 million loan granted to EBM by Banca Popolare Emilia Romagna in December 2016 2,272 -

Loan granted to EBM by CariUmbria Intesa San Paolo in June 2015 for the original amount of euro 2.5 million 1,283 1,778

Euro 0.7 million loan granted to Crimo Italia by Monte dei Paschi in May 2016 348 na

Euro 3 million mortgage granted to TBS Group by UniCredit in March 2014 195 -

Euro 2.5 million loan granted to TBS Group by Friuladria in December 2013 536 1,070

Euro 6 million loan granted to EBM by Ca.ri.FVG Banca Intesa in November 2015 3,692 4,861

Mortgage granted by BKS to PCS in December 2007 - 485

Euro 180 thousand loan granted to Caribel Programmazione, merged with Insiel Mercato, by Antonveneta in September 2008 - 33

Euro 100 thousand loan granted to Delta X, now TBS Imaging, by Banca di Credito Cooperativo in 2014 20 33

Loan granted to Ing. Burgatti by Banca di Imola in September 2016 for euro 170 thousand 101 -

Loan granted to Ing. Burgatti by Cassa di Risparmio di Bologna in April 2016, for euro 350 thousand 158 -

Loan granted to Ing. Burgatti by Cassa di Risparmio di Rimini in March 2016, for euro 200 thousand 86 -

Loan granted to Ing. Burgatti by Cassa di Risparmio di Bologna in April 2015 - 51

Loan granted in September 2015 to Ing. Burgatti by Banca Popolare Emilia Romagna for euro 400 thousand 178 278

Loan granted in September 2016 to Ing. Burgatti by Banca di Desio for euro 400 thousand 247 102

Loan granted in September 2014 to Ing. Burgatti by Emilbanca for euro 200 thousand 73 113

Loan granted to TBS India to purchase equipment 140 162

Loans and payables of the subsidiary Tunemedix 321 -

Other payables of the subsidiary TBS IMAGING 12 -

Total medium/long term portion of medium/long loans 28,420 31,081

Derivatives measured at fair value 211 165

Financial payable to minority shareholders for the acquisition of a 35.00% interest in Ing. Burgatti (put & call option) 2,000 2,418

P.I.A. loan granted to subsidiary Insiel Mercato - 84

Financial payable to minority shareholders for the acquisition of a 49% interest in Tunemedix (put & call options) 177 -

Derivatives of EBM measured at fair value 36 4

Total medium/long term portion of debts payable to others 2,424 2,671

Non-current portion of leasing contracts’ debts 1,898 2,407

Total non-current financial liabilities 47,298 50,608


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Some loans require compliance (financial covenants) with certain parameters based on the consolidated financial statements of the Parent Company at the year-end.

These financial parameters, to be calculated on an annual basis, do not have characteristics or expenses different from those generally established under market practices.

Note that at the end of financial year 2016, all of these parameters were respected.

Five year non-convertible bond loan (mini bond)

On 25 August 2014 the Extraordinary Shareholders’ Meeting of TBS Group resolved the issuing of a non-convertible bond loan with a duration of five years for a total amount of euro 15 million. The placement of this loan ended on 29 October 2014. The five year bond loan - reserved exclusively for Italian and foreign institutional investors, which originally had an annual nominal rate of 6.5% - consists of 150 bonds with a nominal unit value of euro 100,000 each, not divisible, and was issued at 100% of the nominal value. Banca Popolare di Vicenza was the arranger, subscriber of the securities and guarantor of 100% of the total amount, while placement of securities with foreign institutional investors was done by KNG Securities LLP. On 28 December 2016, all those present at the Bondholders’ Meeting voted unanimously in favour of the new loan regulations. The most significant changes involved lowering the interest rate from 6.5% to 5.2%, extending maturity to 31 December 2020 and eliminating the company’s ability to repay it in advance. On 11 January 2017, the Company’s Board of Directors met and approved the changes. Insertion of the relative minutes of the Board of Directors meeting in the Register of Companies made the approved amendments effective, in particular reduction of the interest rate starting from the initial period of interest accrual, following coupon detachment on 31 January 2017. The capital will be repaid in a single payment at maturity (December 2020), while interest will continue to accrue and be repaid on a quarterly basis. The value of the loan at 31 December 2016, booked at the amortised cost, is equal to euro 14,556 thousand, entirely medium/long-term, net of issuing costs attributed to the loan.

The bond loan contract envisages respect for the parameters calculated with reference to the yearly and consolidated financial statements, as well as the respect for the other pre-established contractual conditions. As of 31 December 2016, these parameters and conditions were respected.

Leasing contracts debts

Leasing contract debts refer to financial leasing contracts stipulated by the parent company and the subsidiaries EBM, TBS Imaging, Ing. Burgatti, Crimo France and Tunemedix. For additional details, please refer to the section in Note 8 on leased assets.

Medium/long term bank loans

The characteristics of the major loans currently active are described below.

• Euro 6 million loan granted to TBS Group by Monte dei Paschi di Siena in February 2016.The loan is repayable in half-yearly deferred instalments; the first instalment came due in June 2017 and the final

one is due for payment in June 2021. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 5,952 thousand, consisting of euro 1,333 thousand

repayable over the short term and euro 4,619 thousand repayable over the medium/long term.


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• Euro 0.8 million loan granted to TBS Group by Banca Popolare in September 2016.The loan is repayable in monthly deferred instalments; the first instalment came due in January 2017 and the final one

is due for payment in December 2018. The interest rate is equal to a 3-month Euribor plus a spread.At 31 December 2016, the outstanding loan amount was euro 797 thousand, consisting of euro 638 thousand

repayable over the short term and euro 159 thousand repayable over the medium/long term.

• Euro 1 million loan granted to TBS Group by Popolare di Vicenza in December 2016.The loan is repayable in quarterly deferred instalments; the first instalment came due in March 2017 and the final one



• Euro 3 million loan granted to TBS Group by Banca Popolare in January 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in March 2015 and the final

one is due for payment in December 2019. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 1,720 thousand, consisting of euro 755 thousand


• Euro 3.5 million loan granted to TBS Group by Banca Popolare Friuladria – Gruppo Credit Agricole in May 2015The loan is repayable in half-yearly deferred instalments; the first instalment came due in November 2015 and the

final one is due for payment in May 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,472 thousand, consisting of euro 694 thousand


• Euro 15 million loan granted to TBS Group by Banca Popolare di Milano in June 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in September 2015 and the

final one is due for payment in June 2019. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 9,501 thousand, consisting of euro 3,749 thousand

repayable over the short term and euro 5,752 thousand repayable over the medium/long term.Moreover the loan agreement requires the compliance with indicators calculated on TBS Group audited consolidated

accounting values, regarding the ratio between net financial debt and shareholders’ net equity, between net financial debt and EBITDA and between net financial debt and net financial expenses. If those indicators should not fall within the settled limits, the Bank is entitled to rescind the contract, in accordance to Italian Civil Code, article 1456. As at 31 December 2016, the Company respected these parameters.

• Euro 4 million loan granted to TBS Group by BNL Gruppo BNP Paribas in October 2015The loan is repayable in half-yearly deferred instalments; the first will come due in April 2016, with a duration of

18 months and an option to extend it for an additional 18 months, with the final rate consequently coming due in October 2018. The loan interest rate is the 6-month Euribor rate plus a spread.

At 31 December 2016, the outstanding loan amount was euro 2,660 thousand, consisting of euro 1,333 thousand repayable over the short term and euro 1,327 thousand repayable over the medium/long term.

Moreover the loan agreement requires the compliance with indicators calculated on TBS Group audited consolidated accounting values, regarding the ratio between net financial debt and shareholders’ net equity, between net financial debt and EBITDA and between net financial debt and net financial expenses. If those indicators should not fall within the settled limits, the Bank is entitled to rescind the contract, in accordance to Italian Civil Code, article 1456. As at 31 December 2016, the Company respected these parameters.


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• Loan granted to TBS Group by FVG in July 2015 for the original amount of euro 1.5 millionThe loan is repayable in half-yearly deferred instalments; the first instalment came due in December 2015 and the

final one is due for payment in June 2018. The interest rate is equal to the Euribor 365 plus a spread.At 31 December 2016, the outstanding loan amount was euro 781 thousand, consisting of euro 514 thousand


• Euro 3 million loan granted to TBS Group by UniCredit in July 2015The loan is repayable in quarterly deferred instalments; the first instalment came due in October 2015 and the final

one is due for payment in July 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,278 thousand, consisting of euro 589 thousand



• Euro 500 thousand loan granted to TBS Group by Mediocredito del Trentino Alto Adige in September 2015.The loan is repayable in half-yearly deferred instalments; the first instalment comes due in April 2016 and the final

one is due for payment in October 2018. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 336 thousand, consisting of euro 167 thousand

repayable over the short term and euro 169 thousand repayable over the medium/long term.Moreover the loan agreement requires the compliance with indicators calculated on TBS Group audited consolidated


• Euro 3 million mortgage granted to TBS Group by Banca Raiffeisen in December 2015.The loan is repayable in half-yearly deferred instalments; the first instalment comes due in April 2016 and the final

one is due for payment in October 2020. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,423 thousand, consisting of euro 586 thousand

repayable over the short term and euro 1,837 thousand repayable over the medium/long term.• Euro 3 million loan granted to EBM by Banca Popolare Emilia Romagna in December 2016.

The loan is repayable in half-yearly deferred instalments; the first instalment came due in June 2017 and the final one is due for payment in December 2020. The loan interest rate is the 6-month Euribor rate plus a spread.

At 31 December 2016, the outstanding loan amount was euro 3 million, consisting of euro 728 thousand repayable over the short term and euro 2,272 thousand repayable over the medium/long term.

• Euro 2.5 million loan granted to EBM by Cassa di Risparmio dell’Umbria Gruppo Intesa San Paolo in June 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in September 2015 and the

final one is due for payment in June 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 1,777 thousand, consisting of euro 494 thousand


• Euro 0.7 million loan granted to Crimo Italia by Monte dei Paschi di Siena in May 2016.


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The loan is repayable in quarterly deferred instalments; the first instalment came due in September 2016 and the final one is due for payment in June 2019. The loan interest rate is the 6-month Euribor rate plus a spread.

At 31 December 2016, the outstanding loan amount was euro 581 thousand, consisting of euro 233 thousand repayable over the short term and euro 348 thousand repayable over the medium/long term.

• Euro 6 million loan granted to EBM by Cassa di Risparmio del Friuli Venezia Giulia Gruppo Intesa San Paolo in November 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in February 2016 and the

final one is due for payment in November 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 4,861 thousand, consisting of euro 1,169 thousand

repayable over the short term and euro 3,692 thousand repayable over the medium/long term.Moreover the loan agreement requires the compliance with indicators calculated on the TBS Group’s consolidated

financial statements, regarding the ratio between net financial debt and net equity, and between net financial debt and EBITDA. Initial determination of these values was set for 31 December 2016. If those indicators should not fall within the settled limits, the Bank is entitled to rescind the contract, in accordance to Italian Civil Code, article 1456. As at 31 December 2016, the Company respected these parameters.

• Loan granted in April 2016 to Ing. Burgatti by Cassa di Risparmio di Bologna for euro 350 thousand.The loan is repayable in monthly deferred instalments; the first instalment came due in May 2016 and the final one

is due for payment in March 2019. At 31 December 2016, the outstanding loan amount was euro 274 thousand, consisting of euro 116 thousand


• Loan granted in September 2016 to Ing. Burgatti by Banca di Desio for euro 400 thousand.The loan is repayable in monthly deferred instalments; the first instalment came due in October 2016 and the final

one is due for payment in October 2019. At 31 December 2016, the outstanding loan amount was euro 379 thousand, consisting of euro 132 thousand


• Loan granted in September 2015 to Ing. Burgatti by Banca Popolare Emilia Romagna for euro 400 thousand.The loan is repayable in monthly deferred instalments; the first instalment came due in October 2015 and the final

one is due for payment in September 2019. At 31 December 2016, the outstanding loan amount was euro 278 thousand, consisting of euro 100 thousand


• Euro 3 million loan granted to TBS Group by UniCredit in March 2014.The loan is repayable in quarterly deferred instalments; the first instalment expired in June 2014 and the final one

is due for payment in March 2018. The loan interest rate is the 3-month Euribor rate plus a spread. At 31 December 2016, the outstanding loan amount was euro 990 thousand, consisting of euro 795 thousand


accounting values, regarding the ratio between net financial debt and shareholders’ net equity and between EBITDA and net financial debt. As at 31 December 2016, the Company respected these parameters.


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• Loan granted in September 2014 to Ing. Burgatti by Emilbanca for euro 200 thousand.The loan is repayable in monthly deferred instalments; the first instalment came due in October 2014 and the final

one is due for payment in September 2019. The loan interest rate is the 6-month Euribor rate plus a spread. At 31 December 2016, the outstanding loan amount was euro 113 thousand, consisting of euro 40 thousand


• Euro 2.5 million loan granted to TBS Group by Banca Popolare Friuladria - Gruppo Credit Agricole in December 2013.The euro 2.5 million loan is repayable in 20 quarterly deferred instalments with the first instalment due in March

2014 and the last instalment in December 2018. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 1,059 thousand, consisting of euro 523 thousand


Payables to other lenders

Medium/long term loans payable to others are detailed in the following table:• Financial payable to minority shareholders for the acquisition of a 35% stake in Ing. Burgatti S.p.A. (put&call option)

for euro 2,000 thousand;• IRS derivatives measured at fair value for euro 247 thousand;• Financial payable to minority shareholders for the acquisition of a 49% interest in Tunemedix (put & call options) for

euro 177 thousand.


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Current financial liabilities

The table below provides a breakdown of the current financial liabilities:


Short-term leasing 392 694

Short-term payables to banks 43,504 47,922

Payables to factoring companies 8,937 16,570

Other short-term financial liabilities 3,717 5,894


Current financial liabilities relate to those Group short-term borrowings from leasing companies, factoring companies, banks, other financial institutions and other lenders.

Amounts due to banks include bank overdrafts, advanced payments of invoices, current portion of medium/long term borrowings and other short term loans.


Euro 6 million loan granted to TBS Group by Monte dei Paschi in February 2016 1,333 -

Euro 0.8 million loan granted to TBS Group by Banca Popolare in September 2016 638 -

Euro 1 million loan granted to TBS Group by Popolare di Vicenza in December 2016 798 -

Euro 3 million loan granted to TBS Group by Banca Popolare in January 2015 755 734

Euro 3.5 million loan granted to TBS Group by Friuladria Credit Agricole in May 2015 694 681

Euro 15 million loan granted to TBS Group by Banca Popolare di Milano in June 2015 3,749 3,670

Euro 4 million loan granted to TBS Group by BNL in October 2015 1,333 1,333

Loan granted to TBS Group by FVG in July 2015 for the original amount of euro 1.5 million 514 485

Euro 3 million mortgage granted to TBS Group by UniCredit in July 2015 589 576


Euro 3 million mortgage granted to TBS Group by Banca Raiffeisen in December 2015 586 573

Euro 3 million loan granted to EBM by Banca Popolare Emilia Romagna in December 2016 728 -

Loan granted to EBM by CariUmbria Intesa San Paolo in June 2015 for the original amount of euro 2.5 million 494 484

Euro 0.7 million loan granted to Crimo Italia by Monte dei Paschi in May 2016 233 -

Euro 3 million mortgage granted to TBS Group by UniCredit in March 2014 795 1,748

Euro 2.5 million loan granted to TBS Group by Friuladria in December 2013 523 499

Loan granted to Crimo by CariUmbria Intesa San Paolo in June 2015 for the original amount of euro 0.4 million - 268

Euro 2.5 million loan granted to TBS Group by Cassa di Risparmio del FVG in August 2014 - 296

Loan granted to TBS Group by Mediocredito del Trentino in September 2012 for the original amount of euro 1,000 thousand - 204

Euro 6 million loan granted to EBM by Ca.ri.FVG Banca Intesa in November 2015 1,169 1,139

Mortgage granted by BKS to PCS in December 2007 - 62

Euro 5 million loan granted to TBS Group by Banca Popolare di Milano in March 2011, transferred to Insiel Mercato in 2011 - 265

Euro 180 thousand loan granted to Caribel Programmazione, merged with Insiel Mercato, by Antonveneta in September 2008 - 19

Loan granted to Erre Effe Informatica by MPS in October 2013 for the original amount of euro 150 thousand - 53

Euro 150 thousand loan granted to REM DI by Banca Popolare della Campania in October 2014 - 41


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Euro 100 thousand loan granted to Delta X, now TBS Imaging, by Banca di Credito Cooperativo in 2014 12 12

Loan granted to Ing. Burgatti by Banca di Imola in September 2016 for euro 170 thousand 55 -

Loan granted to Ing. Burgatti by Cassa di Risparmio di Bologna in April 2016, for euro 350 thousand 116 -

Loan granted to Ing. Burgatti by Cassa di Risparmio di Rimini in March 2016, for euro 200 thousand 66 -

Loan granted in April 2015 to Ing. Burgatti by Cassa di Risparmio di Bologna, for euro 300 thousand 51 150

Loan granted in September 2015 to Ing. Burgatti by Banca Popolare Emilia Romagna for euro 400 thousand 100 186

Loan granted in September 2016 to Ing. Burgatti by Banca di Desio for euro 400 thousand 132 170

Loan granted in September 2014 to Ing. Burgatti by Emilbanca for euro 200 thousand 40 39

Loan granted in July 2014 to Ing. Burgatti by Banca di Bologna for euro 800 thousand - 240

Loan granted in October 2013 to Ing. Burgatti by BNL for euro 200 thousand - 56

Loan granted in October 2011 to Ing. Burgatti by Banca Popolare Emilia Romagna for euro 500 thousand - 89

Other lesser financial payables 6 -

Total non-current portion of long-term loans 15,678 14,236

Current account overdrafts, advances on invoices and use of short-term credit lines 17,363 33,686

Short-term loans due within 12 months 10,463 -


TBS FR financial payable for the balance of Crimo France shares 158 3,086

Financial payable to Erre Effe Informatica minority shareholders for the acquisition of a 49.00% interest in Erre Effe (put & call options) 1,221 1,221

Financial payable to TBS GB minority shareholders for the acquisition of a 3.87% interest in TBS GB 1,278 1,278

Financial payables Tunemedix 32 -

P.I.A. loan granted to subsidiary Caribel Programmazione, merged with Insiel Mercato - 41

Debts payable to Erre Effe Informatica minority shareholders 108 47

Various payables TBS India 144 -

Payables for various Sava loans of the subsidiary EBM 4 3

Other financial payables 772 218

Total short-term portion of other borrowings 3,717 5,894

Current leasing contracts’ debts 392 694

Current payables to factoring companies 8,937 16,570

Total current financial liabilities 56,550 71,080

Payables due to other lenders include:• Euro 1,278 thousand financial payable to TBS GB minority shareholders.

On the basis of the agreement signed with the minority shareholder of EBME, the Group acted to evaluate a put option in favour of the minority shareholder and a call option in favour of the TBS Group, for repurchase of the exchanged TBS GB shares. • Euro 1,221 thousand financial payable to Erre Effe Informatica minority shareholders.

Based on the agreement signed by Erre Effe Informatica minority shareholders, the Group proceeded with valorisation of the Put & Call option for purchase of 49% of Erre Effe Informatica shares.


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NOTE 17 – Employee Severance Indemnity

The table below shows changes in the Employee Severance Indemnity provision:


At the start of the period 9,074 9,027

Change in the scope of consolidation -2,453 683


Actuarial gains/(losses) 542 -553


Benefits paid -326 -780

Change in assets held for sale -5 0

At the end of the period 7,136 9,074

According to international accounting standards, and IAS 19 in particular, the employee severance indemnity is regarded as a defined benefit obligation whereby the liability is measured on the basis of actuarial methods.

Following the Italian Financial Law of 2007, for Italian companies the employee severance indemnity – accrued from 1 January 2007 or from the date the option to be exercised by employees was selected – is included in the category of programmes with defined contribution; both in the case of supplementary allowance, as well as in the case of allocation to the INPS Treasury Fund. The accounting of this Employee Severance Indemnity is therefore assimilated with other types of contribution deposits.

At 31 December 2016 and 31 December 2015 the breakdown of the provisions by Italian and foreign companies, which said reserve applies to, is expressed in percentage terms and absolute values in the following table:


% Value % Value

Italian companies 92.2% 6,579 91.0% 8,261

Foreign companies 7.8% 557 9.0% 813

Total 100.0% 7,136 100.0% 9,074

Employee Severance Indemnity liabilities were measured by independent actuaries, applying the Projected Unit Credit Method.


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For Italian entities, the actuarial assumptions used were as follows:

31/12/2016 31/12/2015

Annual probability of termination due to death ISTAT 14 death-rate tables lowered to

85%, divided by gender

ISTAT 13 death-rate tables lowered to

85%, divided by gender

Annual probability of termination due to disability INPS data lowered to 70%

INPS data lowered to 70%

Annual probability of attrition due to other causes 5.74% 3.80%

Annual probability of request of employee severance indemnity advance by employees 0.49% 1,54%

Annual interest rate 1.31% 2.03%

Annual inflation rate 2.00% 2.00%

Retirement age according to current INPS retirement rules

according to current INPS retirement rules

In order to indicate the potential effects that could have occurred to the Group’s defined benefit obligations following changes in some of the main actuarial hypotheses, we indicate the following:• in the case the discount rate used were to increase by 0.5%, the debt registered in the financial statements would

be reduced by euro 349 thousand;• in the case the discount rate used were to decrease by 0.5%, the debt registered in the financial statements would

be increased by euro 377 thousand;• if pension costs were increased by 1%, the impact on the debt booked to the balance sheet would increase by euro

199 thousand; • if pension costs were decreased by 1%, the impact on the debt booked to the balance sheet would decrease by

euro 192 thousand.

NOTE 18 – Provisions for risks and charges

The table below provides a breakdown of provisions for risks and charges:

(thousands of euro) Other provisions

for risks and charges

FISC Provision for litigation

Total

At 1 January 2016 529 508 422 1,459

Change in the scope of consolidation -175 -1 0 -176

Provisions for the year 155 55 40 250

Provisions for the year exceptional risks 0 0 684 684

Utilisation for the year -307 -137 -103 -547

Foreign exchange differences and reclassifications 0 0 -31 -31

At 31 December 2016 202 425 1,012 1,639

Other provisions for future liabilities and charges regard:• for euro 156 thousand for provisions carried out during the year by EBM for risks deriving from the breakage of

components connected to high-tech DI equipment that the company holds due to a maintenance full risk contract (the previous year’s provision of euro 141 thousand was used during the year);


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• euro 25 thousand for the provisions of TBS India hedging the risk connected with the SLA clause included in customer contracts. Usage during the year amounted to euro 8 thousand;

• euro 10 thousand for provisions during the year by Crimo Italia for contractual risks (use during the year of euro 20 thousand);

• euro 12 thousand for provisions during the year by Crimo France for contractual risks. Within utilisations, euro 138 thousand is relative to use by TBS Group for compensation of certain contingent

liabilities relative to the purchaser of Subitec, disposed of on 23 December 2014.The provision for disputes refers to:

• euro 684 thousand (entirely provisioned during the year), to the subsidiary TBS GB relative to the possible risk of a dispute with a customer;

• euro 70 thousand (use during the year of euro 100 thousand) to subsidiary Crimo France against the possible risk of disputes with suppliers;

• euro 44 thousand (the provision during the year was euro 25 thousand) to the subsidiary TBS FR and for euro 30 thousand (of which euro 3 thousand used during the year) to the Parent Company for possible risks for disputes with personnel;

• euro 15 thousand (entirely provisioned during the year) to Crimo Italia for possible tax risks;• euro 200 thousand to EBM for the possible risk of adverse outcomes in disputes.

The supplementary customer indemnity provision was allocated by the Italian companies EBM, Crimo Italia and TBS Group and includes provisions for indemnity payable in certain cases of dissolution of agent contracts. The provision was calculated in accordance with the Collective Bargaining Agreements for Agents and Sales Representatives for Industry of 20 March 2002 and is recorded at current value (the provisions amount in total to euro 55 thousand and the utilisation of euro 137 thousand).

NOTE 19 – Other medium/long-term liabilities


Other non-current liabilities 183 306

Total other non-current liabilities 183 306

Other medium/long-term liabilities mainly refer to deferred income relating to grants obtained. The amount will be recognised in the Income Statement as revenue, according to the occurrence, on the basis of

depreciation schedules of tangible assets (property, plant and equipment) that the grants were obtained for.

NOTE 20 – Trade payables

The table below provides a breakdown of trade payables:


Change in the scope of consolidation

Payables to suppliers 38,583 38,706

Total trade payables 38,583 38,706

Payables to suppliers as at 31 December 2016 amount to euro 38,583 thousand (38,706 thousand as at 31 December 2015).


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Trade payables are not interest bearing and the payment terms are in line with the commercial practices of the business areas in which they fall. Trade payables are not secured.

NOTE 21 – Other current liabilities

The table below provides a breakdown of other current liabilities:


Payables to employees 7,018 9,655

Payables to social security institutions 4,061 5,671

Customer advance payments on invoices 776 3,170

VAT payables 2,889 4,985

Other tax liabilities 2,249 2,980

Other payables 2,960 2,710

Total other current liabilities 19,953 29,171

Payables to employees include payables for salaries and wages for the month of December 2016, to be paid in the following month, and payables to employees for holidays and leave.

Social security liabilities primarily consist of payables to the Italian Institute for Social Security (INPS), the Italian Workers’ Compensation Authority (INAIL) and the Local Social Security Institutes, as well as amounts due for contributions towards leave.

Other taxes payables primarily comprise employee and collaborator tax withholdings.The other payables item relates to various payables such as amounts due to directors, freelancers, etc.

NOTE 22 – Guarantees granted, commitments and financial liabilities

Guarantees given

The Parent Company provided Bid Bond, Performance Bond and Advance Bond guarantees for euro 4,371 thousand in favour of customers relative to participation in international tenders.

EBM has provided insurance guarantees to the value of euro 39,165 thousand for the proper execution of works in favour of customers and for participation in calls for tender.

Tesan Televita has provided insurance guarantees to the value of euro 883 thousand for the proper execution of works in favour of customers and for participation in calls for tender.

NOTE 23 – Revenue

The table below provides a breakdown of revenues as at 31 December 2016 and 31 December 2015:


Revenue from the sale of goods and services 198,405 191,788

Change in work in progress on order -34 -22

Total revenue 198,371 191,766



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Revenues primarily relate to contractual amounts accrued on the basis of the progress of services performed and accrued in the year, changes in contract work in progress for services that have a value at year-end but have not been completed, invoices issued to customers or entities in temporary associations of businesses with the Group for the sale of consumables and spare parts, and ISTAT adjustment invoices in the period at issue and previous periods.

The increase in revenues is mainly due to the increase in revenues from the subsidiary TBS India and the subsidiaries Crimo France which entered the scope of consolidation in August of last year and Tunemedix which entered consolidation in March 2016.

NOTE 24 – Other revenue and income

The table below provides a breakdown of other revenue and income as at 31 December 2016 and 31 December 2015:


Contributions 608 585

Other operating revenue 1,343 580

Total other income 1,951 1,165


Revenue contributions include both revenues linked to cost components and revenues linked to investments in non-current intangible fixed assets, and are recognised on an accruals basis for their offsetting against related costs.

Positive components relative to the use of the provisions for risks and charges are included among other revenues, where risks did not arise or arose at a value of less than that allocated.

NOTE 25 – Cost of raw materials and consumables

The table below provides a breakdown of the cost of raw materials and consumables as at 31 December 2016 and 31 December 2015:


Raw materials, consumables and goods 35,719 30,687

Changes in inventories of raw materials, consumables and goods -1,872 -1,328

Total raw materials, consumables and goods 33,847 29,359


The costs shown primarily relate to the purchase of spare parts for medical devices on receipt of orders.


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NOTE 26 – Service costs

The table below provides a breakdown of service costs as at 31 December 2016 and 31 December 2015:


Consultancy and technical contracts 40,825 41,707

Legal, administrative and commercial services 4,101 4,711

Travel expenses 2,540 2,536

Telephone expenses 1,005 1,227

Directors’ remuneration 1,120 1,102

Board of statutory auditors remuneration 338 325

Commissions 1,895 1,820

Bank commissions and factoring charges 1,625 1,438

Third-Party Insurance 1,025 1,161

Transportation and shipping 1,856 1,546

Other repairs and maintenance 557 518

Advertising, promotion, exhibitions and trade fairs 768 598

Use of third-party assets 2,881 2,750

Vehicle rental 3,081 3,120

Other service costs 6,008 5,912

Total service costs 69,625 70,471


The following table provides the 2016 fees for the services involving the audit of the separate and consolidated financial statements, and the limited audit for the half-year report (without issuing the associated report), as provided by the auditing firms and by other companies belonging to its network.

(thousands of euro)Party who provided the service – fees for the year

2016amount

2015amount

Ernst & Young S.p.A. Parent Company – TBS Group Spa – auditing service 107 107

Ernst & Young S.p.A. Parent Company – TBS Group S.p.A. – other services 13 14

Ernst & Young S.p.A. Italian subsidiaries – auditing services 185 187

Ernst & Young S.p.A. foreign subsidiaries – auditing service 63 74

Ernst & Young S.p.A. foreign subsidiaries – other services 0 19

Other auditing firms – auditing services 15 14

Total 383 415


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NOTE 27 – Personnel costs

The table below provides a breakdown of personnel costs as at 31 December 2016 and 31 December 2015:


Salaries and wages 54,240 52,493

Social security contributions on salaries 14,846 13,990

Retirement benefits 284 211

Employee Severance Indemnity 2,457 2,165

Other personnel costs 732 993

Total personnel costs 72,559 69,852


The increase in personnel costs as at 31 December 2016 compared to the previous year is primarily due to Crimo France entering the scope of consolidation in August of the previous year.

The “Other personnel costs” item primarily relates to costs for temporary work and staff leaving incentives for the year.

The changes in the number of Group employees in the last two financial years, taking into account the companies acquired and disposed of in the periods, are summarised below:

01/01/2016 Recruitment Resignations 31/12/2016

Managers 23 2 25

Employees 1,873 352 251 1,974

Total 1,896 354 251 1,999

01/01/2015 Recruitment Resignations 31/12/2015

Managers 30 2 3 29

Employees 2,305 484 343 2,446

Total 2,335 486 346 2,475

The decrease in employees between 2015 and 2016 is due to Insiel Mercato and PCS leaving the scope of consolidation and TBS IT being reclassified to assets held for sale.

NOTE 28 – Other operating costs

The table below provides a breakdown of other operating costs as at 31 December 2016 and 31 December 2015:


Write-downs of receivables under current assets 700 671

Taxes and duties 724 569

Other costs 2,826 3,721

Total other operating costs 4,250 4,961



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“Other costs” primarily relate to membership expenses, marketing and promotional costs and costs pertaining to previous years.

NOTE 29 – Cost adjustments for in-house generation of non-current assets

The following table illustrates the extent of the cost adjustments for in-house generation of non-current assets as at 31 December 2016 and 31 December 2015:


Cost adjustments for in-house generation of non-current assets -1,480 -1,571

Total cost adjustments for in-house generation of non-current assets -1,480 -1,571


The item “Cost adjustments for in-house generation of non-current assets” as at 31 December 2016 amounted to euro 1,480 thousand (euro 1,571 thousand at 31 December 2015). It related entirely to personnel and service expenses incurred for some development of new software and information technology. In particular, should such costs be deducted from the corresponding Income Statement item, there would be a reduction in personnel and service costs.

NOTE 30 – Depreciation, amortisation and write-downs

The following table shows the breakdown of depreciation, amortisation and write-downs at 31 December 2016 and 31 December 2015:


Depreciation of tangible fixed assets 4,921 4,538

Amortisation of intangible fixed assets 5,069 4,563

Total depreciation, amortisation and write-downs 9,990 9,101


The increase in the amortisation of intangible fixed assets at 31 December 2016 with respect to 31 December 2015 is due to the increase in amortisation of EBM due to an increase in investments made.


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NOTE 31 – Other provisions for risks and charges

The table below provides a breakdown of other provisions for risks and charges as at 31 December 2016 and 31 December 2015:


Provisions Contractual risk provision for disputes 40 19

Provisions Supplementary customer indemnity provision 55 41

Provisions Other provisions for risks and charges 155 175

Total allocation to provisions 250 235


Additional, a provision for exceptional risks was made relative to a complex contractual dispute associated with the subsidiary TBS GB for euro 684 thousand.

Please refer to Note 19 for the related comments.

NOTE 32 – Gains/(losses) from investments


Write-downs on equity investments -93 0

Revaluations of equity investments 0 35

Total (write-downs) revaluations -93 35

NOTE 33 – Financial income and expenses

The table below provides a breakdown of income and financial expenses at 31 December 2016 and 31 December 2015:


Interest payable on loans 4,306 5,305

Other financial expenses 837 70

Actuarial termination indemnity loss 103 151

Total Financial Expenses 5,246 5,527

Bank interest receivable 139 111

Other interest receivable 107 367

Other financial income 788 531

Total Financial Income 1,034 1,009

Total financial income and expenses 4,212 4,517


The decrease in financial expenses is due to the decrease in the cost of debt and expenses following credit assignment operations.


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NOTE 34 – Income taxes

The table below provides a breakdown of income taxes distinguishing between current, deferred and pre-paid taxes. A breakdown of Italian and foreign taxes is provided in relation to current taxes.


Current IRAP 617 716

IRES 957 969

Current income taxes, Foreign 1,856 1,213

Current income taxes 3,430 1,685

(Pre-paid)/deferred taxes -631 -130

Total income taxes 2,799 2,768


The following table shows the tax incidence on earnings before tax as at 31 December 2016 and 31 December 2015:


Pre-tax profit 6,292 6,040

Income taxes 2,799 2,768

Incidence on earnings before taxes 44.5% 45.8%


With reference to deferred tax assets, note that liabilities for deferred tax of euro 128 thousand were booked directly as a contra-entry in shareholders’ net equity. This amount refers to the tax effects:• of actuarial losses calculated based on IAS 19 for euro 116 thousand (credit); • the fair value measurement of future cash flows for derivatives based on IAS 39 for euro 12 thousand (credit).

Deferred tax receivables and payables

The following table details prepaid tax assets:


Financial statements

Income statement


Income statement

Deferred income on previous losses 1,018 -86 1,098 170

Capitalization write-off 408 -36 506 36

Revenue recognition 93 -15 106 -15

Receivables for prepaid tax for substitute tax 2,473 -692 3,165 -692

Other temporary differences 1,642 -168 2,470 41

Total prepaid tax receivables 5,634 -997 7,345 -460


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The Group recorded prepaid taxes relating to temporary differences between the civil and fiscal assessment of Group companies, based on the consideration that future taxable amounts will absorb all the temporary differences (including consolidation adjustments) that generated them. In calculating prepaid taxes, reference was made to the rates in force in the various countries.

One of the most significant amounts is allocation of deferred tax assets on tax losses arising in TBS FR and MSI that can be offset by the future taxable profits of the companies in which the losses arose. In particular, the deferred tax assets recorded and the theoretical tax assets arising from tax losses that may be carried forward are as follows:


Deferred tax assets recorded

Theoretical deferred tax

assets

Deferred tax assets recorded

Theoretical deferred tax

assets

TBS FR 891 891 942 1,269

MSI 127 127 156 156

TBS ES 0 1,633 0 1,503

Deferred tax receivables on losses carried forward 1,018 2,651 1,098 2,928

The amount of deferred tax receivables which can be carried forward, linked to the corresponding tax base, can be broken down by individual company as follows:

(thousands of euro) Unlimited Total

TBS FR 891 891

MSI 127 127

Deferred tax receivables on losses carried forward 1,018 1,018

Among the most important amounts are also deferred tax assets for euro 2,473 thousand, equal to the residual tax benefit deriving from the future deductibility of the goodwill liberated in 2010 for the subsidiary EBM. In years following 2010 deferred tax assets booked were in fact released to the statement of income for a tenth in each year, in correspondence to the tax deductibility of the amortisation of the goodwill carried out exclusively in the financial statements of the subsidiary drawn up in accordance with Italian accounting principles.

Details of deferred tax liabilities are as follows:



Income statement


Income statement

Difference between fiscal-IFRS goodwill amortisation 3,556 -313 4,106 50

Deferred tax following orders portfolio and relations with customers 2,411 -1,112 4,109 -870

Other temporary differences 1,573 -202 1,946 100

Total deferred tax provision 7,540 -1,627 10,161 -720

The deferred tax liabilities were recorded against all the taxable temporary differences, and more specifically:• on write-downs of goodwill amortisation after their initial recognition on the basis of the fiscally deductible

amortisation;• on the portfolio order and customer relations accounting on the basis of the purchase price allocations of the

various purchases made by the Group.


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NOTE 35 – Related party disclosures

The consolidated financial statements include the financial statements of the TBS Group and of those subsidiaries falling under the scope of consolidation.

Transactions between TBS Group and the related subsidiaries were eliminated from the Consolidated Financial Statements.

Transactions with related parties (relating to financial and equity interests) were not removed when preparing the consolidated financial statements and are broken down as follows:


costs revenue receivables payables costs revenue receivables payables

SEGES 68 0 0 20 83 0 0 40

Paolo Salotto 247 0 0 52 281 0 0 41

MEA Consulting 26 0 0 0 25 0 0 0

Capitol Health 0 3

Nicholas Bosanquet 30 0 0 0 56 0 0 0

Innovating Global Health S.A. 37 0 0 0 130 0 0 47

Total 408 0 0 72 578 0 0 128

Mr. Paolo Salotto is the Chief Executive Officer of the TBS Group and the costs indicated in the table refer to fees accrued during 2016 as the Director of Strategic Planning, Director of M&A, General Manager for Corporate activities and Managing Director.

Seges Srl is considered a related party since Mr. Paolo Salotto is its Chairman. Relations with Seges are governed by a consulting contract, with particular reference to administration, accounting and legal issues.

Innovating Global Health S.A. is considered to be a related party as it is a subsidiary of Capitol Health Special Fund L.P., one of the shareholders of the Company. Relations with Innovating Global Health SA are regulated by a strategic and financial consulting agreement under General Management.

The services company MEA Consulting is a related party in that Laura Amadesi, a Director of the TBS Group is a shareholder and partner of said company. Costs for the year relative to MEA Consulting refer to consulting activities.

Mr. Nicholas Bosanquet is a manager at TBS GB, and entered into a consultancy contract with TBS GB.Relations with the associated companies are stated in amounts in thousands of euro as at 31 December 2016

below:


costs revenue receivables payables costs revenue receivables payables

REM 97 0 0 0 97 0 0 0

SAIM – Südtirol Alto Adige Informatica Medica Srl na na na na 0 1,316 1,859 0

03 Enterprise na na na na 36 0 36 57

TH MED Group SarL 0 0 24 0 0 0 24 0

SIGE 186 2,357 6,961 210 0 1,726 9,944 0

Easy Care 0 0 0 0 0 0 10 0

Insiel Mercato 786 859 194 325 0 0 0 0

SLT 139 61 33 136 3 16 850 16

Total 1,208 3,277 7,212 671 136 3,058 12,723 73


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Accrued remuneration for TBS Group directors with strategic responsibilities is shown below:


Salaries(*) Remuneration(**) Salaries(*) Remuneration(**)

Diego Bravar 90 122

Nicola Pangher 128 125

Paolo Salotto(***)

(*) The amounts shown relate to the gross salaries paid to Company employees.

(**) The amounts shown relate to remuneration paid to Company directors.

(***) For the fees relative to Mr. Paolo Salotto please refer to the figures in the table above, “Relations with other related parties”

NOTE 37 – Subsequent events

On 3 February 2017, EBM, a 100% subsidiary of the TBS Group, completed its acquisition of the Esaote business branch operating in the clinical engineering services sector and, with it, 26 contracts to manage and maintain biomedical equipment. Specifically, the portfolio of contracts acquired has an estimated value of approximately euro 26 million over the next three years.

The investment amounted to euro 4.1 million. No other significant events occurred after 31 December 2016 and up to the date the financial statements were

prepared.




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134

135

Financial Statements as at 31 December 2016Annual Financial Report

Financial Statements as at 31 December 2016

Drawn up in accordance with international accounting standards

Statement of financial position

Notes 2016 of which withrelated parties

2015 of which withrelated parties

ASSETS

NON-CURRENT ASSETS

- Assets with indefinite useful life (goodwill) 4 380,671 380,671

- Intangible assets with finite useful life 5 1,532,339 1,350,881

Intangible assets 1,913,010 1,731,552

- Land and buildings 1,036,614 1,077,845

- Plants and equipment 213,730 216,181

- Other tangible assets 187,004 258,798

Tangible assets 6 1,437,348 1,552,824

- Investments in subsidiaries 77,829,646 88,261,466

- Investments in associated companies and joint ventures 2,266,973 1,111,675

- Investments in other companies 98,709 92,709

Investments 7 80,195,328 89,465,850

- Other financial assets 14 15 15

- Other non-current assets 8 35,227 17,449

- Prepaid tax assets 31 128,833 142,495


TOTAL NON-CURRENT ASSETS 83,709,761 92,910,185

CURRENT ASSETS

Inventories 9 1,126,381 411,760

Trade receivables 10 14,260,851 11,759,108 9,494,135 7,535,368

Assets held for trading 11

Other current assets 11 1,113,691 150,196 1,006,173 409,689

Income tax receivables 12 1,387,119 1,844,631

Current financial assets 14 25,591,800 25,563,916 19,095,312 18,849,980

Cash and cash equivalents 14 14,384,527 11,386,296

TOTAL CURRENT ASSETS 57,864,369 43,238,307

TOTAL ASSETS 141,574,130 136,148,492


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TOTAL SHAREHOLDERS’ NET EQUITY AND LIABILITIES

NET EQUITY

- Share capital 4,142,137 4,142,137

- Reserves 63,189,537 69,840,558

TOTAL NET EQUITY 13 67,331,674 73,982,695

NON-CURRENT LIABILITIES

Non-current financial liabilities 14 34,597,658 38,188,690

Employee severance indemnity 15 297,368 276,528

Deferred tax provision 31 579,635 625,568

Provisions for risks and charges 16 33,598 174,775

Other medium/long-term liabilities 0

TOTAL NON-CURRENT LIABILITIES 35,508,259 39,265,561

CURRENT LIABILITIES

Trade payables 17 2,330,679 670,936 2,085,877 859,492

Other current liabilities 18 3,667,411 1,940,799 3,578,987 2,216,493

Current financial liabilities 14 32,736,076 12,097,625 16,796,073 0

Income tax payables 12 31 439,299

TOTAL CURRENT LIABILITIES 38,734,197 22,900,236

TOTAL NET EQUITY AND LIABILITIES 141,574,130 136,148,492

Income statement



Revenue from sales and services 20 10,711,112 8,600,484 9,087,029 7,593,165

Other income 21 355,827 162,977 289,266 175,259

Total revenue and income 11,066,939 9,376,295

Cost of materials 22 2,846,846 101,600 1,748,010 11,250

External services costs 23 5,783,534 1,339,155 5,687,705 1,138,590

Personnel costs 24 3,455,647 3,534,554

Other operating costs 25 323,354 44,610 563,587 7,622

Cost adjustments for in-house generation of non-current assets 26 -254,410 -239,221

Amortisation and write-downs on fixed assets 27 957,390 924,407

Other provisions 28 455 3,258

Total operating costs 13,112,816 12,222,300

OPERATING PROFIT -2,045,877 -2,846,005

Gains/(losses) from investments 29 -7,873,936 -7,873,936 303,802 303,802

Gains from equity investments 30 4,166,297 4,166,297 6,209,950 6,209,950

Financial income 30 1,145,901 1,050,690 1,518,217 1,186,040

Financial expenses 30 2,786,799 161 2,670,744 30,835

PROFIT BEFORE TAX -7,394,414 2,515,220

Income taxes 31 -789,561 -1,169,151

NET PROFIT FOR THE YEAR -6,604,853 3,684,371


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Comprehensive income statement

2016 2015

Net profit for the period (A) -6,604,853 3,684,371

Other items of the comprehensive income statement that will be subsequently reclassified to profit/(loss) for the year

Fair value change in hedging derivatives -45,863 -165,170

Tax effect on fair value change in hedging derivatives 12,612 45,422

-33,251 -119,748

Other components of the comprehensive income statement that will not besubsequently reclassified to profit/(loss) for the year

Actuarial gains/(losses) -16,995 20,149

Tax effect on actuarial gains/(losses) 4,078 -4,836

-12,917 15,313

Other comprehensive income statement components, net of taxes (B) -46,168 -104,435

Total profit/(loss) of the period (A)+(B) -6,651,021 3,579,936

CASH FLOW STATEMENT – TBS GROUP SPA

2016 2015

Adjustments to reconcile before tax income with financial flows net of operating activities:

Profit before tax -7,394,414 2,515,220

- Depreciation, amortisation and write-downs of fixed tangible and intangible assets 957,390 924,407

- Write-downs/(write-backs) on investments 7,873,936 -303,802

- (Gain)/losses on disposal of non-current assets, including investments 0 0

- Changes in deferred and prepaid taxes 0 0

- Net increase/(decrease) in the Employee Severance Indemnity provision and other personnel funds 0 0

- Net increase/(decrease) in provisions for risks and charges 455 3,258

- Dividends attributable -4,166,297 - 6,209,950

- Interest and other financial income -1,145,901 -1,518,217

- Financial expenses 2,786,799 2,718,213

- Costs for share-based payments 0 0

Total -1,088,032 - 1,870,871

Net change in working capital for the period

(Increase)/decrease in inventories -714,621 642,023

(Increase)/decrease in trade receivables -4,766,716 - 1,008,200

Increase/(decrease) in trade payables 277,596 -1,418,104

(Increase)/decrease in various receivables 1,404,708 - 87,128

Increase/(decrease) in other liabilities -395,699 -1,665,190

Total -4,194,732 -3,536,599

Interest income and other financial income received 0 0-

Income taxes (paid)/reimbursed -252,812 931,912


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2016 2015

CASH FLOW GENERATED (USED) BY OPERATING ACTIVITIES -5,535,576 -4,475,558

- Purchases of intangible assets -952,286 -395,680

- Purchases of tangible assets -81,522 -125,930

- Net change in financial receivables and other financial assets 0 0

-Recapitalised/establishment of subsidiaries -600,000 -557,243

- (Acquis.)/sales of equity investments 1,963,792 - 13,390,804

- Dividends received 3,412,135 5,990,873

- Disposal of intangible assets 0 10,501

- Disposal of tangible assets 10,436 1,775

CASH FLOWS PROVIDED BY (USED IN) INVESTMENT ACTIVITIES 3,752,555 -8,466,508

- Net Increase/(decrease) in current financial liabilities 15,940,003 2,909,730

- Net (increase)/decrease in current financial assets -5,880,959 3,532,935

- Net Increase/(decrease) in non-current financial liabilities -3,636,895 9,649,661

- Net (increase)/decrease in non-current financial assets 0 0

- Capital Increase 0 0

- Purchase of own shares 0 0

- Dividends paid 0 704,163

Dividends distributed to third parties 0 0

- Interest and other financial expenses paid -2,786,799 - 2,670,744

- Interest receivable and other financial income received 1,145,901 1,518,217

- Other changes 0 0

CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,781,251 14,235,636

TOTAL CASH FLOW 2,998,231 1,293,570

CASH AND CASH EQUIVALENTS (NET) AT THE START OF THE YEAR 11,386,296 10,092,726

CASH AND CASH EQUIVALENTS (NET) AT THE END OF THE YEAR 14,384,527 11,386,296


139

Summary statement of changes in shareholders’ net equity

Share capital Reserve, Share premium

Other reserves and retained

earnings/(losses)

Net profit for the period

NET EQUITY

Shareholders' net equity 31/12/2014 IAS/IFRS 4,142,138 42,832,382 20,146,206 3,986,196 71,106,922

Allocation of 2014 profit 3,986,196 -3,986,196 0

Net profit at 31 December 2015 3,684,371 3,684,371

Actuarial gains/(losses) net of tax effect 15,313 15,313

Fair-value measurement hedging derivatives net of tax effect -119,748 -119,748

Total profit/(loss) of the period 0 0 -104,435 3,684,371 3,579,936

Dividends resolved -704,163 -704,163

Shareholders' net equity 31/12/2015 IAS/IFRS 4,142,138 42,832,382 23,323,804 3,684,371 73,982,695

Allocation of 2015 profit 3,684,371 -3,684,371

Net profit at 31 December 2016 -6,604,853 -6,604,853

Actuarial gains/(losses) net of tax effect -12,917 -12,917

Fair-value measurement hedging derivatives net of tax effect -33,251 -33,251

Total profit/(loss) of the period 0 0 -46,168 -6,604,853 -6,651,021

Dividends resolved

Shareholders' net equity 31/12/2016 IAS/IFRS 4,142,138 42,832,382 26,962,007 -6,604,853 67,331,674


140

Notes to the Financial Statements

NOTE 1 – General information, layout and content of the financial statements and IFRS compliance

General information

TBS Group is the Parent Company of Italian and foreign companies that provide clinical engineering and integrated ICT solutions to social/healthcare entities, public and private, as well as managing all technological, biomedical and IT equipment through outsourcing, in particular medical devices and ICT systems.

In this context, preventive and corrective maintenance is done on biomedical equipment and endoscopic and ultrasound instruments of public or private hospitals, verifications of safety and functional quality checks, electronic management, advice on purchasing, inspections and training.

In addition, telemedicine and telecare solutions are provided to support diagnostic and therapeutic continuity between the hospital and the local area and to implement telematic home-based social/healthcare assistance services.

In addition, the Company offers its subsidiaries strategic, consulting and coordination services as well as administrative assistance.

TBS Group S.p.A. is listed on AIM Italia, a market organised and managed by Borsa Italiana.The registered office of TBS Group S.p.A. is at the AREA Science Park in Padriciano (Trieste), Italy. The company has

developed the size of its group through a series of acquisitions of subsidiaries held to be strategic in Italy, Europe and, over the last few years, in India.

These financial statements were approved with a resolution of the Board of Directors on 23 March 2017.

Layout and content of the financial statements for the year and IFRS compliance

The financial statements for the year are the separate financial statements of the TBS Group S.p.A. parent company.The financial statements of the TBS Group S.p.A. were drawn up in compliance with the International Financial

Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and approved by the European Commission as of 31 December 2016. The IFRS are also intended to include all the main revised international accounting standards (IAS), all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) previously known as the Standing Interpretations Committee (SIC).

The financial statements for the year are based on the historical cost principle, except for the financial derivative instruments that are recorded at fair value.

The TBS Group S.p.A. financial statements are presented in Euro. The values shown in the accounting schedules of the Balance Sheet, Income Statement, Comprehensive Income Statement, Cash Flow Statement and changes in net equity are shown in Euro, while the other accounting schedules and the explanatory notes are expressed in thousands of Euro.

The company has adopted the following financial statements:1. Statement of financial position: assets and liabilities are distinctly classified between current and non-current.2. Income statement: classification by type.3. Comprehensive income statement.4. Cash flow statement: the indirect method was adopted for stating the cash flows.5. Summary statement of changes in shareholders’ net equity.


141

NOTE 2 – Preparation criteria, accounting standards and valuation criteria

These annual financial statements and the relative tables were prepared and are shown in Euro, while the tables contained in the explanatory notes are shown in thousands of Euro, with the consequence that the sum of the rounded amounts does not always coincide with the rounded total.

Homogeneity of the accounting principles, new or reviewed IFRS and IFRIC principles and interpretations adopted in effect or that will come into effect in subsequent years

The accounting standards adopted are comparable to those used as at 31 December 2015, apart from the adoption of the following new or revised IFRS or IFRIC standards which were applied for the first time by the Company from 1 January 2016.

Accounting standards, amendments and interpretations applied from 1 January 2016

The nature and impact of each new standard/change is listed below:

Changes to IAS 19 Defined contribution plan: employee contributions

IAS 19 requires entities to consider employee or third-party contributions in recording Defined Benefit Plans. When contributions are associated with the service rendered they should be allocated to the periods of service as a negative benefit. This amendment clarifies that, if the amount of the contributions is independent of the number of years of service, the entity can recognise these contributions as a reduction to the cost of service during the period in which the service is provided, rather than allocating the contributions to the periods of service.

The change came into effect for the financial periods starting from 1 February 2015 or afterwards. This change was not significant for the company, given that there are no plans that foreseen contributions made by employees or third parties.

2010-2012 annual improvement project

These improvements are effective as of 1 February 2015 and it is not expected that they will have a material effect on the company. They include:

IFRS 2 Share-based payments

This improvement is applied prospectively and clarifies a number of points relative to the definition of performance and service conditions that represent conditions for accrual, including:• a performance-based condition must contain a service condition; • a performance-based objective must be achieved while the counterparty provides the service;• a performance-based objective can refer to operations or activities of an entity, or to those of another entity within

the same Group;


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• a performance-based objective can be a market condition or non-market-related condition;• If the counterpart ceases providing service during the accrual period, irrespective of the reason, the service

condition is not satisfied.

IAS 16 Property, plant and equipment and IAS 38 Intangible assets

The amendment applies retrospectively and clarifies that in IAS 16 and IAS 38 an asset can be revalued with reference to observable data either by adjusting the asset’s gross and net book value, and by calculating the accounting market value, and adjusting the gross book value proportionately so that the book value is the same as the market value. In addition, accumulated amortisation and depreciation is the difference between the gross and book value of the asset.

IAS 24 Related party disclosures

The amendment applies retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related-party disclosure requirements. In addition, an entity that seeks recourse to a management entity must disclose the costs sustained for the management services.

Amendments to IAS 16 and IAS 38 Clarifications on acceptable methods of amortisation and depreciation

The amendments clarify the principle contained in IAS 16: Property, Plant and Equipment and in IAS 38: Intangible fixed assets, that revenues reflect a model of economic benefits that are generated through the management of a business (which the asset is part of), rather than the economic benefits that are consumed through use of the asset. It follows that a revenue-based method cannot be used for depreciation and amortisation of Property, Plant and Equipment and can only be used in very limited circumstances for the amortisation of intangible assets. It is not expected that the company will see any impacts from the application of these amendments, given that the TBS Group S.p.A. does not use revenue-based methods to amortise or depreciate its non-current assets.

Amendments to IAS 27 Equity method in separate financial statements

The amendments will allow entities to use the equity method to recognise investments in subsidiaries, joint ventures and related companies in their separate financial statements. Entities that are already applying the IFRS and decide to change the accounting criteria, passing the equity method in their separate financial statements, must apply the change retrospectively. The amendments are effective for financial years beginning on or after 1 January 2016. Early application is allowed. These amendments did not have any impact on the TBS Group S.p.A.’s individual financial statements as at 31 December 2016. The company does not foresee applying these changes in the future.


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2012-2014 annual improvement project

These improvements include:

IFRS 5 Non-current assets held for sale and discontinued operating activities

Assets (or groups of assets) held for sale are generally transferred through sale or distribution to shareholders. The amendment clarifies that switching from one method of transfer to the other should not be considered a new transfer plan but, rather, a continuation of the original one. Hence there is no interruption in the application of requirements under IFRS 5. This amendment must be applied prospectively.

IFRS 7 Financial instruments: disclosure

(i) Servicing contracts The amendment clarifies that a servicing contract that includes payment may constitute continuing involvement in

a financial asset. An entity must define the nature of the payment and the agreement using the guidance found in IFRS 7 on continuing involvement, to determine whether disclosure is required. The determination of which servicing contracts involve continuing involvement must be carried out retrospectively. In any case, the disclosure required does not need to be presented for financial years prior to that in which the amendment was initially applied.

(ii) Applicability of IFRS 7 amendments to condensed interim financial statements The amendment clarifies that the payment disclosure requirements do not apply to condensed interim financial

statements, unless the disclosure would provide a significant update to the information provided in the most recent annual financial statements. This amendment must be applied retrospectively.

IAS 19 Employee benefits

The amendment clarifies that the market depth for high quality corporate bonds must be defined with respect to the currency in which the bond is denominated, rather than the country in which the bond is located. When there is no active market for high quality corporate bonds in that currency, rates relative to government securities must be used. This amendment must be applied prospectively.

Amendments to IAS 1 Disclosure initiative

The amendments to IAS 1 clarify, rather than significantly amend, some of the already existing requirements established under IAS 1. The amendments clarify:• The materiality requirement in IAS 1• The fact that specific items in the table indicating profit/(loss) of the financial statements or other components of

the comprehensive income statement or the statement of financial position may be disaggregated• That entities are not held to present the notes to the statements in a specific order


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• That the portion of other components of the comprehensive income statement relative to associates and joint ventures measured using the equity method must be presented in aggregate form in a single line, and classified among the items that are not subsequently reclassified in the income statement.Moreover, the amendments also clarify that the requirements that apply when sub-totals are presented in the profit/

(loss) statements for the period or in other components of the comprehensive income statement or the statement of financial position. These amendments had no impact on the company.

International accounting standards and/or interpretations approved by the relevant European Union bodies in 2016 but not yet applicable

On 22 September 2016, with Regulation 2016/1905, the European Commission approved IFRS 15 Revenue from Contracts with Customers.

The new standard provides a guide, consisting of five steps, for the handling of all contracts with customers, with the exception of leasing contracts, insurance contracts, financial instruments and non-monetary exchanges.

The five steps are: identifying the contract, identifying performance obligations, determining the transaction price, allocating price to performance obligations, recognising revenue.

The standard establishes that revenues must be recognised at the moment when (or as) an obligation is met, or when the good (or service) promised is transferred to the customer.

The price promised in the contract with the customer may include fixed amounts, variable amounts or both. In the case of variable components, the price must be appropriately estimated taking all reasonably available information into account (historic, current and predicted).

Amounts due for royalties are an exception to the general rule for revenue recognition. These must be recognised only after the underlying sale or use has occurred.

The standard provides specific indications relative to dividing the transaction prices between performance obligations, changes to the transaction price and definition of incremental costs of obtaining a contract.

Additionally, the operating guide, which is an integral part of the standard, discusses in detail various issues such as sales with rights of return, consignment arrangements and bill and hold arrangements.

With Regulation 2016/2067 of 22 November 2016, the European Commission adopted IFRS 9 Financial Instruments, which introduces new requirements for the classification and measurement of financial assets, previously handled using IAS 39.

The new standard establishes that financial assets must be classified relative to the measurement criteria in two categories, specifically: assets measured at amortised cost and assets measured at fair value.

Financial assets which meet two conditions are measured at amortised cost: the objective of the entity’s business model is to hold the financial asset to collect the contractual cash flows and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets must be measured at fair value, recognised among other components of the comprehensive income statement or recognised in the profit (loss) for the year.

The changes introduced in the above cited Regulations will apply to the first financial year starting on or after 1 January 2018.

The Company has not adopted in advance any new standards, interpretations or amendments approved but not yet in force.


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Valuation criteria

The accounting principles and valuation criteria adopted for the preparation of the financial statements at 31 December 2016 are provided below.

Intangible assets with indefinite useful life – goodwill

Goodwill deriving from the acquisition of a company branch is initially booked at cost, and represents the excess of the cost of the business combination with respect to the share pertaining to the company of the net fair value of the assets, liabilities and potential liabilities that can be identified for the acquired branch. After initial booking, the goodwill is not subject to amortisation and is decreased for any accumulated impairment, determined using the methods described below.

Goodwill is subjected to recoverability analysis on an annual basis or more frequently in the case in which events or changes of circumstances occur which could lead to possible impairment.

At the end of the impairment test, as of the acquisition date, any goodwill arising is allocated to each of the cash flow generating units which are expected to benefit from the synergistic effects deriving from the acquisition, independent of whether other assets or liabilities of the company are assigned to said units or groups of units.

Each unit or group of units for which goodwill is allocated:• represents the lowest level at which the goodwill is monitored for the purposes of internal management within the

company; and• is not larger than the segments that can be identified on the basis of the method of presenting the segment

reporting provided in the TBS Group S.p.A. consolidated financial statements, determined in the basis of the that indicated in IFRS 8 Segment reporting.Any impairment is identified through measurement of the capacity of single units to generate cash flows meant to

recover allocated goodwill through the procedure indicated below in the “Impairment” section. When the recoverable amount of the cash generating unit is less than its carrying amount, an impairment loss is recognised in profit or loss. Should the causes having generated the impairment cease to exist, impairment losses are not reversed.

At the time of the transfer of a part or an entire company previous acquired, and from which goodwill had arisen through the acquisition, in determining the capital gains or losses from the transfer booked to the statement of income, the corresponding residual value of the goodwill is taken into account.


Intangible assets acquired separately are initially capitalised at cost.Following initial recognition, intangible assets with finite useful life are carried at cost less any accumulated

amortisation and any impairment determined in accordance with the methods detailed in the “Impairment” section.The useful life of an intangible asset is reviewed annually.


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The Company applies the following policies to intangible assets:

Development Costs Software, licenses and trademarks


Useful lives Finite Finite Finite

Amortisation method used Amortised on a straight-line basis over a period of

5 years

Amortised on a straight-line basis over a period of

5 years

Amortised on a straight-line basis over a period of

3 years

Internally generated or acquired Internally generated/Acquired

Internally generated/Acquired Acquired

Impairment test for recognition of impairment Annually or more frequently if indicators of

impairment exist

Annually or more frequently if indicators of

impairment exist

Annually or more frequently if indicators of

impairment exist

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statements of income upon disposal.

Property, plant and equipment – Owned assets

Property, plant and equipment is stated at purchase or production cost. The cost of the assets includes directly attributable costs and those necessary for putting the asset into operation for the use for which it was acquired, in addition to the present value of the estimated cost for dismantling and removing the asset, where applicable and in presence of current obligations.

Improvements to leased assets are recognised at cost under tangible fixed assets coherently with the nature of the cost incurred.

The expenses incurred for ordinary and/or cyclical maintenance and repairs are directly recognised in the statements of income as incurred. The capitalization of costs related to the enlargement, updating or improvement of an asset owned or in use by third parties is carried out exclusively within the limits in which they meet the requirements for being separately identified as an asset or part of an asset.

The cost of property, plant and equipment is reduced by depreciation, calculated on a straight-line basis over the estimated useful life of the asset, and by any accumulated impairment, determined in accordance with the methodology detailed in the “Impairment” section.

For owned assets, the depreciation rates which correspond to the estimated useful lives are as follows:

Description Rate

Buildings 3%

Plants and equipment 15%

Industrial and commercial equipment 15%

Furnishings 12%

Office equipment 12%

Office electronic machines 20%

Motor vehicles 25%

The above depreciation rates are reviewed at least annually; any adjustments, as deemed appropriate, are applied prospectively.


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An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and residual carrying amount of the asset) is included in the statement of income in the year the asset is derecognised.

Property, plant and equipment – Leased assets

Assets held under finance leases, which substantially provide the Company with all the risks and rewards of ownership, are recognised as assets and liabilities at their fair value or, if lower, at the present value of the minimum lease payments including any sum to be paid for exercising the purchase option. The corresponding liability due to the lessor is recorded under financial liabilities.

Lease payments are apportioned between interest expense and reduction of financial liabilities so as to achieve a constant periodic interest rate on the outstanding balance of the liability. Financial expenses are included in statements of income.

Assets held under finance leases are depreciated using the following depreciation rates:

Description Rate

Buildings 3%

Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as operating leases. Operating lease expenditures are charged to the statement of income over the lease term.

Impairment of assets

At the balance sheet date and if there are any indicators of impairment, an assessment is carried out to determine the recoverable value of the intangible assets or property, plant and equipment, or group of intangible assets or property, plant and equipment (Cash Generating Units, hereinafter also referred to as CGUs), net of sale costs and value in use. When the asset’s carrying amount exceeds its recoverable amount the asset is written down to its recoverable amount.

The recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the cost of money over time and the risks specific to the asset. For an asset that does not generate independent cash inflows, the recoverable amount is determined for the cash-generating unit to which it has been allocated. Impairment losses are recognised in the statement of income with the costs for depreciation, amortisation and write-downs. Said impairment is reversed in the case that the reasons behind them cease to exist, with the exception of impairment relative to goodwill.

Investments in subsidiaries

Investments in subsidiaries are booked at purchase or subscription cost, less any capital repayments or write-downs, determined by the same methods indicated previously for property, plant and equipment. Should the reasons for the impairment cease to exist, the original value shall be restored in subsequent years. These adjustments are booked to the statement of income.


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The risk deriving from any losses that exceed shareholders’ net equity is booked in a special fund in the amount in which the company is committed to fulfil legal or implicit obligations for the investee company or in any case to cover its losses.

The closing date of the fiscal year for most of the subsidiaries and associated companies is the same as that of the Company. For the direct subsidiary TBS India, the closing date of the fiscal year is 31 March of each year. This company therefore prepares a reporting package in conformance with the main international accounting principles as of 31/12.

Investments in associated companies

Investments in associates are booked at purchase or subscription cost, less any capital repayments or write-downs, if necessary adjusted based on losses determined using the equity method. Should the reasons for the impairment cease to exist, the original value shall be restored in subsequent years.

Investments in other companies

Investments in other companies for which fair value cannot be reliably assessed are stated at the acquisition or subscription cost less any distribution of share capital and reserves and after any impairment, if necessary adjusted based on losses determined using the equity method. Should the reasons for the impairment cease to exist, the original value shall be restored in subsequent years.

Financial assets and other non-current assets

Receivables and other non-current assets to be held to maturity are recognised at cost, represented by the fair value of the initial consideration given, including transaction costs. The initial measurement is subsequently adjusted in order to reflect capital repayments, any write-downs and the amortisation of the difference between the repayment value and the valuation on initial recognition. Amortisation is recorded on the basis of the effective internal interest rate, represented by the rate which equals, at the time of the initial recognition, the present value of the estimated cash flows and the measurement of initial recognition (amortised cost method).

Inventories

Inventories are valued at the lower of the purchase or manufacturing cost and net realisable value, represented by the amount that the Company expects to receive from sale in the ordinary course of the business, less costs of completion and estimated selling costs.

The purchase cost, which also includes direct accessory costs (including shipping, handling, etc.), is calculated using the weighted average cost method.

Slow-moving and obsolete stock is written-down according to its potential use or sales value.

Trade receivables and other receivables

Trade receivables are recognised at their estimated realisable value, which corresponds to nominal value less write-downs reflecting the estimated losses, if any.


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A provision for doubtful account is made when there is an objective indication (such as a probable insolvency or the debtor facing significant financial difficulty) that the Company is unable to recover the entire amount due on the basis of original invoicing conditions. The book value of the receivable is reduced through a provision. Receivables subject to impairment are removed from the accounts when it is ascertained that they are not recoverable.

Any medium and long-term loans containing an implicit interest component are discounted using an appropriate market interest rate.


Financial assets kept for negotiation purposes are recorded on the basis of the negotiation date and, at the time of the initial entry on the balance sheet, are valued at the purchase price, represented by the fair value of the initial consideration given in exchange, net of transaction costs. Following the initial recognition, current financial assets are assessed at fair value and corresponding variation in fair value are included in profit and loss. The fair value of these instruments is determined by referring to the market value at the closing date of the period in which the instrument is recorded; the fair value of financial instruments not listed in an active market is determined by using valuation techniques commonly in use.

Own shares

Own shares are deducted from shareholders’ net equity. No gain or loss is recognised in the statements of income upon the purchase, sale, issue or cancellation of the own shares.

Share-based payments

Stock options are estimated at fair value using the model based on the Black and Scholes formula, determined by the date of assignment. The relevant cost is recognised in the statement of income under personnel costs (if concerning employees) or under service costs (if concerning directors) during the period in which the conditions for exercising them mature and a contra entry is recognised in an equivalent increase of the shareholders’ equity. The changes in the present value of the shares after the date of assignment have no effect on the initial valuation.


Cash and cash equivalents include deposits held at call or available in a very short period for which no expenses for collection have to be incurred. They are recorded at their nominal value.

For the purposes of the Cash Flow Statement, cash and cash equivalents is presented gross of bank overdrafts at the Financial Statements closing date.


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Termination indemnities

Employee benefits paid on or after termination of the employment through defined benefit programmes (Employee severance indemnity) or other long term benefits (Termination Indemnities) are recognised on an accrual basis.

The liability relating to defined benefit plans, net of any related plan asset, is determined on the basis of actuarial assumptions and is recognised on an accruals basis, in line with services rendered in order to obtain the benefits; liabilities are measured by an independent actuary.

The part of actuarial profits and losses that must be recognised for each defined benefit plan, following the amendment to IAS 19 in effect as of 1 January 2013, is systematically booked directly to an item in the shareholders’ net equity, and will not be reclassified to the income statement in successive years.

Following amendments made to the Employee Severance Indemnity by law No. 296 of 27 December 2006 (Financial Law 2007) and subsequent Decrees and Regulations issued in early 2007, the Employee Severance Indemnity matured as at 1 January 2007 or at the date the option to be exercised by employees was selected is included in the category of programmes with defined contribution, both in the case of supplementary allowance as well as of allocation to the Treasury Fund of the INPS. The accounting of this Employee Severance Indemnity is therefore assimilated with other types of contribution deposits.

Provisions

Provisions for risks and future charges are recognised when the Company has a present obligation (legal or implicit) resulting from a past event, when it is probable that an outflow of Company’s resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Changes in the assessment are reflected in profit and loss of the period during which the change occurred. If the potential discount effect is significant, the provisions are discounted using a pre-tax discount rate that reflects the specific risks of the liabilities. Once the discount is carried out, the increase of the provision due to the passing of time is recognised as a financial expense.

Loans

All long-term loans are initially recognised at fair value of consideration received less directly attributable transaction costs.

After initial recognition, long-term debts are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

Trade payables and other debts

Trade payables with a due date within the standard commercial terms are not discounted and are recognised at cost (identified by the nominal value).

Other liabilities are entered at cost (identified by nominal value).


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Items in foreign currency

Transactions in foreign currencies are initially recorded at the functional exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are then translated at the financial statements reference date using the closing exchange rate. All foreign exchange differences are booked to the statement of income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

Revenue recognition

Revenues are recognised when it is probable that the economic benefits will flow to the Company and the revenues can be reliably measured.

Revenue is shown net of discounts, reductions, returns and other sales taxes. In particular, revenue from the sale of goods is recognised according to the contractual terms when the significant

risks and rewards of ownership relating to the goods are transferred to the buyer. Rendering of services revenues are recognised by stage of completion. This is measured as the percentage of the

incidence of costs incurred with respect to the total costs estimated for each contract. When the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses incurred that are recoverable.

Financial revenue is recorded on an accrual basis.

Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all underlying conditions will be met.

When a grant relates to cost components, it is recognised as revenue over the proper period in order to be correlated to the costs that it is intended to compensate.

When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the statement of income over the expected useful life of the relevant asset.

Accounting for costs and expenses

Costs and expenses are recorded when they relate to goods and services sold or consumed during the year or by systematic allocation when their future utility cannot be identified.

Interest

Interest income and expense are recognised as the interest accrues on the net carrying amount of the underlying value of financial asset or liability, using the effective interest rate.


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Dividends

Dividends are recognised when the right of shareholders to receive payment is established. This right arises following the decision made on distribution made (by 31 December each year) by the subsidiary.

Income taxes

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date and in those countries in which the Group operates.

Current taxes relating to items recorded directly to equity are recognised directly to equity and not to the profit and loss.

Deferred taxes

Deferred income tax is provided using the liability method on temporary differences at the balance-sheet date between the reference fiscal values for assets and liabilities and the values recorded in the financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences, except:• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction

that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.Prepaid tax is recognised for all deductible temporary differences, carry-forward of tax losses, to the extent that

it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of deductible temporary differences and tax losses, can be utilised, except:• where the deferred income tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.In assessing the probability of the availability of a future income against the entry of deferred assets for tax losses

one considers: • there must exist sufficient temporary differences with regard to the same tax authorities and the same tax subject

that will turn into taxable amounts against which tax losses may be used prior to their expiration;• that unused tax losses result from identifiable causes that are unlikely to be repeated;• that there exist opportunities for tax planning on the basis of which there will be taxable income during the year in

which tax losses may be used.


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The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and liabilities relating to items recognised directly in net equity are recognised in net equity and not in the statement of income.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set offering of current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Use of estimates

The preparation of the financial statements requires the directors to make estimates and assumptions that affect the reported amounts of the assets and liabilities and the disclosure of information on contingent assets and liabilities at the date of the financial statements. Nonetheless, the uncertainty of these assumptions and estimates may determine impacts requiring a significant adjustment to the accounting value of these assets and/or liabilities at a future date.

The estimates are essentially used to recognize provisions for doubtful account, amortisation, valuations of investments, write-downs of non-current property, plant and equipment and intangible assets, employee benefits, deferred income taxes and other provisions for risks and charges. Estimates and assumptions are revised periodically and the effects of every variation are immediately reflected on the profit and loss.

NOTE 3 – Financial risk management

The main financial liabilities of the Company include bank loans, trade payables and miscellaneous payables and financial guarantees. The main objective of these liabilities is to finance the Company’s operating activities. The Company has financial receivables and other receivables, both trade and non, and cash and cash equivalents that originate directly from operating activities and from its activities as a parent company.

The assessment of interest rate risk, credit risk, liquidity risk and foreign exchange risk is a responsibility Company Management is entrusted with, and the relevant information is given below.

Interest rate risk

TBS Group’s exposure to changes in interest rate mainly involves medium/long-term obligations taken on by the company, which have variable interest rates linked to various indexes.

As of 2015, TBS began a strategy aimed at controlling and covering risks deriving from interest rate fluctuations in relation to new medium/long-term loans taken out during the year, with maturities exceeding 37 months.


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During the year, following the disbursement of new loans by major banking institutions to TBS Group S.p.A. and its subsidiaries, three new interest rate swap derivatives (IRS) were subscribed for a notional value of euro 13.4 million, with an eye to keeping a certain percentage of financial debt at fixed rates. The conditions of the IRS contracts were negotiated to coincide with the conditions of the underlying commitments. These contracts fulfil the hedging requirements set in IAS 39 and fair value changes are therefore recognised directly to net equity.

Nonetheless, a risk exists connected to the possible worsening of general market conditions. Note that the Company also holds sizeable financial receivables in regards to the subsidiaries, some of which are

subject to variable rates.

Sensitivity analysis

The Company’s financial structure partially consists of variable rate financial instruments. As a result, the sensitivity analysis is conducted solely for this type of instrument.

By virtue of the above, a hypothetical, instant and unfavourable 100 bps change in the short term interest rate, applicable to the variable rate of financial assets and liabilities, would increase net annual pre-tax charges by approximately euro 184 thousand.

Credit risk

Most of the Company’s receivables are held by its subsidiaries and are contracted with public bodies or private bodies affiliated with the public sector. Hence, the Company is not significantly exposed to credit risk.

Country risk

Starting in 2012, the Company began to work with some foreign customers. At the end of 2016, it has receivables with the Ministry of Health of the Republic of Gabon, the Ministry of Health of Swaziland and two hospitals in China. In regards to these positions, the Company constantly monitors the situation, also carrying out an evaluation of the political, social and economic risks for the areas in which it operates.

In the case that the Company continues to grow significantly in this way in 2017, above all for international trading activities, it could expose the Company to various types of risks deriving from, for example, changes in local regulations, the political, economic and social situation and extraordinary events today unforeseeable.

The probability that these events take place varies from one country to the next, and is hard to forecast. Nevertheless, one or more of these events could have a negative impact on the Company’s economic and financial situation.

Liquidity risk

In the context of the activities carried out by the Company as the parent company, note financing activities for some subsidiaries. On the other hand, in the case that some Group companies have financial availability that exceeds their normal requirements, said amounts are transferred to the parent company under the form of loans.


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That being said, the Company continuously maintains balance and flexibility between funding sources and uses. Two primary factors that influence the Company and the Group’s liquidity are, on the one hand, resources generated or absorbed by operations or investments of the company itself and/or subsidiaries, and on the other hand, the expiry and renewal of debts. The breakdown of financial payables as at 31 December 2016 is presented under Note 14.

In any event, it is felt that liquidity from operations deriving from management at the Group level should be sufficient to cover requirements. It should however be emphasized that considering the fact that the customers primarily consist of public bodies, with significantly extended payment terms and anyway subject to the availability of financial resources, even linked to public debt management policies, the leading Italian Group companies have assigned credit to factoring companies in order to boost cash flows.

Finally, note that some loans require compliance (financial covenants) with certain parameters based on the consolidated financial statements of the TBS Group S.p.A. at year-end. For additional comments, please refer to Note 14.

Exchange rate risk

The Company operates primarily in the eurozone. There is therefore no significant exposure to exchange rate risk. In reference to the foreign customers cited above, note that the Company invoices its services and/or sales of goods in Euro.

Capital Management

The Company’s primary capital management objective is to guarantee that a solid credit rating and appropriate levels of capital indicators are maintained in order to support its work and maximize shareholder value.

The Company manages the capital structure, making changes to it in line with changes in economic conditions.The Company may adjust the dividends paid to shareholders, reimburse capital or issue new shares in order to

maintain or adapt the capital structure.The Company monitors its capital via the net financial debt / shareholders net equity ratio. This ratio for each period

considered is shown below:

(thousands of euro) 31/12/2016 of which withrelated parties

31/12/2015 of which withrelated parties

Non-current financial liabilities 34,598 38,189

Current financial liabilities 32,736 12,098 16,796 0

Non-current financial assets 0 0

Current financial assets -25,592 -25,564 -19,095 -18,850

Cash and cash equivalents -14,385 -11,386

Net financial debt 27,357 24,503

Net Equity 74,332 73,983

Net financial debt/ Shareholders' net equity ratio 0.4 0.3


156

Fair value valuation and the relative hierarchical levels of valuation

The following statement indicates the categories of financial instruments held by the Company:

at 31/12/2016


receivables




maturity

Total Fair value


Other non-current financial assets 14 0 0 0










Trade payables 17 2,331 2,331 2,331





157

at 31/12/2015


receivables




maturity

Total Fair value


Other non-current financial assets 14 0 0 0










Trade payables 17 2,086 2,086 2,086




All the financial instruments recognised at fair value are classified in the three categories shown below:Level 1: market quotationLevel 2: evaluation techniques (based on observable market data) Level 3: evaluation techniques (not based on observable market data) For all financial instruments, the relative nominal recognition value is the same as the fair value.Note that there were no transfers from Level 1 to Level 2 or to Level 3 and vice versa.

NOTE 4 – Assets with indefinite useful life (goodwill)

In total the item amounts to euro 381 thousand. This item includes goodwill (euro 94 thousand) arising from the merger by incorporation of Panacea Clinical

Services Srl during financial year 2009 and goodwill (euro 287 thousand) arising from the merger by incorporation of Tecnobiopromo Srl during financial year 2014. On the basis of the impairment test carried out in reference to the Clinical Engineering Italy CGU to which the goodwill was attributed, a need to carry out impairment was not found.


158

NOTE 5 – Intangible assets with a finite useful life

The table below provides a breakdown of “Intangible assets with a finite useful life” as they appear in the Balance Sheet:


Development 0 0

Industrial patents, licenses, trademarks and similar rights 1,202 1,196

Other Intangible fixed assets 0 0

Intangible fixed assets under construction and advances 330 155

Total Intangible fixed assets 1,532 1,351

Changes in the period for “Intangible assets with a finite useful life” are shown below:

(thousands of euro) Development Industrial patents, licenses,

trademarks and similar rights

Other intangible fixed

assets

Intangible fixed assets under construction

and advances

Total intangible assets

Cost at 1 January 2016 net of provisions 0 1,196 0 155 1,351

Net increases 0 390 0 562 952

Disposals (historical cost) 0 0 0 0 0

Disposals (amortisation provision) 0 0 0 0 0

Revaluations 0 0 0 0 0

Impairment 0 0 0 0 0

Depreciation in the period 0 771 0 0 771

Foreign exchange differences 0 0 0 0 0

Reclassifications and other 0 387 0 -387 0

At 31 December 2016 0 1,202 0 330 1,532

(thousands of euro)At 1 January 2016

Total

Cost or fair value 1,413 11,013 79 155 12,661

Amortisation provisions and impairment -1,413 -9,817 -79 0 -11,309

Residual net value 0 1,196 0 155 1,351

(thousands of euro)At 31 December 2016

Total

Cost or fair value 1,413 11,791 79 330 13,613

Amortisation provisions and impairment -1,413 -10,588 -79 0 -12,081

Residual net value 0 1,202 0 330 1,532

Costs for software, trades and licenses mainly include software licenses and programs acquired externally for pay, costs sustained for implementation of Piteco software for treasury management, the various Hyperion software modules and the costs sustained for the development of the Pharma Phi module, for email software, business continuity software, endoscopy management software, and SI3C Gestapp software relative to electromedical equipment management. Amortisation is calculated on a straight-line basis over a period of 5 years.


159

Assets under construction relate to costs deferred during the year for the creation of other management software (euro 330 thousand). Reclassifications mainly refer to transfer to the category “Industrial patents, intellectual property rights and works, licenses and trademarks” for various Hyperion software modules (euro 114 thousand), of software created to guarantee business continuity (euro 39 thousand), the SI3C Gestapp software (euro 49 thousand), endoscopy management software developed by foreign subsidiaries (euro 111 thousand), and document management software (euro 11 thousand).

NOTE 6 – Tangible assets

The table below presents the net balances for fixed tangible assets:


Land and buildings 1,037 1,078

Plants and Equipment 214 216

Other tangible fixed assets 187 259

Total tangible fixed assets 1,437 1,553

Changes in the period are shown below:

(thousands of euro) Land and buildings


Other property, plant and

equipment

Total tangible fixed assets

Cost at 1 January 2016 net of provisions 1,078 216 259 1,553

Net increases 0 51 30 82

Disposals (historical cost) 0 30 29 58

Disposals (amortisation provision) 0 -20 -27 -48

Revaluations 0 0 0 0

Impairment 0 0 0 0

Depreciation in the period 41 45 101 187

Foreign exchange differences 0 0 0 0

Reclassifications and other 0 0 0 0

At 31 December 2016 1,037 214 187 1,437


Total

Cost or fair value 1,374 427 1,055 2,856

Amortisation provisions and impairment 297 210 797 1,304

Residual net value 1,078 216 259 1,553

(thousands of euro) At 31 December 2016

Total

Cost or fair value 1,374 448 1,057 2,880

Amortisation provisions and impairment 338 235 870 1,442

Residual net value 1,037 214 187 1,437


160

Land and buildings

These are buildings that are leased. These are amortised at an annual rate of 3%. The table below indicates the total of minimum payments due for leasing and the current value as of the date of

the financial statements, indicated by the presumed repayment period.


Minimum payment Present value Minimum payment Present value

Within 1 year 71 44 71 44

Between 1 and 5 years 288 242 284 198

Over 5 years 104 100 174 190

Total minimum payments 463 386 529 432

Financial expenses -77 -77 -97

Total minimum payments present value 386 386 432 432

The leasing contract stipulated by the Company envisages a variable financial cost of 5.75%.Present value was determined based on the amortisation schedule communicated by finance leasing companies

and does not significantly diverge from the present value of minimum payments calculated by discounting cash flows due to the rental payments as indicated in the schedule at the same interest rate of the finance lease contract.

Of the debts indicated above at 31 December 2016, euro 44 thousand are short-term and euro 342 thousand medium/long-term (of which euro 100 thousand beyond 5 years).


The item mainly includes heating systems, and telephone and data transmission systems.


This item includes electronic office equipment, furniture and furnishings, cars and mobile radio equipment.


161

NOTE 7 – Investments in subsidiaries, associated companies and other companies

Investments in subsidiaries(thousands of euro)

balance 01/01/2016

reclassified recapitalised estab./purchase/

sale

transfer/merger/

demerger

capital gains/capital losses

write-down/write-back

balance 31/12/2016

EBM 32,553 32,553

TBS GB 6,374 6,374

TBS FR 2,620 2,620

TBS BE 304 304

STB 388 388

Surgical Technologies 2,637 2,637

CRIMO Italia 2,323 2,323

TBS INDIA 6,092 6,092

TBS SE 5 5

TBS ES 4,939 600 -600 4,939

TBS IT 11,140 -7,000 4,140

INSIEL MERCATO 17,330 -1,516 -1,820 -13,961 -33 0

NEOIM 0 13,961 -247 13,714

MSI 1,550 1,550

Tunemedix 0 184 184

TBS Bohemia 7 7

sub total 88,261 -1,516 600 -1,636 0 -33 -7,847 77,830

Investments in associated companies and joint ventures(thousands of euro)

balance 01/01/2016


sale

transfer/merger/

demerger



balance 31/12/2016

INSIEL MERCATO 1,516 -27 1,489

Sinopharm TBS 333 -333 0

SLT 750 750

Fond.Easy Care 27 27

Cons.Soc.Care Expert 2 2

sub total 1,112 1,516 0 -333 0 0 -27 2,267

Investments in other companies(thousands of euro)

balance 01/01/2016


sale

transfer/merger



balance 31/12/2016

ISBEM 30 30

Medic4All AG 50 50

CBM Consorzio 2 2

Credito Coop.Lombardo 0 0

Biohightech-rete impresa 6 6

ITS Foundation 10 10

F.do cons. Re-Media 1 1

sub total 93 0 0 6 0 0 0 99

TOTAL 89,466 0 600 -1,963 0 -33 -7,874 80,195


162

Purchases refers to:• the acquisition on 7 March 2016 of 51% of the shares of Tunemedix Lda, with registered office in Aldeia de Paio

Pires (Portugal). The company supplies products for diagnostic imaging and manages related services;• the establishment of NEOIM Srl, on 13 December 2016, through a demerger of the subsidiary Insiel Mercato Spa.

The company has its registered office in Trieste and is 100% controlled by the TBS Group. NEOIM’s share capital totals euro 20,000;

• the adhesion of the TBS Group to the company network contract, known as BioHighTech-NET and establishment of the relative shared fund.

Transfers refer to:• the assignment of part of Insiel Mercato Spa’s equity to NEOIM Srl, following the demerger operation relative to

Insiel Mercato Spa.

Sales refer to:• the sale of all the shares held in the Sinopharm TBS joint venture to third parties, with a consequent elimination of

the stakeholding;• the sale of 55% of Insiel Mercato Spa shares to third parties. Following this transaction, the stake held by TBS Group

fell to 45%. Therefore, the company is now classified among associated companies.

Reclassifications refer to:• reclassification of Insiel Mercato Spa from a subsidiary of the TBS Group to an associated company, following said

sale, after which TBS Group’s stake fell from 100% to 45%.

Recapitalisations refer to:• the increase in the net equity of TBS ES SL by euro 600 thousand.

Write-downs refer to:• the write-down on the stakeholding in TBS IT Srl by euro 7,000 thousand;• the write-down on the stakeholding in TBS ES SL by euro 600 thousand;• the write-down on the stakeholding in NEOIM Srl by euro 247 thousand;• the write-down on the stakeholding in Insiel Mercato Spa for euro 27 thousand, following the fair value measurement

of the 45% stake held by the TBS Group.


163

Below the data required under article 2427, paragraph 5 of the Civil Code is provided for subsidiaries and associated companies:

Company name(thousands of euro)

Registered Office Currency Share Capital

SE 31/12/2016

(IAS)

2016 attributable result (IAS)

Share % 2016

Share % 2015

Values recognised on the financial

statements

Investments in subsidiaries

EBM Foligno (Italy) Euro 1,898 47,542 2,317 100 100 32,553

TBS GB Southend on Sea (UK) Euro 681 6,284 1,175 96.13 96.13 6,374

TBS FR Lyon (France) Euro 1,691 1,637 -100 100 100 2,620

TBS BE Loncin (Belgium) Euro 150 443 27 100 100 304

STB Dafundo (Portugal) Euro 100 520 206 100 100 388

Surgical Tech. Didam (The Netherlands) Euro 18 1,031 407 100 100 2,637

Crimo Italia Gualdo Tadino (Italy) Euro 103 4,149 788 55.75 55.75 2,323

TBS INDIA Bangalore (India) Euro 69 3,979 2,246 100 100 6,092

TBS SE Belgrade (Serbia) Euro 4 -186 -19 100 100 5

TBS ES Barcelona (Spain) Euro 650 3,367 -673 100 100 4,939

TBS IT Trieste (Italy) Euro 5,296 1,573 -2,836 100 100 4,140

NEOIM Trieste (Italy) Euro 20 12,763 10,008 100 100 13,714

MSI Pfullendorf (Germany) Euro 321 46 62 100 100 1,550

Tunemedix Aldeia de Paio Pires (Portugal) Euro 5 76 127 51 0 184

TBS Bohemia Prague (Czech Republic) Euro 7 -51 -17 100 100 7

Total 79,830

Company name(thousands of euro)

Registered Office Currency Share Capital

SE 31/12/2016

(IAS)

2016 attributable result (IAS)

Share % 2016

Share % 2015

Values recognised on the financial

statements

Investments in associated companies and joint ventures

INSIEL MERCATO Trieste (Italy) Euro 3,247 7,940 -21 45 100 1,489

SLT Cernusco sul Naviglio (Italy) Euro 47(*) 857(*) 361(*) 40 40 750

Fondaz.Easy Care Reggio Emilia (Italy) Euro 230(*) 94(*) 8(*) 25 25 27

Cons.Soc.Care Expert Reggio Emilia (Italy) Euro 40(*) 55(*) 3(*) 25 25 2

Total 2,267

(*) figures at 31/12/2015

Data regarding Net Equity and the results for the period indicated for the subsidiaries are taken from the reporting packages prepared in accordance with the IAS/IFRS principles for the creation of the consolidated financial statements and, for only those companies held to be significant for the group, subjected to inspection by the audit firm.

Figures regarding Shareholders’ Net Equity and the results for the year indicated by the associated companies are taken from the most recent available financial statements approved by the relevant shareholders’ meetings.

The recoverability of the book value of the investments was verified using impairment tests. Specifically, said value was compared with the equity value of the various companies (enterprise value obtained from the impairment test to which the net financial position of the same was added - in some cases aggregated into a single CGU).

Cash flow projections for 2017-2019, as taken from the financial plans prepared by the TBS Group and approved by its Board of Directors and by the Boards of Directors of the single subsidiaries, were normally used to carry out the impairment test. Cash flows for years subsequent to the last year included in the plan were discounted on the assumption of an indefinite time frame for the various CGUs at an annual growth rate ranging from 1% (3% only for the Indian subsidiary).


164

The impairment test indicated the need to carry out the cited write-down in the value of the stakeholding relative to TBS IT for euro 7,000 thousand.

NOTE 8 – Other non-current assets



Total other non-current assets 35 17

This item is entirely composed of security deposits.

NOTE 9 – Inventories


Inventories consumables, spare parts and goods

Cost 1,353 589

Inventory write-down provision -227 -177

Net realisable value 1,126 412

Advances 0 0

Total inventories 1,126 412

Inventories derive from the merger by incorporation of the subsidiary Tecnobiopromo, which occurred in 2014. Changes in the inventory write-down provision in the two years under consideration are as follows:


Inventory write-down provision as at 1 January 177 45

Utilization in the year 0

Reclassifications 0

Foreign exchange differences 0 0


Inventory write-down provision as at 31 December 227 177

The write-down carried out in 2016 (euro 50 thousand) is relative to the cited inventories.

NOTE 10 – Trade receivables


Trade receivables – customers 2,577 2,012

Trade receivables from related parties 11,759 7,535

Receivables write-down provision -75 -55

Total trade receivables 14,261 9,494

For the details of the item trade receivables from related parties, please refer to Note 32.


165

Changes in the receivables write-down provision in the two years under consideration are as follows:


At 1 January 55 25

Provisions 21 30

Utilisation 1 0

At 31 December 75 55

The analysis of the past-due loans and those to mature as at 31 December 2016 is as follows:


Overdue

over 3600 – 30 30 – 60 60 – 90 90 – 120 120 – 150 150 – 180 180-360

Trade receivables – customers 2,577 765 16 44 144 5 240 18 56 1,291

Trade receivables from related parties 11,759 2,859 448 475 1,737 71 395 992 2,343 2,439

Receivables write-down provision - 75 -75

Total 14,261 3,624 464 519 1,881 75 635 1,010 2,399 3,730

The overdue “over 360 days” category includes the euro 906 thousand receivable due from the Ministry of Health of Gabon.

The analysis of receivables by geographic area is as follows:

Receivables by geographic area(thousands of euro)

From related parties From others Total

Italy 9,263 747 10,010

EU 2,221 95 2,316

non EU 276 1,660 1,936

Total 11,759 2,502 14,261

Non-EU receivables mainly include the aforementioned receivables due from the Ministry of Health of Gabon (euro 906 thousand), relative to two hospitals in China (euro 280 thousand) and the receivable due from the Ministry of Health of the Kingdom of Swaziland (euro 222 thousand).

NOTE 11 – Other current assets


Social security receivables 13 21

Receivables for contributions to public entities 180 120

Receivables from employees 13 12

Other prepaid expenses and accrued income 127 155

Other tax receivables 319 211

Other receivables 311 77

Receivables from related parties 150 410

Total other current assets 1,114 1,006


166

Amounts receivable for contributions refer to credits from M.I.U.R. (euro 180 thousand).Receivables from employees mainly consist of advances to employees for expenses to be sustained in the execution

of their work.Other tax receivables mainly include VAT and tax credits for investments in research and development.The item “Other receivables” mainly consists of advances to suppliers.Receivables from related parties refer to receivables from subsidiaries which arose following tax consolidation (euro

150 thousand).

Assets held for trading

The item “Assets held for trading” had a value of zero at the end of 2016, as at the end of the 2015.

NOTE 12 – Income taxes payable and receivable


Income tax receivable 1,387 1,845

Total income tax receivables 1,387 1,845

The item income tax receivables consists of:• receivables due from the tax authorities for advances paid during the year on direct taxes (euro 508 thousand); • credits with the Treasury following the request reimbursement of IRES for non-deduction of IRAP relative to

expenses for payroll employees and assimilated for the years 2007-2011, for both the company and subsidiaries included in tax consolidation (euro 868 thousand);

• credits for withholdings relative to bank interest receivable (euro 11 thousand).


Income tax payables 0 439

Total tax payables 0 439

NOTE 13 – Shareholders’ net equity

As at 31 December 2016, the item amounted to euro 69,332 thousand as opposed to euro 73,983 thousand as at 31 December 2015. For changes in shareholders’ net equity, please refer to the relevant “Statement of changes in shareholders’ net equity”.

Share capital

The subscribed and paid-up share capital of TBS Group at 31 December 2016 amounts to euro 4,142,137 and consists of 41,421,370 shares with a nominal value of euro 0.10 each.

The total amount of own shares held by the Company as at 31 December 2016 amounts to 764,210 (unchanged with respect to 31 December 2015).


167

The value shown in the financial statements is net of the own shares held by the company, for the part attributable to capital (euro 76 thousand).

Share premium account

The share premium account, set up following a number of Company capital increases, amounted to euro 42,832 thousand as at 31 December 2016 (unchanged with respect to 31 December 2015). That in the reserve is also booked net of the own shares held by the company, for the part attributable to the share premium (euro 986 thousand).

Other reserves and retained earnings

Other reserves include:• the First-time Adoption (FTA) reserve deriving from the first-time application of the international accounting

standards as at 1 January 2010;• the IAS reserve deriving from application of the international accounting standards after 1 January 2010;• profit/loss carried forward.

The reserves are composed as follows:

SCHEDULE OF AVAILABILITY, DISTRIBUTABILITY AND USE OF SHAREHOLDERS’ EQUITY

Nature/Description(thousands of euro)

Amount Possibility of use

Share available

Summary of uses made in the three previous years:

to hedge losses for other reasons

Capital 4,142

Legal reserve 844 - loss coverage 844

Share premium reserve 42,832 - loss coverage 42,832

- distribution to shareholders

Revaluation reserve 10,037 - loss coverage 10,037

- Own share purchase reserve

Optional extraordinary reserve 17,094 - loss coverage 17,094 3,488

- capital increase


FTA reserve -862 -862

IAS reserve -396 -396

Profit (loss) carried forward 246 - loss coverage 246

- capital increase


Net profit for the period -6,605 -6,605

Total 67,332 63,190

Non-distributable share 12,943

Residual distributable share 50,247


168

In regards to the non-distributable share, which comes to a total of euro 12,943 thousand, this is the sum of the net residual value at 31/12/2016 of the development costs capitalised during the year and in previous years (euro 1,172 thousand) of intangible fixed assets under construction (euro 330 thousand), of the capital gains which arose in 2011 following the transfer of the e-Health branch (euro 560 thousand), of the legal reserve (euro 844 thousand) and, on the basis of that envisaged in article 2426 of the Civil Code, the amount of the capital gains deriving from the application in previous years of the equity method of valuing investments in subsidiaries (euro 10,037 thousand).

NOTE 14 – Net financial debt

The Company’s net financial debt can be broken down as follows:

(thousands of euro) 31/12/2016 of which withrelated parties

31/12/2015 of which withrelated parties

A. Current financial assets 25,592 25,564 19,095 18,850

B. Cash and cash equivalents 14,385 11,386

C. Liquidity (A. + B.) 39,976 30,482

D. Non-current financial assets 0 0

E. Non-current financial liabilities 34,598 38,189

F. Current financial liabilities 32,736 12,098 16,796 0

G. Net financial debt (D + E + F -C ) 27,357 24,503

For further information on the breakdown of financial assets and liabilities, please refer to the paragraphs below.



Short-term financial receivables 28 245

Short-term financial receivables from related parties 25,564 18,850

Total current financial assets 25,592 19,095

Financial receivables from related parties refer in part to dividends approved but not yet paid as at 31 December 2016, in part to loans granted to subsidiaries, and in part to receivables relative to operations deriving from cash pooling between the parent company and certain subsidiaries.

Said loans envisage the payment of interest, governed under market conditions. For detailed information on their composition, please refer to Note 32.




Total cash and cash equivalents 14,385 11,386

The balance indicates cash and cash equivalents in existence as of the final date of the year.


169

Non-current financial liabilities

The table below provides a breakdown of the non-current financial liabilities:


within 5 years

over 5 years Total within 5 years

over 5 years Total

Leasing contracts debts 242 100 342 198 190 389

Medium/long term bank loans 19,489 19,489 23,186 23,186

Convertible bond loan 0 0 0 0

Mini bond loan 14,556 14,556 14,449 14,449

Financial payables MTM derivatives 211 211 165 165

Total non-current financial liabilities 34,498 100 34,598 37,998 190 38,189

Non-current financial liabilities are detailed in the following table:

Non-current financial liabilities(thousands of euro)

31/12/2016 31/12/2015

Non-current portion of leasing contracts’ debts 342 389

Euro 1,000 thousand loan granted to TBS Group by Popolare di Vicenza in December 2016 196 -

Euro 800 thousand loan granted to TBS Group by Banca Popolare in September 2016 159 -

Euro 6,000 thousand loan granted to TBS Group by Monte dei Paschi in February 2016 4,619 -

Euro 3,000 thousand loan granted to TBS Group by Banca Raiffeisen in December 2015 1,837 2,418

Euro 4,000 thousand loan granted to TBS Group by BNL in October 2015 1,327 2,652


Euro 1,500 thousand loan granted to TBS Group by Mediocredito del FVG in July 2015 267 780

Euro 3,000 thousand loan granted to TBS Group by UniCredit in July 2015 1,689 2,276

Euro 15,000 thousand loan granted to TBS Group by Banca Popolare di Milano in June 2015 5,752 9,478

Euro 3,500 thousand loan granted to TBS Group by Friuladria Credit Agricole in May 2015 1,778 2,465

Euro 3,000 thousand loan granted to TBS Group by Banco Popolare in January 2015 965 1,712

Euro 3,000 thousand loan granted to TBS Group by UniCredit in March 2014 195 -

Loan granted to TBS Group by Friuladria in December 2013 for the original amount of euro 2,500 thousand 536 1,070

Total medium/long term portion of medium/long loans 19,489 23,186

Convertible bond loan - -

Mini bond loan 14,556 14,449

Financial payables MTM derivatives 211 165

Total non-current financial liabilities 34,598 38,189


170

Some loans require compliance (financial covenants) with certain parameters based on the consolidated financial statements at year-end.

These financial parameters, to be calculated on an annual basis, do not have characteristics or expenses different from those generally established under market practices and at the end of 2016 were all respected.

Five year non-convertible bond loan (mini bond)

On 25 August 2014 the Extraordinary Shareholders’ Meeting of TBS Group resolved the issuing of a non-convertible bond loan with a duration of five years for a total amount of euro 15 million. The placement of this loan ended on 29 October 2014. The five year bond loan - reserved exclusively for Italian and foreign institutional investors, which originally had an annual nominal rate of 6.5% - consists of 150 bonds with a nominal unit value of euro 100,000 each, not divisible, and was issued at 100% of the nominal value. Banca Popolare di Vicenza was the arranger, subscriber of the securities and guarantor of 100% of the total amount, while placement of securities with foreign institutional investors was done by KNG Securities LLP. On 28 December 2016, all those present at the Bondholders’ Meeting voted unanimously in favour of the new loan regulations. The most significant changes involved lowering the interest rate from 6.5% to 5.2%, extending maturity to 31 December 2020 and eliminating the company’s ability to repay it in advance. On 11 January 2017, the Company’s Board of Directors met and approved the changes. Insertion of the relative minutes of the Board of Directors meeting in the Register of Companies made the approved amendments effective, in particular reduction of the interest rate starting from the initial period of interest accrual, following coupon detachment on 31 January 2017. The capital will be repaid in a single payment at maturity (December 2020), while interest will continue to accrue and be repaid on a quarterly basis.

The value of the loan at 31 December 2016, booked at the amortised cost, is equal to euro 14,556 thousand, entirely medium/long-term, net of issuing costs attributed to the loan.

The bond loan contract envisages respect for the parameters calculated with reference to the yearly and consolidated financial statements, as well as the respect for the other pre-established contractual conditions. As of 31 December 2016, these parameters and conditions were respected.

Leasing contracts debts

The leasing contract debt refers to the leasing contract stipulated for the acquisition of the property in Cernusco al Naviglio. For additional details, please refer to the section in Note 6 on leased assets.

Medium/long term bank loans

The characteristics of the major loans currently active are described below.

• Euro 1 million loan granted to TBS Group by Popolare di Vicenza in December 2016.The loan is repayable in quarterly deferred instalments; the first instalment came due in March 2017 and the final one




171

• Euro 0.8 million loan granted to TBS Group by Banca Popolare in September 2016.The loan is repayable in monthly deferred instalments; the first instalment came due in January 2017 and the final

one is due for payment in December 2018. The interest rate is equal to a 3-month Euribor plus a spread.At 31 December 2016, the outstanding loan amount was euro 797 thousand, consisting of euro 638 thousand


• Euro 6 million loan granted to TBS Group by Monte dei Paschi di Siena in February 2016.The loan is repayable in half-yearly deferred instalments; the first instalment came due in June 2017 and the final

one is due for payment in June 2021. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 5,952 thousand, consisting of euro 1,333 thousand


• Euro 3 million loan granted to TBS Group by Banca Raiffeisen in December 2015The loan is repayable in half-yearly deferred instalments; the first instalment comes due in April 2016 and the final

one is due for payment in October 2020. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,423 thousand, consisting of euro 586 thousand


• Euro 4 million loan granted to TBS Group by BNL Gruppo BNP Paribas in October 2015The loan is repayable in half-yearly deferred instalments; the first will come due in April 2016, with a duration of

18 months and an option to extend it for an additional 18 months, with the final rate consequently coming due in October 2018. The loan interest rate is the 6-month Euribor rate plus a spread.

At 31 December 2016, the outstanding loan amount was euro 2,660 thousand, consisting of euro 1,333 thousand repayable over the short term and euro 1,327 thousand repayable over the medium/long term.

Moreover the loan agreement requires the compliance with indicators calculated on TBS Group audited consolidated accounting values, regarding the ratio between net financial debt and shareholders’ net equity, between net financial debt and EBITDA and between net financial debt and net financial expenses. If those indicators should not fall within the settled limits, the Bank is entitled to rescind the contract, in accordance to Italian Civil Code, article 1456. As at 31 December 2016, the Company respected these parameters.

• Euro 500 thousand loan granted to TBS Group by Mediocredito del Trentino Alto Adige in September 2015The loan is repayable in half-yearly deferred instalments; the first instalment comes due in April 2016 and the final

one is due for payment in October 2018. The loan interest rate is the 6-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 336 thousand, consisting of euro 167 thousand




172

• Loan granted to TBS Group by FVG in July 2015 for the original amount of euro 1.5 millionThe loan is repayable in half-yearly deferred instalments; the first instalment came due in December 2015 and the

final one is due for payment in June 2018. The interest rate is equal to the Euribor 365 plus a spread.At 31 December 2016, the outstanding loan amount was euro 781 thousand, consisting of euro 514 thousand


• Euro 3 million loan granted to TBS Group by UniCredit in July 2015The loan is repayable in quarterly deferred instalments; the first instalment came due in October 2015 and the final

one is due for payment in July 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,278 thousand, consisting of euro 589 thousand



• Euro 15 million loan granted to TBS Group by Banca Popolare di Milano in June 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in September 2015 and the

final one is due for payment in June 2019. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 9,501 thousand, consisting of euro 3,749 thousand



• Euro 3.5 million loan granted to TBS Group by Banca Popolare Friuladria - Gruppo Credit Agricole in May 2015The loan is repayable in half-yearly deferred instalments; the first instalment came due in November 2015 and the

final one is due for payment in May 2020. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 2,472 thousand, consisting of euro 694 thousand


• Euro 3 million loan granted to TBS Group by Banco Popolare in January 2015.The loan is repayable in quarterly deferred instalments; the first instalment came due in March 2015 and the final

one is due for payment in December 2019. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 1,720 thousand, consisting of euro 755 thousand



173

• Euro 3 million loan granted to TBS Group by UniCredit in March 2014.The loan is repayable in quarterly deferred instalments; the first instalment expired in June 2014 and the final one

is due for payment in March 2018. The loan interest rate is the 3-month Euribor rate plus a spread. At 31 December 2016, the outstanding loan amount was euro 990 thousand, consisting of euro 795 thousand


accounting values, regarding the ratio between net financial debt and shareholders’ net equity and between EBITDA and net financial debt. As at 31 December 2016, the Company respected these parameters.

• Euro 2.5 million loan granted to TBS Group by Banca Popolare Friuladria - Gruppo Credit Agricole in December 2013.The euro 2.5 million loan is repayable in 20 quarterly deferred instalments with the first instalment due in March

2014 and the last instalment in December 2018. The loan interest rate is the 3-month Euribor rate plus a spread.At 31 December 2016, the outstanding loan amount was euro 1,059 thousand, consisting of euro 523 thousand


Current financial liabilities

The table below provides a breakdown of the short term interest-bearing loans and borrowings:


Short-term leasing 44 44


Payables to banks, short-term portion of loan long term 18,719 11,385

Other short-term financial liabilities 228 210

Other financial debt due to related parties 12,098 0


Financial liabilities due to related parties refer to operations deriving from cash pooling between the parent company and a subsidiary.


174

Details of current financial liabilities are shown below:


Euro 1,000 thousand loan granted to TBS Group by Popolare di Vicenza in December 2016 798 -

Euro 5,000 thousand loan granted to TBS Group by Banca Popolare di Milano in November 2016 4,586 -

Euro 800 thousand loan granted to TBS Group by Banca Popolare in September 2016 638 -

Euro 1,000 thousand loan granted to TBS Group by Friuladria Credit Agricole in July 2015 585

Euro 6,000 thousand loan granted to TBS Group by Credem in May 2016 650

Euro 6,000 thousand loan granted to TBS Group by Monte dei Paschi in February 2016 1,333 -

Euro 5,000 thousand loan granted to TBS Group by Banca Popolare di Milano in January 2016 421 -

Euro 3,000 thousand loan granted to TBS Group by Banca Raiffeisen in December 2015 586 573

Euro 4,000 thousand loan granted to TBS Group by BNL in October 2015 1,333 1,333


Euro 1,500 thousand loan granted to TBS Group by Mediocredito del FVG in July 2015 514 485

Euro 3,000 thousand loan granted to TBS Group by UniCredit in July 2015 589 576

Euro 15,000 thousand loan granted to TBS Group by Banca Popolare di Milano in June 2015 3,749 3,670

Euro 3,500 thousand loan granted to TBS Group by Friuladria Credit Agricole in May 2015 694 681

Euro 3,000 thousand loan granted to TBS Group by Banca Popolare in January 2015 755 734

Euro 5,000 thousand loan granted to TBS Group by Banca Popolare di Milano in January 2015 - 422

Euro 2,500 thousand loan granted to TBS Group by Cassa di Risparmio del FVG in August 2014 - 296

Euro 3,000 thousand loan granted to TBS Group by UniCredit in March 2014 795 1,748

Loan granted to TBS Group by Friuladria in December 2013 for the original amount of euro 2,500 thousand 523 499

Loan granted to TBS Group by Mediocredito del Trentino in September 2012 for the original amount of euro 1,000 thousand - 204

- Total short-term portion of medium/long-term loans 18,718 11,385

- Current account overdrafts, advances on invoices and other short-term borrowings 1,648 5,157

Total short-term bank loans 20,366 16,542

Current leasing contracts’ debts 44 44

Other short-term financial liabilities 228 210

Other financial payables to related parties 12,098 0

Total current financial liabilities 32,736 16,796


175

NOTE 15 – Employee Severance Indemnity

The table below shows changes in the Employee Severance Indemnity provision:


At 1 January 277 329


Actuarial gains/(losses) 13 -22

Payments to pension funds -165 -171


Benefits paid 0 -38

At 31 December 297 277

Defined benefit plans in effect in Italy refer exclusively to the Employee Severance Indemnity. With the adoption of the new international principles and IAS 19 in particular, the employee severance indemnity is regarded as a defined benefit obligation whereby the liability is measured on the basis of actuarial methods.

Employee Severance Indemnity liabilities were measured by independent actuaries, applying the Projected Unit Credit Method.

Following the issuing of Law 296 of 27 December 2006 (2007 Financial Law) and subsequent Decrees and Regulations issued in early 2007, the Employee Severance Indemnity matured as at 1 January 2007 or at the date the option to be exercised by employees was selected is included in the category of programmes with defined contribution, both in the case of supplementary allowance as well as of allocation to the Treasury Fund of the INPS. The accounting of this Employee Severance Indemnity is therefore assimilated with other types of contribution deposits.

The main assumptions used in determining the current value of the Employee Severance Indemnity are illustrated below:

31/12/2016 31/12/2015

Annual probability of termination due to death ISTAT 14 death-rate tables lowered to 85%, divided by

gender

ISTAT 13 death-rate tables lowered to 85%, divided by

gender

Annual probability of termination due to disability INPS data lowered to 70% INPS data lowered to 70%

Annual probability of attrition due to other causes 5.74% 3.80%

Annual probability of request of employee severance indemnity advance by employees 0.49% 1.54%

Annual interest rate 1.31% 2.03%

Annual inflation rate 2.00% 2.00%

Retirement age according to current INPS retirement rules

according to current INPS retirement rules

In order to indicate the potential effects that could have occurred to the Company’s defined benefit obligations following changes in some of the main actuarial hypotheses, we indicate the following: • in the case the discount rate used were to increase by 0.5%, the debt registered in the financial statements would

be equal to euro 284 thousand;• in the case the discount rate used were to decrease by 0.5%, the debt registered in the financial statements would

be equal to euro 311 thousand;• in the case the inflation rate increased by 1%, the debt registered in the financial statements would be equal to

euro 306 thousand;• in the case the inflation rate decreased by 1%, the debt registered in the financial statements would be equal to

euro 289 thousand.


176

NOTE 16 – Provisions for risks and charges

(thousands of euro) Risk provisions Provision for investment risks

Provision for additional agent

indemnity

Total

At 1 January 2016 172 0 3 175

Impairment 0 0 0

Re-securitisations 0 0 0

Provisions for the year 0 0 0

Utilisation for the year -142 0 -142

At 31 December 2016 30 0 3 33

The provision for risks consists of an allocation made in previous years for potential disputes with personnel equal to euro 30 thousand.

NOTE 17 – Trade payables

Payables to suppliers as at 31 December 2016 amount to euro 2,331 thousand (euro 2,086 thousand as at 31 December 2015).


Payables to suppliers 1,660 1,227

Trade payables to related parties 671 859

Total trade payables 2,331 2,086

Trade payables are not interest bearing and the payment terms are in line with the commercial practices of the business areas in which they fall. Trade payables are not secured.

Trade payables to related parties mainly are constituted by payables to subsidiaries and associated companies. The associated details are provided in Note 32.

NOTE 18 – Other current liabilities

The table below provides a breakdown of other current liabilities:


Payables to employees 482 429

Payables to social security institutions 263 265

Customer advance payments on invoices 618 280

VAT payables 2 3

Other tax liabilities 216 295

Other payables 145 90

Other financial payables to related parties 77 6

Payables to subsidiaries for tax consolidation 1,864 2,211

Total other current liabilities 3,667 3,579


177

Among other payables are deferred income for contributions for investments in intangible assets equal to euro 38 thousand, which will be booked as revenue as attributable in relation to costs to which they are correlated.

NOTE 19 – Guarantees granted, commitments and financial liabilities

Guarantees given


Third parties for guarantees granted 166,646 214,041

Commitments for purchase and sale 4,676 2,498

Other commitments 0 265

Total 171,322 216,804

Guarantees received


Third parties for guarantees received 4,371 2,125

Total 4,371 2,125

The Company provided guarantees, and signed letters of comfort and credit mandates in favour of subsidiaries and third parties totalling euro 166,646 thousand.

“Commitments for purchase and sale” include a value of euro 4,676 thousand that represents the residual commitment in consideration of the “Put & Call” options connected to the acquisition of the controlling investment in Erre Effe Informatica (euro 1,221 thousand), TBS GB (euro 1,278 thousand), Ing. Burgatti (euro 2,000 thousand) and Tunemedix (euro 177 thousand).

The company also obtained third party guarantees totalling euro 4,371 thousand in relation to participation in international tenders in Ukraine, Tunisia, Uruguay, Romania, Albania, Swaziland, Uganda, Uzbekistan, Belize, Malta, Turkey, Kosovo and China.

NOTE 20 – Revenue


Revenue from the sale of goods and services 2,111 1,494

Change in work in progress on order 0 0

Revenues from related parties 8,600 7,593

Total revenue 10,711 9,087

Revenues from the sale of goods and services mainly refer to fees for the supply and installation of biomedical equipment in Jordan (euro 566 thousand), Romania (euro 300 thousand), Swaziland (euro 222 thousand), and the Russian Federation (euro 152 thousand).

In regards to the item “Revenues from related parties,” this includes management fees invoiced to the subsidiaries on the basis of a “Strategic Management Services Agreement or Management Service Agreement” signed in 2010 between TBS Group and each of the subsidiaries.


178

TBS Group S.p.A. as the parent company has a highly skilled central structure, which the group companies do not have and no not intend to obtain, for reasons of efficiency and associated expenses, which is able to provide Company Management services. Hence, TBS Group S.p.A. has undertaken to make available to the companies of the group consulting and coordination services aimed at leading, implementing and expanding the business of its subsidiaries and at obtaining a high degree of efficiency and better use of resources, as well as offering specialised services, which can be identified as follows:a) use of the results of the research and development carried out within the group;b) assistance with administrative, financial and management control problems;c) support for company organisation activities in regards to coordination of legal activities and supervision of quality

policies;d) supervision of human resources management policies, in particular for training activities, identification of criteria

to recruit qualified personnel, the determination of tools to evaluate individual and collective performance, and to define payment policies;

e) coordination of technical activities, particularly in defining production processes, with a particular focus on policies to reduce industrial costs, including through international checks or the best purchase prices for materials and equipment;

f) definition of commercial policies, to coordinate the portfolio of services offered, both at an inter-company level and between the various “Business Units” and to optimise the distribution networks;

g) assistance with IT system activities, to optimise the use of the most efficient solutions and coordinate the purchase and use of hardware systems and software products;

h) consulting and assistance in the establishment of marketing strategies, including review and analysis of market data, the selection and valuation of specific communication methods to be used in the context of activities to promote services;

i) all other consulting and assistance in management and strategic issues that could lead to significant developments of business in the interest of the Group companies.

Revenues relative to payment for said services (Management Fees) for 2016 totalled euro 4,937 thousand (euro 4,943 thousand in the previous year).

In addition, during the year large amounts of revenue were booked relative to service and release contracts stipulated with some Italian companies in the group and other re-invoicing for euro 3,663 thousand (euro 2,650 thousand in the previous year).

The subdivision of revenues by geographic area is illustrated in the table below:

Revenues by geographic area

(thousands of euro) From related parties From others Total

Italy 5,899 325 6,224

EU 2,486 560 3,046

Non EU 215 1,226 1,442

Total 8,600 2,111 10,711


179

NOTE 21 – Other revenue and income


Contributions 183 112

Other operating revenue from related parties 163 175

Other operating revenue 10 2

Total other income 356 289

The item grants consists of:• contributions connected to development costs for euro 113 thousand (also recognised under the form of tax

receivables). Their booking to the statement of income occurs in correlation with the amortisation of the capitalised projects to which they refer;

• contributions by M.I.U.R. for euro 70 thousand relative to two research projects presented by the Consorzio per il Centro di Biomedicina Molecolare Scrl.Other revenue from related parties mainly refers to income from building leases (euro 161 thousand).

NOTE 22 – Cost of raw materials and consumables


Raw materials, consumables and goods 3,460 1,095

Acquisition of materials from related parties 102 11

Changes in inventories of raw materials, consumables and goods -715 642

Total raw materials, consumables and goods 2,847 1,748

The item “Raw materials, consumables and goods” mainly refers to purchases relative to the supply and installation of biomedical equipment for foreign customers. For the relative details, please refer to Note 20.


180

NOTE 23 – Service costs

Below is the composition of service costs:

(thousands of euro) 2016 of which withrelated parties


Consultancy and technical contracts 298 20 333 18

Legal, administrative and commercial services 1,368 360 1,626 504

Travel expenses 319 330

Telephone expenses 121 130 0

Directors’ remuneration 160 233

Board of statutory auditors remuneration 106 100

Commissions 13 8

Bank commissions and factoring charges 294 208

Insurances 437 454

Transportation and shipping 151 2 71

Other repairs and maintenance 30 42

Advertising, promotion, exhibitions and trade fairs 253 0 249 0

Leases and rentals 267 0 310 18

Vehicle rental 117 7 111 7

Other service costs 1,850 950 1,483 591

Total service costs 5,784 1,339 5,688 1,139

The payments contractually established for the year 2016 made to EY S.p.A. are equal to euro 120 thousand for services to audit the separate financial statements for the year and for carrying out some limited auditing procedures at 30/06/2016, the latter without issuing of the associated report.

NOTE 24 – Personnel costs

The table below provides a breakdown of personnel costs as at 31 December 2016 and 31 December 2015:


Salaries and wages 2,525 2,586

Social security contributions 762 769

Retirement benefits 5 6

Employee Severance Indemnity and similar obligations 164 173

Other personnel costs 0 0

Total personnel costs 3,456 3,535

The item includes all expenses for payroll employees, including merit raises, changes of category, cost of living increases, costs for holidays matured and not used, and legal allocations and collective contracts.


181

Employment figures

Initial staff, divided by category, underwent the following changes with respect to the previous year.

Payroll Staff Managers and mid-level managers

Employees Blue-collar staff Total

Average 2015 21 40 0 61

Average 2016 21 38 0 59

The national labour contract used is that for the metalworking industry.

NOTE 25 – Other operating costs

The table below provides a breakdown of other operating costs as at 31 December 2016 and 31 December 2015.

(thousands of euro) 2016 of which with related parties

2015 of which with related parties

Write-downs of receivables under current assets 21 30

Taxes and duties 32 7

Other costs 270 45 527 8

Total other operating costs 323 45 564 8

NOTE 26 – Cost adjustments for in-house generation of non-current assets


Cost adjustments for in-house generation of non-current assets 254 239

Total cost adjustments for in-house generation of non-current assets 254 239

The item “Cost adjustments for in-house generation of non-current assets” as at 31 December 2016 amounted to euro 254 thousand (euro 239 thousand at 31 December 2015). It related entirely to personnel and for the execution of some projects to develop new software and information technology. In particular, should such costs be deducted from the corresponding income statement item, there would be a reduction in personnel costs.

NOTE 27 – Depreciation, amortisation and write-downs


Depreciation of tangible fixed assets 187 210

Amortisation of intangible fixed assets 771 714

Total depreciation, amortisation and write-downs 957 924


182

NOTE 28 – Other provisions


Allocation to contractual risk provision for disputes 0 0

Supplementary customer indemnity provision 0 0

Allocation to other provisions for liabilities and charges 0 3

Total allocation to provisions 0 3

NOTE 29 – Gains/(losses) from investments

(thousands of euro) 2016

of which with related parties

2015

of which with related parties

Reval. equity investments in subsidiaries 0 0 0 0

Reval. equity investments in related parties and joint ventures 0 0 530 530

Reval. minority shareholdings 0

Reval. financial assets held for sale

Write-downs of investments in subsidiaries due to impairment 7,847 7,847 0 0

Write-downs of investments in related parties and joint ventures 27 27 227 227

Write-downs of minority shareholdings 0 0

Write-downs of financial assets held for sale 0 0

Total Gains/(losses) from investments -7,874 -7,874 304 304

The item write-down of investments in subsidiaries refers to write-downs carried out for the subsidiaries TBS IT (euro 7,000 thousand), TBS ES (euro 600 thousand) and NEOIM (euro 247 thousand).

Write-downs of stakeholdings in associated companies totalling euro 27 thousand refers to the write-down carried out for the associate Insiel Mercato.


183

NOTE 30 – Income from investments, financial income and financial expenses

(thousands of euro) 2016 of which withrelated parties


Gains from equity investments 4,166 4,166 6,210 6,210

Bank interest receivable and from related parties 1,065 1,051 1,213 1,186

Other interest receivable 21 0

Other financial income 61 305

Total financial income 1,146 1,051 1,518 1,186

Bank interest payables and from related parties 1,186 0 1,016 31

Leasing interest payable 2 4

Interest payable convertible bond loan 0 468

Interest payable Minibond 1,125 1,095

Other interest payable 4 15

Other financial expenses 401 65

Actuarial termination indemnity loss 4 6

Stakeholding transfer expense (Insiel Mercato) 65 3

Total financial expenses 2,787 0 2,671 31

Total financial income and expense and dividends 2,525 5,217 5,057 7,365

Interest receivable came to a total of euro 1,065 thousand and mainly includes interest deriving from loans granted to subsidiaries (euro 1,051 thousand) and in a residual amount to interest for the year matured in regards to banks (euro 14 thousand).

Interest payable totalled euro 2,787 thousand and mainly included interest accrued on the part of banking institutions (euro 1,186 thousand) and the interest payable relative to the non-convertible bond loan - mini bond (euro 1,125 thousand).

The detail of income from investments in subsidiaries and associated companies is as follows:

Dividends from subsidiaries and associates (Related Parties)


TBS GB 2,206 2,607

EBM 304 2,609

Surgical Technologies 300 300

Crimo Italia 279 307

SLT(*) 145 68

TBS FR 0 0

TBS BE 0 100

TBS INDIA 832 0

TBS Imaging 0 159

TBS PT 100 60

Total dividends 4,166 6,210

Total income from investments in subsidiaries and associates 4,166 6,210

(*) Associated company


184

NOTE 31 – Income taxes for the year

The table below illustrates the composition of income taxes, distinguishing between the current, deferred and prepaid components:


IRAP 0 0

IRES -668 -1,122

Allocation to the tax risk provision

Taxes for previous years -106 19

Substitute tax 0 0

Taxes for previous years (allocation to the tax risk provision) 0

Taxes for previous years

Current income taxes -774 -1,102

(Pre-paid)/deferred taxes -16 -67

Total income taxes -790 -1,169

Note that the company adhered to the provisions pursuant to article 117 and subsequent of the T.U.I.R. (so-called “Consolidated Tax Act”) as the parent company.

The amount of IRES shown in the table (positive for euro 668 thousand) refers to the income from consolidation deriving from the valuation of the tax losses seen by the Company during the year and used to compensate for the taxable amounts of other subsidiaries in the context of tax consolidation. The amount indicated also includes the benefit deriving from the deductibility of TBS Group interest payable thanks to the use of part of the ROL (reduction of labour hours) by some consolidated companies, a benefit which was not booked to said subsidiaries but kept by the parent company.

The following table shows the tax incidence on earnings before tax as at 31 December 2016 and 31 December 2015:


Pre-tax profit -7,394 2,515

Income taxes -790 -1,169

Incidence on earnings before taxes 10.7% -46.5%


185

Deferred tax receivables and payables

The following table details prepaid tax assets:

(thousands of euro)

PREPAID TAX CREDIT

PREPAID TAXES

2016 2015

IRES IRAP TOTAL IRES IRAP TOTAL

Tax losses Tecnobiopromo, formerly SIC 0 0 0 0 0 0

Grant for Sympar research project 0 0

Grant for phi Gen research project 0 0

Pharma Phy grant taxed in cash 0 0 0 9 0 9

Exchange losses from valuations 0 0 0 1 0 1

Membership fees in cash 1 0 1 1 0 1

Deductible taxes not paid during the year 0 0 0 0 0 0

Deductible interest payable on arrears in cash 0 0 0 0 0 0

Inventory write-down provision 54 2 56 42 0 42

Directors' fees in cash 4 0 4 4 0 4

Expenses relative to more than one year not capitalised under IAS 0 0

Excess maintenance 0 0 0 0

Risk provisions 7 0 7 8 0 8

Employee severance indemnity 2 0 2 2 0 2

Reversal of multi-year costs, former Tecnobiopromo 0 0 0 1 0 1

Costs for stock market listing 0 0

Reversal of capital increase expenses 0 0 0 26 4 29

MTM derivatives 58 0 58 45 0 45

TOTAL 127 2 129 139 4 142

The Company recorded prepaid taxes relating to temporary differences between the civil and fiscal assessment, based on the consideration that future taxable amounts will absorb all the temporary differences that generated them.

Details of deferred tax liabilities are as follows:

(thousands of euro)

PROVISION FOR DEFERRED TAX

DEFERRED TAXES

2016 2015

IRES IRAP TOTAL IRES IRAP TOTAL

Deductions credit write-down EC framework 51 51 51 51

Deductions EC-directors software framework 0 0

Taxable portion, transfer capital gains 259 259 259 259

Dividends not received 13 13 6 6

MIUR grant taxed in cash 106 106 121 121

Amortisation changes, 2012 Cernusco property improvements 0 0

Foreign exchange rate differences 3 3 0 0

Deferred on mini bond expenses 118 118 154 154

Leasing 28 28 28 28

Employee Severance Indemnity discounting 1 1 5 5

TOTAL 580 0 580 626 0 626


186

NOTE 32 – Related party disclosures

Pursuant to Consob letter 6064293 of 28 July 2006, the disclosure relative to related parties is presented in these Notes, in the appropriate sections.

Payables and receivables, as well as financial income and expenses that TBS Group S.p.A. has with its subsidiaries, associated companies and related parties, for the period in question, are those summarised in the tables below:

Relations with subsidiaries

(thousands of euro)Company

RECEIVABLES / PAYABLES 2016 REVENUES / EXPENSES 2016

Receivables comm.

Receivables financial

Receivables for tax

consolidation

Payables comm.

Payables financial

Payables for tax

consolidation

Revenue comm.

Income from

investment

Financial income

Costs comm.

Charges fin.

TesanTelevita * 19 0 23 0 0 5 42 0 0 0 0

PCS 0 0 0 0 0 0 0 0 0 0 0

TBS FR 766 4,352 0 16 0 0 549 0 231 11 0

TBS BE 12 0 0 0 0 0 61 0 0 0 0

TBS GB 285 0 0 3 0 0 876 2,206 0 86 0

TBS ES 64 0 0 0 0 0 257 0 0 0 0

STB 18 370 0 0 0 0 72 100 0 0 0

Surgical Technologies 81 0 0 0 0 0 191 300 0 0 0

CRIMO Italia 913 0 116 40 0 71 1,520 279 0 0 0

EBM 4,515 9,600 0 236 0 889 2,502 304 330 119 0

MSI 779 761 0 9 0 0 198 0 28 3 0

TBS IT 88 1,950 0 2 0 761 233 0 38 2 0

Tunemedix 114 1,017 1 12 0 0 84 0 45 105 0

TBS INDIA 185 704 0 28 0 0 210 832 0 0 0

TBS SE 90 155 0 0 0 0 5 0 0 0 0

Erre Effe Informatica * 33 0 0 0 0 30 35 0 0 0 0

NEOIM 388 0 0 0 12,098 0 0 0 2 0 0

TBS IMAGING* 2,975 6,615 11 1 0 3 597 0 375 2 0

Ing. Burgatti* 105 0 0 0 0 105 212 0 0 0 0

TBS BOHEMIA 15 40 0 0 0 0 1 0 2 0 0

CRIMO FRANCE* 85 0 0 0 0 0 198 0 0 0 0

CRIMO Instrumentation Medicale* 0 0 0 0 0 0 0 0 0 0 0

Total 11,532 25,564 150 349 12,098 1,864 7,843 4,022 1,051 327 0

* Indirectly controlled


187

(thousands of euro)Company

RECEIVABLES / PAYABLES 2015 REVENUES / EXPENSES 2015

Receivablescomm.

Receivables financial

Receivables for tax

consolidation

Payables comm.

Payables financial

Payables for tax

consolidation

Revenue comm.

Income from

investment

Financial income

Costs comm.

Charges fin.

TesanTelevita * 17 0 0 0 0 19 45 0 0 0 0

PCS 147 0 0 7 0 0 199 0 0 18 0

TBS FR 524 2,715 0 10 0 0 558 0 66 9 0

TBS BE 15 0 0 0 0 0 72 100 0 0 0

TBS GB 413 0 0 16 0 0 1,008 2,607 0 21 0

TBS ES 92 0 0 0 0 0 269 0 3 0 0

STB 47 320 0 0 0 0 89 60 0 0 0

Surgical Technologies 159 0 0 0 0 0 252 300 0 0 0

SLT 0 0 0 0 0 0 56 68 0 9 0

CRIMO Italia 81 0 0 0 0 136 175 307 2 2 0

EBM 1,872 8,131 0 122 0 1,414 2,934 2,609 512 107 0

MSI 682 761 0 7 0 0 150 0 29 1 0

TBS IT 168 0 0 0 0 631 254 0 212 6 0

INSIEL MERCATO 876 0 69 502 0 5 895 0 0 440 31

TBS INDIA 85 0 0 20 0 0 98 0 0 13 0

TBS SE 85 155 0 0 0 0 2 0 0 0 0

Erre Effe Informatica* 23 0 43 0 0 4 32 0 0 0 0

TBS IMAGING* 2,172 6,728 298 53 0 3 653 159 362 1 0

Ing, Burgatti* 0 0 0 0 0 0 0 0 0 0 0

TBS BOHEMIA 13 40 0 0 0 0 10 0 0 0 0

CRIMO FRANCE* 0 0 0 0 0 0 0 0 0 0 0

CRIMO Instrumentation Medicale* 0 0 0 0 0 0 0 0 0 0 0

Total 7,470 18,850 410 737 0 2,211 7,753 6,210 1,186 627 31

* Indirectly controlled

Relations with associated companies

(thousands of euro) trade receivables

trade payables

other payables

revenue income from stakeholdings

costs

Insiel Mercato 194 253 72 859 0 787

SLT 33 2 6 61 145 11

Easy Care Foundation 0 0 0 0 0

Consorz.Soc.Care Expert 0 0 0 0 0

Total 227 255 78 920 145 798

The operations carried out with subsidiaries and associated companies essentially involve the provision of services, and obtaining and using financial means. These are part of ordinary operations and are regulated at market conditions – that is the conditions that would be applied between two independent parties.


188

Relations with other related parties

(thousands of euro) trade receivables trade payables revenue costs

SEGES 0 16 0 50

Paolo Salotto 0 52 0 247

Capitol Health 0 0 0 0

MEA Consulting 0 0 0 26

Innovating Global Health S.A. 0 0 0 37

Total 0 68 0 360

Seges Srl is considered a related party since Mr. Paolo Salotto is its Chairman. Relations with Seges are governed by a consulting contract, with particular reference to administration, accounting and legal issues.

Mr. Paolo Salotto, formerly a member of the TBS Group Board of Directors, was appointed as the CEO of TBS Group on 19 December 2013. The costs indicated in the table refer to the fees accrued during the course of 2016 as the Managing Director of TBS Group, Director of Strategic Planning, Director of M&A, and General Manager for Corporate activities.

Capitol Health Consultants Inc. is considered to be a related party as it is a subsidiary of Capitol Health Special Fund L.P., one of the shareholders of the Company. Costs for the year relative to Capitol Health Consultants Inc. refer to payments connected to the activities of a member of the Board of Directors.

The services company MEA Consulting is a related party in that Laura Amadesi, a Director of the TBS Group is a shareholder and partner of said company.

Innovating Global Health S.A. is considered to be a related party as it is a subsidiary of Capitol Health Special Fund L.P., one of the shareholders of the Company. Relations with Innovating Global Health S.A. are regulated by a strategic and financial consulting agreement under General Management, which was activated during the course of 2013.

Accrued remuneration for directors with key responsibilities:


Salaries(*) Remuneration(**) Salaries(*) Remuneration(**)

Diego Bravar 90 122

Nicola Pangher 128 125

Paolo Salotto(***)

(*) The amounts shown relate to the gross salaries paid to Company employees.

(**) The amounts shown relate to remuneration paid to Company directors.

(***) For the fees relative to Mr. Paolo Salotto please refer to the figures in the table above, “Relations with other related parties”

NOTE 33 – Subsequent events

No significant events occurred after 31 December 2016 and up to the date the financial statements were prepared.




189

Board of Statutory Auditors’ Report on the Annual Financial Statements as at 31.12.2016(pursuant to article 2429, paragraph 2 of the Civil Code)

Shareholders,with this document, the Board of Statutory Auditors provides information about its activities in relation to the

year ending at 31 December 2016, as required by article 2429, paragraph 2 of the Civil Code, taking into account the behavioural principles recommended by the National Boards of Chartered Accountants (the Italian Accounting Body).

Supervision

We supervised the observance of the Law and the Articles of Association, and respect of the principles of proper administration.

We participated in the Shareholders’ Meetings and the meetings of the Board of Directors, carried out in conformance with the legal norms or the Articles of Association.

We obtained from the delegated bodies, with the frequency established under the Law and/or in the Articles of Association, the information required under article 2381, paragraph 5 of the Civil Code, both in regards to the Company and the subsidiaries, not discovering operations that were manifestly imprudent, hazardous, in conflict of interest or such to compromise the integrity of company equity.

The Board of Statutory Auditors acknowledged and supervised the principles of proper administration, to the extent of its responsibilities, through direct observation and gathering of information from department managers.

The Company exercises management and coordination activities in regards to its subsidiaries. The relationships which exist between TBS Group S.p.A. and the companies of the group include operations that involve public interest, and are regulated under normal market conditions, taking into account the quality and specific nature of the services provided. Appropriate disclosures of these relationships are provided in the documents accompanying the consolidated financial statements and separate financial statements for the year.

During financial year 2016, the Board of Directors of the TBS Group resolved to restructure the two Business Units based on the sectors in which they operate into two Business Units based on the geographic location of their operations, known as “Clinical Engineering Services and Integrated ICT Solutions, Italy”, and “Clinical Engineering and Integrated ICT Solutions, International”. The process of implementing the group’s new organisational model is still under way.

Company operations pursuant to articles 2391 and 2391-bis of the Civil Code were resolved in respect of the regulations in effect, the Company’s Code of Conduct and the internal procedure for valuation and approval of operations with related parties, established in conformance with that envisaged in article 13 of the AIM Regulation, providing adequate and timely information to the public when necessary.

We acquired information and supervised the financial disclosure processes, the adequacy of the corporate organisation, administration and accounting structure and the functioning of the Company’s internal control system, to the extent of our responsibilities, including through meetings with department managers and the members of the Supervisory Body, the Internal Control Committee and the manager of Internal Audit. To that end, we have no special observations to note.

We have periodically met with managers from the auditing firm, maintaining contact throughout the year, as well as a constant exchange of information.

We exchanged information with the auditors of the main subsidiaries, coordinating with them control actions relative to respect for the compliance procedures and the Group’s organisational matrix.

The supervisory activities described above were carried out through a total of five meetings of the Board of Statutory Auditors, three of which involved the Internal Control Committee, and during the eight meetings of the Board of Directors.


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No complaints were received pursuant to ex article 2408 of the Civil Code.During the course of the supervisory activities, as described above, nor did other significant issues arise which

would require mention in this report.

Financial statements for the year

The 2016 financial statements of TBS Group S.p.A. were approved by the Board of Directors on 23 March 2017 and were prepared in conformance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Board (IABS) and adopted by the European Union and IAS.

We have examined the financial statements of the year ending at 31/12/2016, in regards to which we note the following.1 Management indicates a net loss of 6,604,853 euro. The Board of Directors, in the Notes to the Financial

Statements, illustrated the valuation criteria adopted and provided the information required under the regulations in regards to both the balance sheet and the income statement, as well as providing all other information considered necessary to ensure the highest possible level of clarity in the statements.

2 As we are not responsible for auditing the financial statements, we supervised the general structure used for the same, and its general compliance with the Law in terms of both its form and structure, and in that regard we have no special observations to note. We verified observance of the regulations of the Law in regards to the preparation of the report on operations and in that regard we have no special observations to note.

3 For the purposes of article 2426, first paragraph, no. 5 of the Civil Code, we note that no capitalisation of enlargement or system costs occurred, nor of research, development or publicity costs with multi-year utility.

4 The Board of Directors subjected the value of its stakeholdings and goodwill recognised to impairment tests. These were developed, respectively, on the basis of projected future cash flows deriving from the financial plans prepared and approved by the same TBS Group Board of Directors and the administrative bodies of the subsidiaries, relative to the value of stakeholdings, and on the basis of projected cash flows approved by the Board of Directors in relation to the Clinical Engineering Italy CGU, in the second case. Based on the results of the impairment tests, a write-down was carried out on the stakeholding in TBS IT, of € 7 million.

5 To the best of our knowledge, the directors, in preparing the financial statements, did not deviate from the regulations of the Law, pursuant to article 2423, paragraph 4 of the Civil Code.

6 The audit firm released its report today, pursuant to articles 14 and 16 of Legislative Decree no. 39 of 27/01/2010, without conditions.

7 The administrative body of the parent company TBS Group S.p.A. prepared the consolidated financial statements at 31 December 2016 based on the IAS/IFRS, and show profit for the year pertaining to the Group of € 2.73 million. The Group’s consolidated financial statements were audited by the appointed company which today issued its report, pursuant to articles 14 and 16 of Legislative Decree no. 39 of 27/01/2010, without conditions.

Conclusions

Also considering the results of the activities carried out by the entity assigned to audit the accounts, the Board proposes that the Shareholders’ Meeting approve the financial statements for the year ending at 31/12/2016, as prepared by the Directors, together with the proposal for covering the loss for the year, as formulated by the directors.

Trieste, 06 April 2017

On behalf of the Board of Statutory Auditors The Chairman (Andrea Fasan)


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Company data and information for the shareholders

HeadquartersTBS Group SpaAREA Science Park. Padriciano 9934149 Trieste – ItalyTel. +39 040 92291Fax +39 040 9229999www.tbsgroup.com

Legal dataShare capital: euro 4,218,557.60 fully paid-upNumber of ordinary shares: 42,185,576Own shares: 764,210Fiscal code, VAT and Companies’Register of Venezia Giulia under n. IT 00707060323REA 95352

Investor Relationse-mail: [email protected]. +39 040 92291Fax +39 040 9229999

The present document is also available in thesection “Investor Relations” on the websitewww.tbsgroup.com

ANNUAL FINANCIAL REPORT AS AT 31 DECEMBER 2016

www.tbsgroup.com

TBS Group SpaAREA Science Park

Padriciano 9934149 Trieste - Italy

tel. +39 040 92291fax +39 040 9229999

[email protected]

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