Annual Report 12 Message from the Ceo

ANNUAL REPORT 12 MESSAGE FROM THE CEO

2012 was marked essentially by the completion of the process of privatis- I thank the current and future shareholders, and appeal to their height- ing ANA, successfully conducted by the Government of Portugal. ened economic and social sensibility in the ongoing transition phase, so that they do not falter in their determination as regards the successful This was effectively one of the largest transactions conducted within the development of this important airport infrastructure that needs to be in- European Union, and certainly the largest in the airport sector. creasingly efficient and customer friendly.

ANAM will thus now be owned by the winner of the international public Therefore, it is with optimism that I once again repose my faith in all those bid for privatising the national airport manager – VINCI CONCESSIONS. who play a part in the good performance of the Airports of Madeira.

The ANA Group starts a new phase this year, with excellent opportunities for international, national and regional development, as VINCI has expressed in its public communications, after winning the bid. António Ferreira de Lemos CEO of the Board of Directors

Negotiations are in progress with the Governments of Portugal and the Autonomous Region of Madeira in order to establish a new concession agreement for ANAM, essentially identical to that held by ANA, as well as for a new organisation model for managing airports in Madeira.

In all these processes, the main concern has been to ensure that the airport infrastructure of Madeira continues to increase its contribution to the development of the Autonomous Region, above all concerning its necessity for the increase of Tourism and the sustained economic development of this Region.

Special thanks are given to the Regional Government of Madeira and all of ANAM’s employees, for their participation in the several tasks they were called upon to fulfil, highlighting their excellent and distinguished performance.

Aeroportos da Madeira ‹ Annual Report 2012 2 OUR VISION

“To be recognised for secure operations, excellence and competitiveness in services provided and for the sustainability of the business”.

Aeroportos da Madeira ‹ Annual Report 2012 03 FOREWORD

The Board of Directors of ANAM, SA pursuant to the law, presents its Subsequently, by means of RCM 111-F/2012 of 27 December, the Council 2012 Annual Report. of Ministers took responsibility for the selection of the tenderer VINCI – Concessions, SAS to proceed with the acquisition of shares representing As a wholly publicly owned company, ANAM, SA follows the guidelines up to 100% of the Share Capital of ANA, SA, which constitutes the object and regulations established and applicable to companies belonging to of sale, by private negotiation, in relation to the privatisation of ANA, SA. the SOE (State Owned Enterprises) sector, so this report follows a structure in which Chapter I deals with Corporate Governance, highlighting As previously mentioned, ANAM – Aeroportos e Navegação Aérea da Ma- the principles of Good Governance and the analysis and evaluation of deira, SA is an affiliated company majority owned by ANA, SA, with the Compliance with Legal Guidelines. remainder of the Share Capital being owned by the Autonomous Region of Madeira and the State. The remaining chapters concern the Management Report, Financial State- ments, Notes to the Financial Statements and the Audit Reports, and the It is covered by a separate Concession Agreement, its own regulatory Statutory Audit. model, and the conditions under which ANAM, SA will be incorporated into the privatisation of ANA, SA are as yet unknown. In terms of new situations, we deem it worth noting that, under the Eco- nomic and Financial Assistance Programme agreed with the European However, already in 2013, according to Resolution 53/2013 (published Union, the International Monetary Fund and the European Central Bank, in the Official Journal on 6 February 2013), the Regional Government of a privatisation program was expected to be implemented that includ- Madeira has approved the Programme to Privatise and Restructure the ed ANA – Aeroportos de Portugal, SA, by which ANAM, SA is majority Corporate Sector of the Autonomous Region of Madeira, where, under owned, with 70%. paragraph 2.10 on the Airport Sector, it is established:

In 2012, by means of Decree-Law 232/2012, of 28 October (article 1), “The Regional Government intends to promote the sale of the share capital the Council of Ministers approved the privatisation of ANA, SA, which is owned in Aeroportos e Navegação Aérea da Madeira, ANAM, SA to Aero- regulated by said DL and any resolutions of the Council of Ministers that portos e Navegação Aérea, ANA, SA, in the context of the privatisation of may establish the final and specific operations necessary for its implemen- the latter, and to adjust the current Concession Agreement covering the tation. Region’s Airports to the ANA Concession Agreement elapsing in 2013”.

Aeroportos da Madeira ‹ Annual Report 2012 04 FOREWORD

Also in 2012, and as a consequence of the existence of a debenture loan traded on a regulated market (Luxembourg Stock Exchange), ANAM, SA, in compliance with Directive 2004/109/EC of the European Parliament and Council, of 15 December 2004 (Transparency Directive), opted to choose as “Member State of Origin” the one where it has its registered office, disclosing financial information in Portugal, with the CMVM – Portuguese Securities Market Commission, as envisaged in article 244-A, paragraph 3 of the CVM.

Thus, the Interim Financial Information for the 1st Half of 2012 has already been disclosed by the CMVM, the aim being also, in this report, to follow the guidelines of the CMVM Circular of 28 January 2013, on the annual presentation of accounts, particularly article 245 of the CVM.

It should finally be noted that in 2013 and according to the DSUE (Unani- mous Written Board Decision) of 6th May 2013, new Decision Making Bodies were elected for the 2013-2015 period, unless a different determination elapses from ANA, SA privatisation program.

As a consequence, and in accordance with paragraph 4 of article 65 of the Companies Act, the Management Report and Accounts will be signed by the Directors in office at the date of submission of the report.

Aeroportos da Madeira ‹ Annual Report 2012 05 TABLE OF I. CORPORATE GOVERNANCE 9 CONTENTS 1. PRINCIPLES OF GOOD GOVERNANCE 10 1.1 Mission, Objectives and Policies of the Company 10 1.2 Internal and External Regulations to which the Company is subject 11 1.3 Information regarding Significant Transactions with Related Entities 15 1.4 Information regarding Other Transactions 15 1.5 Indication of the Governance Model and Identification of Members of Decision-making Bodies 17 1.6 Remuneration of Members of Decision-making Bodies 21 1.7 Analysis of Economic, Social and Environmental Sustainability 22 1.8. Feasibility of Compliance with Principles of Good Governance 31 1.9 Code of Ethics 32 1.10 Information regarding the Existence of a Control System consistent with the Size and Complexity of the Company 32 1.11 Identification of Mechanisms Adopted for the Prevention of Conflicts of Interest 33 1.12 Explanation of the Disclosure of updated Information 33

2. COMPLIANCE WITH LEGAL GUIDELINES 36 2.1 Management Objectives 36 2.2 Financial Risk Management 36 2.3 Average Payment Terms (APT) 39 2.4 Disclosure of Late Payments 40 2.5 Special Duties of Information 40 2.6 Compliance with the Recommendations of Shareholders, issued upon approval of the accounts 41 2.7 Remuneration 42 2.8 Public Procurement 49 2.9 Measures provided in the Stability and Growth Pact (SGP) 51 2.10 Accrued Debt 52 2.11 Cost Reduction Plan 52 2.12 Unity of Treasury Principle 53 2.13. Disclosure of Compliance with Legal Guidelines 54 2.14 Annual Statement on Corporate Governance 57

Aeroportos da Madeira ‹ Annual Report 2012 06 TABLE OF II. MANAGEMENT REPORT 58 CONTENTS 1. SUMMARY OF PERFORMANCE 59

2. LEADING INDICATORS 62

3. CORPORATE STRUCTURE 64

4. ECONOMIC FRAMEWORK 67 4.1 Economic Environment 67 4.2 Traffic at Airports belonging to the ANA, SA Group 71 4.3 Traffic at Airports belonging to the ANAM, SA 76

5. Business Strategy 77 5.1 Sustained Growth 77 5.2 Operational Efficiency 80 5.3 Employee Advancement 80 5.4 Balance of the Financial Structure 80

6. Evolution of Business 84 6.1 Aviation 84 6.2 Non-aviation 89 6.3 Security 91 6.4 PMR 92 6.5 Key Customers 92

7. INVESTMENTS 93 7.1 Airport Infrastructure 94 7.2 Operating Investment 95

Aeroportos da Madeira ‹ Annual Report 2012 07 7.3 Current Investment 95 TABLE OF 7.4 Summary of Total Investment 95 CONTENTS 7.5 Investments in Progress and Projects in Portfolio 97 7.6 Financing of Investments 102

8. HUMAN RESOURCES 102 8.1 Permanent 103 8.2 Programmes to Optimise the Number of Workers Employed and the SSLCI (Firefighting and Rescue System) 104 8.3 Training 104 8.4 Wage Bill 105 8.5 Accidents at Work and Absenteeism 106 8.6 Actions under Development 107

9. ECONOMIC AND FINANCIAL ANALYSIS 107 9.1 Economic Situation 107 9.2 Financial Situation 115

10. FUTURE PROSPECTS 119

11. PROPOSED APPROPRIATION OF PROFITS 122

12. ANNEX TO THE MANAGEMENT REPORT 123

III. FINANCIAL STATEMENTS 124

IV. NOTES TO THE FINANCIAL STATEMENTS 129

V. AUDIT REPORTS AND STATUTORY AUDIT 190

Aeroportos da Madeira ‹ Annual Report 2012 08 CORPORATE GOVERNANCE I

Aeroportos da Madeira ‹ Annual Report 2012 CORPORATE GOVERNANCE

1. PRINCIPLES OF GOOD GOVERNANCE b) “Fund for Investment in Tourism Promotion” – in partnership with the 1.1. MISSION, OBJECTIVES AND POLICIES OF THE COMPANY Regional Secretariat of Culture, Tourism and Transport and private entities with an interest in the touristic economy of the Region; It is the Mission of our Company: “To provide a quality service to its Customers, to safeguard the interests c) “Tactical Plan and Others” – own initiative aimed at actions aimed at of Shareholders, to prioritise Employees and to contribute to the develop- more individualised promotional initiatives, with particular interest in ment of the Autonomous Region of Madeira”. bolstering the airport business;

Being a service company, its main focus is Customer satisfaction, seeking, d) “Madeira Airports Incentive Programme” – own initiative for excep- for this purpose, the best match in terms of infrastructure and financial and tional situations not covered by the other programmes. human resources. Notwithstanding the adoption of the programmes and initiatives men- ANAM, SA is committed and continually seeks to raise levels of efficiency tioned above, the evolution of passenger numbers has been quite irregular and quality of service through an improvement in indicators obtained in and is at a level witnessed more than a decade ago, with the likelihood that Satisfaction Surveys, which are conducted periodically. this regression would have been even greater had such programmes not been secured. Also, with the implementation of Airport Marketing, ANAM, SA has developed an array of benefits to attract new companies, air routes and markets In terms of Non-aviation business, and in the wake of moderate growth to the Region. over recent years, stagnation is currently being witnessed. The weight of this component is not yet significant (about 17% of turnover), but its Starting in 2006, these benefits have been consolidated over the years and growth is a priority of the Company. currently consist of four programmes designed to leverage the growth of traffic, to the ARM: Security and PRM (Passengers with Reduced Mobility) are “non-core” activities entrusted to airport managing bodies, but which do not add value. a) “Initiative:pt-Developing Tourism and Aviation” – in partnership with The rates applied are intended solely to maintain Investments and ensure Portugal Tourism and the Madeira Promotion Association; operating expenditure, assuming a nil return.

Aeroportos da Madeira ‹ Annual Report 2012 10 CORPORATE GOVERNANCE

Objectives and Policies of the Company • Developing appropriate environmental practices, in strict compliance with the relevant legal framework; In quantitative terms, ANAM, SA’s operational activity was based on the • Promoting the gradual rejuvenation and qualification of Company staff; fulfilment of the 2012 MFI – Management Forecasting Instruments, and, • Ensuring strict management of the Investment Plan for airport infrastructure overall, the performance achieved was above expectations. under concession, fulfilling the limitation rules established for the SOE sector; • Continuing measures to contain costs and solutions to improve the ef- Indeed, the budget then made was executed with an unfavourable devia- ficiency of existing processes; tion in Income (3.5%) and an improvement in Operating Costs of 1.9%. • Encouraging improvements in the efficiency of management and com- However, it must be said that this operational improvement is directly re- munication, innovating and seeking, through innovation and motivation, lated to a reduction in charges related to IFRIC 12, which was not planned. to achieve better performance; • Promoting appropriate actions to achieve the financial recovery of the Operating Income and Net Income are positive and Cash Flow amounted Concession; to 9,379,000 euros. • Providing, under the process of privatisation of ANA, SA, all information and clarifications that may be required. Structurally, the Company’s activities are based on the following objectives: • Sustained Growth; Below, under specific points, we will seek to develop some of themore • Operational Efficiency; significant aspects considered within this context. • Employee Advancement; • Balance of the Financial Structure. 1.2 INTERNAL AND EXTERNAL REGULATIONS TO WHICH THE COMPANY IS SUBJECT And Company Policies are aligned to: • Stimulating growth through Airport Marketing; Being engaged in airport management, the Company is the concession op- • Improving the Quality of Service provided to passengers and airlines, erator of the Airports of the Autonomous Region of Madeira and its busi- within a context of restrictive measures for the SOE sector and an unfa- ness activities, in relations with the Authority, are governed by the Conces- vourable environment; sion Agreement, published by DLR 8/92/M, of 12 April, and subsequent • Developing Non-aviation business; amendments: DLR 7-A/M/2000, of 15 March and Addendum to the Agree- • Continuing the Productivity Improvement Programme; ment of 20 April 2010.

Aeroportos da Madeira ‹ Annual Report 2012 11 CORPORATE GOVERNANCE

Its business activities are regulated by the National Institute of Civil Avia- with the publication of Decree-Law 254/2012, of 28 November, which ap- tion (INAC), whose mission is to promote the safe, effective and sustained proved the rules to be adopted by the airport industry, unifying legislation development of civil aviation activities through regulation, legislation, cer- that was contained in various laws, while maintaining the structure of oc- tification, licensing, approval, monitoring and oversight of these activities, cupation and operation within the public domain, as previously enshrined of the respective agents and recipients, as shown in the Strategic Transport in Law. Plan, approved by RCM 45/2011, of 10 November, and by extensive international regulations, particularly those emanating from the International Civil Notwithstanding the foregoing, the Company’s status as exclusively pub- Aviation Organisation (ICAO). licly owned determines its classification within the State Enterprise Sector, and means it is subject to the law and jurisdiction of the State Business and Likewise, the exercise of its business activities is regulated by general Public Enterprise Sector: Decree-Law 558/1999, of 17 December, with the laws applicable to Portuguese Companies, by its Charter and a wide new wording given by Decree-Law 300/2007, of 23 August (republishes range of International Conventions and Agreements, as well as by na- Decree-Law 558/99). tional and EU law. Under the Principles of Good Governance, an array of regulatory instru- In 2012, the applicable legal and regulatory framework underwent changes ments emanating from the various bodies identified below also applies:

Nature Date Purpose Note

Decree-Law 191/99 05.JUN. 1999 State Treasury System See Unity of Treasury Principle

RCM 121/2005 23.JUN.2005 Cost Containment Policy Limited Expen. Represent. 12 months

DL 71/2007 27.MAR.2007 Public Manager Statute (EGP) Management Agreement Article 6 no. 3 and Article 18

RCM 49/2007 28.MAR.2007 Principles of Good Governance of Companies In overall terms and, in particular, point 19, point 22. belonging to the SOE sector RCM 65/2007 25.JAN.2007 Green Public Procurement

Aeroportos da Madeira ‹ Annual Report 2012 12 CORPORATE GOVERNANCE

Nature Date Purpose Note

DL 300/2007 23.AUG.2007 Strategic Guidelines for the SOE sector Alt. DL 558/99, 17.DEC and Art. 13-A

RCM 70/2008 22.APR.2008 Management Guidelines for the SOE sector Special areas of guidance

Order 14.277/2008-MEF 23.MAY.2008 Containment in Public Spending and rigorous Dematerialisation of Information (SIRIEF). Special duties management of available resources of information RCM 34/2008 22.FEB.2008 Pay on Time Optimisation of Average Payment Term

DL 18/2008 29.JAN.2008 Public Procurement Code Procurement of Goods and Services

Order 101/09-SETF 30.JAN.2009 Financial Risk Management Applicable to EPNF

Order 9870/2009-MEF 13.APR.2009 Monitoring Programme of Pay on Time Approval of the Monitoring model

RCM 47/2010 25.JUN.2010 Rules of Procurement of Institutional Advertising disclosure in the Activities Report

RAR 29/2010 12.APR.2010 PEC 2010-2013 - Budgetary Consolidation Maximum of limits of accrued indebtedness

Order 438/2010-SETF 10.MAY.2010 Application Public Procurement Standards Discloses off. 6.132-DGTF, of 06.AUG.2010

Order 510/ 10-SETF 01.JUN.2010 Details RAR 29/2010 and Circular Letter 4384 of the 01.JUN of the DGTF Law 3-B/2010 28.APR.2010 State Budget for 2010 Application Article 172 - non-assignment of variable remuneration Order MEF 25.MAR.2010 Non-management bonuses awarded to members Cf. Circular Letter 2590 of 26.MAR.2010 of the Management Bodies 2010 and 2011 Law 12-A/2010 30.JUN.2010 Additional Measures of Budgetary Consolidation Application Article 12 and 17 (reduction in salaries; provided under the PEC Unity of Treasury Principle) Circ. Lett. 6132-DGTF 06.AUG.2010 Auditing of Technical Consultancies and services Reported Order 438/10-SETF, 10.MAY contracted by Public Companies Lett. 7688-DGTF 07.OCT.2010 Standards of the State Budget Act for 2011 Freezing of Promotions and Progressions

Aeroportos da Madeira ‹ Annual Report 2012 13 CORPORATE GOVERNANCE

Nature Date Purpose Note

DGTF Document 21.OCT.2010 Strategic Guidelines for 2011 - SOE sector PEC measures for SOE sector

Lett. 8784-DGTF 15.NOV.2010 Strategic Guidelines for 2011 - SOE sector Cost Containment and Rationalisation measures

Ordinance 1297/2010 21.DEC.2010 Powers of the GMCS

Law 55-A/2010 31.DEC.2010 OGE - Compensatory Reductions article 19, article 22, article 24, and article 77

RCM 1/2011 04.JAN.2011 Compensatory Reduction >1,500 euros As per defined Tables

Order 1246/2011-MAP 07.JAN.2011 Office of Mass Media (GMCS) Database

Order 155/2011-MEF 28.APR.2011 Limits on Indebtedness and Investments AG Authorisation for individual Investments greater than 5% of Share Capital Dec-Law 65-A/2011 17.MAY.2011 Financial Undertaking and delays in payment Consideration of delays in payment - article 3

Order 896/2011-SETF 09.JUN.2011 Financial Risk Management (amended by Order 101/2009) EPNF Application

RCM 45/2011 10.NOV.2011 Strategic Transport Plan Duties of INAC as a Regulatory body

Circular Lett. 7405-DGTF 09.DEC.2011 Suspension of payment of 13th and 14th months Lett. Parpública ref. 18864, of 22.DEC.2011

Law 64-B/2011 30.DEC.2011 CGB 2012 - Suspension of payment Holidays and article 21 Christmas Allowances Decree-Law 8/2012 18.JAN.2012 Amendment to EGP article 32 on credit card usage

Circular Lett. 7896-DGTF 08.OCT.2012 Instructions for Preparation of IPG 2013 Procedures

Circular Lett. 843-DGTF 30.JAN.2013 Instructions on Process for Presentation of Accounts 2012 Disclose 6 annexes of mandatory procedures

Aeroportos da Madeira ‹ Annual Report 2012 14 CORPORATE GOVERNANCE

1.3 INFORMATION REGARDING SIGNIFICANT TRANSACTIONS WITH Regarding PORTWAY, which is licensed by INAC and ANAM, SA to provide RELATED ENTITIES Handling services to air operators at Madeira and Porto Santo Airports, the Company practises rates legally approved for the Region. ANAM, SA has privileged relations with the ANA, SA, which owns 70% of the Share Capital of the Company and collaterally with PORTWAY, a com- Similarly, PORTWAY provides services to ANAM, SA at Madeira Airport pany 100% owned by ANA, SA, as part of its business with related entities. through a Contract for Labour Services, to assist passengers with reduced mobility (PRM), with use of the “MyWay” brand, extended to the ANA These relationships are formalised with ANA, SA by means of a Contract for Group. Consulting Services aimed at providing support and technical assistance in the management and operation of the Airports. In the Notes to the Financial Statements, the transactions carried out in 2012 with those entities are itemised and quantified. In addition, specific Protocols have been concluded for the following areas: • Personnel Management; 1.4 INFORMATION REGARDING OTHER TRANSACTIONS • Health and Safety at Work; • Information Technology. • Procedures Adopted in relation to the Procurement of Goods and Services This close relationship allows ANAM, SA to benefit from the know-how of ANA, SA in the technical and management spheres through the provision For purposes of public procurement, ANAM, SA uses the VORTAL Electronic of specialised support, which is indispensable and economically advanta- Platform, where Procedures launched may be consulted in terms of con- geous to the Company, with the associated costs being determined accord- tracts and the provision of goods and services. ing to market values. In 2012, 24 procedures were released on that platform, with the nego- In relation to the purchase of other Goods and Services, it also benefits tiation procedures adopted in the conclusion of the contracts being sum- from economies of scale in procurement procedures across Group compa- marised in the table below (according to the classification established in nies by means of the use of the negotiating capacity of ANA, SA’s Shared Article 16 of Dec-Law 18/2008, of 29 January): Services Centre.

Aeroportos da Madeira ‹ Annual Report 2012 15 CORPORATE GOVERNANCE

Nature Total No. Total No. Total Value Average Supplier Nature Value Variation % Consultations No. Bids Awards of Awards Award Term 2012 2011 Limited Tendering 16 29 12 192.609€ 47 SECURITAS,SA MA and PSA Private Security 2.093 1.980 5,7 Activities

Open Procedure 8 26 3 418.348€ 80 ANA, SA Miscellaneous 1.365 1.485 (8,1)

Limited ------EEM,SA Supply of Electricity 1.029 842 22,2 Tender for Pre-Qualification Un: thousand euros Procedure ------for Negotiation

Competitive ------Dialogue • SECURITAS is the entity contracted to carry out monitoring, passenger control positions and hold baggage screening. The 5.7% increase wit- As can be seen, ANAM, SA only adopted two types of procedures: i) Limited nessed over the previous year is essentially justified by a rise in VAT from Tendering with 12 awards in the amount of 192,609 euros; and ii) Open 16% to 22%. Procedure with 3 awards amounting to 418,348 euros. • ANA, SA provides a range of specialised services to ANAM, SA, on a • Transactions not carried out under Market conditions regular basis, which are formalised in a Contract for Consulting Serv- ices and in three Protocols, as mentioned in paragraph 1.3 above. According to the Company, no transactions were carried out outside the This also included the temporary transfer of two senior managers market context. from ANA, SA, the cost of which, incurred in the company of origin, have been charged to ANAM, SA. • Most Representative Suppliers The reduction (8.1%) is related to the evolution of the “fee” of the Contract for Services and also the suspension of holiday and Christ- Suppliers representing more than 5% of Supplies and Services, for a turno- mas allowances for ANA, SA employees temporarily transferred to ver of more than 1 million euros (VAT included), in 2012, are shown in the ANAM, SA. table below:

Aeroportos da Madeira ‹ Annual Report 2012 16 CORPORATE GOVERNANCE

• Empresa de Eletricidade da Madeira, SA provides electricity to Madeira BOARD OF DIRECTORS and Porto Santo Airports, the main cause of the 22.2% rise in turnover compared to the previous year being VAT changing from a reduced rate Chairman António Guilhermino Rodrigues(4) to the normal rate and, additionally, 2011 turnover only received in 2012. Members Duarte Nuno Fraga Gomes Ferreira(5) Rui Manuel Sarmento Veres(6) 1.5 INDICATION OF THE GOVERNANCE MODEL AND IDENTIFICATION Alda Maria de Araújo Ribeiro Borges Coelho(7) OF MEMBERS OF DECISION-MAKING BODIES António José do Amaral Ferreira de Lemos(8)

• Decision-making Bodies during 2012 AUDIT COMMITTEE

The Members of Decision-making Bodies of ANAM - Aeroportos e Nave- Chairman Víctor Hugo Amaro Bettencourt Calado gação Aérea da Madeira, SA, elected for 2008-2010, were as follows(1): Members Ana Beatriz de Azevedo Dias Antunes Freitas Paulo Guilherme Lajoso BOARD OF THE GENERAL MEETING Alternate Member António Sérgio Correia Mendonça

Chairman António Manuel Rebelo Quintal(2) Deputy Chairman José Clemente Gomes(3) Secretary Maria Octávia Ferreira Carrilho

(1) As per resolution adopted by the General Meeting of Shareholders, of 16.MAY.2008, the (5) This office is combined with that of Director of Madeira and Porto Santo Airports. General Meetings of 11.APR.2011 and 26.MAR.2012 not having deliberated on the new (6) Resignation from the position of Member of the Board of Directors of ANAM, SA on mandate of the Decision-making Bodies. 31.JUL.2012, due to retirement. (2) Resignation from the position of Chairman of the Board of the General Meeting, due to (7) Resignation from the position of Member of the Board of Directors of ANAM, SA on illness, on 24.FEB.2012. 31.AUG.2012. (3) Deceased on 24.JUN.2010 and not replaced. (8) Appointed Deputy Chairman of the Board of Directors of ANA, SA on 10.AUG.2012. (4) Resignation from the position of Chairman of the Board of Directors of ANAM, SA on Maintains the office of Member of the Board of Directors of ANAM, SA, not having been 31.AUG.2012. remunerated since 10.AUG.2012.

Aeroportos da Madeira ‹ Annual Report 2012 17 CORPORATE GOVERNANCE

STATUTORY AUDITOR(9) BOARD OF DIRECTORS

ROC Statutory Auditors Baptista da Costa & Associa- Chairman António José do Amaral Ferreira de Lemos dos, SROC, represented by Gabriel Correia Alves Members António dos Santos Morgado Duarte Nuno Fraga Gomes Ferreira Alternate ROC Luís Francisco Pereira Rosa AUDIT COMMITTEE Regarding the Board of Directors of ANAM, SA, it is noteworthy that, since 01 September 2012, it has only comprised two Directors. Day-to-day man- Chairman Víctor Hugo Amaro Bettencourt Calado agement decisions are taken unanimously and formally recorded in Min- Members José Inácio Coelho Toscano utes, so they may be ratified by a future Board of Directors. Graciete Conceição Pires Tomás Calejo Pinto Alternate Member Mário José Alveirinho Carrega • Decision-making Bodies when Approving Accounts • Roles and Responsibilities Following the DSUE (“Deliberação Social Unânime por Escrito”, Unanimous Written Board Decision), of May 6, 2013, the following member of decision- As established in Chapter III of the Company By-laws, the Decision-making making bodies were elected, for years 2013-2015, unless, during the privatisa- Bodies are responsible for the following: tion process of ANA - Aeroportos de Portugal, SA, another decision is taken: The General Meeting represents the highest decision-making body of the BOARD OF THE GENERAL MEETING Company, being responsible for: a) Deliberating on the Management Report and Accounts for the year; Chairman Henrique Pontes Leça b) Deliberating on the appropriation of profits for the year; Deputy Chairman Amílcar Augusto Contel Martins c) Electing the members of the Decision-making Bodies; Secretary Maria Octávia Ferreira Carrilho d) Deliberating on any changes to the By-laws and Capital Increases; e) Deliberating on the salaries of members of the Governing Bodies; f) Dealing with any other matter for which it has been convened.

(9) As per the Unanimous Board Decision of 29.SEP.2008.

Aeroportos da Madeira ‹ Annual Report 2012 18 CORPORATE GOVERNANCE

In addition to the general performance of the tasks conferred upon it by The Board of Directors shall meet at least once a month, and whenever law, the Board of Directors is responsible for: convened by the Chairman on his or her own initiative or at the request of a) Managing the company’s business and undertaking all acts and transac- two directors. tions relating to the corporate purpose that do not fall within the remit of other corporate bodies; In relation to the members of the Board of Directors, the main elements of b) Representing the Company, in legal proceedings and otherwise, actively their CVs are shown below. and passively, with powers to yield, acquiesce and admit in any legal proceedings, and make commitments under arbitration agreements; António José do Amaral Ferreira de Lemos (Dr.) – Chairman c) Acquiring, sell or otherwise disposing of or encumbering rights; d) Establishing the technical and administrative organisation of the com- Education: pany and the internal operating rules, particularly in relation to staff and Degree in Finance from ISCEF – Higher Institute of Economic and Financial their remuneration; Sciences of the Technical University of Lisbon. e) Appointing representatives with the powers deemed appropriate, in- Course in Transport Policy, Planning and Development from EDI – Economic cluding those to appoint substitutes. Development Institute of the World Bank (World Bank Fellow).

The Chairman of the Board of Directors is responsible for, in particular: Work Experience: a) Representing the Board in legal proceedings and otherwise; Deputy Chairman of ANA – Aeroportos de Portugal, SA (2002-2005), Direc- b) Coordinating the activities of the Board of Directors and convening and tor of ANA – Aeroportos de Portugal (2004/2008), Director of CP (2000- chairing respective meetings; 2002), Director of the Port Maritime Institute (1998/2000), Chairman of c) Exercising the casting vote; the National Port Pilotage Institute (1997/1998), Director of the Port of d) Ensuring proper implementation of the resolutions of the Board of Di- Sines (1996/1997), Director of Soponata (1991/1994), Director of CTT/ rectors. TLP (1986/1989), Director of Carris (1984/1986). Director of CTM (1981- Where the chairman is absent or unable to attend, he or she shall be re- 1984), Director of Coordination Services and Programme Control of GEP/ placed by the member of the board of directors appointed by him or her TC (1976/1981). for that purpose.

Aeroportos da Madeira ‹ Annual Report 2012 19 CORPORATE GOVERNANCE

Other: torate, ANA, Aeroportos e Navegação Aérea E.P. – 1990-1993; Commander of the Order of Merit (2006). Senior Technician, Finance Directorate, ANA, Aeroportos e Navegação Aé- Lisbon City Councillor (1989/1993). rea E.P. – 1980-1990; Member of the Lisbon Municipal Assembly (from 2004/2008 and 2008/2013). Assistant to the Head of Accounting Services, Rodoviária Nacional E.P. - Member of the Lisbon Metropolitan Assembly (since 2009). 1976-1980; Deputy State Secretary to the Minister of Housing, Public Works and Trans- Accounting Technician, Grupo Boa Viagem Transportes, S.A. – 1974-1975; port (1981/1983). Visiting Professor at ISCTE (1976/1989) – Cost Accounting and Budgeting. Duarte Nuno Fraga Gomes Ferreira (Eng.) – Member President of Engraving – Cooperative Society of Engravers. Education: António dos Santos Morgado (Dr.) – Member Degree in Civil Engineering from the Faculty of Engineering, University of Porto. Successful attendance of the XXVIII Programme for Senior Management of Education: Companies at AESE – Advanced Business Studies Association, in 2002-2003. Degree in Business Organisation and Management from ISCTE – Higher In- Professional Qualifications: member of the Engineering Association under stitute of Employment and Business Sciences – University Institute – 1984; number 15575 with the qualification Senior Member. Bachelor’s Degree in Accounting and Administration from ISCAL – Higher Institute of Accounting and Administration of Lisbon – 1979; Recent Work Experience: PADE (Programme for Senior Management of Companies) at AESE. Since 1991: called upon by the company ANAM - Aeroportos e Navegação Aérea da Madeira, SA to perform duties as member of the Board of Direc- Work Experience: tors of the Company on behalf of the shareholder the Autonomous Region Director of Planning and Management Control, ANA, Aeroportos de Portu- of Madeira, since 20.NOV.1998. gal, SA – from 2005 to the present. Combines duties as a Member of the Board of Directors with coordination of the Directorate of Planning and Other: Management Control of ANA, SA. Awarded with the rank of Grand Officer of the Order of Merit on 15 Sep- Head of the Finance Division of the Finance Directorate, ANA, Aeroportos tember 2000 by the President of the Republic. de Portugal, SA – 1994-2005; Chairman of the General Assembly of the Madeira Regional Section of the Head of the Department of Planning and Financial Analysis, Finance Direc- Engineering Association since 2007.

Aeroportos da Madeira ‹ Annual Report 2012 20 CORPORATE GOVERNANCE

The Board of Directors is governed by the Rules of the Board of Directors External Auditor approved on 12.NOV.2009 and meets twice a month, the full Board having held 14 meetings to July 2012, with all decisions being recorded in dedicat- Professional auditing services are provided by PriceWaterhouseCoopers ed minutes. However, decisions taken at 8 subsequent meetings by mem- (PWC), with whom the ANAM, SA has a contract for services. bers of the Board of Directors in office were recorded in separate minutes. The contract, for an initial period of 3 years, was extended for periods of The Audit Committee and the Statutory Auditor or Firm of Statutory Audi- one year (for 2011 and 2012). PWC monitors the business activities of the tors have the powers and duties assigned by the Companies Code, namely, Company and, where it is deemed relevant, reports any shortcomings de- to issue an opinion regarding the budget, the balance sheet, inventory and tected in the structure and functioning of internal control, with the amount annual accounts. of fees paid being indicated in paragraph 2.7 Remunerations.

The Audit Committee should submit quarterly, to shareholders with at 1.6 REMUNERATION OF MEMBERS OF DECISION-MAKING BODIES least 10% share in capital, a brief report stating the checks carried out, the anomalies detected and main deviations from forecasts. By means of minutes drawn up by the Remuneration Committee on 12.JUL.2009, new levels of Remuneration were established for the Deci- In accordance with its Charter, the Company is subject to review by the sion-making Bodies of ANAM, SA. Audit Court in operations that are directly or indirectly related to the construction and expansion of Airports in the Autonomous Region of Madeira. In June 2010, remuneration of members of the Board of Directors was reduced by 5% by virtue of Law 12-A/2010, of 30 June, followed in 2011 and Specialised Committees 2012 by a reduction of 10%, pursuant to article 19 of Law 55-A/2010, of 31 December, maintained by article 20 of Law 64-B/2011, of 30 December A member of the Board of Directors simultaneously exercises the duties of (CGB 2012). Director of Madeira and Porto Santo Airports(10). The reduction was also applied to the other Decision-making Bodies, members of the Board of the General Meeting, the Audit Committee and the Statutory Auditor. (10) This has been in effect since 06.FEB.2004.

Aeroportos da Madeira ‹ Annual Report 2012 21 CORPORATE GOVERNANCE

Also in 2012, due to the application of Law 64-B/2011 (CGB 2012), in ac- Degree of Achievement of Targets Established cordance with article 21, holiday and Christmas allowances were suspended. The objectives established in the Management Contract of the Board of It should be noted, however, that the members of the Board of Directors, Directors for 2010 and for the 2008-2010 period were subject to review by whether or not remunerated by the Company, and the Audit Committee the General Meeting of Shareholders of ANAM – Aeroportos e Navegação bear, at their own expense, liability insurance premiums to which they are Aérea da Madeira, SA of 11 April 2011, as per the agenda, items 3 and bound. 4, with votes being cast in favour and the annual objectives being unanimously approved. The detail of the remuneration of the Decision-making Bodies, as required by letter 843, of 30 January 2013 of the DGTF, can be found under para- In relation to the “...Managers’ Management objectives for the 2011- graph 2.7. 2013 period, pursuant to and for the purposes of article 18 of Decree- Law 71/2007, of 27 March”, the representative of the State Shareholder 1.7 ANALYSIS OF ECONOMIC, SOCIAL AND ENVIRONMENTAL delivered the following statement to vote “considering the need to define SUSTAINABILITY the management objectives for the 2011-2013 period, the members of the Board of Directors to be elected for the period in question should liaise Strategies Adopted with the financial and sectoral supervisory bodies, being the subject matter of deliberation as soon as they are defined. This definition should include As previously noted above, the Company’s activities are underpinned by the goals of reducing operating costs and controlling levels of debt, as four of strategic objectives: provided under CGB-2011 and SGP 2010-2013”, a situation that, to date, Sustained growth; has not materialised. Operational efficiency; Employee advancement; Furthermore, in the appraisal of section 5, Assessment of the Degree of Balance of the Financial Structure. Achievement of Business Objectives, of the General Meeting of 26 March 2012, the 2011 resolution was highlighted and the fact that the decision- The development of each is explained in Chapter II – Management Report, making bodies have not, in the meantime, been elected. section 5.

Aeroportos da Madeira ‹ Annual Report 2012 22 CORPORATE GOVERNANCE

Consequently, for purposes of assessing the objectives, the Board of Direc- Identification of Key Risks tors in office considered those contained in the Management Forecasting Instruments for 2011, presented in due time to the technical and financial With external support, the Company prepared an initial Risk Management supervisory bodies and to Shareholders. diagnosis, the 2010 results of which were evaluated and led to the identification of a set of actions that enable the development and implementation On this subject, the representative of the State Shareholder made a state- of a properly structured risk management system that can be monitored. ment, which was voted on and unanimously approved: “To propose and vote in favour of not adopting any resolution on this item of the agenda As the development of these actions requires external support, with added due to the necessary conditions for doing so not having been fulfilled”. costs in a period of strict restraint, ANAM, SA, in collaboration with the ANA, SA, chose an alternative solution, without the need to resort to ex- In light of the foregoing, and for the term 2011-2013, the management ternal means. objectives of the Board of Directors have not yet been established. Indeed, taking advantage of the model under development for ANA, SA, However, despite the mandate having ended in 2010, the members of the transfer of its Risk Management System to ANAM, SA was agreed, the Decision-making Bodies in office ensure compliance with the multiple which will be adapted to the latter’s specific situations. guidelines established by the financial and sectoral supervisory bodies for companies belonging to the SOE sector. Work has been undertaken, albeit somewhat delayed as a result of the priorities dictated primarily by the process of privatisation of ANA, SA, with Policies Pursued in order to Ensure Efficiency the established Risk Matrix covering the following Priority Risks:

Under paragraph 1.1, Mission, Objectives and Policies of the Company, a • Financial and Liquidity Risk – RRisk associated with unexpected increas- summary was presented of that which ANAM, SA considers to be priorities. es in the cost of debt, due to an increase in the reference rate or spread, and risk associated with the availability of cash to meet obligations; In addition, and to further develop these points, we refer to section 5. of Chapter II – Corporate Strategy.

Aeroportos da Madeira ‹ Annual Report 2012 23 CORPORATE GOVERNANCE

• Business Risk – Risk associated with unexpected variations in the different promote and execute Expansion works at Santa Catarina Airport, today business “drivers”, with impact in terms of Costs and Income; Madeira Airport, and to develop infrastructure in the ARM and also execute the activities, under its responsibility, under the public service system. • Concession Risk – Risk associated with the maintenance of the current Concession Agreement; From the outset, the need for a close relationship with the ANA, SA was recognised, it being an entity with expertise and experience in the airports’ • Risk of the Privatisation of ANA, SA – Risk associated with the business sector nationwide. activities of ANAM, SA against the backdrop of the privatisation of ANA, SA; Furthermore, according to Clause 25 of the Concession Agreement, ANAM, • Credit Risk – Risk associated with non-compliance with the payment of SA was authorised to contract out to ANA, SA the provision of Services cov- amounts due by key customers of ANAM, SA. ering the Administration, Structuring, Coordination and Operational Man- agement of the Airports, of which the former is the concession operator, In parallel, in 2009, ANAM, SA drafted the Management Risk Prevention as well as initiatives for their respective development, excluding the works Plan, including Risks of Corruption and Related Offences, which was up- to expand Santa Catarina Airport, a situation that remained until 2004, at dated in 2010, pursuant to the order issued by the Minister of Public Works, which time the management model was taken on directly by ANAM, SA. Transport and Communications of 06.NOV.2009, having likewise prepared, with the support of the DAO/ANA, the Annual Implementation Report. However, under the development of airport infrastructure in the ARM, to date, ANAM, SA has made investments amounting to approximately 586 Form of Compliance with the Principles inherent to proper Business million euros, a considerable financial effort that, due to the funding model Management adopted, led to ANAM, SA becoming highly indebted, a situation it is currently attempting to resolve, given its inability to free up the required Cash ANAM, SA, a company majority owned by ANA, SA, was created by Decree- Flows. Law 453/91, with the main purpose of studying, planning, constructing and operating airports (Funchal and Porto Santo) of the ARM. Accordingly, in the coming years, the Company will face difficulties in repaying loans for which, by itself, it will not have sufficient liquidity. In 1993, the Regional Government of Madeira – as Authority – concluded the Concession Agreement with ANAM, SA, which included the right to

Aeroportos da Madeira ‹ Annual Report 2012 24 CORPORATE GOVERNANCE

The Company’s debt is external in nature and currently stands at approxi- Social Responsibility mately 199.7 million euros(11). ANAM, SA believes in the sustainable development of its business activities The current financial situation is characterised by a balance sheet structure as airport operator, ensuring a balance between economic benefits and in which fixed assets have significant weight as a result of the investments environmental and social responsibilities. made, Equity being 13,969,000 euros and Net Cash Flow 45,395,000 euros. It recognises people as its most important asset, and therefore implements The Company’s Operating Cash Flow was 9,379,000 euros, with a favour- practices aimed at respecting human rights, employment rights and enable outlook. suring equality and health and safety in the development of its business activities. To comply with the provisions of article 35 of the Companies Code, Equity will be increased by at least 20 million euros. The Company has long practised a policy of gender equality, in full compliance with all applicable laws, specifically with regard to maternity leave, Due to the major contribution it makes to the economic development of parenting, family support and assistance, allowing, under the terms of the the ARM, whenever possible, ANAM, SA will pursue technological develop- AE, workers not covered by a shift arrangement to take one day or two half ments, ensuring a high degree of security (Security and Safety), without days off per month to deal with personal matters that cannot be dealt with losing sight of the high standards of satisfaction of its Customers. outside of normal working hours, with no loss of remuneration.

Moreover, despite providing a public service of general interest, ANAM, SA Also, the holidays are always scheduled with the agreement of the employ- has never been the recipient of production subsidies by means of the Cen- ee, overtime is not mandatory, some workers have flexible working hours tral Government Budget or the ARM Regional Budget, despite the socio- and working time is 7.2 hours per day, which allows them to benefit from economic nature of the management of Porto Santo Airport being structur- some “waivers” throughout the year, and thus facilitates greater compat- ally loss-making (an average annual loss of around 3.5 million euros over ibility between personal and professional obligations. the last five years).

(11) See Note: 16.2 – Terms and Deadlines for Reimbursement of Loans in the Annex.

Aeroportos da Madeira ‹ Annual Report 2012 25 CORPORATE GOVERNANCE

The Company recognises its social responsibilities through support and par- In 2012, ANAM, SA, with the support of some employees, participated ticipation in programmes in the communities in which it operates and, in in the restoration of the Capela dos Cardais chapel in Machico, and four cooperation with its partners, engages in projects aligned with its values. dwellings belonging to employees affected by the wildfires that ravaged the region last summer. The aim is to consolidate and put into action its Social Responsibility Policy, aligning it not only with the overall strategy of the organisation, but also Sustainable Development directing it towards its stakeholders. In 2010, a study was conducted to measure the impact of Madeira Airport It also recognises as being of vital importance the preservation of the en- on the surrounding community through a survey of the population living in vironment and, with this in mind, has implemented mechanisms for iden- villages close to Madeira Airport, the findings of which were positive and tifying environmental aspects and impacts and respective prevention and the results satisfactory. control measures, particularly, among others, actions to: Monitor noise; In parallel, ANAM, SA identifies the expectations and forms of communica- Reduce energy consumption; tion with key stakeholders as per the following table: Voluntarily manage carbon.

To the extent possible, the Company has been concerned with the surrounding social environment, looking to contribute actively and in a non-discrimi- natory manner to the development of the workforce and for progress in the Autonomous Region of Madeira and the country.

Aeroportos da Madeira ‹ Annual Report 2012 26 CORPORATE GOVERNANCE

Stakeholders Expectations Forms of Communication

• Defence of their interests and monetisation of assets. Shareholders • Clear and transparent reporting • Good image and credibility. • Sustained growth.

• Socio-economic and cultural development of populations and regions. Communities • Respect for the rules of good environmental • Initiatives and events management. • Ensuring accessibility in the community area.

• Passenger safety. Customers: • Connectivity. Passengers • High value-added service with best quality/price ratio.

• Appropriate infrastructure Customers: • Efficiency and safety. • Internet Airlines • Studies and surveys of customer satisfaction • Commercial competitiveness • Code of Ethics and Conduct (ACI). Information campaigns. Ongoing communication. Customers: • New business opportunities. • Advertising and accessibility of information Non-aviation • Quality in the value proposition.

• Respect in the satisfaction of specific needs. Customers • Equal treatment. Other • Respect in decision-making and weighting of opinions or suggestions.

• Recognition of performance. • Performance management system. Vocational • Skills development and management. Employees training. Consultation and participation bodies. • Team spirit, encouraging sharing/integration • Intranet. and respecting diversity.

• Co-accountability in the commitment to quality Suppliers and excellent services. • Procurement policy. • Fulfilment of payment terms

Aeroportos da Madeira ‹ Annual Report 2012 27 CORPORATE GOVERNANCE

The great complexity of the relationship with its stakeholders requires The provision of public services is thus ensured under clause 4 of the Con- consistency and transparency from ANAM, SA. This relationship is always cession Agreement. a priority for the Company. Therefore, ANAM, SA’s relationship strategy However, no funding model was established relevant to the provision of with its stakeholders is to maintain active and ongoing dialogue. the public service undertaken by the Company within the scope of the economic and financial balance of the Concession. Also, with regard to the Authority, the transparency and reliability practised, particularly for the purpose of updating airport charges, presup- Consequently, at the General Meeting of 26.MAR.2010, ANAM, SA, share- poses appropriate communication formulas, not excluding the formal holders mandated the Board of Directors to begin the process of renego- institutional relationship made by means of the Board of Directors and tiating the Concession Agreement with the Authority, with a view to its contacts and ongoing monitoring through Company staff and the ARM. revision.

As Airport Manager, ANAM, SA contributes to the economic growth of Also in 2010, the Board of Directors proceeded to send to Shareholders the regions where it operates through the creation and promotion of and the Authority a duly substantiated proposal for revision of the Con- employment and improving the living conditions and quality of life of its cession Agreement, which included, in addition to an extension of the employees and the surrounding community. term of Concession for another 20 years, changes to its purpose, the Con- cession Operator’s obligations, the Authority’s powers and the regulatory Public Service and Satisfaction of Collective Needs principles to be observed.

Through the Concession Agreement concluded between the Government The proposal was discussed at the two following General Meetings, but, of the ARM and ANAM, SA, the Company was granted “the right to pro- to date, no formal decision has been made on the matter, although it mote and execute the expansion works at Santa Catarina Airport and should be noted that the amendment of the term of Concession to an- develop infrastructure, as well as planning and operating a public service other twenty years has never been challenged by the Authority, which to support civil aviation in the Autonomous Region of Madeira, pursuant throughout has demonstrated a readiness to negotiate, but which is to the law...” and the Concession Agreement, which governs this matter. currently awaiting the implementation of the process of privatisation of ANA, SA.

Aeroportos da Madeira ‹ Annual Report 2012 28 CORPORATE GOVERNANCE

Competitiveness of the Company national commercial aviation, has not allowed resources to be channelled into activities of pure research and development, and, in specific areas di- Under the Concession Agreement, ANAM, SA has a monopoly over man- rectly related to the “core business” of the company, it has opted to build agement of airport infrastructures in the ARM. partnerships with organisations and agencies that have scientific capacity in these areas, particularly with its largest shareholder, ANA, SA. However, this apparently privileged position is subject to restrictions that do not preclude a constant demand for increased productivity/competitiveness. From this perspective, it also maintains a protocol with LNEC for a range of follow-up and monitoring initiatives for the special structures of Madeira The scrupulous observance of the Concession Agreement and subjection to Airport, through the acquisition and processing of data from instrumenta- the regulations in force pose a systematic challenge to the Company to be tion that has been incorporated into those structural elements considered more effective and efficient. most significant, which will lead to information on the need to perform preventive and corrective maintenance becoming available, in sufficient The quality of the service provided and the full satisfaction of the needs time for the appropriate management of technical and financial resources. of customers and all stakeholders are the central goals of the Company’s business activities, always underpinned by a fundamental assumption of A study is also under way with this laboratory that aims to characterise security. the aerological conditions of wind systems, through a mathematical model that, when compared with the technical characteristics of the aircraft that In order to achieve this, ANAM, SA has been modernising its image with typically use Madeira Airport, will allow the operating limitations to be im- costs appropriate to the level of its operations, seeking not to worsen the posed at this Airport to be established on a scientific basis, a situation that financial situation, promoting management focused on rationalising costs could result in fewer days of penalty. and increasing revenues, rejuvenating human resources in order to enhance competitiveness and thereby positioning the Company in the future as an Additionally, but within the same line of work, in accordance with DL airport manager par excellence within its category and size, according to 78/2006 and 79/2006, of 04 April, an overall assessment of energy effi- the classification of the ACI and other international entities. ciency and indoor air quality has been completed, which was designed to reduce and streamline the energy bills at the Airports, through the imple- In relation to Research and Development (Innovation) the economic and mentation of specific production solutions, with a view to reducing total financial situation of ANAM, SA in the current context of national and inter- power and kW units expended.

Aeroportos da Madeira ‹ Annual Report 2012 29 CORPORATE GOVERNANCE

Action Plans for the Future

ANAM, SA has based its operations on the strategic objectives and guidelines established in the Medium-term Plan, which are summarised as:

Strategic Objectives Guidelines

a) Ensuring Customer Satisfaction; b) Promoting the development of Traffic; 1. Sustained Growth c) Maximising Non-aviation Business; d) Developing Management Systems; e) Ensuring the safety and operability of Airport Infrastructure;

a) Promoting efficiency in Processes and Rationalisation of Resources; b) Creating Management routines for monitoring the Strategic Plan and monthly 2. Operational Efficiency Management Indicators; c) Promoting the adaptation and development of Technology.

a) Employee Development; 3. Employee Advancement b) Optimising Human Resources.

a) Containment of Investments; 4. Balance of the Financial Structure b) Adequacy of Financial Resources; c) Financial Recovery of the Concession.

Aeroportos da Madeira ‹ Annual Report 2012 30 CORPORATE GOVERNANCE

In addition to the strategic objectives and guidelines defined and established During the last months of 2012, it worked to prepare the elements of the above, in 2012, the General Principles, Quantitative Indicators and Government Company for DDLegal and Financial, with a view to the privatisation of Guidelines established for Businesses belonging to the SOE sector, as per cir- ANA, SA, its main Shareholder, and, at the end of the year, was informed cular letter 7405-DGTF, of 09.DEC.2011, were followed, which the Company of the identity of the winning candidate in the process to privatise ANA sought to follow during the year and in pursuing its business activities. - Aeroportos de Portugal, SA – VINCI Concessions, SAS, pending future developments that may entail profound changes in the strategy outlined so For 2013, in accordance with the Strategic and Operating Guidelines for Com- far within ANAM, SA. panies belonging to the State Owned Enterprise Sector (circular letter 7896, of 08.OCT.2012, of the DGTF), translated into Instructions for the Preparation of 1.8 FEASIBILITY OF COMPLIANCE WITH PRINCIPLES OF GOOD GOVERNANCE Management Forecasting Instruments for 2013, the following objectives were established: Under the terms of RCM 49/2007, of 28 March, in developing its business • To maximise revenue from Airport Charges; activities, ANAM, SA seeks to fulfil the Principles of Good Governance, pay- • To reduce Operating Costs, specifically through SS and Personnel Costs; ing particular attention to all the guidelines and recommendations of the • To ensure a selection of Investments; regulatory and supervisory bodies. • To reduce Payment Terms and the volume of payments in arrears; • To reduce Indebtedness and Associated Financial Charges; To this end, the Board of Directors has taken a stance in line with best • To promote the rationalisation of the Number of Workers Employed and practices in order to respond adequately to the need for accountability, optimise respective charges; transparency, quality in internal procedures and clear and timely disclosure • To adapt Organisational Structures and implement a Cost Reduction Pol- of relevant information regarding the company’s business activities, which icy with Leaders. may be found on the website: www.anam.pt.

ANAM, SA will pursue the objectives listed above with some characteristics Also, an appraisal of the obligations imposed by RCM 34/2008, of 22 Feb- specific to the sector in which it operates and the guidance that it receives ruary, RCM 65/2007, of 25 January, RCM 70/2008, of 22 April, and Decree- for the purpose, maintaining an up-to-date information reporting system Law 300/2007, of 23 August, is contained in a report that will be presented in order to control its business activities in the SIRIEF database, the Annual by ANAM, SA at the next General Meeting regarding the degree to which Report and on the Company website. the obligations imposed have been achieved, pursuant to the aforementioned legal texts.

Aeroportos da Madeira ‹ Annual Report 2012 31 CORPORATE GOVERNANCE

1.9 CODE OF ETHICS 1.10 INFORMATION REGARDING THE EXISTENCE OF A CONTROL SYS- TEM CONSISTENT WITH THE SIZE AND COMPLEXITY OF THE COMPANY In 2009, an Ethics and Conduct Committee was appointed to disseminate the principles that govern the relationship between the Company and its In accordance with paragraph 19 of RCM 49/2007, of 28 March, ANAM, SA various Stakeholders in order to analyse any matters raised and to issue must have a control system consistent with the size and complexity of the recommendations, where they were deemed necessary. Company, in order to protect investments and assets, which should cover all relevant risks. Initially, ANAM, SA complied with the ANA, SA Code of Ethics, this providing the basis for guiding the work undertaken by the Committee. In 2010, It is believed that the Company is formally organised to look after its Assets, the ANAM, SA Ethics and Conduct Committee proposed the adoption of determine Annual Results and fulfil all Tax Obligations and those to Third a separate Code of Ethics, which, in key aspects, is aligned with the ANA, Parties. SA Code of Ethics. It has organised accounts and budget and forecasting management for The purposes of the Code of Ethics and Conduct, the General Principles of one and five years, in pursuit of its statutory objectives. In accounting Conduct, Relations with Stakeholders and Examples of Good Practice have terms, since 2005, it has adopted the IFRS (International Financial Report- been disclosed in group sessions conducted at Madeira and Porto Santo ing Standards). Airports. The accounts of ANAM, SA are subject to consolidation under those of During 2012, the Ethics and Conduct Committee held 3 sessions, two at ANA, SA, which holds a 70% stake in its Capital, and with which it main- Madeira Airport and one at Porto Santo Airport. tains close relations in an organisational context, either through a Contract for Consulting Services, or various Protocols geared to specific areas. The Code of Ethics can be found on the website: www.anam.pt and the Ethics Committee has a dedicated email address that is accessible to all It is an operator of public airport services in the Autonomous Region of employees, in confidence, providing them with a communication channel. Madeira, under a Concession Agreement concluded in 1993 with the Gov- ernment of the Autonomous Region of Madeira.

Aeroportos da Madeira ‹ Annual Report 2012 32 CORPORATE GOVERNANCE

Under this Agreement, application of the Accounting Interpretation desig- The Company does not apply any provision allowing personal or confiden- nated as IFRIC 12 (Service Concession Arrangements) became mandatory, tial expenditure. with effect from 1 January 2010, with the 01.JAN.2009 values being restated for comparative purposes. It has been standard practice and conduct to request of all members of the Company’s Decision-making Bodies the completion of a statement of any Thus, the asset base is now expressed according to the principles of IFRIC 12, shareholdings and/or equity interests in other companies, or any relevant as stated in the Financial Statements, as Intangible Assets (Concession Rights). relationships with business partners that may generate conflicts of interest, with the individual statements being forwarded to the Inspectorate General Also relevant in this context is the development of an Integrated Activity of Finances, the Audit Office and the Prosecutor-General’s Office. Basis Costs (ABC) System, which, in the future, will allow the results of the various functions to be analysed, and will allow reliable information to be produced, not only for management, but also for supervisory and regula- 1.12 EXPLANATION OF THE DISCLOSURE OF UPDATED INFORMATION tory bodies. RCM 49/2007, of 28 March, on the Principles of Good Governance in Com- Current procedures of the Control and Information Technology Systems, panies in the State Owned Enterprises Sector presents in Annex (Chapter III) the Budgetary Control System, the Operating Systems, the Environmental the Principles relating to the disclosure of information. Its nature is summa- System and the Health and Safety at Work System are subject to regular rised in Annex 2 of circular letter 843-DGTF, of 30 January 2013, which sets audits, both by ANA, SA and outside entities, in an effort to mitigate risks out the conditions for the disclosure of the updated information provided relevant to the Company. in the above regulations, namely:

1.11 IDENTIFICATION OF MECHANISMS ADOPTED FOR THE PREVENTION a) On the Company portal; OF CONFLICTS OF INTEREST b) On the SOE sector Companies portal (via SIRIEF – Economic and Financial In relation to the prevention of Conflicts of Interest (paragraph 2.2 of RCM Information Collection System). 49/2007), Members of the Decision-making Bodies of ANAM, SA fully comply with these guidelines and never intervene, personally or collectively, in The following matrix explains the format required, the nature and location decisions involving their private interests. for consulting information intended for disclosure:

Aeroportos da Madeira ‹ Annual Report 2012 33 CORPORATE GOVERNANCE

Disclosure

Information to be shown on SOE sector Site Y N N.A. Comments

Updated charter (PDF)

History, Vision, Mission and Strategy

Company data sheet

Company Identification:

Mission, Objectives, Policies, Oblig. Pub. Serv. and Financing Model

Governance Model/Ident. Decision-making Bodies:

Governance Model (identification of Decision-making Bodies)

Fixed Remuneration Statute DGTF Site – State Owned Remuneration and other benefits Enterprises Sector - Information on the Regulations and Transactions: Companies

Internal and External Regulations

Significant Transactions w/ related entities

Other Transactions

Analysis of Economic, Social and Environmental Sustainability

Assessment of Compliance with PBG

Code of Ethics

Historical and Current Financial Information

Financial Effort of the State

Aeroportos da Madeira ‹ Annual Report 2012 34 CORPORATE GOVERNANCE

Disclosure

Information to be shown on Company Site Y N N/A Y N N.A. Comments

Existence of Site

History, Vision, Mission and Strategy

Organisational Chart

Decision-making Bodies and Governance Model:

Identification of Decision-making Bodies

Identification of areas of Responsibility of the CA

Identification of existing Committees within the Company

Identify Risk Control Systems ANAM Site - Institutional - Remuneration of Decision-making Bodies Discover

Internal and External Regulations

Transactions outside Market Conditions

Significant Transactions with Related Entities

Analysis of Economic, Social and Environmental Sustainability

Code of Ethics

Annual Report

Ombudsman

Aeroportos da Madeira ‹ Annual Report 2012 35 CORPORATE GOVERNANCE

2. COMPLIANCE WITH LEGAL GUIDELINES e) To initiate the actions necessary to achieve the economic and financial balance of the Concession and the sustainability of the Company;

2.1 MANAGEMENT OBJECTIVES f) To promote the adaptation of organisational structures.

As is provided under article 11 of Decree-Law 300/2007, of 23 August, in 2.2 FINANCIAL RISK MANAGEMENT general terms, the Company has implemented the management guidelines issued by the bodies of financial and technical supervision, seeking, inter alia: Order 101/2009-SETF, of 30 January, established a set of instructions aimed at mitigating the effects of volatility of financial results on the financial situ- a) To promote the maximisation of revenue by boosting traffic and com- ation of companies and specifies the obligation of reporting information in mercial activity, given that airport charges have remained unchanged for this regard. several years;

Also, in the Instructions for the process of Presentation of Accounts of b) To ensure sustained containment of current expenditure and invest- 2012, circular letter 843-DGTF, of 30 January 2013, the aspects to be re- ments and ensure rigorous management of available resources, with eco- ported are identified. nomic investments and risk mitigation;

Compliance with the Order c) To pursue actions in an effort to continually seek to improve Operating Income and EBITDA and its maintenance at positive levels; The table below provides details of the conditions for fulfilling the above- mentioned Order: d) To ensure the non-accrual of debt and ensure that investments to be made, in addition to being viable, have financing secured;

Aeroportos da Madeira ‹ Annual Report 2012 36 CORPORATE GOVERNANCE

Fulfilled

Financial Risk Management – Order 101/09-SETF, of January 30th Y N N/A Description

Procedures Adopted in relation to Risk Assessment and respective

Hedging measures To hedge the investment made, the Company resorted to Equity Capital, Diversification of Funding Instruments Community Funds and medium long-term borrowing, the last one contracted in 2004. The rates of interest are diversified. At the moment, 25% of indebtedness Diversification of forms of Interest Rate available has a fixed rate and the remaining rates are variable, indexed to the 6 and 3-month Euribor.

Diversification of Creditor Entities Loans have been placed with 4 different entities.

Contracting of Risk Hedging Management Instruments according to Presently, there are no Managing Risk Hedging Derivatives in the Com- Market Conditions pany.

Adoption of Active Policy to Increase Fixed Capital

Consolidation of interest-bearing liabilities: transformation of short-term liabilities into M/L-term liabilities, under favourable conditions

Contracting of the operation that minimises financial cost cdl-in-( cost) of the operation

The loans to EIB and Schuldschein are guaranteed by the Stat and the deben- Minimisation of the Provision of Security in Rem ture loan of ANA, SA.

Minimisation of restrictive covenants (covenants)

Aeroportos da Madeira ‹ Annual Report 2012 37 CORPORATE GOVERNANCE

Fulfilled

Financial Risk Management – Order 101/09-SETF, of January 30th Y N N/A Description

Measures implemented with a view to optimising the Financial Struc- ture of the Company

Adoption of a policy that minimises the allocation of debt capital to the In recent years, the maintenance and current investments have been secured financial hedging of investments by in-house financing.

Option for investments with proven social/business profitability benefit The Company seeks, where possible, to exercise this option. Recently, it took from FC and CP advantage of the Intervir+ of ERDF Programme, for information systems.

Use of in-house financing and revenue from divestiture In 2012, 60% of investments made were effected using in-house financing.

Inclusion in the Annual Report

Description of the evolution of the annual middle rate of funding over the See below. Indebtedness last 5 years

Interest expenses annually on interest-bearing liabilities and other charges See below: Indebtedness in the last 5 years

Efficiency analysis of the financing policy and the use of financial risk The company is in a period of refunding of the debt and for this reason has management instruments not resorted to Financial Risk Management Instruments.

Reflection on CFS 2011 of the effects of variations in Fair Value of Swap Contracts in the portfolio

Aeroportos da Madeira ‹ Annual Report 2012 38 CORPORATE GOVERNANCE

Indebtedness 2.3 AVERAGE PAYMENT TERMS (APT)

As can be seen in the table below, the Company complies with the maximum limits for in- RCM 34/2008, of 22 February, approved the “Pay on Time” creasing indebtedness established under Order 155/2011-MEF, of 28 April, for 2013, having Programme. This Programme is monitored by a formula achieved a reduction in the level of debt of around 23% since 2008. that is defined in the Order 9870/2009-MEF, of 13 April.

Additionally, article 1 of Decree-Law 65-A/2011, of 17 Description 2012 2011 2010 2009 2008 May, considers “late payment” to be the non-payment of Debt at start of Period 203.479 207.228 207.240 207.261 257.855 invoices relating to the supply of goods and services, after 90 days have elapsed from the date agreed for their pay- Debt at end of Period 199.738 203.479 207.228 207.240 207.261 ment or non-payment on the date shown on the same.

Total Charges (Interest 4.553 5.314 4.529 6.252 12.388 Thus, and as can be seen from reading the tables below, + Guarantee Rate) the APT of ANAM, SA suppliers is far below the threshold Average Annual Rate 2,3% 2,6% 2,2% 3,0% 5,3% of 90 days, above which it is considered “late”.

Un: thousand euros

From an analysis of the above table, the evolution of debt over the last 5 years can be seen, as well as, the average annual rate of interest. Also, between 2011 and 2012, we can see that the average annual rate of funding declined by 3bp. It should be remembered, inciden- tally, that the average annual rate shown is influenced by the fixed rate of the debenture loan, which is 5.34%(12).

(12) Note: 16.2 – Terms and Deadlines for Reimbursement of Loans in the Annex.

Aeroportos da Madeira ‹ Annual Report 2012 39 CORPORATE GOVERNANCE

PMP Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2.5 SPECIAL DUTIES OF INFORMATION 2011 2011 2011 2011 2012 2012 2012 2012 APT Suppliers (days) 35 33 31 37 36 37 39 34 Order 14277/2008, of 23 May, provides that, for purposes of monitoring and financial control, non-financial public enterprises should provide information by sending the 2.4 DISCLOSURE OF LATE PAYMENTS items below to the IGF and DGTF by the established deadlines: Additionally, the Statement of Position at 31.DEC.2012 includes those payments nominally in arrears, in accordance with article 3 of Decree-Law 65-A/2011 of 17 May. a) Annual and Multiannual Activity Plans, within 10 days of being approved;

Late Payments 91-120 121-240 241-360 > 361 b) Annual budgets, including estimate of financial trans- days days days days actions with the State, within 10 days of being approved; 4110236 Imprensa Nacional Casa da Moeda, SA 3) 0 (430) 0 0

4114920 SPdH-Serviços Portugueses Handling, SA 5) 0 556 711 0 c) Annual and Multiannual Investment Plans and respective sources of funding, in conjunction with opinions of 4115022 ANA - Aeroportos de Portugal, SA 1)18.463 2)228 2)228 2)1.405 the supervisory board, within 10 days of being approved; 4115081 Extinfogo Madeirense 1) 28.328 0 0 0 d) Quarterly Budget Execution Reports, together with the 4116500 PTC-Paula Tomás Consultores, LDA 4) 0 0 1.624 0 reports from the supervisory board, within 30 days of the 46.791 354 2.563 1.405 end date of the period to which they relate;

Un.: euros e) A copy of the minutes of General Meetings and unanimous resolutions in writing, within 15 days of the date on 1) Delays in billing validation, already settled in January 2013. which they were held. 2) Situation to be rectified after finalisation of the agreement with the ANA, SA, currently in progress. 3) Prepayment. 4) Training services, ongoing. 5) Services to be settled by account reconciliation.

Aeroportos da Madeira ‹ Annual Report 2012 40 CORPORATE GOVERNANCE

In general, this information has been provided by the Company within the In November 2010, the Board of Directors submitted to the Share- established deadlines. holders and the Authority a proposal for a Revision of the Concession Agreement, the main changes being to the concession term (another 2.6 COMPLIANCE WITH THE RECOMMENDATIONS OF SHAREHOLDERS, 20 years), the respective purpose, the obligations of the concession ISSUED UPON APPROVAL OF THE ACCOUNTS operator, the powers of the authority and regulatory principles to be observed. The purpose of the proposed amendments is aimed not At the General Meetings of 2011 and 2012 the following recommendations only at the economic and financial balance of ANAM, SA, but also were made to the Board of Directors: the financing of investment in maintenance and replacement and to enable the repayment of debt. a) 2011 General Meeting: “... take steps to ensure that i) it adopts the principles of the National Strategy for Green Procurement approved At the General Meetings held on 19 April 2011 and 26 March 2012, by RCM 65/2007, of 25 January, and ii) undertake a six-monthly re- the matter was considered, at the latter Meeting, by explanation of view of the guidelines contained in subparagraphs b) to h) of para- vote of the Shareholder State, the following being voted for and ap- graph 1 of Annex II of RCM 70/2008, of 22 April, presenting the proved unanimously: “Since the terms and conditions upon which the results of this assessment to the ministers responsible for industry renegotiation of the Concession Agreement shall be based have not sectors by the end of the month following the period in question.” yet been subject to authorisation, the representative of the Share- holder State shall propose and vote for this item to be removed from In compliance with this recommendation, ANAM, SA already adopts the agenda.” the principles of the National Strategy for Green Procurement approved by RCM 65/2007, of 25 January, and has presented, every six Thus, the development of the process of Revision of the Concession months, the reports required under subparagraphs b) to h ) of para- Agreement remains pending, the terms of which are likely to change graph 1 of Annex II of RCM 70/2008, of 22 April. significantly before the announced privatisation of ANA, SA. b) Consideration of the Proposal of the Board of Directors to Revise the c) At the General Meeting of 2012: i) “To adopt the principles of the Na- Concession Agreement, pursuant to the resolution adopted at the tional Strategy for Green Procurement approved by RCM 65/2007, of General Meeting of 26 May 2010. 25 January” and ii) “to cease assigning Health and Accident at Work Insurance to members of the Audit Committee, to the extent that the

Aeroportos da Madeira ‹ Annual Report 2012 41 CORPORATE GOVERNANCE

Resolution of the Remuneration Committee of ANAM, SA of 27 July Also, with regard to the reduction applied to the fees of the External 2009, only adopted a resolution in terms of the executive members Auditor PWC, this has been implemented. of the Board of Directors enjoying the social benefits of widespread application provided to all employees of the company, notwithstand- Finally, we present a table in paragraph 2.11 – Cost Reduction Plan, ing the provisions of the final part of paragraph 1 of article 34 of with the reductions in remuneration achieved and a brief explanation Decree-Law 71/2007, of 27 March”; iii) “to apply the reduction in the pursuant to Order 155/2011-MEF, of 28 April. external auditors’ fees, pursuant to article 22 of Law 55-A/2010, of 31 December”; and iv) “to comply with the 15% Cost Reduction Plan 2.7 REMUNERATION provided under Order 155/2011-MEF, of 28 April.” Under the Principles of Good Governance, paragraph 1.6 above, the remunera- In relation to the Green Procurement approved by RCM 65/2007, of tion of the members of the decision-making bodies is outlined, as alluded to in 25 January, ANAM, SA has introduced environmental requirements Annex 4 of DGTF circular letter 843, of 30 January 2013, namely: both in the preparation and in the execution of Contracts with external service providers. • Board of the General Meeting • Supervisory Bodies For groups of priority products and services, as defined in paragraph • External Auditor and 4 of Annex I of the aforementioned RCM, the Company seeks to com- • Board of Directors ply strictly with the guidelines issued by the national and international bodies that supervise this matter, seeking to reconcile established In 2012, there was no change in terms of office (only the resignation of contracts, existing stocks and indispensable cost reductions with the three members of the Board of Directors, including the Chairman), so for aforementioned guidelines. the analysis of remuneration of members of the decision-making bodies in office and in accordance with the description of the maps of the aforemen- In terms of termination of the attribution of Health and Accidents tioned DGTF circular letter, below the compensation and benefits awarded at Work Insurance to members of the Audit Committee, it should be are shown. noted that cancellation was ordered at the termination of the annuity, on 31 May 2012. The reduction of the Board of Directors of ANAM, SA from five to three members, only occurred on 06 May 2013, as per the DSUE mentioned above.

Aeroportos da Madeira ‹ Annual Report 2012 42 CORPORATE GOVERNANCE

This decision did not alter in any way the remuneration Supervisory Bodies framework that is detailed below for the year 2012. Audit Committee Board of the General Meeting The remuneration paid to the Audit Committee in 2011 and 2012 are presented in the table During the year 2012, a General Meeting was held, on below: 26 March 2012, which, by Shareholder resolution, was chaired by the Secretary (the only member on duty), to 2011 2012 whom an attendance fee was paid corresponding to that Audit (P) V(1) V(2) (P) V(1) V(2) of the Chairman. Committee V. Calado A. Freitas P. Lajoso V. Calado A. Freitas P. Lajoso Fixed Annual 19.712 14.784 14.784 16.896 12.672 12.672 Remuneration 2012 Reduction* 1.971 1.478 1.478 1.690 1.267 1.267 Board of the Chairman Deputy Secretary General Meeting Effective Annual 17.741 13.306 13.306 15.206 11.405 11.405 Annual a) b) 500 Remuneration Attendance Fees Un: euros Reduction 0 0 50 (Law 64-B/2011) * Resulting from Law 55-A/2010 and 64-B/2011 (10%) and suspension of Christmas and Holiday Allowances in 2012. Actual Annual 0 0 450 Attendance Fees

Un: euros a) Resigned from the post of Chairman on 02.FEB.2012; b) Deceased on 24.JUN.2010 and not replaced;

Aeroportos da Madeira ‹ Annual Report 2012 43 CORPORATE GOVERNANCE

It should be remembered that, by the resolution adopted by the General This requirement, which became mandatory, gave rise to a need to issue a Meeting of 26 March 2012, the Health and Personal Accident Insurance Limited Audit Report on the financial information of the 1st Half, this extra hitherto allocated to members of the Audit Committee, on an equal foot- work resulting in a charge of 1,600 euros. ing with those of the Board of Directors and the remaining workers, was cancelled at the end of the annuity, on 31 May 2012. External Auditor

Statutory Auditor As previously mentioned, PriceWaterhouseCoopers (PWC) are the external auditors of the Company. The initial 3-year contract, which coincided with In 2011 and 2012, the Certified Public Accountants, Baptista da Costa & As- the 2008-2010 term of office of the Board of Directors, was extended for sociados, SROC, were paid the following fees for services rendered: annual periods (2011 and 2012).

Statutory Auditor 2011 2012 The company paid PWC the amounts indicated below for the provision of

Fees Additional Serv. audit services in 2011 and 2012: Annual Fees 16.960 16.960 -- External Auditor 2011 2012

Fees Additional Serv. Fee Reduction* 1.696 1.696 -- Annual Fees 10.500 10.500 -- Actual Annual Fees 15.264 15.264 1.600 Fee Reduction* 1.050 1.050 --

Un: euros Actual Annual Fees 9.450 9.450 1.500 * Resulting from Law 55-A/2010 and 64-B/2011 (10%).

Un: euros * Resulting from Law 55-A/2010 and 64-B/2011 (10%). Also in 2012, and as a consequence of the existence of a debenture loan traded on a regulated market (Luxembourg Stock Exchange), ANAM, SA started disclosing, from the 1st half of 2012, interim financial information via the CMVM – Portuguese Securities Market Commission.

Aeroportos da Madeira ‹ Annual Report 2012 44 CORPORATE GOVERNANCE

Additional services in 2012, of 1,500 euros, correspond to the issue of the Limited Audit Report, prepared by the External Auditor registered with the CMVM, for the disclosure of accounts with the CMVM relating to Biannual Information, a situation not contractually established.

• Board of Directors

The detail of the remuneration received by members of the Board of Direc- tors, on behalf of ANAM, SA, including: i) Social Benefit charges; ii) Car Park; iii) Other Perks and Compensation and iv) Travel Expenses, is presented in the Table below, in accordance with required format.

Board of Directors P(1) V(1) V(2) V(3) V(4) A. Rodrigues D. Ferreira R. Veres A.Coelho A. Lemos

Term of Office 2008-2010 2008-2010 2008-2010 2008-2010 2008-2010

Adapted to the EGP (Yes/No) No No No No No

Total Compensation (1.+2.+3.+4.) 0 64.190 0 64.093

OPRLO No No No No No

Originator (identify)

Payer (Origin/Destination) ANA, SA ARM ANA, SA ANA, SA ANA, SA/ANAM, SA

1.1.Annual Remuneration 0 87.588 0 0 51.927

1.2.Representation Expenses (Annual) 0 0 0 0 0

1.3.Attendance fee (Annual Value) 0 0 0 0 0

Aeroportos da Madeira ‹ Annual Report 2012 45 CORPORATE GOVERNANCE

Board of Directors P(1) V(1) V(2) V(3) V(4) A. Rodrigues D. Ferreira R. Veres A.Coelho A. Lemos 1.4.Reduction arising from Law 12-A/2010 0 4.379 0 0 2.596

1.5.Reduction arising from Law 64-B/2011 0 8.321 0 0 4.933

1.6.Suspension of payment of holiday and Christmas allowances 0 10.698 0 0 5.349

1.7.Reductions on previous years 0 0 0 0 0

1. Actual Net Annual Remuneration 0 64.190 0 39.049 (1.1+1.2.+1.3-1.4-1.5-1.6-1.7) 2. Variable remuneration 0 0 0 0 0

3.Limits on Working Time (LWT) 0 0 0 0 0

4.Other - Redemption of Holidays 0 0 0 0 25.044

Travel allowance 0 0 0 0 0

Meal allowance 0 2.150 0 0 1.192

Social benefit charges

Social Protection Scheme (ADSE/Social Sec./Other) 0 4.836 0 0 3.115

Health insurance 0 635 0 0 355

Life insurance 0 0 0 0 0

Personal Accident / Accident at Work Insurance 0 360 0 0 350

Other (specify) 0 0 0 0 0

Accumulation of Management Functions (Y/N) No

Entity (identify) -- N/A ------

Annual Remuneration -- N/A ------

Unit: euros

Aeroportos da Madeira ‹ Annual Report 2012 46 CORPORATE GOVERNANCE

Car Park Post Post Post Post Post

Term of Office 2008-2010 2008-2010 2008-2010 2008-2010 2008-2010

Type of Use -- Vehicle Function -- -- Vehicle Function

Reference value of the new vehicle -- 49.311 -- -- 54.471

Start Year -- 2004 -- -- 2006

End Year -- No Term -- -- No Term

No. instalments (if applicable) -- N/A -- -- N/A

Residual Value -- N/A -- -- N/A

Value of rental/instalment of company car -- N/A -- -- N/A

Fuel used in the vehicle -- 3.611 -- -- 1.779

Annual ceiling Fuel allocated -- 3.500 -- -- 3.500

Other (Tolls / Repairs / Insurance) -- 5.379 -- -- 7.299

Limit set in accordance with article 33 of the EGP (Yes/No) -- No -- -- No

Unit: euros

Aeroportos da Madeira ‹ Annual Report 2012 47 CORPORATE GOVERNANCE

Other perks and compensations Post Post Post Post Post

Term of Office 2008-2010 2008-2010 2008-2010 2008-2010 2008-2010

Monthly ceiling assigned in mobile communications 0 1.000 0 0 1.000

Annual spending on mobile communications 0 189 0 0 461

Other - Credit Card 0 462 0 0 98

Limit set in accordance with article 32 of the EGP (Yes/No) 0 No 0 0 No

Unit: euros

Other perks and compensations Post Post Post Post Post

Term of Office 2008-2010 2008-2010 2008-2010 2008-2010 2008-2010

Total annual cost of travel 2.348 8.735 1.353 1.739 3.317

Annual costs of Lodging 640 1.409 800 960 3.618

Daily subsistence allowance 387 1.472 277 350 830

Other (specify) 0 0 0 0 0

Unit: euros

* Resulting from Law 55-A/2010 and 64-B/2011, as applicable. V(2) Ceased on 31 jul; P(1) and V(3) ceased on 31 aug. V(4) appointed as Vice Chairman of ANA, SA on 10 aug., while continuing as a member of the BD of ANAM, SA. From that date, ANAM, SA only took on transport expenses when incurred in the service of the Company.

Aeroportos da Madeira ‹ Annual Report 2012 48 CORPORATE GOVERNANCE

Apropos of the remuneration of benefits of the Board of Directors, it should Other Workers(13) be emphasised that:

Remuneration 2012 a) No monies are paid as variable compensation, in accordance with the Annual basic fixed salary 9.234.675,41 provisions of article 172 of Law 3-B/2010, of 28 April (CGB 2010).

Reduction arising from Law 64-B/2011 414.340,51 b) The credit cards that had been assigned were cancelled in January 2012, in accordance with paragraph 1 of article 32 of Decree-Law 8/2012, of 18 Suspension of Holiday and Christmas Allowances 1.159.318,55 January, according to which: “the use of credit cards and other payment instruments by public managers for the purpose of paying expenses of the Effective Annual Remuneration 7.661.016,35 company is prohibited”, whereby, as per the resolution of the Board of Di- rectors of 26 January 2012, these were cancelled. Un: euros c) The members of the Board of Directors indicated in the table above, in P(1), V(2) and V(3), had executive roles at ANA, SA and received no remuneration As set forth in RCM 1/2011, of 04 January, since 2011 inclusive, the Com- from ANAM, SA. The member of the Board of Directors V(4) was, on 10 Au- pany has made reductions in remuneration exceeding 1,500 euros, accord- gust 2012, appointed Deputy Chairman of the Board of Directors of ANA, SA ing to the tables defined for the purpose, and suspended, in accordance and, despite maintaining the functions of member of the Board of Directors of with Law 64-B / 2011 (CGB 2012), the payment of holiday and Christmas ANAM, SA ceased, thereafter, to receive any remuneration, mobile phone or car allowances. The figures shown as effective annual remuneration were actu- from the latter. ally paid. d) The values of V(4) are included in section 4. Others correspond to the 2.8 PUBLIC PROCUREMENT redemption of 103 days of accrued holiday not taken, pursuant to article 245 of the Labour Code, between 2008 and 2012. ANAM, SA, for purposes of procurement, uses the VORTAL Electronic Platform, where all procedures are entered, the characterisation of which, under Law 18/2008, of 29 January, is shown in the table under paragraph 1.4, under Pro- cedures Adopted for the Procurement of Goods and Services. (13) Excludes Decision-making Bodies.

Aeroportos da Madeira ‹ Annual Report 2012 49 CORPORATE GOVERNANCE

Contract for Services

Additionally, Order 438/2010-SETF, of 10 May (published as DGTF circular letter 6132, of 06.AUG.2010) defines some procedures to be adopted in the contracting of services in an amount equal to or greater than 125,000 euros (excluding VAT).

Presently, ANAM, SA has only 2 contracts for services under the conditions of the above Order, as detailed below:

Proc. Type of Procedure Description of the Procedure Type of Name of TIN of the Nationality of the suc- Contract Note Ref. contract Tenderer Tenderer cessful bidder or leader price of the successful (excluding VAT grouping of companies 032/2011 Public Tender Provision of Relief and Emergency Services EFACEC - Serviços 502 700 823 Portuguese 3.149.100,00 2011 Procedure Airfield Services at Madeira and Porto de Manutenção e Santo Airports Assistência, S.A. - Contract in conjunc- Supply, Installation and Maintenance Procurement Siemens, S.A. 500 247 480 Portuguese 2.351.461,10 Supply tion with ANA, SA of Automatic Hold Baggage Screening of Goods and 1.801.159,10€ Equipment at Madeira Airport Provision of Continuance Services 550.302€ Unit: euros

Provision of Relief and Emergency Airfield Services at Madeira and Porto Santo Airports The contract has a duration of 60 months and is intended to incorporate into the Relief Services, under an outsourcing arrangement, 3 teams: two at Porto Santo Airport and one at Madeira Airport. Despite being a 2011 procedure, the contract was only signed in 2012.

Supply, Installation and Maintenance of Automatic Hold Baggage Screening Equipment at Madeira Airport The provision of component services is linked to the contract for the Supply, Installation and Commissioning of Automatic Hold Baggage Screening Equipment, the tender for which was launched by ANA, SA, also involving the various airports managed by it, the Overall Contract consisting of two components: i) Equipment: 1,801,159 euros; and ii) Maintenance: 550,302 euros. Thus, the provision of Maintenance corresponds to Technical Assistance for the automatic hold baggage screening equipment for a period of 37 months.

Aeroportos da Madeira ‹ Annual Report 2012 50 CORPORATE GOVERNANCE

Purchase of Advertising Space in the Media Action OCS Designation NIPC Type of Annual Media Amount

RCM 47/2010, of 25 June, establishes the rules of public Insert in Sirius Magazine SIRIUS Magazine 500787620 Press 4.560,00 procurement in relation to the purchase of advertising space in the media or the rules governing the placing Promotional Advertising Diário Notícias da Madeira 511000235 Press 3.815,40 of advertising in the local and regional press, which the Several ads re. Open Diário da República 500792887 Press 2.812,69 Company complies with. Procedures Promotional Advertising SPG Média Limited GB0242281093 Magazine 2.100,00 Since the creation of the GMCS database (provided under Ordinance 1297/2010, of 21 December, and Order Promotional Advertising Publiotel - e.Pub. Turismo 500224609 Magazine 500,00 Hotel, Lda 1246/2011, of 07 January, of the Minister of Parliamen- 13.788,09 tary Affairs), ANAM, SA has been reporting the information under the conditions required in Annex I to the said Un: euros Order. 2.9 MEASURES PROVIDED IN THE STABILITY AND GROWTH PACT (SGP) In this regard, it should be emphasised that, in 2012, ANAM, SA expended on advertising 75,609 euros, of In terms of the rationalisation of procurement policy for goods and services, the Company does which: i) newspapers and magazines: 13,788 euros; ii) not yet comply with the National Public Procurement System (SNCP), but is prepared to do so. other media: 61,821 euros, spent mostly on Airport Mar- However, it should be noted that the Company fulfils a significant part of its procurement needs keting and promoting Madeira as a destination. through ANA, SA’s Shared Services Centre or, alternatively, directly in the region where it operates, where conditions are favourable, including transport costs. Moreover, in 2012, ANAM, SA did not undertake any campaigns with a value equal to or exceeding 15,000 euros. It is believed, therefore, that the size of the Company, its location (Madeira) and the savings already generated by taking advantage of major acquisitions common to other airports across ANA, SA, However, advertising campaigns were run in the media to- its majority shareholder, have meant that the need has not arisen to call upon the National Pro- talling 13,788 euros, as indicated in the following table: curement Agency (ANCP) or the Portuguese Environmental Agency (APA), a situation that, in the future, may be reconsidered due to economically advantageous terms.

Aeroportos da Madeira ‹ Annual Report 2012 51 CORPORATE GOVERNANCE

2.10 ACCRUED DEBT sociated with Programmes to Optimise the Number of Workers Employed and the SSLCI, whose recovery period is 4/5 years, and the Traffic Incentive Programmes, without which the In 2012, Company debt decreased from 203,479,000 evolution of traffic would have been much more negative. euros to 199,738,000euros, whereby, under the circumstances, which is established in this regard under Order The table below breaks down the change in Costs into their key components: 155/2011-MEF, of 28 April, it is considered to have been fully complied with in 2012. Costs 2012 2011 2010 Var 2012/2010 In this connection, it should be remembered that the Shareholders did not go through with the Capital Increase Supplies 88 103 109 (19,1%) proposed by the Board of Directors of ANAM, SA at the FSE 10.050 14.089 13.206 (23,9%) last General Meeting, to ensure the Restitution of Equity Personnel costs (without com- 11.206 11.361 12.560 (10,8%) pensation) Capital provided under article 35 of the Companies Act, Other Operating 1.517 1.976 1.408 7,8% which also provided that any inflow of funds through payments in cash is to be used exclusively for debt repayment. Total 22.862 27.529 27.283 (16,2%) Excludes: Furthermore, a debenture loan in an amount of 50 million Amortisation / Recognition 4.557 4.712 5.137 (11,3%) of Grants euros matures in July 2014, for the repurchase of which Compensation by Mutual 4.332 556 555 680,3% ANAM, SA does not expect to have sufficient financial Agreement means available on its own. Un: thousand euros

2.11 COST REDUCTION PLAN Without considering amortisations and compensation by mutual agreement, a decrease Even prior to the publication of Order 155/2011-MEF, of of (16.2%) was recorded in Cash-Costs between 2010 and 2012. 28 April, the Company management had been guided by a systematic and rigorous policy of cost containment, even In 2012, a cost with the exit of 21 employees was acknowledged, whose agreement was though specific situations of growth existed that were as- negotiated, but which was only finalised in 2013.

Aeroportos da Madeira ‹ Annual Report 2012 52 CORPORATE GOVERNANCE

In addition and in accordance with DGTF letter 843, of 30 January 2013, we present the 2.12 UNITY OF TREASURY PRINCIPLE change in the number of staff and managerial positions in the format specified in Annex 5 of the above letter: Law 55-A/2010, of 31 December, under article 77, states that: “...non-financial public enterprises should keep their cash and financial investments with IGCP, IP, Designation 2012 2011 2010 in accordance with paragraph 1, with the State Treas- Personnel expenses 15.538.543,59 11.916.941,33 13.115.643,01 ury regime, approved by Decree-Law 191/99 of 05 June

Spending on Decision-making Bodies 196.929,41 207.794,60 239.144,40 being applicable for this purpose...”. Reductions resulting from Legislative amendments 44.297,13 30.328,42 5.630,58 On 21 January 2011, ANAM, SA, through ANA, SA, Increases resulting from Legislative amendments 0,00 0,00 0,00 its majority shareholder, submitted by means of let- Spending on Managers excluding DMB 621.758,21 626.461,85 647.320,48 ter SCEN/2011/16 a formal request to the Secretary of Reductions resulting from Legislative amendments 149.981,64 54.262,35 0,00 State for Treasury and Finance for waiver of applica- Increases resulting from Legislative amendments 0,00 0,00 0,00 tion to ANAM, SA of the principle of Unity of Treasury Redundancies / Compensation 10.387.749,76 10.526.552,43 11.673.993,91 provided for in the Central Government Budget Act of Total No. HR (DMB + Managers + Staff) 1.423.677,42 404.143,37 0,00 2011, with no reply having been received to date.

No. Decision-making Bodies (DMB) (number) 0,00 0,00 0,00 In accordance with the letter sent at that juncture, the No. Managers excluding DMB (number) 4.332.106,21 556.132,45 555.184,22 conclusions of which remain, a commitment is made Total No. HR (DMB + Managers + Staff) 307 320 329 “that all cash on hand belonging to the Company may No. Decision-making Bodies (DMB) (number) 5 5 5 be channelled to ANA, SA, with the full consolidation No. 9 9 8 of cash within this Company, which is its largest share- No. Staff excluding DMB and excluding Managers 293 306 316 holder and totally controlled and supervised by the (number) State.”, which, since that time, is what has been oc- Un: euros curring.

Aeroportos da Madeira ‹ Annual Report 2012 53 CORPORATE GOVERNANCE

However, it should be noted that the waiver of application of the Unity Compliance with Unity of Treasury at ANAM, SA was subjected to an au- of Treasury Principle for the companies ANA, SA, ANAM, SA and PORT- dit by the Audit Court in July 2012, wherein ANAM, SA provided all the WAY was revisited by ANA, SA, as majority shareholder of ANAM, SA, required information. The conclusions of the proceedings are awaited. as per letter 457982, of 14 September 2012.

Thus, in light of the needs expressed by ANA, SA, it is reported that a 2.13 DISCLOSURE OF COMPLIANCE WITH LEGAL GUIDELINES substantial portion of cash belonging to the Company is in ANA, SA, with returns roughly equal to those of the market. In the table below the degree of compliance with the legal guidelines in question is disclosed, as shown in Annex 6 of DGTF circular letter 843, of However, ANAM, SA has opened an account with IGCP – Public Credit 30 January 2013. Management Institute, according to the instructions received.

Compliance

Compliance with Legal Guidelines Y N N.A. Quantification Justification

Management Objectives:

Change in Revenue -4.5% in Turnover 4.6% in pax

Postponement of Investments in MA and PSA Containment of current and investment expenses 13,994 thousand euros Runways (2014/2016) EBITDA 9,379 thousand euros, EBIT 4 B22 Operating Efficiency – Operating Income positive EBITDA As per paragraph 2.11 Cost Reduction Plan thousand euros

Control of the level of Indebtedness Reduction of 3.7 million euros in 2012 Reimbursement of Instalment to the EIB

Economic and Financial Balance of the Concession Ongoing Awaiting development by the Authority (ARM)

Financial Risk Management Adoption of the ANA, SA Model in progress see paragraph 2.2

Limits on Growth of Debt Debt reduction of 3.7 million euros see paragraph 2.10

Change in APT for suppliers Average of 34 days see summary paragraph 2.3

Arrears Already settled or under settlement see table paragraph 2.3

Special Information Obligations see paragraph 2.2

Aeroportos da Madeira ‹ Annual Report 2012 54 CORPORATE GOVERNANCE

Compliance

Compliance with Legal Guidelines Y N N.A. Quantification Justification

Recommendations of the shareholder in approving accounts: Half-yearly Report subparagraphs b) to h) of paragraph 1 of An- √ Preparation and submission of required Reports See paragraph 2.6 nex II of RCM 70/2008

Review of the Concession Agreement √ Negotiations are ongoing Awaiting development of this process Adoption of the Principles of the National Strategy for Green √ See paragraph 2.6 Procurement Termination of Health and Accident at Work Insurance – Audit √ Since 14 June 2012 End of Insurance Annuity Committee

Applying the reduction in the External Auditors’ fees √ The reduction was effected Extension of Contract for 2012 The was a decrease of 16.2% between 2010 Cost Reduction Plan 15% √ See paragraph 2.11 and 2012 Remuneration: No management bonuses awarded, pursuant to article 29 of Law √ No variable remuneration paid to Directors. 64-B/2011 Decision-making Bodies - suspension of Holiday and Christmas √ The decrease in 2012 was 19.927 euros allowances - Law 64-B/2011 Decision-making Bodies – reduced remuneration pursuant to √ The decrease in 2012 was 18.488 euros article 20 of Law 64-B/2011 Decision-making Bodies - 5% reduction by application of article √ The decrease in 2012 was 6.882 euros 12 of Law no. 12-A/2010 see paragraph 2.11 External Auditor – reduced remuneration pursuant to article 26 √ The decrease in 2012 was 1.050 euros of Law 64-B/2011 Remaining workers – reduced remuneration pursuant to article √ The decrease in 2012 was 414.341 euros 20 of Law 64-B/2011 Remaining workers - suspension of Holiday and Christmas allow- √ The decrease in 2012 was 1.159.318 euros ances - Law 64-B/2011 Article 32 of the EGP

Aeroportos da Madeira ‹ Annual Report 2012 55 CORPORATE GOVERNANCE

Compliance

Compliance with Legal Guidelines Y N N.A. Quantification Justification

Credit Card Use √ Credit Card Cancellations January 2012 subparagraph b) P. 49 of the RC There were no personal entertainment Refund of Personal Entertainment Expenses √ Without expenditure expenses Public Procurement

Public procurement standards √ see paragraph 1.4

Public procurement standards for subsidiaries √ giving attention to the nature of the Contracts Contracts submitted for the TC’s approval √ In 2012 - Not applicable and their low value see paragraph 2.6 Corporate purchases in Compliance with the National Public Procurement System √ conjunction with ANA, SA

Car Park √ On 31 DEC 2012 - 4 vehicles involved in functional use less one VCA vehicle from August 2012 see paragraph 1.7 Social Responsibility (p. 25 Gender Equality Principle √ and 26 of the RC) Cost Reduction Plan

Personnel Expenses (excluding Redundancy Agreements) √ -10,8% between 2010 and 2012 see paragraph 2.11

External Supplies and Services √ -23.9% between 2010 and 2012 see paragraph 2.11 Reduction in the No. of Workers Employed and Management Positions

No. of Workers Employed √ -3.7% between 2010 and 2012, average rate changed from 316 to 293 Return to the staff of ex-Reg. Secretary Educa- No. of Management Positions √ Increase of 6.1% from 8 to 9 tion Culture see paragraph 2.12. Request for Remission of Unity of Treasury 1,000 euros deposited with the IGCP - 0% degree Unity of Treasury Principle √ Principle of execution

Aeroportos da Madeira ‹ Annual Report 2012 56 CORPORATE GOVERNANCE

2.14 ANNUAL STATEMENT ON CORPORATE GOVERNANCE

In accordance with paragraph 4 of article 245-A of the CVM (Portuguese Securities Market Code), companies whose securities, other than shares, are admitted for trading on a regulated market situated or operating in Portugal must annually disclose the information referred to in subparagraphs c), d), f), h), i) and m).

As ANAM, SA has a debenture loan on a regulated market (the Luxembourg Stock Exchange), it discloses information on the subparagraphs above:

Nature Disclosure

c) Qualifying holdings in the Share Capital of the company Not applicable

d) Identification of shareholders with special rights and de- Not applicable scription of these rights f) Any restrictions on voting rights, such as limitations on the Not applicable exercise of voting rights subject to the holding of a number or percentage of shares, deadlines for exercising voting rights, or systems that highlight patrimonial rights h) Rules governing the appointment and replacement of The by-laws of the Company and Reso- members of the board of directors and the amendment of lution of the General Meeting at the the Articles of Association proposal of shareholders i) Powers of the board of directors, particularly with regard to Presentation of reasoned proposals for decisions to increase capital deliberation at the General Meeting m) Main data of the internal control and risk management See paragraphs 1.10 and 2.2 of Chapter systems implemented by the company in relation to the I. Corporate Governance process of financial reporting

Aeroportos da Madeira ‹ Annual Report 2012 57 MANAGEMENT REPORT II

Aeroportos da Madeira ‹ Annual Report 2012 MANAGEMENT REPORT

1. SUMMARY OF PERFORMANCE increase in traffic on this route and thus offset losses then witnessed in the main tourist catchment markets (the UK and Germany), ceased to leverage the effect of such losses with effect from 2011. The year 2012 ended with a Net Profit of 6,414,000 euros and Operating Income of 4,822,000 euros. In 2012, the Mainland and UK routes alone, which together represent about 64% of total traffic, lost 181,400 passengers compared to the same In the recent past, the Net Profit and Operating Income, had, under normal markets the previous year. conditions, performed negatively.

Although with a more marginal weight, the positive development in 2012 This better performance stems, in particular, from the adoption of IFRIC 12 of the German, French, Spanish and Canary Islands and Swiss markets are in 2010 by Companies with Service Concession Agreements, and also from worthy of note. the consideration of extending the Concession Agreement (for another 20 years), given that the average level of development of business activity over In terms of airlines, with the abandonment of the Mainland route, the SATA recent years has been one of contraction. Group showed a very marked fall, with around 134,200 fewer passengers carried, 64,600 fewer passengers on EasyJet Airlines, while companies such It should be remembered that the decrease in activity in 2012 impacts Re- as TAP, Transavia France, TuiFly GmbH, Condor and Air Mediterranee toge- sults, which were obtained in an extremely difficult economic and financial ther transported 57,100 more passengers. context, boosted by a change in a certain traffic paradigm (strong contraction of routes with the Mainland, the main market), the maintenance of Thus, the evolution of Aviation activity in 2012 is characterised, in general airport fees, unchanged since 2005, and continued management measures terms, as follows: relating to cost containment.

Reductions of (4.6%) in Passenger traffic and (6.1%) in Movements, led to a) Passengers decreased (4.6%) overall, with reductions per airport being: Income from Aviation activities, the main component of revenue, standing (4.6%) at Madeira Airport and (4.9%) at Porto Santo Airport. at a level of (5.8%) below the previous year. b) Aircraft Movement also saw a reduction of (6.1%), distributed between The liberalisation of the route between the Mainland and the Autonomous Madeira Airport with (6.2%), and Porto Santo Airport with (5.7%) com- Region of Madeira that, in the recent past (2009 and 2010), had led to an pared to the preceding year.

Aeroportos da Madeira ‹ Annual Report 2012 59 MANAGEMENT REPORT

c) In turn, Cargo Handling decreased (3.3%) at ARM Airports: decrea- with the plan for maintenance, operation and budgeted current invest- sing by (4.1%) at Madeira Airport and increasing by 23.5% at Porto ments, which in 2012 totalled 1,297,000 euros. Santo Airport. Mail also performed negatively with (12.8%) compared to the previous year, which is usually accepted as an indicator of It should be noted that the reported Investments have been fully borne economic downturn. using its own resources, except the SITI – Integrated Information and Te- lecommunications System – Project, currently being finalised, which, with As a result of the performance of Traffic, Aviation Revenue fell (5.8%) in an eligible investment of 1,741,000 euros, is expected to receive, under the 2012 compared to 2011. contract concluded with the IDR of Madeira, a financial reimbursement of 80% from Community Funds (ERDF). Non-aviation activities in the components: Retail, Real Estate, Advertising, Rent-a-Car and Car Parks saw, overall, a reduction in income of (0.9%). The Programme to Optimise the Number of Workers Employed, which began in 2005, was followed in 2011 by a new specific programme for the This reduction was due to the positive development of Real Estate and SSLCI. Until 2012, the two programmes were followed by 103 employees, Rent-a-Car being insufficient to offset the drops in Retail and Car Parks. which was crucial to achieving a net reduction in the workforce of 89 employees, from 393 to only 304, over the period in question. On the other hand, in 2012, the components Security and PRM came to represent a share of 10.4% in the calculation of Turnover (not including the The compensation for these redundancies by mutual agreement, has resul- item “Construction Contract” associated with IFRIC 12). This is “non-core” ted, to date, in a charge of 10,784,000 euros, the average period of reco- income intended to cover costs associated with these activities, and gene- very of which is estimated at 4/5 years. rally does not contribute to the achievement of profits. Still under the scope of the two programmes, in 2012 the cost of the 21 It is also noteworthy that 67.2% of the turnover of the Company achieved redundancy agreements was recognised in an amount of 2,943,000 euros, in 2012 is concentrated among 10 customers: 7 airlines, 2 handlers and the to occur in the 1st half of 2013. Duty Free Shops of Portugal. In 2012, ANAM, SA‘s 199,700,000 euro debt was reduced by 3,700,000 eu- In terms of expenditure, ANAM, SA continued a policy of cost containment ros and is represented by three bank loans and a debenture loan. Currently, and postponed major investments in infrastructure. It did, however, comply ANAM, SA is amortising the loan from the EIB, with annual instalments of

Aeroportos da Madeira ‹ Annual Report 2012 60 MANAGEMENT REPORT

3.7 million euros, but will have to repurchase the 50 million euro debenture The Board of Directors’ proposal was considered at the General Meetings loan in 2014. of 11 April 2011 and 26 March 2012, but with no specific resolution being adopted. Overall, ANAM, SA generated Operating Income of 36,573,000 euros, giving a Net Operating EBIT of 4,822,000 euros. The EBITDA Operating Cash However, the Regional Government of Madeira has approved, in 2013, the Flow, in the amount of 9,379,000 euros, is positive, and the EBITDA margin Programme to Privatise and Restructure the Corporate Sector of the Auto- corresponds to 25.8%. nomous Region of Madeira, as per Resolution 53/2013, of 6 February, where, under paragraph 2.10 on the Airport Sector, it is established: Financial Income of (3,255) thousand euros showed a 16% improvement in 2012, given that, in addition to there being a reduction of 3.7 million euros “The Regional Government intends to promote the sale of the share capital in the EIB loan, there was a decrease in lending rates, with indexing to the owned in Aeroportos e Navegação Aérea da Madeira, ANAM, SA to Aero- Euribor. Also in this period, deposit rates from financial investments tended portos e Navegação Aérea, ANA, SA, in the context of the privatisation of to be lower, despite the investment of larger amounts. the latter, and to adjust the current Concession Agreement covering the Region’s Airports to the ANA Concession Agreement elapsing in 2013”. Net Profit of 6,414,000 euros in 2012, compared with 5,603,000 euros in 2011, includes Current Tax (-1,182,000 euros) and Deferred Taxes (6,029,000 euros) in a total of 4,847,000 euros. Deferred Taxes result from the liabilities incurred through the adoption of IFRIC 12, the recognition in 2012 of tax on the cost of 21 redundancy agreements to be amortised in the 1st half of 2013, as well as,, tax losses reported which, according to the best estimates, are expected to recover in future periods (by 2015).

At the end of 2010, the Board of Directors, fulfilling the mandate given to it by the General Meeting of 26 March 2010, presented to the Authority and to Shareholders a proposal for revising the Concession Agreement, with a view to extending its term for another 20 years and creating the conditions to ensure the economic and financial balance of the Concession.

Aeroportos da Madeira ‹ Annual Report 2012 61 MANAGEMENT REPORT

2. LEADING INDICATORS 2012 2011 2010 % Var.

Airports Passengers (no.)* 2.305.571 2.417.972 2.336.861 (4,6%) Aircraft Movements (no.) * 22.679 24.162 25.064 (6,1%) Cargo (Ton) 5.063 5.238 6.283 (3,3%) Pax / Movements (no.) 101,7 100,1 93,2 1,6% Work Load Units (WLUs) 2.325.486 2.446.686 2.378.546 (5,0%) Personnel Average Active Number of Workers Employed (no.) 311 323 325 (3,7%) Personnel Costs (thousand euros) 15.539 11.917 13.116 30,4% Personnel Costs per capita (thousand euros) 50,0 36,9 40,4 35,4% Passengers per Number of Workers Employed (no.) 7.413 7.486 7.190 (1,0%) GVA per capita (thousand euros) 80,1 68,5 70,3 17,0% Economic Performance Turnover (thousand euros) 36.325 38.053 37.412 (4,5%) Turnover per Passenger (euros) 15,8 15,7 16,0 0,1% Operating Costs (thousand euros) 31.751 32.797 32.976 (3,2%) Operating Cash Flow – EBITDA (thousand euros) 9.379 10.162 11.148 (7,7%) Operating Income - EBIT (thousand euros) 4.822 5.450 6.011 (11,5%) Net Profit (thousand euros) 6.414 5.603 784 14,5% Average Payment Terms (days)** 34 37 34 (8,1%) Aviation Income Aviation Income (thousand euros) 25.906 27.509 27.374 (5,8%) Aviation Income/Pax (euros) 11,2 11,4 11,7 (1,2%)

Aeroportos da Madeira ‹ Annual Report 2012 62 MANAGEMENT REPORT

2012 2011 2010 % Var. PRM PRM income (thousand euros) 689 727 703 (5,3%) Security Income Security Income (thousand Euros) 3.033 3.133 3.190 (3,2%) Security Income/Pax (euros) 1,3 1,3 1,4 1,5% Non-aviation Income Non-aviation Income (thousand euros) 6.213 6.271 5.940 (0,9%) Non-aviation Income/Pax (euros) 2,7 2,6 2,5 3,9% Retail Income/m2 (euros) 370,3 308,2 277,2 20,1% Car Park Income/no. spaces (euros) 353,8 383,7 443,9 (7,8%) Balance Sheet Total assets (thousand euros) 245.014 240.471 236.058 1,9% Equity Capital (thousand euros) 13.969 7.554 1.952 84,9% Debt Capital (thousand euros) 231.046 232.917 234.106 (0,8%) Free Cash Flows 7.804 12.760 14.097 (38,8%) Indicators EBITDA margin (%) 25,8 26,7 29,8 -0,9 p.p. Operating Margin (%) 13,3 14,3 16,1 -1,0 p.p. Weight Non-aviation Income (%) 17,0 16,4 15,2 0,6 p.p. Base Cost Growth (%) (3,2) 0,9 (6,7) -4,1 p.p. Borrowing Capacity 2,9 2,6 2,8 10,0% ROCE - Return on Capital Employed (%) 2,0 2,3 2,6 -0,3 p.p. Financial Autonomy 0,06 0,03 0,01 81,5%

* excludes Non-commercial Traffic. ** APT calculated according to Order 9870/2009. Prior years have been adjusted and rectified.

Aeroportos da Madeira ‹ Annual Report 2012 63 MANAGEMENT REPORT

3. CORPORATE STRUCTURE

The macrostructure of ANAM, SA is comprised of the following bodies(14):

BOARD OF DIRECTORS Chairman: António Ferreira de Lemos Member: António Morgado, Duarte Ferreira

DFPC MANAGEMENT ADVISORY BOARD Financial Planning and Control Director: Duarte Ferreira Francisco Estrela Martins Division Deputy Director : Francisco Fernandes Hilário Valente Roberto Santa Clara Gomes

AJ Legal Department Elsa Assunção GISQA Office of Innovation, Safety, Quality and Environment Mário Gil Fernandes AMCGP Management and Project Control Cátia Vieira

AMGOP AMGTE AMGFA AMGREH AMGCM APSGEX Operating Management Technical Management Financial and Adminis- Human Resource Commercial Manage- PSA Operational Ma- Mário Gil Fernandes Elsa Franco trative Management Management ment and Marketing nagement Henrique Freitas Elsa Assunção Cláudia Gonçalves Isabel Velosa

(14) Change in the organisational structure approved by the Board of Directors: DAM- OS 01/2009, of 04.MAR.2009 and DFPC OS 02/2009, of 17.APR.2009.

Aeroportos da Madeira ‹ Annual Report 2012 64 MANAGEMENT REPORT

Monitoring levels of Duties and Powers Legal Department (AJ) Ensure coordination, support and provision of legal services to the Board of Directors Company’s corporate activities, including, among others: i) collaboration in (As described in paragraph 1.5 of Chapter I – Corporate Governance) the preparation of tender procedure regulations, also including acquisition procedures, negotiation processes, etc.; ii) ensuring appraisal and legal ac- Financial Planning and Control Division (DFPC) tion on matters and processes related to aeronautical regulatory activities, Funding strategy and financial management in the short, medium and long ground handling and operating licences and occupation of public airport term; accounting and equity disclosure; preparation of Company accounts; property; iii) ensuring legal advice and support for the Company’s various development of the Company’s controlling and reporting process and risk organisational units in all matters involving employment and labour pre- control. litigation; iv) ensuring the review of all legislation issued and ensuring its The DFPC is located at the premises of ANA, SA in Lisbon and relates directly internal disclosure. with the Airports Division in Madeira. Office of Innovation, Safety, Quality and Environment (GISQA) Advisory Board Ensure, in general terms, coordination, directly or by delegation, of security Coordination and monitoring of projects related to aviation infrastructure (Safety and Security), Quality and Environment and Civil Aviation Safety for Madeira and Porto Santo Airports. Quality Control Office, also including: i) the preparation and development Direct support to the Board of Directors in defining Company strategy and of Safety Plans, Emergency Plans, physical airport planning of Safety Ma- all matters of an operational nature particularly assigned to it. nuals on Airfields and Others; ii) coordination of actions related to the provision of services (SLA) and the Survey of Quality of Services (ASQ), among Madeira Airports Division (DAM) other actions. Administration, operational coordination and maintenance of Madeira and Porto Santo Airports; definition and implementation of business strategy Management and Project Control (AMCGP) for non-aviation business; human resource management and development Control and report on all management indicators, in accordance with the policy and training; supply, comprising: guidelines arising from the Strategic Plans and Budgets approved by authorities for Madeira Airports, also comprising: i) monitoring of budgets, analysis of variances and, if necessary, the implementation of corrective measures; ii) ensuring, in the areas of management planning and control,

Aeroportos da Madeira ‹ Annual Report 2012 65 MANAGEMENT REPORT

compliance with the guidelines of the central bodies of the Company; iii) coordinate, in conjunction with the Financial Planning and Control Division, monitoring projects implemented across the Company, with particular em- the economic and financial activities ensuring, once approved, their imple- phasis on Madeira Airports. mentation and control; promote the disclosure of management information, including Budgetary Control; ensure office and filing services. Operational Management Division (AMGOP) Coordinate, directly or by delegation, Operational and Relief areas, under Human Resource Management Division (AMGREH) the responsibility of the Airport Operations and Rescue and Firefighting Ensure the development of human resources and related policies in accordan- Services, further comprising, among others: i) the operationalization of ce with the Company’s strategy; ensure adequate application of the Company the Emergency Operations Centre (COE); ii) the relationship with the NAV, Agreement and other applicable labour laws and regulations; promote the im- EPE, official bodies and other services located at Madeira Airport within the plementation of the Company’s training programme and projects under the Aviation activity; and iii) the coordination of all operations in the areas of Integrated Human Resources Management System, with impact across the movement and terminals. company.

Technical Management Division (AMGTE) Commercial Management and Marketing Division (AMGCM) Ensure good operating conditions for all airport infrastructure, systems Ensure coordination and development of all functional areas dependent on and equipment, in the areas of energy, electronics, information systems them, with the objective of planning, management and control of the Avia- and technologies, construction, mechanics and incident management, tion and Non-aviation business of the Madeira Airports, based on efficient guaranteeing high levels of reliability, availability and safety. service delivery and value creation for the Company, also including: i) deve- It is also responsible for ensuring: i) the coordination of transport ser- lopment and implementation of marketing strategies to support the Avia- vices and the management of the vehicle fleet; ii) processes for purcha- tion, Non-aviation and Institutional areas, aimed at increasing and consoli- sing goods and services, in accordance with the Law and the provisions dating Income; ii) coordination of the Company’s public relations policy, as of the Acquisition and Management of Property and Services Manual; well as the Passenger Information service Passenger Services and Telephone iii) contract management, among other duties. Operator Services; iii) ensure the operability and systematic updating of the Company’s website. Financial and Administrative Management Division (AMGFA) Ensure implementation of procedures of an administrative, financial and accounting nature necessary for the operation of the Airports; plan and

Aeroportos da Madeira ‹ Annual Report 2012 66 MANAGEMENT REPORT

PSA Operational Management Division (APSGEX) On the other hand, the sovereign debt crisis in the euro area has spread Ensure, in coordination with the Management of Madeira Airports, the to most economies, such as Spain, Cyprus and Italy, with the governments operation of airport and commercial activities at Porto Santo Airport and of Cyprus and Spain having requested external assistance in order to re- also all actions relating to the maintenance of infrastructure, Airport securi- capitalise the banking sector. During the second half, Standard & Poor’s ty, environment, quality and supply, in strict collaboration with the various credit-rating agency decided to lower the rating assigned to the Spanish Company bodies. government’s sovereign debt to BBB (medium-low grade).

Government bond yields (percent) 4. ECONOMIC FRAMEWORK 29 June 2012 8 4.1 ECONOMIC ENVIRONMENT 7 Spain 6 Italy General Context 5

France 4

The economic crisis affecting the euro area and the resulting uncertainty 3 regarding the future have been identified as the major causes of the down- Germany 2 turn in the world economy. The weakening of economic activity witnessed 1 in 2012 reflects, in large part, a contraction in private consumption and 0 investment, as a result of: 2007 2008 2009 2010 2011 2012

Source: FMI • Low levels of business confidence; • Limited access to bank credit; • The highest rates of unemployment since the introduction of the euro, which are affecting levels of disposable income and consumer confidence.

Aeroportos da Madeira ‹ Annual Report 2012 67 MANAGEMENT REPORT

Thus, the question of the viability of the euro, and the ability of European These factors, coupled with a decline in lending, have contributed to a countries (especially those in the periphery) to take fiscal and structural decline in household disposable income and a lower level of confidence measures that enable them to tackle public deficits, continue to haunt the among various economic agents, which hit a new low in December 2012. financial markets. The Air Transport Sector In 2012, Portugal continued to implement the policies agreed under the Economic and Financial Adjustment Programme (EFAP) agreed with the Eu- The performance of air transport is strongly influenced by external factors, ropean Commission (EC), the European Central Bank (ECB) and the IMF in specifically the performance of the world economy, which has triggered 2011, the limits imposed for the budget deficit being revised during the changes in the structure of this sector. fifth assessment to 5% of GDP in 2012, instead of the 4.5% previously forecast. In addition to the high pressure on costs, particularly in terms of fuel prices, airlines have been operating in an increasingly competitive environment, Despite this revision, in late 2012, interest rates on Portuguese public debt with increasing market share for low-cost carriers, whose business model recorded their biggest falls since December 2010, and it may be assumed allows them to offer lower fares and sufficient quality to attract more pas- that confidence will rise among some investors. sengers.

However, the austerity measures adopted have had a more negative effect Despite this trend, the number of low cost airlines declined in 2012 (mainly than expected and, in 2012, Portugal will be in a recession of around in Europe), with only the strongest companies, which managed to impro- 3%, heavily influenced by a contraction in domestic demand and a lack ve their performance, surviving. The number of new airlines also declined, of investment. Unemployment levels in the country have been worrying, given the increasing difficulty in obtaining financing for new investments. reaching 16.3% in November 2012, while inflation and wages fell, due to containment of expenditure in the public sector, pay cuts and rises in income taxes.

Aeroportos da Madeira ‹ Annual Report 2012 68 MANAGEMENT REPORT

Number of new airlines formed Thus, while in the medium-haul sectors the major concern of European airlines has been competition from low cost airlines, in the long-haul sector, the pressures have also intensified after the exponential growth in capacity 160 offered by the so-called Gulf companies (Emirates, Etihad and Qatar), whi- 140 ch offer a quality product backed by strong State strategies. 120

100 Consolidation and restructuring have been cited as the main reasons for

80 the increased efficiency of the airport sector and, as a consequence, the

60 retention of profits, which has allowed rising costs to be absorbed. As a result, the IATA has revised upwards its profit outlook for the global aviation 40 industry in 2012, predicting profits of around 6.7 billion dollars, more than 20 double that anticipated in June (three billion). 0 1995 2000 2005 2010 Since tourism is one of the main reasons for air travel, it is also important to Source: Ascend note that in 2012, despite the international environment, international tourism exceeded one billion passengers, the highest ever number. According to estimates of the World Tourism Organization (WTO), international air The so-called traditional companies have been forced to respond to these transport should growth of 5% in 2012, mainly supported by international challenges through consolidation processes and the increased bargaining traffic growth in the Middle East and Latin America. Domestic air transport power of the alliances formed between them, or have revised their business should decrease, with China being the only economy that continues to de- model in order to meet the changing market trends and created the their monstrate strong growth in this market. own low-cost airlines.

Aeroportos da Madeira ‹ Annual Report 2012 69 MANAGEMENT REPORT

Total air travel and air freight volumes Thus, competition between airports to attract new routes and flows of (seasonally adjusted) passengers has increased, at the same time as greater pressure is being 17 witnessed on the prices charged by airlines, with a view to reducing 450 airport charges. 430 RTKs 16 410 Airport managers have been forced to find factors that set them apart, and 15 390 the need to pay greater attention to airport marketing has become an un- FTKs 370 14 questionable reality. The adoption of new services and systems to support 350 the development of routes, offering incentives to airlines (especially low- 330 13 cost airlines), partnerships with third parties and the support of marketing 310 and sales techniques are now common practices. RPKs per month, billion 12 FTKs per month, billion 290 270 11 On the other hand, the pressure on costs has forced airport managers to 2007 2008 2009 2010 2011 2012 seek alternatives that allow them to generate new sources of revenue or

Fonte: IATA maximise existing ones, with investment in commercial areas being the most common solution. In relation to the carriage of cargo, the results are not as encouraging, given that sharp falls were recorded for the second consecutive year. This Therefore, in order to boost consumption, an increase in shopping areas behaviour is explained by the fact that it is strongly influenced by the ma- and redesign of the layouts of airport infrastructure have been witnessed, croeconomic environment and the evolution of world trade, which is now investment in renowned brands, communication through new media and, more rooted in emerging economies and not so much in the US or Europe. crucially, investment in distinctive services that enhance the airport experience for passengers. In a context of high competition between airlines, the adaptation of airport infrastructure to increase efficiency and lower operating costs has become Thus, airport infrastructure has evolved in recent years, and currently take a market requirement. a more proactive position attentive to market changes, interacting with stakeholders, adopting integrated strategies and more closely attending to their needs.

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However, to address these new trends, the industry is also witnessing a Ana Group Airports – growth in passengers growing trend of airport privatisation. (2012/2011 variation) ANA GROUP 1,4% 4.2 TRAFFIC AT AIRPORTS BELONGING TO THE ANA, SA GROUP

3,5% In 2012, the top ten airports in the ANA Group confirmed their overall 1,0% resilience, reflected in overall growth of 1.4% in terms of the number of 0,8% MADEIRA AZORES BEJA passengers carried and 1.2% in terms of percentage load factor. However, on the supply side, there was a negative trend in both movements (-1.6%) and in seats offered (-0.2%).

PORTO LISBON FARO -4,6%

-5,9%

-13,9%

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The following table presents the main traffic indicators relating to 2012 for airports in the ANA Group (ANA+ANAM) and respective variations over the same period of the preceding year:

Lisbon Porto Faro Beja Azores ANA ANAM ANA Group

Passengers 15.301.176 6.050.094 5.672.377 1.925 1.184.421 28.209.993 2.305.571 30.515.564

Variation 12-11 3,5% 0,8% 1,0% (13,9%) (5,9%) 1,9% (4,6%) 1,4%

Aircraft Movements 140.909 57.817 39.441 28 19.472 257.667 22.679 280.346

Variation 12-11 1,0% (3,8%) (2,8%) (60,6%) (5,7%) (1,2%) (6,1%) (1,6%)

Seats Offered 20.385.350 7.877.186 6.708.215 3.142 1.851.528 36.825.421 3.052.049 39.877.470

Variation 12-11 2,0% (2,7%) (1,5%) (31,9%) (4,6%) 0,0% (3,1%) (0,2%)

Load Factor 75,2% 77,4% 85,3% 61,4% 66,1% 77,0% 76,5% 77,0%

Variation 12-11 1pp. 2,6pp. 2,2pp 11,1pp. (2,5pp) 1,4pp (1,0pp) 1,2pp

In this context, the ANA Group’s airports grew by 1.4% in passenger volume and shrank 1.6% in terms of aircraft movements. In terms of supply, there was a slight reduction in the number of seats offered of 0.2%, and an increase of 1.2% in load factor on commercial flights. Regarding the performance of the ANA Group’s airports, Lisbon airport stands out, which saw 3.5% growth in comparison with the same period of 2011, with the milestone of 15 million passengers carried being reached for the first time. Porto airport exceeded 6 million passengers with a growth rate of 0.8%, while Faro airport recorded a growth rate of 1%, representing 5.7 million passengers.

In terms of source/destination markets, the increasing importance of the French, German, Swiss and Dutch markets, and the fall in the Spanish, UK and Portuguese markets, are particularly noteworthy.

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Regarding airlines, reference should be made to the increase in the number of passengers carried in 2012 by TAP Portugal, EasyJet and transavia.com, as shown in the table below, which shows the six major carriers and their performance in terms of passengers served:

Airline 2011 2012 Var. 11/12 Var. % 11/12 Var. QM 11/12 QM 12

TAP Portugal 11.379.194 11.817.781 438,587 3,9% 0,91pp 38,7%

easyJet 3.826.018 3.933.099 107.081 2,8% 0,17 pp 12,9%

Ryanair 3.791.406 3.856.474 65.068 1,7% 0,04 pp 12,6%

Grupo SATA 1.988.114 1.714.377 - 273.737 ´- 13,8% ´- 0,99 pp 5,6%

Lufthansa 969.150 1.007.622 38.472 4,0% 0,08 pp 3,3%

transavia.com 808.029 985.665 177.636 22,0% 0,54 pp 3,2%

airberlin 581.531 516.036 - 65.495 ´- 11,3% ´- 0,24 pp 1,7%

Monarch 547.495 549,460 1.965 0,4% ´- 0,02 pp 1,8%

Air France 432.164 414.613 -17.551 ´- 4,1% ´- 0,08 pp 1,4%

Aer Lingus 321.507 388.609 67.102 20,9% 0,20 pp 1,3%

Other 5.444.097 5.331.828 -112.269 ´- 2,1% ´- 0,62 pp 17,5%

Total 30.088.705 30.515.564 426.859 1,4% 100,0%

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Considering the ANA Group’s airports, Lisbon operated nine of the ten routes with the highest growth in passengers carried, among them five new routes:

TOP + ROUTES

Source (ANA Airports) Destination (Airport Pair) Airline 2011 2012 Var. 11/12 Var% 11/12

Faro Airport London, Southend easyJet 0 73,630 73,630 -

Lisbon Airport Dubai Emirates 0 71,880 71,880 -

Lisbon Airport Paris, Orly vueling 0 66,408 66,408 -

Lisbon Airport Amsterdam easyJet 0 41,043 41,043 -

Lisbon Airport Madeira TAP Portugal 515,410 554,899 39,489 7.7%

Lisbon Airport Bordeaux easyJet 0 36,224 36,224 -

Lisbon Airport Porto Alegre TAP Portugal 50,346 86,044 35,698 70.9%

Lisbon Airport Vienna TAP Portugal 35,858 70,466 34,608 96.5%

Lisbon Airport Eindhoven transavia.com 289 34,608 34,319 11875.1%

Lisbon Airport Berlin, Schoenefeld TAP Portugal 0 32,606 32,606 -

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In terms of the distribution of passengers by global alliances of traditional With regard to passenger traffic by type of company, within the ANA Group, companies, ANA Group maintains its dominant presence within the Star different behaviours were witnessed, with LCC – Low Cost Carrier passen- Alliance (growing 1% in market share from 2011 to 2012), with the other ger growth of 4.2%, with about 0.4 million passengers carried, being of alliances having little weight. The loss of 2% in market share of the second particular note. The traditional scheduled segment grew 1.0% with over most representative alliance, One World, should be noted, which was due 184,000 passengers, while the non-scheduled (charter) segment saw an to the performance achieved by British Airways and Iberia. However, the accentuated downward trend (9.5%), falling in 2012 to 1.55 million pas- highlight is the growth of Non-aligned companies, which gained a further sengers, confirming the progressive loss of the importance of this segment 2% in market share, driven by the start-up of Emirates at Lisbon airport. to ANA Group airports.

In 2012, the Group’s passenger traffic was broken down as follows for the different markets: Ana Group - traditional traffic Distribution by global alliance 2012 Ana Group - passenger traffic by market

24,9% Others 17% Portugal 17% United Kingdom 11,6% France 10,2% Spain and the 72% Star Alliance Canary Islands 17% Not aligned 9,3% Germany 7% Oneworld 5,2% Brazil 4% Sky Team 4,8% Switzerland

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In terms of market share, the markets of Portugal, UK, Spain, France and On the supply side, there was a decrease in seats offered (3.1%). The occu- Germany as a whole accounted for around 65.0% of the total. Domestic pancy rate was 75.5%, a decrease of 1.2% over the same period. passenger traffic continues to hold a significant market share (17.0%), although lower than the market share in 2011 (17.8%). This decrease is The good performance of the French, German, Dutch, Spanish and Swiss explained by the fall recorded in this traffic segment, with 218,000 fewer markets is worth mentioning, while the most significant falls occurred in passengers served. the domestic, British and Finnish markets.

4.3 TRAFFIC AT AIRPORTS BELONGING TO ANAM, SA In terms of airlines, the SATA Group witnessed a considerable decline, with about 134,200 fewer passengers carried, mostly due to the dropping of the Traffic at Madeira Airports was, like the regional and national economy, Lisbon route. Also negative, and justifying the loss of the British market, heavily penalised by the macroeconomic environment. Lower consumption EasyJet and ThomsonFly showed a decrease of about 90,800 passengers in the domestic market had a strong impact on Madeira as a destination, over the previous year. with air transport suffering markedly. On the other hand, the increase in passengers carried by the operators At ANAM, SA Airports, demand fell to 2.3 million passengers, (4.6%) less TAP Portugal, Transavia France, TuiFly and Condor should be mentioned, than in the same period of the preceding year and below the level recorded totalling around 45 million passengers. a decade ago. Despite the macroeconomic climate being characterised by high levels of In the 1st half of 2012, the fall of (8.5%) compared to the previous year, as uncertainty, volatility on the supply side and the probability of a slow-down a result of the events described above, had a very negative influence on tou- in demand due to a fall in levels of confidence and disposable income of rism – the main economic activity of the archipelago. In the 2nd half, despite consumers of air transport, the initial traffic projections for 2013 indicate also showing a decrease of (0.9%), a significant improvement was noted in a recovery in traffic, with the main focus on seven new weekly scheduled the last two months of the year, which is expected to continue in 2013. flights operated by Lufthansa and Monarch, planned for the whole year.

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5. BUSINESS STRATEGY by ANAM, SA and the entities most closely involved in the economic activities of the Region.

The Company’s strategic objectives pursued in 2012 are in line with those It should be noted that the aviation sector has undergone radical changes in stipulated in IPG 2012, under the guidelines set out in the 2010-2013 Sta- recent years, through the emergence and expansion of so-called “low-cost” bility and Growth Plan and also the strategic guidelines for the SOE sector, airlines that, mainly in Europe, have revolutionised cost structures, passenger and is based on that set out in paragraph 1.7 of Chapter I – Corporate mobility and, principally, the relationship between airlines/airports/regions Governance: receiving and/or providing the source of traffic. • Sustained Growth; • Operational Efficiency; In this context, the Madeira Airports, together with the Regional Government • Employee Advancement; and national and regional tour operators, have maintained and initiated ini- • Balance of the Financial Structure. tiatives to ensure new companies, new operations, new routes and new fare offers, the main initiatives, of a strategic nature, being: 5.1. SUSTAINED GROWTH

5.1.1 ENSURING CUSTOMER SATISFACTION In 2012, economic activity in the country and the ARM suffered severe negative impacts resulting from the Request for Financial Aid made to the In- It is a priority of the Company to serve its customers with high levels of qua- ternational Bodies by the Republic and the subsequent request for Financial lity, ensuring a high degree of satisfaction, convenience, comfort and safety. Assistance made to the Republic by the Regional Government of Madeira, To this effect, it seeks to understand the needs and expectations of custo- which was formalised in 2012. mers and tailor the services it provides to satisfy them.

In 2012, the implementation of the necessary restrictive measures deepened It pursues initiatives aimed at continuous improvement of its processes and the imbalance even more between the supply of and demand for tourism in the manner in which these contribute to the creation of value within the Madeira. organisation. Continuous improvement is achieved through customer satisfaction, the implementation of effective, efficient and safe operations and Madeira Airports, the main gateway to the ARM, reflect the context descri- the Company’s ability to adapt to the changing demands of the market and bed above, despite the Region’s continued promotional efforts undertaken the regulatory authorities.

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Thus, by conducting quarterly field surveys, the Company monitors the de- and the Airport Incentives Programme was maintained, which focused on gree of customer satisfaction, building a specific metric that allows Overall Porto Santo Airport; Passenger Satisfaction to be assessed. In terms of external promotion and participation, ANAM, SA was present The results of these surveys remained relatively stable throughout the year, at the most important European fairs and Routes, seeking to forge closer with average values of 3.88 (on a scale from 1 to 5), the same being suppor- ties with the main European Tour Operators, major players in tourism ope- ted in studies designed under Airport Service Quality (ASQ) and published rations in the Autonomous Region of Madeira and collaborating in identi- by the Stakeholders. fying new opportunities and consolidating current operations.

Also, Service Level Agreements have been established with the main stakehol- 5.1.3 MAXIMISING NON-AVIATION BUSINESS ders and indicators defined for monitoring each summer and winter period. The Non-aviation area encompasses the following businesses: Retail (inclu- 5.1.2 PROMOTING THE DEVELOPMENT OF TRAFFIC ding food), Real Estate, Advertising, Rent-a-Car and Car Parks. Overall revenues amounted to 6,213,000 euros, which represents approximately 17% Against a backdrop of economic downturn, with major consequences on of the turnover of the Company and 19.3% if only turnover from “core” tourism in the Autonomous Region of Madeira and traffic at the Airports, business is taken into account (excluding: Security, PRM and Construction the main gateway for entry, ANAM, SA has made every effort to seek to Contracts). reverse a downward trend that has lasted virtually all year. In this area, the year 2012 was marked by the performance of the food and With this objective, interaction between the Madeira Airports and local real estate sectors and the level of Profits achieved, by virtue of the con- partners has been enhanced, in particular with the Association for the Pro- tractual conditions, from the Duty Free Shops of Portugal and Rent-a-Car, motion of Madeira, with which tactical initiatives have been carried out to which performed better in terms of Profits achieved than actual volume of consolidate the Schengen markets and promote recovery, in the last quar- sales by the Concessionaires. ter of the year, in the British market. Negative results were witnessed in Car Parks as well as a drop in revenues The scope of the Initiative:pt Programme was reformulated, in partnership generated by Retail. with Portugal Tourism and the Association for the Promotion of Madeira

Aeroportos da Madeira ‹ Annual Report 2012 78 MANAGEMENT REPORT

During this period, the activity of the Concessionaires was closely monito- Accordingly, the Company has an Integrated Management System for red in pursuit of better results, in conjunction with and supported by the Quality and Environment certified according to the standards NP EN ISO Marketing Plan. 9001:2008 and NP EN ISO 14001:2004, the level of Quality Management having been recognised as being “Committed to Excellence” in 2011. As strong points in 2012, the promotional campaigns heavily concentrated on the area of food was notable: Euro 2012 Campaign (in June) and Cam- Also in 2011, Airport Service Quality Certification was obtained according paign for Internal Stakeholders (with effect from December). to the requirements of the ACI – Airports Council International, called “Air- port Service Quality Assured”, which was based on: A new version of the magazine Take It was edited, with a new layout. • The evaluation of Service Quality Management Processes; Also in 2012, the remodelling of the 2nd floor commercial space began, • The results of the ASQ Survey; which, once completed, is expected to boost Non-aviation income in 2013. • The range of services available at the Airport.

5.1.4 DEVELOPING MANAGEMENT SYSTEMS Also, under the scope of safety and food hygiene Audits, in 2012, at the culmination of this process, the “Hygiene Monitored” mark was obtained Integrated Management System for Quality and Environment from our partner, SGS.

ANAM, SA provides its services by adopting procedures to minimise the Overall, the Integrated Management System for Quality and Environment impact of its business activities on the environment. The same principles are is a tool for monitoring objectives and indicators and facilitating the esta- applied to all entities that operate within the airport infrastructure. blishment of more ambitious goals (as the targets are exceeded), ensuring the integration of the environmental component into both planning and A policy to reduce pollution and conserve natural resources has been im- decision-making. plemented: i) the accounting and monitoring of emissions of greenhouse gases associated with our activity; ii) the identification of opportunities for reducing the energy consumption of airports; iii) the reduction of our carbon footprint.

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5.2 OPERATIONAL EFFICIENCY 5.3 EMPLOYEE ADVANCEMENT

In order to streamline operational management processes and systems, In 2012, ANAM, SA proceeded with a range of organisational motivation ANAM, SA has implemented the project designated GO, in relation to whi- initiatives, including, in this context, those aimed at employee advance- ch, in 2012, “updates” were implemented to the GO and GOPAOS Systems. ment and encouraging greater involvement between the departments and the administration itself. In addition to the features considered necessary for operation, this project allows the parameterisation of processes to be greatly streamlined, which Among the various initiatives implemented, of particular importance are: i) a facilitates its use by any workstation and its permanent monitoring. policy of internal mobility and reorganisation of human resources; ii) a clear commitment to the Technical and Behavioural Training Action Plan, the latter The Event Management project also deserves mention, which is moulded to co-funded by the European Social Fund through the RUMOS Programme. the SGSO (Operational Safety Management) requirements specific to each airport, with global harmonisation of criteria for airports managed by ANA, Greater detail regarding the key Human Resources initiatives is given in SA and ANAM, SA. section 8. Human Resources.

This project is intended to ensure compliance with the inspections (SOA 5.4 BALANCE OF THE FINANCIAL STRUCTURE and SLCI), guaranteeing the operationalization of the response system envisaged under the SGSO through the registration of statistical data that The main strategic actions relevant to obtaining the Balance of the Finan- facilitates Operational Risk assessment. cial Structure of the Company are, necessarily: i) Financial Recovery of the Concession; ii) Containment of Operating Costs and Investments; and iii) In parallel, at Madeira Airport, ANAM, SA is currently developing the imple- Reorganisation of Financial Resources. mentation of the “MAXIMO” Project, which is designed to interconnect and manage maintenance systems, with the Preventive Maintenance, Corrective Financial Recovery of the Concession Maintenance, Incident Management, Technical Services Management and EMM (Measurement Equipment) Management Modules, as well as the in- The economic and financial situation of the Company suffers from struc- terface with the Events Module and Purchasing and Contracting Platform, tural problems which, if not overcome in the short term, may jeopardise all already operational. normal operations.

Aeroportos da Madeira ‹ Annual Report 2012 80 MANAGEMENT REPORT

Since 2010, the Board of Directors has been making representations to the for the recognition, by financial analysts, of the degree of solvency of the Shareholders and the Authority in order to secure the revision of the Con- Company. cession Agreement, in such a manner as to allow changes to the term and purpose of the Concession, and the obligations of the Concession Operator Thus, at the next convened General Meeting, the Board of Directors of and the Authority, and regulation itself. ANAM, SA shall report the halving of Share Capital in order to allow a shareholder decision to be made on this matter. The matter was discussed at the General Meetings held in 2011 and 2012, with the deliberations proving inconclusive, whereby further developments Cash Position are awaited, bearing in mind the effects of the privatisation of ANA, SA and the necessary impacts on ANAM, SA, given that it is a Company majority To date, ANAM, SA has scrupulously complied with the obligations arising owned by the former. from the operation of its business, in particular the impact on its cash position: i) refund of instalments to the EIB and the payment of financial Equity Capital charges; ii ) the investment of surplus Cash under economic conditions considered advantageous; and iii) the containment of costs and investments. The Company’s Equity Capital does not comply with article 35 of the Companies Act, given that more than half of the Share Capital has alrea- In 2012, it managed to reduce debt by 1.8%, paid interest at an average dy been lost. rate (including the fixed component) of 2.3%, as shown in the table under paragraph 2.2 of Chapter I – Corporate Governance, representing, in com- Since 2006, the Board of Directors has been reporting the situation to the parison to the previous year, a decrease of 3% in view of changes in the Shareholders and presenting a proposal for the Restitution of Equity Capital. Euribor rates to which most of the loans are indexed. Available cash resources are managed in conjunction with ANA, SA, and to It should be emphasised that this situation has led to the inclusion of an this end, a request to waive the Unity of Treasury Principle provided in the “emphasis of matter” section by the Supervisory Authority and Auditors in budget for 2011 has been submitted to the competent government agen- the Statutory Audit of Accounts and the Audit Report. cies, no response having been received to date.

It should be recalled that an appropriate level of Equity Capital is a necessary condition for compliance with the Companies Code, and is also desirable

Aeroportos da Madeira ‹ Annual Report 2012 81 MANAGEMENT REPORT

Renegotiation Medium and Long-Term Debt Infrastructure of Porto Santo Airport

The Company does not release Cash Flows sufficient for future needs to Porto Santo Airport is, in terms of operations, structural and highly loss-making. service debt, repay loans and investments. Maintaining this airport in operation, under the same conditions, reduces The recovery of the economic and financial situation of ANAM, SA has been the competitiveness of Madeira Airport, given its negative impact on the considered for several years. Indeed, in addition to other goals, the request results of that infrastructure as integrated within the Company network. It submitted for revision of the Concession Agreement includes extending the should be added that ANAM, SA does not receive any support, nor is there term for a further 20 years (until 2053). a contractual relationship with the State or the Autonomous Region for providing this service, which we understand to be a public service obliga- It should also be noted that Regional Government of Madeira Resolution tion, which, due to the nature of the service being one of general economic 53/2013, of 6 February, which mentions the intention to sell off, during interest, should be formalised contractually. 2013, ANA, SA’s interest in ANAM, SA and the adaptation of the current Concession Agreement, will constitute, in our view, an important milestone For information purposes, the evolution of the Net Operating Income and in the development of the process. EBITDA generated by this infrastructure over the last five years is shown below: The next phase will necessarily create conditions for the renegotiation of existing contracts or, if not applicable, seek alternatives to access other so- Indicators 2012 2011 2010 2009 2008 lutions that ensure the conditions for refinancing the debt and the future sustainability of ANAM, SA. Operating Income (4.546) (2.239) (3.594) (3.935) (3.754)

Net Income (4.546) (2.239) (3.594) (3.615) (3.755) Moreover, it is expected that the ongoing privatisation of ANA, SA, and the fact that ANAM, SA falls within the scope of such privatisation, will, in EBITDA (4.482) (2.171) (3.508) (3.840) (3.469) the short-term, bring about substantial changes in its organisational and corporate structure. Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 82 MANAGEMENT REPORT

The indicators listed above prove that it removes competitiveness from Ma- Sector, at the last General Meeting, ANAM, SA submitted for the considera- deira Airport, the main airport under concession, to the tune of 3.5 million tion of Shareholders investments exceeding 5% of Equity Capital. euros/year. Among these Investments is the Reinforcement and Re-profiling of the Containment of Operating Costs and Investments Runways at Madeira and Porto Santo Airports, which was planned to begin in 2013, but due to no resolution having been adopted by shareholders, Over the past few years, the Company has been making efforts to contain had to be postponed accordingly until a decision is made. operating costs which, in a systematic way and, where applicable, it has sought to strengthen in light of the government strategic guidelines for In order to ensure the continued operation and safety of the runways, de- the SOE sector. laying these investments any longer may require periodic and spot repairs to be carried out on the runways (possibly annually), which could prove The low degree of elasticity of Operating Costs and the additional charges costly and would generate no return. related to the termination of contracts by mutual agreement mean that the Results achieved are not, immediately, greater. Adequacy of Financial Resources

As regards Investments, ANAM, SA seeks to manage needs quite parsimo- The Company’s financial resources are scarce given its future needs and the niously, prolonging, in time, their inception. Projected Cash Flows generated by its business activities.

Furthermore, most of the investments made in 2012 and planned for the It is believed that, until 2013, the Company, under normal conditions, will coming years follow a more replacement/renewal strategy, and therefore be able to fulfil its obligations relating to operations, investments and ser- do not add economic value to Company operations. vicing debt. From 2014 onwards, the contractual date for the repurchase of a debenture loan in an amount of 50 million euros, the Company will need In parallel, the profitability of Operational Investments in themselves does to renegotiate the amounts owed or arrange new loans to satisfy commit- not permit benefits from economies of scale. ments falling due.

In accordance with Order 155/2011, issued by the Minister of State and Moreover, in 2016 and 2017, it also has to repay two foreign Shuldschein Finance, and the government guidelines for the State Owned Enterprises loans amounting to 35 and 47.4 million euros respectively.

Aeroportos da Madeira ‹ Annual Report 2012 83 MANAGEMENT REPORT

6. EVOLUTION OF BUSINESS Passengers

Overall, passenger numbers fell (4.6%) in 2012 over the preceding year, 6.1 AVIATION with a negative trend in traffic from the Schengen and EU Non-Schengen areas, which was not offset by increases in International and Transit traffic. In 2012, the Aviation business decreased (5.8%) as a result of not only the falls in revenue across all items of traffic, but also the freezing of airport By reading table below, which compares the evolution of passengers be- charges since 2005, with revenue dependent only on the performance of tween 2010 and 2012, this can be demonstrated: traffic.

2012

2012 2011 2010 Variation % Madeira Porto Santo Total %

Schengen 1.856.702 1.882.798 1.859.849 (1,4) 1.782.629 74.073 1.856.702 80,5

Interior 63.468 78.825 95.817 (19,5) 31.668 31.800 63.468 2,8

Territorial 1.014.992 1.092.355 1.144.708 (7,1) 988.464 26.528 1.014.992 44,0

Other Schengen 778.242 711.618 619.324 9,4 762.497 15.745 778.242 33,8

EU Non-Schengen 389.080 484.576 425.323 (19,7) 373.542 15.538 389.080 16,9

International 29.071 26.936 30.542 7,9 29.071 0 29.071 1,3

Total Local 2.274.853 2.394.310 2.315.714 (5,0) 2.185.242 89.611 2.274.853 98,7

Transit 30.718 23.662 21.147 29,8 18.954 11.764 30.718 1,3

Total* 2.305.571 2.417.972 2.336.861 (4,6) 2.204.196 101.375 2.305.571 100,0

* Excludes Non-commercial Traffic.

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Indeed, in 2012, ARM Airports handled 2,305,571 Commercial Passen- Passenger movement gers (including Transits), which represents a decrease of (4.6%) over the preceding year. The reduction at Madeira Airport was (4.6%), while Porto Schengen EU Non-Schengen International Transit 2.000.000 Santo Airport registered a decrease of (4.9%). 1.782.629

However, Schengen Territorial passengers dropped (7.1%) in a passenger 1.500.000 share of 44%. Also, EU non-Schengen flights fell (19.7%), mainly due to the contraction of the British market. 1.000.000 On the other hand, the sharp, 29.8% increase in passengers in “Transit” is

500.000 the result of circular operations on the Berlin-Canary Islands-Funchal-Berlin 373.542 route, affecting Madeira Airport, and Brussels-Porto Santo-Funchal-Brussels 74.073 15.538 29.071 0 18.954 11.764 route, affecting Porto Santo Airport. 0 Madeira Porto Madeira Porto Madeira Porto Madeira Porto Santo Santo Santo Santo In the segmentation of passengers recorded in 2012, it should be noted that 80.5% are “Schengen” passengers, with 54.7% of these being “Terri- torial” passengers. Aircraft The following chart illustrates, by Airport, the significant weight of “Schen- gen” passengers in relation to the remaining segments. In 2012, the movement of Commercial Aircraft registered at ARM Air- ports was 22,679, which represents a decrease of (6.1%) on the preceding year, with Madeira Airport contributing with a decrease of (6.2%) and Porto Santo Airport, (5.7%).

Aeroportos da Madeira ‹ Annual Report 2012 85 MANAGEMENT REPORT

2012

2012 2011 2010 Variation % Madeira Porto Santo Total %

Schengen 19.670 20.436 21.527 (3,7) 17.141 2.529 19.670 86,7

Interior 3.950 4.355 4.727 (9,3) 1.965 1.985 3.950 17,4

Territorial 9.576 10.518 11.732 (9,0) 9.253 323 9.576 42,2

Other Schengen 6.144 5.563 5.068 10,4 5.923 221 6.144 27,1

EU Non-Schengen 2.675 3.412 3.130 (21,6) 2.558 117 2.675 11,8

International 334 314 407 6,4 324 10 334 1,5

Total Commercial 22.679 24.162 25.064 (6,1) 20.023 2.656 22.679 100,0

* Excludes Non-commercial Traffic.

Thus, compared with the preceding year, there was a decrease of (3.7%) in the “Schengen” area, which influenced the major reductions seen in the segments: “Territorial” and “Interior” with, respectively, (9.0%) and (9.3%), despite the 10.4% growth in “Other Schengen”.

The decrease in the segment: “EU Non-Schengen” is (21.6%), with the evolution of the segment “International” being positive, albeit immaterial.

As with the figures already registered for passengers, the movement of Aircraft from the “Schengen” area represents 86.7% of the total, while the “EU Non-Schen- gen” and “International” areas, together, account for only 13.3%.

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The following chart shows the distribution, by Airport, of aircraft by “Schen- The Average Take-off Weight of Aircraft operating at ARM Airports, which gen”, “EU non-Schengen” and “International” traffic: in 2011 was 63.8 tons, decreased in 2012 to 62.8 tons, 66.8 tons at Madei- ra Airport and 33.1 tons at Porto Santo Airport. Aircraft movement Cargo and Mail Handled Schengen EU Non-Schengen International

20.000 Compared to 2012, Cargo Handled at ARM Airports decreased by (3.3%), 17.141 with Madeira Airport registering (4.1%), while Porto Santo Airport recorded 15.000 an increase 23.5%. In turn, Mail, handled at the same airports, presented a decrease of (12.8%), (13.0%) at Madeira Airport and (6.3%) at Porto Santo 10.000 Airport.

5.000 2.529 2.558 74.073 117 324 10 0 Madeira Porto Madeira Porto Madeira Porto Santo Santo Santo

Cargo Handled Mail

2012 2011 2010 Deviation % 2012 2011 2010 Deviation % Madeira 4.887 5.095 6.070 (4,1) 1.908 2.194 2.367 (13,0)

Porto Santo 176 143 214 23,5 88 94 109 (6,3)

Total 5.063 5.238 6.283 (3,3) 1.996 2.288 2.476 (12,8)

Un: ton

* Excludes Non-commercial Cargo and Mail.

Aeroportos da Madeira ‹ Annual Report 2012 87 MANAGEMENT REPORT

In conclusion, in terms of the level of activity of air traffic Aviation Income at ARM Airports, there has been: With a total of 25,906,000 euros in 2012, the account reflects a decrease of (5.8%) compa- 1. An overall decrease of (4.6%) in passengers, with posi- red to 2011. tive changes in the segments “Other Schengen”, “Interna- tional” and “Transits”. The table below presents the detail, by nature, of the Income concerned, which is self- Disregarding “Transits”, the decrease in paying passengers explanatory: is (5.0%). Description Madeira Porto Total Total Total Variation Santo 2012 2011 2010 % 2. A reduction of (6.1%) in aircraft movements compared Landing/Take-off 7.004 398 7.402 7.816 8.291 (5,3%) with the preceding year, in particular: i. Growth in the number of aircraft operated in the seg- Passengers 16.256 599 16.854 17.895 17.232 (5,8%) ments: “Other Schengen” and “International”, which, together, account for only 28.6% of traffic. Parking and Shelter 173 2 175 213 234 (18,0%) ii. Very significant reductions in the remaining traffic segments: “Schengen/Interior”, “Schengen/Territorial” and Ground Handling 1.328 70 1.399 1.515 1.549 (7,7%) “EU Non-Schengen”. Other 69 7 76 69 68 10,6% 3. Overall, Cargo and Mail decreased quite considerably. Total Aviation 24.830 1.076 25.906 27.509 27.374 (5,8%)

Un: thousand euros

Income related to Landing/Take-off and Passengers represents 93.6% of the “Aviation” business.

Aeroportos da Madeira ‹ Annual Report 2012 88 MANAGEMENT REPORT

6.2 NON-AVIATION Retail

This front includes commercial activity in its various components: retail, real estate, adver- After strong growth in 2011, in 2012, this balance sho- tising, rent-a-car and car parks and the item “Other”, which includes Non-aviation Services wed a decrease of (3.4%) corresponding to 100,000 eu- and Equipment. ros, compared to the preceding year, primarily due to fall in turnover among smaller stores. The table below shows 2012 “Non-aviation” Income, and a comparison with 2011, which shows a slight reduction (0.9%), whereby “Retail” and “Car Parks” performed below the Almost all Retail revenue is generated at Madeira Air- levels seen in 2011. port, with revenues at Porto Santo Airport standing at only 33 000 euros.

Description Madeira Porto Total Total Total Variation Santo 2012 2011 2010 %

Retail 2.859 33 2.892 2.992 2.721 (3,4%)

Real Estate 1.050 119 1.169 1.152 1.153 1,5%

Car Parks 500 0 500 542 627 (7,8%)

Rent-a-Car 1.154 12 1.166 1.136 994 2,6%

Advertising 331 0 331 313 297 5,7%

Other 140 15 156 137 149 14,0%

Total Non-aviation 6.033 180 6.213 6.271 5.940 (0,9%)

Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 89 MANAGEMENT REPORT

The following table shows the evolution of some indicators related to Retail activity between 2012 and 2010, where it can also be seen that, on the whole, sales achieved by the concessionaires at Madeira Airports fell (5.7%), a sharper reduction than that seen in the revenues of ANAM, SA itself:

Madeira Airport Porto Santo Airport

2012 2011 2010 Var. % 2012 2011 2010 Var. %

Concessionaire Sales 13.960.22 € 14.826.68 € 13.982.78 € (5,8%) 312.489 € 303.041 € 216.585 € 3,1%

Revenue ANAM, SA 2.858.450 € 2.958.52 € 2.678.43 € (3,4%) 32.993 € 33.728 € 42.988 € (2,2%)

Income/Sales 20,5% 20,0% 19,2% 0,5pp 10,6% 11,1% 19,8% (0,6)pp

Commercial Passengers 2.204.196 2.311.380 2.233.524 (4,6%) 101.375 106.592 103.337 (4,9%)

Sales/Passenger (€) 6,33 6,41 6,26 (1,3%) 3,08 2,84 2,10 8,4%

Revenue/Passenger (€) 1,30 1,28 1,20 1,3% 0,33 0,32 0,42 2,9%

Un: euros

Real Estate Car Parks, Rent-a-Car and Advertising

“Real Estate” revenues are related to the occupation and use of areas pro- Car Parks decreased by (7.8%) compared to the preceding year, maintai- vided for “Aviation” business. In 2012, these revenues remained at a level ning the trend has been registered since 2009, which, in cumulative terms, slightly higher than at the same period of the preceding year, due to new already stands at around (25.0%). spaces occupied by PORTWAY. In the period, they generated 1,169,000 euros, equivalent to 18.8% of “Non-aviation” business. Concessionaires operating the Rent-a-Car business continued to perform well, with an increase of 2.6% over the same period last year, and 17.3% compared to 2010, although there are signs of a downturn in the activity.

Aeroportos da Madeira ‹ Annual Report 2012 90 MANAGEMENT REPORT

Even so, revenues from Rent-a-Car represent 18.8% of The revenue generated from the application of the rates set forth in Ordinance 541/2004, Non-aviation Revenues. of 21 May, comprises two Components, A) and B) and is intended to secure investments in control systems and their operation. During 2012, Advertising increased by 5.7% over the preceding year, solely due to the application of the “guaran- The table below reflects income earned by ANAM, SA in 2012 under Security activities and teed minimum return”, since actual sales were down on its comparison with 2011 and 2010. the preceding year.

6.3 SECURITY Description Madeira Porto Total Total Total Variation Santo 2012 2011 2010 %

Component A) 1.138 43 1.181 1.178 1.299 0,3% Civil Aviation Security against acts of unlawful interferen- ce – Security falls under the remit of the airport managing Component B) 1.780 71 1.852 1.955 1.892 (5,3%) body, under the supervision of the Ministry of Internal Affairs, with such activity being ensured by private con- Total Security 2.919 114 3.033 3.133 3.190 (3,2%) tractors hired by ANAM, SA the entity specialised for the Un: thousand euros purpose – Securitas.

This activity is regulated at European Union level, being Revenue from Component A) is payable per embarking passenger and is collected by INAC. operationalized in Portugal through Regulatory and Secu- It shows a slight increase of 0.3% over the same period of the preceding year. rity Instructions produced by INAC. INAC payments being made in cash, the delivery of the revenues by INAC, occurs at times Also in 2012, ANAM, SA proceeded to update the automa- different from when the actual operations are performed, which explains the variations in tic hold baggage screening equipment (for EDS of Stan- comparison with the passengers. dard II) at Madeira Airport, in compliance with the provisions of EU legislation. In relation to the evolution of Component B), the reduction of (5.3%) is practically in line with the evolution of paying passengers.

Aeroportos da Madeira ‹ Annual Report 2012 91 MANAGEMENT REPORT

6.4 PRM The table below presents, in descending order of turnover, the weight of the key customers considered, highlighting, among them, 7 airlines, 2 han- In a similar vein as with Security, support for passengers with disabilities dlers and the Duty Free Shops. and persons with reduced mobility falls under the remit of the airport ma- Total Variation naging body. Customer 2012 2011 2010 Value % For that reason, in addition to having to provide the appropriate technical TAP-Air Portugal SA 10.466 10.341 10.557 126 1,2% infrastructure, in operational terms, ANAM, SA outsources the work to ap- EASYJET Airlines 3.321 4.171 4.037 (850) (20,4%) propriately trained employees, using, for the purpose the brand My Way, Duty Free Shops of Portugal (*) 1.665 1.597 407 68 4,2% which applies to this service within the ANA Group. Thomsonfly Limited 1.649 1.992 1.715 (343) (17,2%)

Presently, the fee in force, per embarking passenger, is 0.61 €. Air Berlin 1.584 1.563 1.615 21 1,3%

SPdH 1.533 1.566 1.602 (33) (2,1%) The amounts received in 2012, and their comparison with 2011, can be found in the table below, which shows a decrease of (5.3%), in line with SATA International 1.326 2.718 3.378 (1.392) (51,2%) the evolution of passengers. Transavia.com France 982 786 475 196 25,0%

PORTWAY 802 743 729 59 8,0% Description Madeira Porto 2012 2011 2010 Variation SATA Air Açores 755 880 1.008 (126) (14,3%) Santo %

Total Income 662 27 689 727 703 (5,3%) Total Top 10 Customers 24.083 26.357 25.521 (2.274) (8,6%) PRM Remaining Customers 11.757 11.284 11.687 474 4,2% Un: thousand euros Grand Total 35.840 37.640 37.209 (1.800) (4,8%) (All Customers) 6.5 KEY CUSTOMERS Un: thousand euros

ANAM, SA’s top 10 customers in terms of turnover accounted for 67.2% of revenues in 2012 generated by all of the Company’s Customers. (*) Started activity 02 October 2010 (formerly “Elframa”).

Aeroportos da Madeira ‹ Annual Report 2012 92 MANAGEMENT REPORT

Compared with the previous year, the most significant 7. INVESTMENTS changes among the key customers were:

During 2012, ANAM, SA made Investments totalling 1,297,000 euros, which corresponds to • Despite having consolidated second position in the 28.7% of the value of 4,521,000 euros that was anticipated. ranking of airlines bound for Madeira Airports, EasyJet witnessed a fall of (20.4%) compared to the preceding The table below summarises the Investments made over the past three years. year; 2012 2011 2010

• Together, SATA Internacional and SATA Air Açores saw Madeira Airport 1.261 1.413 847 the highest drop in turnover, with (42.2%); Concession Rights 485 412 147

Replacement Investments 640 960 453 • The very pronounced growth of 25% evidenced by Tran- Capital Assets 29 27 29 savia.com.France; Costs 106 13 218 • In turn, the handling companies (SPdH and PORTWAY) Porto Santo Airport 35 142 181 had inverse performances; while PORTWAY grew 8% Concession Rights 0 1 56 compared to 2011, SPdH witnessed a fall of (2.1%); Replacement Investments 20 138 116

Capital Assets 15 3 0 • Finally, the turnover of the Loja Franca (Duty Free Shops Costs 0 0 9 of Portugal) should be noted, which, despite the nega- Central Services 1 5 4 tive trend in the area of Retail, grew 4.2% as a direct result of the change in VAT implemented in April 2012. Concession Rights 0 0 0 Replacement Investments 0 0 0

Capital Assets 1 5 4

Costs 0 0 0

Total 1.297 1.559 1.033

Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 93 MANAGEMENT REPORT

Also in the following chart the detail of the Investments is shown, in accor- 7.1 AIRPORT INFRASTRUCTURE dance with their nature: ANAM, SA is executing Investments in Infrastructure and, running in parallel, previously developed projects for the expansion or improvement of airport infrastructure at Madeira and Porto Santo Airports, the execution of Allocation of 2012 investment which is pending opportunity (shareholder approval in specific situations) and the necessary financial coverage.

To date, the investments undertaken and completed by ANAM, SA, only in infrastructure at the ARM Airports, amount to around 586,000,000 euros, as shown in the table below: 485 660 Ac. 2010 2011 2012 Total

Replacement Investments Madeira Airport 564.656 93 231 564.980 Concession Right Expenditure 106 Porto Santo Airport 20.491 69 0 20.559 46 Capital Assets Total 585.146 161 231 585.539

Un: thousand euros

During the year 2012, no infrastructure projects that were ongoing from previous years were completed.

Aeroportos da Madeira ‹ Annual Report 2012 94 MANAGEMENT REPORT

7.2 OPERATING INVESTMENT 7.4 SUMMARY OF TOTAL INVESTMENT

As a rule, these investments are made annually, and are designed to res- The table below summarises the evolution of major investments made be- pond to the need to protect and control the environment, implement ener- tween 2010 and 2012 by nature and Airport: gy-saving solutions, improving public information systems, equip rescue teams and improve various areas of infrastructure and services. 2012 2011 2010

In 2012, at the Madeira Airports, Operating Investments totalling 965,000 Madeira Airport euros were made, as can be seen in the table under paragraph 7.4. 1. Infrastructure 231 93 581

Reinforcement and Re-profiling of the Runway 33 28 428 It should also be noted that, in 2011, the Intervir+ Programme was begun, which is currently nearing completion, which is supported by the ERDF, Reorganisation of the commercial areas on Floor 2 106 0 0 of the Air Terminal through the SITI – Integrated Telecommunication and Information System Replacement of Equip. 100% Screening Baggage System 92 0 0 – Project. Other 0 65 153

7.3 CURRENT INVESTMENT 2. Operating 935 1.241 205

SITI Project 630 487 0 Geared, among other things, towards the replacement of computer equipment and respective software, communications equipment and office equi- SLCI Vehicle 213 317 0 pment; light vehicles, tools and utensils at Airports and Central Services. GO Project 0 220 0

Other 92 217 205 During 2012, a sum of 100,000 euros was spent on Current Investments, which is broken down in the table shown under the next section. 3. Current 94 79 60 Total 1.261 1.413 847

Aeroportos da Madeira ‹ Annual Report 2012 95 MANAGEMENT REPORT

Porto Santo Airport In the graph below, the impact of investments by nature can be seen:

1. Infrastructure 0 69 74 Nature of the investment made in 2012 Reinforcement and Re-profiling of the Runway 0 69 59

Other 0 0 15

2. Operating 29 0 5

SITI Project 20 0 0

Other 10 0 5 965

3. Current 5 73 103

Total 35 142 181 Operating 231 Central Services Infrastructure Current 1. Infrastructure 0 0 0 100 2. Operating 0 0 0

3. Current 1 5 4

Total 1 5 4

Grand Total 1.297 1.559 1.033

Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 96 MANAGEMENT REPORT

7.5 INVESTMENTS IN PROGRESS AND PROJECTS IN PORTFOLIO For each of the investments or projects considered above, a short project brief and situation report is given below. As mentioned above, the Company maintains a number of ongoing Pro- jects and work aimed at future works to improvement and/or expand Air- a) Additional Work on the HBS port infrastructures, as noted in the following table: Intended to complement the 100% Screening Baggage Verification Systems at the Airports of Madeira and Porto Santo, providing conditions for deacti-

Ac. Total vating and/or carrying out a controlled explosion on “suspicious” baggage 2012 considered a “threat”, which have been established as “standard” across Additional Work on the HBS 6 356 European airports.

Design of the new MA Control Tower 24 243 The first phase of the 100% Screening Baggage System has been completed Renovation and Development of the MA Air Terminal 116 8.966 and the commissioning of the additional work will be dependent on the Car Park Project at MA 261 278 completion of the studies on the solution to be adopted. Estimated budget

Reinforcement and Re-profiling of the Runways at MA and PSA 616 14.610 forecasts for implementation are 156,000 euros and 200,000 euros respectively for MA and PSA, considering that there will be a deferral of one year Changes to the Air Terminal at PSA 30 30 between Madeira and Porto Santo. Study to Repair the TWR at PSA 30 30

SITI Project 1.166 1.741 No work was carried out on these projects in 2012.

Renovation of the commercial areas on Floor 2 of the Air Terminal 106 300 at MA b) MA TWR Project Subst equip Sist Bagagem 100% screening – AM 92 2.007 Construction of a new Control Tower at Madeira Airport to replace the cur- Total 2.447 28.562 rent one, which does not allow direct, full visibility of runway thresholds, is Un: thousand euros planned for the medium term.

Aeroportos da Madeira ‹ Annual Report 2012 97 MANAGEMENT REPORT

The project itself is being developed by ANAM, SA, with the support of the d) Car Park Project at MA ANA/DIA, with the participation and collaboration of NAV, EPE. The growing demand witnessed in the past for parking capacity in terms of The budgeted amount of 243,000 euros is intended exclusively for payment Airport car parks, whether by users or by rent-a-car companies, led to a decision of the work contracted to ANA/DIA, which corresponds to the preparation to create car parking through the phased/modulated construction of a multi- of studies and architectural designs and speciality services. storey car park integrated into the structure of the existing parks and core verti- cal access, in accordance with discretionary criteria to be established. During 2012, no work was carried out on this project. The drafting of the Design of a Multi-storey Car Park, to be executed in a phased c) Renovation and Development of the MA Air Terminal manner, was contracted out on 12 December 2008 to the firm Segadães Tava- res & Associados for the amount of 278,000 euros, a preliminary version of the The need to increase the profitability of commercial operations at Madeira Final Design of the first phase having been concluded, which is currently being Airport, combined with a desire to improve passenger comfort, led to the appraised by management. need to study the redesign of boarding/disembarkation circuits, including the optimisation of the available areas on floors 2 and 3, affecting opera- The subsequent execution of this Project is dependent on its economic viability, tional, shopping and dining areas, with possible plans in the final stage of considering that, at this stage, it is no longer a priority, given the sharp fall in development for the installation of passenger boarding bridges. demand witnessed over recent years.

The corresponding Preliminary Study of Architecture was awarded to the e) Re-profiling and Resurfacing of the Runways at MA and PSA firm MC Arquitectos, Lda. at a price of 116,000 euros, and has been completed and delivered. Madeira Airport: the bituminous pavement of the runway and taxiways The execution of the work on this project, which is expected to last for 36 shows rapid and worrying superficial cracking and disintegration, the con- months at an estimated cost of around 8,850,000 euros, is expected to sequence of a pathological condition of the surface layer known as top- begin after 2017. down cracking, caused by the premature ageing of the bituminous binder.

Aeroportos da Madeira ‹ Annual Report 2012 98 MANAGEMENT REPORT

Following a tendering procedure, CENORPLAN – Planeamento e Projetos, The volume of this investment requires ANAM, SA to seek a financial contri- Lda was tasked with drafting a Project for the Reinforcement and Re-profi- bution for the performance of this contract, given the civil and military use ling of the Runway, which was delivered in 2011 at a cost of 117,000 euros. of the Airport and the fact that the infrastructure is heavily making losses.

In the meantime, the need to ensure the minimum operating conditions of In order to minimise the operational upheavals resulting from the state of the bituminous pavement led to spot repairs being carried out, through a the runway surfaces, in the 1st quarter of 2011 spot repairs were carried tender awarded to TECNOVIA Madeira, beginning in 2010 and ending in out, which was awarded to EDIMADE – Edificadora da Madeira, SA, for 2011, which represented a total cost of 394,000 euros and constituted a 27,000 euros, an amount included in the estimate for the work. first phase of work. Thus, the performance of the Contract corresponding to this project and In short, the work to Reinforce and Re-profile the Runways at Madeira Air- the spot repairs carried out on the runway are estimated to cost 7,894,000 port and Porto Santo Airport should be completed: the former by 2016, euros, and the work is expected to be completed by 2016. and the latter by 2014 according to the contracts, at an estimated cost of 13,300,000 euros. Porto Santo Airport: the runway has a total length of 3,000 metres, of which 2,450 m are bituminous, the life cycle of which has already been This is in addition to the estimate for the work under the contracts mentio- exhausted and, for this reason, it is undergoing structural degradation. ned above, 659,000 euros relating to the revision of the design, supervision of construction and monitoring of the LNEC. Should servicing not be carried out in the short term, this situation will cause, in the near future, a sharp drop in the load capacity of the structure However, due to its unit value (greater than 5% of Share Capital), the exe- of the runway, which may, ultimately, cripple operations. cution of these contracts requires the prior authorisation of the General Meeting, which will be requested at the next General Meeting. Thus, the Reinforcement and Re-profiling Project was carried out by NOR- VIA – Consultores de Engenharia, SA, following a tendering procedure for f) Alteration of the PSA Air Terminal an amount of 114,000 euros. The implementation of the HBS system led to a reduction in baggage re- The overall implementation of the corresponding contract, with an expec- claim areas (due to the creation of a corridor, which was removed from ted value of 5,827,000 euros, is expected to be completed by 2014. the baggage reclaim hall), so a study was commissioned from Atelier Mota

Aeroportos da Madeira ‹ Annual Report 2012 99 MANAGEMENT REPORT

Carvalho Arquitectos with a view to increasing this area by relocating the h) SITI Project – Integrated Telecommunications and Information System VIP Lounge, with a consequent rearrangement of all the departure lounges. The SITI – Integrated Telecommunications and Information System – Pro- The redesign and replacement of the firefighting system, which has been ject aims to provide the Company with a convergence of communications damaged by bad weather, was also incorporated into this Project. involving data, voice, image, interactive information and value-added services applications, based on an optical fibre broadband network on which The project was awarded at 30,000 euros, and is in the final stages of adap- the new equipment and systems will be supported in terms of the various tation to the comments made. specific airport systems. ANAM, SA’s current telecommunications systems are based on outdated The completion of this project, in terms of work on the Air Terminal, is de- technology that will be discontinued, which will lead to an unacceptable pendent on adequate funding being obtained. loss of reliability, in addition to not allowing Madeira, as a tourist region, to realise its full potential, in which the Airport plays a critical role. During 2012, no work was carried out or liabilities assumed in relation to this project. This project thus allows a qualitative leap to be taken inherent to joining the information society, which is a factor that will increase competitiveness g) Study to Repair the TWR at PSA and the quality of the airport services provided.

Cracks having been found in the Control Tower at PSA in the areas of the Only one component of the project “Electronic Group Voice Calling System”, floors in use, a Study was conducted and it was concluded that there are is underway, and is expected to be completed during the first half of 2013. no underlying structural weaknesses, but servicing to restore these areas to a proper state of repair is recommended. i) Remodelling of the Shopping Area on Floor 2 of Madeira Airport

To this end, ANAM, SA provided the users of this area (FA, NAV and Me- Until the MA Air Terminal is remodelled and developed, as detailed in c) teorology) the respective study, proposing that the cost of any necessary above, and in order to reorganise and renovate existing shops on the 2nd repairs should be shared among the users, given that the Company does floor (departure area), the relevant work has been awarded by tendering not receive any consideration for the use of those spaces. procedure to the Consortium RIM/SPROG, for an amount of 269,000 euros. We are awaiting development of this process.

Aeroportos da Madeira ‹ Annual Report 2012 100 MANAGEMENT REPORT

The architectural design was awarded in 2011 following a restricted proce- The tender for the replacement of this equipment was processed jointly dure to the Architect Carla Vieira for the sum of 11,900 euros, with the Board with the Airports managed by ANA, SA, with ANAM, SA, following a tende- of Directors additionally authorising a specialities project for 8,100 euros. ring procedure, awarding to SIEMENS, SA not only the supply, installation and commissioning of the automatic hold baggage screening equipment, The work was confirmed in October, with a completion deadline of 120 but also the provision of technical assistance for a period of 37 months. days, and is expected to be finished by the end of January 2013. The total value of the contract is 2,351,000 euros, of which 550,000 euros j) Replacement of Equipment belonging to the 100% Screening Baggage relate to technical assistance services (maintenance). System The HBS units were installed by the end of December, and are currently With the aim of satisfying community requirements in terms of 100% hold being tested and the Matrix Servers installed. baggage screening (HBS), ANAM, SA was obliged to replace the Standard 1 equipment installed with Standard 2, which will ensure the technical con- It is anticipated that provisional acceptance will occur in the first half of ditions required until 2018. 2013.

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7.6 FINANCING OF INVESTMENTS 8. HUMAN RESOURCES

A contribution of 80% from the ERDF – Intervir+ Programme was secured ANAM, SA’s Human Resource Management has focused its activities on pro- for the SITI – Integrated Telecommunications and Information System, with fessional development and the involvement of employees in the Company’s the remaining 20% being secured through in-house financing. strategic objectives.

The other investments made by ANAM, SA in 2012 were fully funded by In 2012: i) the Annual Training Plan was continued, focusing not only on means of in-house financing and/or the use of loans already contracted. technical training, but also behavioural aspects; ii) a Performance Apprai- sal was implemented, which comprises an Assessment of Objectives and a

Skills Assessment Test; iii) an Employee Satisfaction Action Plan was developed, dealing with recreation, health and wellness; and iv) the Optimisation of the Number of Workers Employed was maintained, and extended to the area of SSLCI.

In terms of social responsibility, ANAM, SA, with the support of some employees, participated in the restoration of the Capela dos Cardais chapel, in Machico, and four dwellings belonging to employees affected by the wildfires that ravaged the region last summer. This support for the employees’ residences amounted to 28,396 euros.

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8.1 NUMBER OF WORKERS EMPLOYED The change witnessed in 2012 comprises only thirteen leavers, as no new staff were recruited during the period. Overall in 2012, there was a net reduction of 13 staff at ANAM, SA, from 317 employees to 304, as indicated below: It should be noted that the 13 leavers were: i) 10 due to redundancy by mutual agreement (4 under the Optimisa- tion of the Number of Workers Employed Programme and Evolution of Number MA % PSA % CEN* % ANAM % 6 under the Specific Programme for the SSLCI); ii) 2 due to of Workers Employed resignation; and iii) 1 due to death. Number of Workers 234 100,0 67 100,0 16 100,0 317 100,0 Employed at 01.Jan.2012

Admissions 0 0,0 0 0,0 0 0,0 0 0,0

Leavers (6) (2,6) (6) (9,0) (1) (6,3) (13) (4,1)

Balance of mov. in year (6) (2,6) (6) (9,0) (1) (6,3) (13) (4,1)

Number of Workers Em- 228 97,4 61 91,0 15 93,7 304 95,9 ployed at 31.Dec.2012

Un: Number of Workers Employed

* Includes the 2 directors. Excludes 3 members of the Audit Committee.

Aeroportos da Madeira ‹ Annual Report 2012 103 MANAGEMENT REPORT

8.2 PROGRAMMES TO OPTIMISE THE NUMBER OF WORKERS EMPLOYED to reducing the number of workers employed in areas where they do not AND SPECIFIC TO THE SSLCI (FIREFIGHTING AND RESCUE SYSTEM) require replacement.

The table below shows the financial impact of the implementation of these With regard to the SSLCI programme, it is aimed at rejuvenating the programmes, since 2005, in terms of compliance and recognition of costs: staff of the Madeira Airports Firefighting and Rescue Service, through a gradual transition to outsourcing of this service.

Un. 2012 2011 2010 To Total To this end, following a tendering procedure, the Company contracted 2009 from EFACEC, SA the Provision of Relief and Emergency Airfield Services Number of Workers Employed no. 10 4 7 82 103 at Madeira and Porto Santo Airports for an initial period of 5 years, ex- tendible for successive periods of 3 years. Incentives Thousand 1.389 556 555 8.284 10.784 euros Under this Contract, in 2012, three shifts had already been incorpora- Average Incentive Thousand 139 139 79 101 105 euros ted: one at Madeira Airport and two shifts at Porto Santo Airport, with two more shifts being expected for 2013, one for each Airport.

In 2012, the Programme to Optimise the Number of Workers Employed, The cost of 21 agreements negotiated this year were also recognised which began in 2005, allowed 93 staff to leave, at an associated cost of in 2012, amounting overall to 2,943,000 euros, which will be settled 9,000,000 euros. during 2013.

The launch of the Specific Programme for the SSLCI in 2011 also allowed 8.3 TRAINING the negotiation of redundancy agreements with 10 employees, with an associated cost of 1,781,000 euros. During 2012, 91 training activities were organised, totalling 12,357 hours, plus 352.5 hours relating to the Student-Worker Statute. Overall, these trai- Since 2010, application of the Programme to Optimise the Number of ning activities involved 837 participants (257 employees). Workers Employed has been very limited and has extended only to situations duly considered and approved by the Board of Directors, with a view

Aeroportos da Madeira ‹ Annual Report 2012 104 MANAGEMENT REPORT

Training hours and their distribution by nature and qualification of partici- It should also be noted that in 2012, several behavioural training courses pants are detailed in the table below: were provided, under the Rumos Programme, a Training Programme co- financed by the European Social Fund.

Managers Senior High. Qualif. Other Total 8.4 WAGE BILL Tech. Tech.

In-house Training 30 41 227 80 378 In 2012, in accordance with the guidelines of RCM 01/2011, of 04 Janua- ry, and other subsequent legislation, the reductions in total gross monthly External Training 1.585 264 8.856 1.274 11.979 wages exceeding 1,500 euros were maintained and all wage increases, including pay rises and promotions, were frozen. Total 1.615 305 9.083 1.354 12.357 Similarly, in accordance with Law 64-B/2011, of 30 December (CGB 2012),

Un: Hours the payment of holiday allowance and Christmas allowance was suspended in 2012.

Note that Training Expenses totalled 147,121 euros, of which: Also in 2012, the accrued cost of holiday allowance for 2013 was recognised according to total salaries (rather than reductions) due to the expected • Direct Expenses: 124.210 Euros (enrolments with Training Costs) privatisation of the Company. • Indirect Expenses: 22.911 Euros (room hire, coffee breaks, lunches, accommodation, daily subsistence allowances, travel, etc.)

It should be recalled that the Annual Training Plan focused mainly on technical training in the areas of Engineering and Maintenance, Health and Safety at Work, Rescues and Operations. The latter courses arose from the internal recruitment process and the need for training for Rescue and Airport Opera- tions Services, at Madeira Airport and Porto Santo Airport, which began in 2011 and ended in 2012.

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The following table shows the evolution of the wage bill per capita between 2010 and 2012: 8.5 ACCIDENTS AT WORK AND ABSENTEEISM

Description 2012 2011 2010 Var. CA Under the promotion of Health and Safety at Work, the 2012/2011 2012/2010 Company has an ongoing range of measures for monito- Wage Bill 8.738 8.977 10.001 (2,7%) (6,5%) ring and controlling some indicators relating to personnel, including Absenteeism and Accidents at Work. Remuneration 8.327 8.570 9.605 (2,8%) (6,9%)

Overtime 412 406 397 1,3% 1,9% The table below lists Absenteeism and Accidents at Work for the last 3 years: Charges on Remuneration 1.980 1.998 2.074 (0,9%) (2,3%) Social Sec. + Acc. at Work Insur. Other Personnel Expenses 4.820 942 1.040 411,5% 115,3% 2012 2011 2010 Total 15.539 11.917 13.116 30,4% 8,8% Absenteeism 5,2% 5,3% 5,8% ANAM Average No. of Workers 311 323 325 (3,7) (2,2) Employees No. Accidents at Work 10 9 9 Wage Bill per Capita 28,1 27,8 30,8 1,1 (4,4) Accidents at Work* 0,3% 1,0% 1,0%

Un: thousand euros

* Weight of hours not worked due to accident at work in total potential hours

Aeroportos da Madeira ‹ Annual Report 2012 106 MANAGEMENT REPORT

An analysis of the above table reveals that, in 2012, the rate of absenteeism 9. ECONOMIC AND FINANCIAL ANALYSIS was the lowest for three years. Regarding Accidents at Work, despite a slight increase in the number of Accidents at Work, there was a significant 9.1 ECONOMIC SITUATION decrease in the percentage weight of hours not worked, due to the fact that there were only 2 more severe incidents leading to time off work (ex- 9.1.1OPERATING INCOME tended time off work).

In 2012, ANAM, SA’s Operating Income amounted to 36,573,000 euros, a 8.6 ACTIONS UNDER DEVELOPMENT decrease of (4.4%) over the preceding year.

During 2012, the area of Human Resources management maintained implementation of the Integrated Human Resources Management System.

Cross-company processes, mainly focusing on Management and Perfor- mance and Training, were continued.

It should be noted that Management and Performance (evaluation of objectives and competencies) has been fully implemented, whereby a monitoring process has begun with a view to its fine tuning and to obtain improvements in the management of Human Capital.

Aeroportos da Madeira ‹ Annual Report 2012 107 MANAGEMENT REPORT

The table below presents the breakdown and evolution of income, grouped into three key An analysis of the above table emphasises the following: balances according to their nature: REVENUE

Description Madeira Porto Central Total Total Total Variação Provision of Services encompasses core Turnover (“Avia- Santo Services 2012 2011 2010 % tion” and “Non-aviation” Services), includes the captions REVENUE 34.969 1.400 0 36.369 38.098 37.504 (4,5%) PRM, Security and Construction Contracts. Provision 34.928 1.397 0 36.325 38.053 37.412 (4,5%) Finally, the value of the item “Other Revenue” is, under of Services current circumstances, residual. Aviation 24.830 1.076 0 25.906 27.509 27.374 (5,8%) The evolution of Revenue between 2011 and 2012 is nega-

PRM 662 27 0 689 727 703 (5,3%) tive (4.5%) and the weight of Revenue in total Income in 2012 is 99.4%, as follows: Security 2.919 114 0 3.033 3.133 3.190 (3,2%) PROVISION OF SERVICES Non-aviation 6.033 180 0 6.213 6.271 5.940 (0,9%)

Construction 485 0 0 485 413 203 17,4% Aviation Contract Other Revenues 41 4 0 44 45 92 (0,7%) With a total value of 25,906,000 euros, this balance accounts OTHER INCOME 200 3 0 204 149 1.482 36,4% for 71.2% of total Revenue. To better understand the nature of this amount, see paragraph 6.1 above. Third Party 0 0 0 0 0 1.475 0,0% Reversals Financial 1 0 0 1 0 1 439,5% PRM

Other 200 3 0 203 149 6 36,1% The revenue generated by this balance was 689,000 euros,

Total 35.169 1.404 0 36.573 38.247 38.986 (4,4%) and its decrease from the previous year (5.3%) is substantially aligned with the evolution of passenger traffic. Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 108 MANAGEMENT REPORT

Security OTHER INCOME

This balance shows the revenue generated by the activity Security, under This balance, with 204,000 euros, essentially reflects the recognition of RE- the responsibility of the Company, in its two components, A) and B). PEX Investments in the SITI Project which, in 2012, were used as Commit- Revenue totalled 3,033,000 euros, as explained in paragraph 6.3 above, ments to the tune of 169,000 euros. and represent 8.3% of Revenue. The caption “Other Income” also includes 35,000 euros relating to disposals of property and participation in the RUMOS Programme, a Training Non-aviation Programme co-financed by the European Social Fund. The evolution of Income characterised above, between 2011 and 2012, is Revenue from the Company’s commercial activities is comprised of: Retail, also illustrated in the following chart: Real Estate, Advertising, Rent-a-Car and Car Parks, as explained in paragraph 6.2 above. Under the scope of core business, this revenue, amounting to 6,213,000 Change in income euros, represents 17.1% of Revenue.

40.000 38.098 2012 Construction Contract 36.369 35.000 2011 This reflects the value of new Intangible Assets (Concession Rights) considered 30.000 under the Concession Agreement, through the adoption of IFRIC 12, with the 25.000 amount of 485,000 euros having been recorded under this balance in 2012. 20.000 The investments made in this context are explained in section 7 above. 15.000

10.000

OTHER REVENUES 5.000 204 149 0 Revenue Other Income The account is not materially relevant and includes some revenues generated by: assignment of staff, works undertaken using own resources and charged to Customers, on the job training and outsourcing of the Fire Department, etc.

Aeroportos da Madeira ‹ Annual Report 2012 109 MANAGEMENT REPORT

However, the contribution of Revenues by Airport and Central Services is distributed as follo- An analysis of the various balances of Operating Costs ws: i) Madeira Airport with 96.2% of total Income; ii) Porto Santo Airport with 3.8%, and the highlights a reduction (28.7%) in Supplies and Services, contribution Central Services being nil. mainly due to the adjustment made to commitments for future replacement investments (according to the inter- 9.1.2 OPERATING COSTS pretation of IFRIC 12).

In 2012, ANAM, SA’s Operating Costs amounted to 31,781,000 euros, a decrease of (3.2%) Due to their impact on the cost structure, the Personnel over the preceding year. Expenses accounts and Amortisation will also be broken down. The evolution of Operating Costs is evidenced in the following table: Supplies and Services

Description Madeira Porto Central Total Total Total Variation In 2012, the scope of the account Subcontracts was wide- Santo Services 2012 2011 2010 % ned and now includes not only ANA, SA’s “fee”, but also Consumption 79 9 0 88 103 109 (15,0%) the accounts related to Rescue Services, PRM and SANAS.

Supplies and 8.511 718 820 10.050 14.089 13.206 (28,7%) This expansion led to the transfer of the accounts PRM and Services SANAS from the caption specialised work. Personnel 9.725 5.061 753 15.539 11.917 13.116 30,4% Expenses Compared with the same period of the preceding year, an Depreciation and 8.308 248 22 8.579 8.725 9.150 (1,7%) Amortisation* explanation of the reduction (28.7%) registered under SS Recognition (3.839) (183) 0 (4.022) (4.013) (4.013) (0,2%) comprises: of Grants • Maintenance and Repairs, down (62.7%) (includes com- Other Expenses 1.417 98 3 1.517 1.976 1.408 (23,2%) mitments(15); • Subcontracts, up 235.0%; Total 24.202 5.950 1.599 31.751 32.797 32.976 (3,2%) • Surveillance and Security, up 0.9%; Un: thousand euros • Cleaning, Hygiene and Comfort, down (6.2%); * This figure excludes Investment Grants. (15) If the impact of the reduction in liabilities of (4,230,000 euros) had not been considered under this account, the caption Maintenance and Repairs would have shown an increase of 0.7% compared to 2011.

Aeroportos da Madeira ‹ Annual Report 2012 110 MANAGEMENT REPORT

• Electricity, down (4.4)%; Depreciation and Amortisation* • Studies, Projects and Opinions, up 5.0%; • Specialised Work, down (57.3%); In 2012, Amortisation remained at the level seen in 2011. • Insurance, up 12.1%; • Gardening and Interior Decoration, down (0.3%); Other Expenses • Water, up 0.1%; • Leases and Rents, up 55.2%. The Other Expenses account showed a reduction of (23.2%) over the preceding year and incorporates as its main component traffic incentives, as The performance of the remaining SS balances was positive, having fallen shown below: short of the predicted values, particularly in terms of Advertising and Pro- motion, Travel and Accommodation and Communications. • Madeira Airport Incentives Programme: 377,000 euros • FIPT – Fund for Investment in the Promotion of Tourism: 180,000 euros Personnel Expenses • Initiative:pt – Developing Tourism and Aviation: 491,000 euros • Tactical Plan and Others: 167,000 euros In 2012, Personnel Costs rose by 30.4% over the preceding year. This rise is essentially due to the application of the Programmes to Optimise the The amount of 1,214,000 euros in traffic incentives spent in 2012, repre- Number of Workers Employed and Specific SSLCI (Firefighting and Rescue sents a reduction of (423,000) euros compared to 2011. System) Programme which totalled 4,332,000 euros. Considering the effects of the economic and financial crisis, the volume In this regard, it should be noted that the value of 4,332,000 euros is com- of incentives demonstrates the Company’s efforts to develop an Airport posed as follows: Marketing policy that incorporates a Customer oriented management phi- losophy (aimed at airlines) and their market. • 10 redundancies, corresponding to a payment of 1,389,000 euros; • Recognition of the cost of the agreements negotiated in 2012, amounting overall to 2,943,000 euros, which will be settled during 2013.

Aeroportos da Madeira ‹ Annual Report 2012 111 MANAGEMENT REPORT

The graph below illustrates the evolution of Operating Costs balances for 9.1.3 PROFITS 2011 to 2012. In the financial year 2012, ANAM, SA recorded a Net Profit, after taxes, of Change in Cost Structure 6,414,000 euros, representing an improvement of 812,000 euros over 2011.

20.000 2012 Achieving this result was influenced by the settlement of Income Tax, in an 2011 15.539 amount of 4,847,000 euros, as a result of the determination of Deferred Tax 15.000 14.089

11.917 Assets as the best estimate of the temporary differences to be recovered in 10.050 future periods (see Income Tax Expenses, Note 26 of the Notes to the Finan- 10.000 8.725 8.579 cial Statements).

5.000 In addition to Net Profit, the following table identifies some of the results 1.517 1.976 88 103 obtained in 2012, and a comparison with 2011, with those obtained in 2010 0 Supplies External Supplies Personnel Depreciation and Other also appearing for information purposes. and Services expenses Amortisation Expenses

MADEIRA PORTO CENTRAL TOTAL TOTAL TOTAL VARIATION SANTO SERVICES 2012 2011 2010 Description VALUE % Provision of Services 34.928 1.397 0 36.325 38.053 37.412 (1.728) (4,5%)

Operating Cash Flow (EBITDA) 15.437 (4.482) (1.576) 9.379 10.162 11.148 (783) (7,7%)

Operating Income (EBIT) 10.967 (4.546) (1.599) 4.822 5.450 6.011 (628) (11,5%)

Financial Income (4.553) (0) 1.298 (3.255) (3.875) (3.924) 620 16,0%

Income tax 0 0 4.847 4.847 4.028 (1.303) 820 20,3%

Net Income 6.414 (4.546) 4.546 6.414 5.603 784 812 14,5%

Un: thousand euros

Aeroportos da Madeira ‹ Annual Report 2012 112 MANAGEMENT REPORT

OPERATING CASH FLOW EBITDA 2012 2011 2010 Variation % The Operating Cash Flow (EBITDA), as an expression of the difference betwe- Interest on Loans (4.553) (5.314) (4.529) 14,3% en Operating Income and Operating Costs (excluding Amortisation) is plus 9,379,000 euros and evidences a decrease (7.7%) over the previous year. Other 1.303 1.439 603 (9,5%)

Financing Operations (3.250) (3.875) (3.925) 16,1% OPERATING INCOME (EBIT)

Other Financial Income (5) 0 2 0,0% Operating Income (EBIT) is plus 4,822,000 euros.

Financial Income (3.255) (3.875) (3.924) 16,0% A positive EBIT at Madeira Airport of 10,967,000 euros and a negative EBIT at Porto Santo Airport and Central Services, with (4,546,000) euros and Un: thousand euros (1,599,000) euros, respectively, should also be highlighted.

FINANCIAL INCOME In 2012, interest expenses relating to bank loans contracted by ANAM, SA, as well as leasing costs, were lower by 14.3%, mainly due to changes Financial income, in an amount of (3,255,000) euros, improved 16% com- recorded in the variable rates indexed to the Euribor. pared to 2011. Financial Income arising from Financial Investments in short-term bills is This improvement results, firstly, from the easing of variable lending rates recorded under Other. The decrease in this balance is also associated with indexed to the Euribor, and secondly, from the application of higher cash a reduction in deposit rates obtained on the investments belonging to the surpluses, as detailed below: Company on the domestic market.

Aeroportos da Madeira ‹ Annual Report 2012 113 MANAGEMENT REPORT

INCOME TAX EXPENSES 9.1.4 VALUE ADDED

Income Tax Expenses in a total amount of 4,847,000 euros comprises Cur- The table below reflects the evolution of Gross Value Added (GVA): rent and Deferred Tax, and is explained in the Notes to the Accounts(16).

Variation The evolution of the results may also be viewed in the following graph: 2012 2011 2010 Value %

Gross Value Added 24.924 22.119 22.841 2.806 12,7%

Change in profit Ave. Number of 311 323 325 (12) (3,7%) Workers Employed

40.000 GVA per capita 80,1 68,5 70,3 12 17,0% 38.053 36.325 35.000 2012 Un: thousand euros 30.000 2011

25.000

20.000 Gross Value Added in 2012 showed an increase of 2,806,000 euros compa- 15.000 red to the previous year, representing an increase of 12.7%.

10.162 10.000 9.379 6.414 5.450 5.603 4.822 4.847 In turn, the average number of workers employed fell slightly (3.7%) as a 5.000 (3.255) (3.875) 4.028 result of the average number of leavers throughout the year. 0 Provision Operating Operating Financial Income Net of Services Cash Flow Income Income Tax Income (EBITDA) (EBIT) Thus, the increase of 17.0% recorded in 2012 over the preceding year, translated into GVA per capita ratio, reflects efficiency gains for the Company.

(16) Note: 26 – Income Tax in the Notes.

Aeroportos da Madeira ‹ Annual Report 2012 114 MANAGEMENT REPORT

9.2 FINANCIAL SITUATION • The increase of 5,597,000 euros in the account Deferred Tax Assets is related to commitments arising from the adoption of IFRIC 12, the recog- 9.2.1 BALANCE SHEET nition in 2012 of costs relating to the termination of (21) contracts by mutual agreement and Reportable Tax Losses, expected to be recovered 9.2.1.1 ASSETS in future periods (by 2015).

At the end of the year, total Assets belonging to ANAM, SA showed a value CURRENT ASSETS of 245,014,000 euros. This figure represents an increase of 1.9% over the 2011 value. The current balance of the account Current Assets is 33,459,000 euros, which represents a decrease of (1,664,000) euros compared to 2011. NON-CURRENT ASSETS As key accounts, the following are worth mentioning: • A reduction of (128,000) euros under the balance of capital assets, due to • Trade and Other Receivables, with 7,189,000 euros. The decrease in this the combined effect of an increase in assets and depreciation; account compared with the previous year was (1,335,000) euros, and is • A reduction of (4,254,000) euros under the balance of Concession Rights, related to the reduction of the ERDF Grant for the SITI Project and a lower resulting from the amortisation of Concession assets, and further increases; volume of Trade Debtors. • A reduction of (7,000) euros under the balance of Other Intangible Assets Current Tax, at 562,000 Euros, decreased by 515,000 euros, due to the resulting from the application of the depreciation rates laid down in De- decrease in accounts receivable in 2013. cree 25/2009, of 14 September. • An increase of 5,000,000 euros in the balance of Trade and Other Recei- •The account Cash and Cash Equivalents, with a balance of 25,395,000 euros, vables due to an increase in medium-term investment, made in ANA, SA, saw an increase of 187,000 euros over the year, from cash surpluses obtai- which rose to 20,000,000 euros. ned, not taking into account the additional 5,000,000 euros, included under Trade and Other Receivables, as highlighted under Non-current Assets.

Aeroportos da Madeira ‹ Annual Report 2012 115 MANAGEMENT REPORT

The graph below illustrates the evolution of Assets between 2012 and 2011. 9.2.1.2 EQUITY CAPITAL AND LIABILITIES

Change in assets EQUITY CAPITAL

250.000 2012 In late 2012, Equity Capital amounted to 13,969,000 euros and only co- 211.555 205.348 2011 vered 20.7% of Capital, whereby, in accordance with article 35 of the Com- 200.000 panies Act, more than 50% of Share Capital has been lost.

150.000 LIABILITIES 100.000

With 231,046,000 euros, Liabilities, decreased by (0.8%) over the previous 50000 35.123 33.459 year, most notably:

0 Non-Current Assets Current Assets Non-current Liabilities

This balance, with 213,384,000 euros at the end of 2012, decreased in relation to 2011 by (2.1%) (4,623,000) euros.

In addition to the Loans of 195,786,000 euros, which are structured over the Medium and Long Term, there is another account, the nature and weight of which within Liabilities should be noted:

Payables and Other Liabilities

The value of this account, 16,477,000 euros, reflects almost exclusively to commitments to cover future obligations of the Concession (renewal/replacement of assets)(17).

(17) Note: 17 – Payables and Other Liabilities

Aeroportos da Madeira ‹ Annual Report 2012 116 MANAGEMENT REPORT

Current Liabilities Change in equity capital and liabilities

At the end of the year, Current Liabilities stood at 17,662,000 euros, 18.5% 250.000 2012 218.006 higher in relation to the previous year and includes the following balances: 213.384 2011 200.000

• Accrued Costss: 7,316,000 euros 150.000 • Short-term Loans: 3,601,000 euros

• Trade Creditors: 1,745,000 euros 100.000 • Contractual Liabilities: 2,273,000 euros • Deferred Income: 969,000 euros 50.000 17.662 13.969 14.910 • Other: 1,758,000 euros 7.554 0 Equity Non-current Liabilities Current Liabilities The following chart illustrates the evolution of Equity Capital and Liabilities:

Aeroportos da Madeira ‹ Annual Report 2012 117 MANAGEMENT REPORT

9.2.2 BALANCE SHEET From the table above, it may be noted that the main Investments focus on Fixed Assets, the evolution of which is negative as a result of being in a The table below details the evolution of the balance sheet in terms of the period of recovery of Investments. source and application of funds, between 2010 and 2012: Since there are no Financial Investments, Total Net Investments are equal to 2012 2011 2010 Variation Net Allocated Investments. % Fixed Assets (Net of Grants). 180.749 184.606 190.124 (2,1%) In relation to Capital Employed, its downward trend is caused by a reduc-

(+) Deferred Tax 9.140 3.111 (921) 193,8% tion in Net Debt (Loans minus Cash and Cash Equivalents) and the increase witnessed in Equity Capital. (+) Inventories 312 313 318 (0,4%) 9.2.3 FINANCIAL FLOWS (+) Receivables 7.752 9.602 7.132 (19,3%)

(+) Debt Capital (29.992) (27.298) (23.396) 9,9% In 2012, Operating Cash Flow generated by the Company’s activities was plus 12,795,000 euros. It should be emphasised, however, that Operating (=) Net Allocated Investments 167.961 170.335 173.258 (1,4%) Cash Flow includes the amounts invested to replace/renew assets and equi-

(+) Financial Investments 0 0 0 0,0% pment in the period, but reported, pursuant to IFRIC 12, in previous periods. (=) Total Net Investments 167.961 170.335 173.258 (1,4%) Net Investment matches CAPEX (Capital Expenditure), Capital Assets and the investment of 5,000,000 euros in ANA, SA, and respective interest. Equity Capital 13.969 7.554 1.952 84,9% Thus, Free Cash Flow for 2012 is 7,804,000 euros, (38.8%) lower than in (+) Minority Interests 0 0 0 0,0% 2011.

(+) Net Debt 153.992 162.781 171.306 (5,4%) Financing Cash Flow presented results from the following allocation: i) Net

(=) Capital Employed 167.961 170.335 173.258 (1,4%) Financial Charges (interest income minus interest expenses) of 3,876,000 euros; ii) Net Debt, which includes the Repayment of Debt, of 3,741,000 Un: thousand euros euros; and iii) Variations in Short-Term Funds of 187,000 euros.

Aeroportos da Madeira ‹ Annual Report 2012 118 MANAGEMENT REPORT

Financial Flows 2012 2011 2010 Variation % 10. FUTURE PROSPECTS Operating Cash Flow 12.795 12.733 14.358 0,5% In economic and financial terms, the next few years represent a critical pe- Net Investment (4.991) 26 (261) --- riod for the Company.

Free Cash Flows 7.804 12.760 14.097 (38,8%) Debt Service requirements, if they are not brought forward by investors Dividends 0 0 0 0,0% via transfer of ownership, focus on 2014, 2016, 2017 and 2020, and in 2014, when the debenture loan of 50 million euros is due for repurchase, Financial Charges (3.876) (4.103) (4.166) (5,5%) ANAM, SA, by itself, will not be able to free up sufficient resources for its Net Debt (3.741) (3.741) 0 0,0% full repurchase.

Capital Contributions 0 0 0 0,0% Accordingly, shareholder support will be required to meet this liability and

Variation Short-term Funds (187) (4.916) (9.931) (96,2%) to find solutions to cover future financial needs.

Financing Cash Flow (7.804) (12.760) (14.097) (38,8%) Indeed, the Cash Flows generated by the Company, which have tended to decrease, are manifestly insufficient to meet operational, investment and Un: thousand euros debt service requirements, causing a marked imbalance in the already weak economic and financial structure.

Caused by the financial model used to ensure implementation of the heavy investments in the Funchal Airport Expansion Project, this being essentially based on non-refundable aid and debt, the situation has been deteriora- ting in recent years, due to both the sharp fall in traffic and the freezing of airport charges since 2005.

Aeroportos da Madeira ‹ Annual Report 2012 119 MANAGEMENT REPORT

It can even be said that current traffic remains at the level reported a ability to pay, as early as 2014. decade ago. Equity Capital also does not meet the requirements of article 35 of the It should be noted that the slowdown in traffic recorded at our Airports, Companies Act, and has been the subject of the “emphasis of matter” by initially originating from the grave international crisis affecting econo- the Statutory Auditor and Auditors. Although it is a matter that has been mies in general, continued with the tragic events and conditioning of discussed in the last General Meetings, no resolution has been adopted to traffic that, in 2010 and 2011, affected the major source markets for the carry through with the Restitution of Equity Capital. destination of Madeira, and also, that of Madeira itself. Thus, ANAM, SA intends to continue submitting a proposal for the Res- Also, in our view, the restrictive measures that followed the Economic titution of Equity Capital, whose funds, when they materialise, must be Adjustment Programme negotiated by Portugal with the EC, ECB and IMF channelled directly and exclusively towards repaying Company debt, whi- and the ARM’s own Economic and Financial Adjustment Programme re- ch currently amounts to around 199,700,000 euros. quested from the Republic, has been affecting the routes between the mainland and the region, which is the main source market. This amount includes instalments relating to the EIB, under repayment since 2011 (3,700,000 euros/year) and disbursements between 2014 In terms of the economic and financial balance of the Concession, we be- and 2017 that the Company needs to repay and/or renegotiate, totalling lieve that this may be achieved through the extension of the concession 132,400,000 euros. term, which, according to previous studies delivered to the Authority and Shareholders, is recommended to be extended until 2053 (20 more years). The adoption of IFRIC 12 in 2010 and simultaneous consideration of ex- Indeed, the Resolution of the Regional Government of Madeira referred to tending the term of the Concession until 2053 (20 more years) enabled a below marks an effort to adapt the current Concession Agreement to the substantial reduction in repayment costs and the recognition of grants, Concession Agreement concluded with ANA, SA, in 2013, thus ensuring with direct consequences on attainment of a sustainable operating break- the aforementioned balance. even point, and a Net Profit with effect from 2010.

Moreover, the amendment of the Concession Agreement is a prerequisite At the same time, the need became more pressing for early recognition for future renegotiation of the Company’s debt, the current repayment of accrued expenses intended for the realisation of future investments to schedule of which, alone, is considered incompatible with ANAM, SA’s replace/maintain assets allocated under the Concession.

Aeroportos da Madeira ‹ Annual Report 2012 120 MANAGEMENT REPORT

In the case of Commitments for future replacement/repair investments, these Despite accounting for approximately 17% of turnover, in recent years, Non- amounts, although they constitute Costs for the Year, are not accepted as Tax aviation business has demonstrated potential growth that, despite its current Costs in the same year, leading to their deferral to future years. stagnation, should be enhanced in the future. In this context, renovations on the 2nd floor of the Air Terminal at Madeira Airport are nearing completion, A direct consequence of this situation is the need to clear Deferred Tax Assets, which aims to create more dynamic shopping areas. which have, at this stage, increased Net Profit. Finally, it should be noted that the Regional Government of Madeira has Moreover, and in addition to the clearance of Deferred Tax Assets arising approved, as per Resolution 53/2013, of 06 February, the Programme to Pri- from temporary commitments made for the purpose of future replacement vatise and Restructure the Corporate Sector of the Autonomous Region of investments, also in 2012, according to the best estimates (APT 2012-2016), Madeira, which, in relation to ANAM, SA, establishes: tax losses that may be recovered by 2015 were rescheduled. “The Regional Government intends to promote the sale of the share capital It is assumed, therefore, that this situation will prevail in the coming years. owned in Aeroportos e Navegação Aérea da Madeira, ANAM, SA to Aeropor- tos e Navegação Aérea, ANA, SA, in the context of the privatisation of the With regard to traffic, whose level, as already mentioned, has regressed to latter, and to adjust the current Concession Agreement covering the Region’s that seen a decade ago, ANAM, SA will continue to make every effort to pro- Airports to the ANA Concession Agreement elapsing in 2013”. mote and develop new routes.

Through Airport Marketing, the proposal is to encourage new routes and strengthen existing ones, with ANAM, SA continuing its strong commitment to partnerships with Portugal Tourism, the Association for the Promotion of Madeira and some operators with an interest in tourism in the region.

Aeroportos da Madeira ‹ Annual Report 2012 121 MANAGEMENT REPORT

11. PROPOSED APPROPRIATION OF PROFITS

The year 2012 ended with a Net Profit of 6,414,330.80 euros, an amount it is proposed should be transferred to Retained Earnings.

Santa Cruz, 08 May 2013

BOARD OF DIRECTORS

António José do Amaral Ferreira de Lemos Chairman

António dos Santos Morgado Member

Duarte Nuno Fraga Gomes Ferreira Member

Aeroportos da Madeira ‹ Annual Report 2012 122 MANAGEMENT REPORT

12. ANNEX TO THE MANAGEMENT REPORT BOARD OF DIRECTORS

SHAREHOLDERS AT 31.DEC.2012

António José do Amaral Ferreira de Lemos List referred to under paragraph 4 of article 448 of the Companies Code. Chairman

Shareholders No. Shares % Capital

ANA – Aeroportos de Portugal, SA 9.450.000 70% António dos Santos Morgado Autonomous Region of Madeira 2.700.000 20% Member

Portuguese State 1.350.000 10%

Duarte Nuno Fraga Gomes Ferreira Member

Aeroportos da Madeira ‹ Annual Report 2012 123 FINANCIAL STATEMENTS III

Aeroportos da Madeira ‹ Annual Report 2012 FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION STATEMENT OF FINANCIAL POSITION

Description Notes 31 DEC 2012 31 DEC 2011 Description Notes 31 DEC 2012 31 DEC 2011

ASSETS LIABILITIES

Non-current Non-current Liabilities

TangibleFixed Assets Loans 16.1 195.785.807,02 199.387.273,22

Capital Assets 6 330.550,05 458.271,80 Deferred Tax Liabilities 10 1.121.490,54 1.553.311,01

Tangible Assets in Progress 6 0,01 0,01 Payables and Other Liabilities 17.1 16.476.549,32 17.065.794,82

Concession Rights 6 180.962.291,78 185.216.490,68 213.383.846,88 218.006.379,05

Other Intangible Assets 6 1.059,03 8.278,68 Current Liabilities

Trade and Other Receivables 9.1 20.000.000,00 15.000.000,00 Payables and Other Liabilities 17.2 14.060.360,81 11.308.730,67

Deferred Tax Assets 10 10.261.369,71 4.664.596,10 Loans 16.1 3.601.466,20 3.601.466,20

211.555.270,58 205.347.637,27 17.661.827,01 14.910.196,87

Current Assets Total Liabilities 231.045.673,89 232.916.575,92 Inventories 11 312.220,97 313.415,63 Trade and Other Receivables 9.2 7.189.457,61 8.524.902,34 Total Equity Capital and Liabilities 245.014.203,29 240.470.774,52 Current Tax 12 562.043,09 1.076.843,42 unit: euros Cash and Cash Equivalents 13 25.395.211,04 25.207.975,86 33.458.932,71 35.123.137,25

Total Assets 245.014.203,29 240.470.774,52 BOARD OF DIRECTORS António José do Amaral Ferreira de Lemos António dos Santos Morgado EQUITY CAPITAL Duarte Nuno Fraga Gomes Ferreira Capital 14 67.500.000,00 67.500.000,00 CHARTERED ACCOUNTANTIsabel Maria Reis da Costa Reserves 15 17.254.263,13 17.254.263,13 Profit or Loss Brought Forward - (77.200.064,53) (82.802.685,47) Net Profit 6.414.330,80 5.602.620,94

Notes 6 to 27 form an integral part of these Financial Statements. Total Equity Capital 13.968.529,40 7.554.198,60

Aeroportos da Madeira ‹ Annual Report 2012 125 FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

Description Notes 31 DEC 2012 31 DEC 2011

Revenue 18 36.369.122,73 38.097.882,77

Goods Sold and Consumed Materials 11 (87.856,45) (103.408,69)

External supplies and services 20 (10.050.154,53) (14.089.088,76)

Staff costs 21 (15.538.543,59) (11.916.941,33)

Impairment of Debts Receivable and Other 22 (6.951,48) (39.571,40) Assets Other Income 19 203.776,49 149.398,13

Other Expenses 23 (1.510.540,11) (1.936.012,60)

EBITDA 9.378.853,06 10.162.258,12

Depreciation and Amortisation 24 (4.556.620,96) (4.712.212,16)

Operating Income 4.822.232,10 5.450.045,96

Borrowing Costs 25.1 (3.250.046,42) (3.875.043,50)

Other Financial Income 25.2 (5.014,70) 0,00

Financial Income (3.255.061,12) (3.875.043,50)

Profit before Tax 1.567.170,98 1.575.002,46

Income Tax Expenses 26 4.847.159,82 4.027.618,48

Net Income 6.414.330,80 5.602.620,94

Total Comprehensive Income for the Year 6.414.330,80 5.602.620,94

Earnings per Share BOARD OF DIRECTORS Basic 27 0,48 0,42 António José do Amaral Ferreira de Lemos António dos Santos Morgado Diluted 27 0,48 0,42 Duarte Nuno Fraga Gomes Ferreira unit: euros STATUTORY AUDITOR Isabel Maria Reis da Costa

Notes 6 to 27 form an integral part of these Financial Statements.

Aeroportos da Madeira ‹ Annual Report 2012 126 FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

Capital Reserves Profit or Loss Brought Forward Net Income Total

Balance at 01.01.2011 67.500.000,00 17.254.263,13 (83.587.095,27) 784.409,80 1.951.577,66

Application of Income from the previous year - - 784.409,80 (784.409,80) -

Total Comprehensive Income for the period - - 5.602.620,94 5.602.620,94

Equity Capital at 31.12.2011 67.500.000,00 17.254.263,13 (82.802.685,47) 5.602.620,94 7.554.198,60

Application of Income from the previous year - - 5.602.620,94 (5.602.620,94) -

Total Comprehensive Income for the period - - 6.414.330,80 6.414.330,80

Equity Capital at 31.12.2012 67.500.000,00 17.254.263,13 (77.200.064,53) 6.414.330,80 13.968.529,40

unit: euros

BOARD OF DIRECTORS António José do Amaral Ferreira de Lemos António dos Santos Morgado Duarte Nuno Fraga Gomes Ferreira

CHARTERED ACCOUNTANT Isabel Maria Reis da Costa

Notes 6 to 27 form an integral part of these Financial Statements.

Aeroportos da Madeira ‹ Annual Report 2012 127 FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS STATEMENT OF CASH FLOWS

Direct Method Notes 2012 2011 Direct Method Notes 2012 2011

Operating Activities Financing activities

Receipts from customers 35.582.791,41 35.889.280,26 Receivables from:

Payments to suppliers (9.896.333,18) (9.678.668,96) Interest and Similar Income 1.020.636,87 1.041.591,10

Payments to employees (12.014.570,61) (12.838.078,30)

Payments and Receipt of income tax (666.633,93) (264.408,37) Payments relating to:

Other Receipts and Payments relating to operating (210.508,11) (374.640,96) Loans Received (3.740.984,20) (3.740.984,20) activities Interest and similar expenditure (4.896.493,64) (5.145.043,19) Flows from operating activities 12.794.745,58 12.733.483,67

Investing Activities Flows from financing activities (7.616.840,97) (7.844.436,29)

Receivables from:

Tangible Fixed Assets 338,17 0,00 Change in cash and cash equivalents 187.235,18 4.915.512,76 Investment Grants 487.832,64 0,00

Interest and Similar Income 309.713,54 235.516,69 Cash and cash equivalents at beginning of period 13 25.207.975,86 20.292.463,10

Cash and cash equivalents at end of period 13 25.395.211,04 25.207.975,86

Payments relating to: unit: euros Tangible and intangible fixed assets (32.503,73) (55.649,03)

Concession Rights (756.050,05) (153.402,28)

Loans granted (5.000.000,00) 0,00 BOARD OF DIRECTORS Flows from investing activities (4.990.669,43) 26.465,38 António José do Amaral Ferreira de Lemos António dos Santos Morgado Duarte Nuno Fraga Gomes Ferreira

CHARTERED ACCOUNTANT Isabel Maria Reis da Costa

Notes 6 to 27 form an integral part of these Financial Statements.

Aeroportos da Madeira ‹ Annual Report 2012 128 NOTES TO THE FINANCIAL STATEMENTS IV

Aeroportos da Madeira ‹ Annual Report 2012 1. GENERAL INFORMATION 134 TABLE OF 1.1 Background and Purpose of Activity 134 CONTENTS 1.2 Airport Sector Public Service Concession 134 1.3 Legal Framework for Regulation 136

2. ACCOUNTING POLICIES 136 2.1 Basis of Presentation 136 2.2 New Standards and Interpretations 137 2.3 Segment Reporting 140 2.4 Foreign Currency Translation 141 2.5 Tangible Fixed Assets 141 2.6 Intangible Assets 142 2.7 Concession Rights 142 2.8 Impairment 143 2.9 Inventories 144 2.10 Financial Assets 144 2.11 Trade and Other Receivables 144 2.12 Cash and Cash Equivalents 145 2.13 Financial Liabilities 145 2.14 Loans 145 2.15 Payables and Other Liabilities 145 2.16 Provisions 146 2.17 Financial Derivatives 146 2.18 Investment Grants 147 2.19 Income tax 147 2.20 Leases 147 2.21 Revenue 148 2.22 Financial Costs 148 2.23 Fair Value of Financial Assets and Liabilities 148

Aeroportos da Madeira ‹ Annual Report 2012 130 3. FINANCIAL RISK MANAGEMENT 149 TABLE OF 3.1 Financial Risk Factors 149 CONTENTS 3.2 Capital Risk Management 152

4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 152 4.1 Impairment of Assets 152 4,2 Judgements 153

5. SEGMENT REPORTING 154

6. MOVEMENTS IN CAPITAL ASSETS, TANGIBLE ASSETS IN PROGRESS AND OTHER INTANGIBLE ASSETS 156

7. CONCESSION RIGHTS 158

8 FINANCIAL ASSETS AND LIABILITIES BY CATEGORY 160

9. TRADE AND OTHER RECEIVABLES 162 9.1 Non-current Receivables 162 9.2 Current Receivables 162 9.3 Maturity of Balances Receivable 164 9.4 Movement in Impairment of Assets captions 165

10. DEFERRED TAXES 166

11. INVENTORIES 168

12. CURRENT TAX 169

13. CASH AND CASH EQUIVALENTS 169

14. CAPITAL 170

Aeroportos da Madeira ‹ Annual Report 2012 131 TABLE OF 15. RESERVES 170 CONTENTS 16. LOANS 171 16.1 Non-current and Current Loans 171 16.2 Terms and Deadlines for Reimbursement of Loans 171 16.3 Debenture Loan 172 16.4 Financial Lease Liabilities 173 16.5 Lines of Credit 173

17. PAYABLES AND OTHER LIABILITIES 173 17.1 Non-Current Payables 173 17.2 Current Payables 174

18. REVENUE 176

19. OTHER INCOME 177

20. SUPPLIES AND SERVICES 177

21. PERSONNEL COSTS 178

22. CONSTITUTION AND REVERSAL OF IMPAIRMENT 179

23. OTHER EXPENSES 180

24. DEPRECIATION AND AMORTISATION 180

25. FINANCIAL INCOME 181 25.1 Borrowing Costs 181 25.2 Other Financial Income 181

Aeroportos da Madeira ‹ Annual Report 2012 132 TABLE OF 26. INCOME TAX 181 CONTENTS 27. EARNINGS PER SHARE 182

28. COMMITMENTS 182

29. BALANCES AND TRANSACTIONS WITH RELATED PARTIES 183

30. INFORMATION ON ENVIRONMENTAL MATTERS 185

31. LAWSUITS AND OTHER CONTINGENCIES 186 31.1 Legal Proceedings in which ANAM, SA is a Party 186 31.2 Insolvency Proceedings and Tax Enforcement 187 31.3 Other Proceedings and Liabilities 187 31.4 Guarantees to Third Parties 188

32. SUBSEQUENT EVENTS 188

V. AUDIT REPORTS AND STATUTORY AUDIT 189

Aeroportos da Madeira ‹ Annual Report 2012 133 NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL INFORMATION The operation of the public airport sector support service for civil aviation in the Autonomous Region of Madeira, as well as related commercial operations, is its main purpose contained under the terms of the Concession 1.1 BACKGROUND AND PURPOSE OF ACTIVITY Agreement:

ANAM - Aeroportos e Navegação Aérea da Madeira, SA (abbreviated to • In the study, planning, construction and operation of the Airports in the ANAM, SA), is a wholly publicly owned public limited company. Capital in Autonomous Region of Madeira; the amount of 67,500,000 euros is subscribed and paid up by the following shareholders: • In the maintenance and development of airport infrastructures of Air- ports in the Autonomous Region of Madeira.

Shareholders No. Shares % Capital The Financial Statements relate to the year ended 31 December 2012. The ANA – Aeroportos de Portugal, SA 9.450.000 70% financial statement and their associated notes are presented in euro cents,

Autonomous Region of Madeira 2.700.000 20% except where expressly stated otherwise.

Portuguese State 1.350.000 10% 1.2 AIRPORT SECTOR PUBLIC SERVICE CONCESSION

Through Regional Legislative Decree 8/92/M, of 21 April, the Regional Government of Madeira licenses under concession to ANAM, SA the The Company’s business activity is developed under a system of Conces- “right to promote and execute the extension works at Santa Catarina sion and, given the public service it provides, it has among its assets and Airport and develop infrastructure, as well as the planning and opera- administers assets and public rights of the airport sector of the ARM, tion of the public service in support of civil aviation in the Autonomous licensing the respective occupation and exercise of any activities and Region of Madeira, pursuant to the law and the following clauses.” charging, accordingly, the respective rates, as established in Regional Leg- (Concession Agreement): islative Decree 8/92/M, of 21 April, and the supplementary application of Decree-Law 102/90, of 21 March and 275/99, of 23 July, depending on Cláusula 3ª: Âmbito da Concessão the type and nature. Cláusula 4ª: Serviço Público

Aeroportos da Madeira ‹ Annual Report 2012 134 NOTES TO THE FINANCIAL STATEMENTS

The Concession Agreement beginning on 01 October 1993, initially for 25 • Adapt the terms of the current contract, which is more focused on an years, was subsequently extended under the terms of Regional Legislative expansion project at Madeira Airport, to the continuous and efficient op- Decree 7-A/2000/M, of 15 March, for periods of 5 years up to a maximum 15 eration of airports; years (i.e. until 2033) in order to achieve a nominal internal rate of return on • Clarify the responsibilities and positions of the Concessionaire, Authority investment of 7.1% + 0.4% for each renewal period and the full amortisation and Regulator. of the debt that was contracted for the project to expand the airport. It should be remembered that the Strengthening of the Economic and Fi- In 2010, the Board of Directors, aware of imbalances evidenced by the struc- nancial Situation of ANAM, SA had already been the subject of previous ture of the Concession and the need to strengthen its economic and financial studies, developed with the support of external consultants, in which three situation, presented at the General Meeting of 26.MAR.2010, an item for the basic scenarios were presented to the Authority: consideration of shareholders regarding the economic and financial situation of the Company, which decided: “in light of the financial difficulties that frame the Review of the Method for Calculating Amortisation; economic activity of ANAM, SA, translated into a state of successive deteriora- Extension of the Concession Term; and tion of levels of Equity Capital, the Board of Directors of the Company should Separation of Property and Infrastructure. restart the process of renegotiating the Concession Agreement with a view to the extension of its term (...)”. These scenarios were presented to the Authority, which at the time considered Extension of the Concession Term to be the priority, taking into ac- The Board of Directors, pursuant to the mandate given to it, commissioned count a change in the assumptions in terms of income, the combination of the necessary studies and submitted to the Authority and to Shareholders, increased traffic and a change in charges, along with specific incentives and in November 2010, a proposal for the revision of the Concession Agreement increments in commercial areas (Letter S5349, from SREST of 17.MAY.2006). which included, in addition to an extension of its term to 2053, a term already considered in the accounts presented since 2010, the need to achieve Since the importance of extending the Concession Agreement was never the objectives envisaged in the aforementioned proposal, in order to: in doubt, as evidenced by the various letters emanating from agencies of • Balance the economic and financial situation of ANAM, SA, seeking to the Autonomous Region of Madeira, for accounting purposes, the term is ensure the sustainability of airport services and hence the accessibility of considered to have been extended for another 20 years. the Region;

Aeroportos da Madeira ‹ Annual Report 2012 135 NOTES TO THE FINANCIAL STATEMENTS

1.3 LEGAL FRAMEWORK FOR REGULATION The Other Charges of a Commercial nature are approved by the Concession Operator’s proposal by order of the Regional Secretariat of Culture, Tourism The Company’s business activities are regulated by the National Institute and Transport. of Civil Aviation (INAC), whose mission is to promote the safe, effective and sustained development of civil aviation activities through regulation, legislation, certification, licensing, approval, monitoring and oversight of 2. ACCOUNTING POLICIES these activities, the respective agents and recipients, as shown in the Stra- tegic Transport Plan, approved by RCM 45/2011, of 10 November, and by The significant accounting policies used in preparing these Financial State- extensive international regulations, particularly those emanating from the ments are described below. These policies have been applied consistently to International Civil Aviation Organisation – (ICAO). the periods presented, unless otherwise stated.

In terms of regulation of traffic charges and ground handling, INAC issues If not explicitly mentioned, all amounts are stated in euros. a preliminary, non-binding opinion, with charges, after consultation with users, being established by ordinance of the Regional Secretariat of Culture, 2.1 BASIS OF PRESENTATION Tourism and Transport. The Financial Statements have been prepared in accordance with the IFRS The Security Fee incorporates a Component A (charged by INAC, 42.5% of adopted by the European Union (“IFRS”), issued and effective or issued and which is subsequently delivered to ANAM, SA) and Component B (billed adopted as early as of 31 December 2012. and collected by ANAM, SA), both pursuant to Ordinance 541/2004, of 21 May. Thus, the Financial Statements have been prepared under the historical cost principle. Also for compliance with Regulation 1107/2006, of 05 July, which entered into force on 26 July 2008, a fee was created for providing assistance to The preparation of Financial Statements in conformity with the IFRS re- Passengers with Reduced Mobility, charged from 01 December 2008 in ac- quires the use of some important estimates that affect the amounts of as- cordance with Ordinance 208/2008, of 28 November. sets and liabilities, as well as the amounts of income and expenses during the reporting period. These estimates and assumptions result from man-

Aeroportos da Madeira ‹ Annual Report 2012 136 NOTES TO THE FINANCIAL STATEMENTS

agement’s best knowledge in relation to current events and actions, but Standards: are not expected to cause significant adjustments to the values of assets and liabilities in future years. The areas involving a higher degree of judge- • IAS 1 (amendment) “Presentation of financial statements” (effective in ment, or where estimates are more significant to the Financial Statements, annual periods beginning on or after 01 July 2012). This amendment re- are described in Note 4. quires Entities to separately present those captions reported as Other comprehensive income, depending on whether they can be recycled or not in 2.2 NEW STANDARDS AND INTERPRETATIONS the future by income for the year and respective fiscal impact, if the balances are presented before taxes. This amendment has no impact on the a) Standards and Interpretations that became effective as of 01.JAN.2012 Financial Statements of ANAM, SA, given that there are no situations reportable as “Other Comprehensive Income”. The following new standards adopted by the European Union are mandatory from 01 January 2012. • IAS 12 (amendment), “Income Taxes” (effective in the EU in annual periods beginning on or after 01 January 2013). This amendment requires an • IFRS 7 (amendment) “Financial Instruments: Disclosure – Transfer of fi- Entity to measure deferred taxes related to assets depending on whether nancial assets (effective in annual periods beginning on or after 01 July the Entity expects to recover the asset’s net value through its use or sale, ex- 2011). This amendment to IFRS 7 relates to disclosure requirements regard- cept for investment properties measured in accordance with the fair value ing financial assets transferred to third parties but not derecognised in the model. This amendment incorporates in IAS 12 the principles included in balance sheet as a result of the entity maintaining associated obligations or SIC 21, which is revoked. This amendment has no impact on the Financial continuing involvement. This amendment has no impact on the Financial Statements of ANAM, SA. Statements of ANAM, SA. • IAS 19 (2011 revision), “Employee benefits” (effective in annual periods b) New standards and amendments to existing standards, which, despite beginning on or after 01 January 2013). This revision introduces significant having already been published, are of mandatory application only for an- differences in the recognition and measurement of the costs of defined nual periods that begin on or after 01 July 2012: benefits and termination benefits, as well as the disclosures to be made pertaining to all employee benefits. Remeasurement impacts are immediately recognised only in “Other comprehensive income” (use of the corridor approach is not allowed). The financial cost of the plans with a constituted

Aeroportos da Madeira ‹ Annual Report 2012 137 NOTES TO THE FINANCIAL STATEMENTS

fund is calculated on the net basis of the non-funded liability. Termination ion. This amendment is intended to clarify how entities adopting IFRS for benefits only qualify as such if there is no obligation on the part of the em- the first time should account for a government loan with an interest rate ployee to provide future services. ANAM, SA will apply this standard in the below the market rate. It also introduces an exemption to retrospective ap- annual period in which it becomes effective. plication, similar to that given to entities that already reported under IFRS in 2009. This amendment has no impact on the financial statements of • Improvement of standards 2009-2010, to be applied mostly to the ANAM, SA, as it already applies the IFRS. annual periods beginning on or after 01 January 2013. This amendment is still subject to the process of adoption by the European Union. The annual • IFRS 10 (new), “Consolidated financial statements” (effective in the EU improvement process in 2009-2010 affects the following standards: IFRS 1, in annual periods beginning on or after 01 January 2014). The IFRS 10 re- IAS 1, IAS 16, IAS 32 and IAS 34. These improvements will be adopted by places all principles associated with the control and consolidation included ANAM, SA, where applicable, except for those improvements to IFRS 1, due in IAS 27 and SIC 12, changing the definition of control and the criteria for to the fact that the Company already applies the IFRS. determining control. The basic principle that the consolidated presents its parent company and its subsidiaries as a single entity remains unchanged. • IFRS 1 (amendment), “First-time adoption of IFRS” (effective in the EU in This standard does not apply to ANAM, SA as it does not consolidate its annual periods beginning on or after 01 January 2013). This amendment accounts. seeks to include a specific exemption for entities that previously operated in hyperinflationary economies, and are now adopting the IFRS for the first • IFRS 11 (new), “Joint arrangements” (effective in the EU in annual periods time. The exemption enables an Entity to measure certain assets and liabili- beginning on or after 01 January 2014). IFRS 11 focuses on the rights and ties at fair value, using the fair value as “deemed cost” in the statement of obligations associated with joint arrangements rather than the legal form. opening financial position for the IFRS. Another amendment relates to the Joint agreements may be joint Operations (rights over assets and obliga- replacement of references to specific dates by “date of transition to the tions) or Joint undertakings (rights over net assets by applying the equity IFRS” in the exceptions to the retrospective application of the IFRS. This method). Proportional consolidation is no longer permitted in the measure- amendment has no impact on the Financial Statements of ANAM, SA. ment of jointly controlled entities. ANAM, SA will apply this standard in the annual period in which it becomes effective. • IFRS 1 (amendment), “First-time Adoption of IFRS – Government loans” (effective for annual periods beginning on or after 01 January 2013). This • IFRS 12 (new) – “Disclosure of interests in other entities” (effective in the amendment is still subject to the process of adoption by the European Un- EU in annual periods beginning on or after 01 January 2014). This standard

Aeroportos da Madeira ‹ Annual Report 2012 138 NOTES TO THE FINANCIAL STATEMENTS

establishes disclosure requirements for all types of interests in other enti- • IFRS 13 (new) – “Fair value: measurement and disclosure” (effective in an- ties, including joint ventures, associated companies and special purpose nual periods beginning on or after 01 January 2013). IFRS 13 is intended to entities, in order to assess the financial nature, risk and impacts associated improve consistency, by providing a definition of fair value and constituting with the interest of the Entity. ANAM, SA will apply this standard in the an- the single basis of measurement and disclosure requirements for fair value, nual period in which it becomes effective. to be applied to all IFRS. ANAM, SA will apply this standard in the annual period in which it becomes effective. • Amendment to IFRS 10, IFRS 11 and IFRS 12 – “Transition guidance” (effective in annual periods beginning on or after 01 January 2013). This • IAS 27 (2011 revision), “Separate financial statements” (effective in the amendment is still subject to the process of adoption by the European Un- EU in annual periods beginning on or after 01 January 2014). IAS 27 was ion. This amendment clarifies that, where application of IFRS 10 results reviewed after the issue of IFRS 10 and contains the accounting and disclo- in an accounting treatment of a financial investment different from that sure requirements for investments in subsidiaries and joint ventures and as- previously followed, according to IAS 12 27/SIC 12, the comparatives must sociated companies when an Entity prepares separate financial statements. be restated, but only for the preceding comparative period, with the dif- ANAM, SA will apply this standard in the annual period in which it becomes ferences arising at the date of the beginning of the comparative period effective. being recognised in equity capital. Specific disclosures are required by IFRS 12. ANAM, SA will apply this amendment in the annual period in which it • IAS 28 (2011 revision), “Investments in associates and joint ventures” (effec- becomes effective. tive in the EU in annual periods beginning on or after 01 January 2014). IAS 28 was revised after the issue of IFRS 11 and includes the accounting treat- • Amendment to IFRS 10, IFRS 12 and IAS 27 – “Investment entities” ment of investments in associates and joint ventures, and establishes the (effective in annual periods beginning on or after 01 January 2014). This requirements for applying the equity method. This standard does not apply amendment is still subject to the process of adoption by the European Un- to ANAM, SA as it does not have investments in associates or joint ventures. ion. This amendment includes the definition of Investment entity and introduces the system for exception from consolidation for investment entities • IFRS 7 (amendment), “Disclosures – offsetting financial assets and finan- that qualify as such, given that all investments will be measured at fair cial liabilities” (effective in annual periods beginning on or after 01 January value. Specific disclosures are required by IFRS 12. ANAM, SA will apply this 2013). This amendment is part of the IASB project “offsetting of assets and amendment in the annual period in which it becomes effective. liabilities” and introduces new disclosure requirements on non-accounted offsetting rights (for assets and liabilities), offset assets and liabilities and

Aeroportos da Madeira ‹ Annual Report 2012 139 NOTES TO THE FINANCIAL STATEMENTS

the effect of such offsetting on exposure to credit risk. ANAM, SA will apply rials in the initial phase of a surface mine, as an asset, whereas the removal this standard in the annual period in which it becomes effective. of the waste materials generates two potential benefits: immediate extrac- tion of mineral resources and the opening of access to additional quantities • IAS 32 (amendment), “Offsetting financial assets and financial liabili- of mineral resources to be extracted in the future. This interpretation does ties” (effective in annual periods beginning on or after 01 January 2014). not apply to ANAM, SA as it does not engage in the exploration of mineral This amendment is part of the IASB project “asset and liability offsetting”, resources through surface mines. which clarifies the term “currently holding the legal right to set-off” and clarifies that some settlement systems by gross amounts (clearing houses) 2.3 SEGMENT REPORTING may be equivalent to offsetting by net amounts. ANAM, SA will apply this standard in the annual period in which it becomes effective. The activity is reported in operating segments, where an operating segment is a component of an entity: • IFRS 9 (new), “Financial instruments – recognition and measurement” (effective in annual periods beginning on or after 01 January 2015). This a) That engages in business activities from which it may obtain Revenue standard is still subject to the process of adoption by the European Union. and incur Expenses (including Revenues and Expenses relating to transac- This represents first phase of IFRS 9, under which two categories of measure- tions with other components of the same entity); ment are provided: depreciated cost and fair value. All equity instruments are measured at fair value. A financial instrument is measured at the depreciated b) Whose Operating Results are regularly reviewed by the principal op- cost only when the Entity holds it to receive the contractual cash flows and erating decision maker of the entity for purposes of making decisions these cash flows represent the nominal plus interest rate. Otherwise, the -fi regarding allocation of resources to the segment and assessment of its nancial instruments are valued at fair value through profit or loss. ANAM, SA performance; and will apply IFRS 9 in the annual period in which it becomes effective. c) In relation to which separate financial information is available. Interpretations: ANAM, SA has identified the Board of Directors as being in charge of mak- • IFRIC 20 (new), “Stripping costs in the production phase of a surface ing operating decisions, i.e. the body that reviews the internal information, mine” (effective in annual periods beginning on or after 01 January 2013). prepared in order to evaluate the performance of the Company’s activities This interpretation refers to the reporting of costs of removing waste mate- and the allocation of resources. The segments were determined based on

Aeroportos da Madeira ‹ Annual Report 2012 140 NOTES TO THE FINANCIAL STATEMENTS

the information that is analysed by the Board of Directors, of which no new In order to translate monetary assets and liabilities in foreign currencies existing segments resulted compared to those previously reported. at balance sheet date, the following exchange rates against the euro were used:

ANAM, SA reports its activity in two operating segments: Airports and Currency 2012 2011 Commercial Activity. USD 1,3194 1,2939

• Airports: includes all activity undertaken by the Airports as business units; GBP 0,8161 0,8353 • Commercial Activity: includes all activity undertaken by the Retail, Real Estate and Car Parking business units.

2.4 FOREIGN CURRENCY TRANSLATION 2.5 TANGIBLE FIXED ASSETS

Items included in the Financial Statements are measured using the currency of The Company’s Tangible Fixed Assets comprise Capital Assets acquired by the economic environment in which the Company operates (the euro). ANAM, SA and not directly allocated to the Concession Rights.

Transactions in foreign currencies are translated into euros at official rates at the Tangible Fixed Assets are stated at historical cost, which includes all dates of transactions. expenditures directly attributable to the acquisition of the assets, net of depreciation. Exchange differences realised in the annual period, as well as those unrealised ascertained in relation to the balances existing at the financial position date, at The assets acquired by the Company are being depreciated on a straight- the exchange rates prevailing at that date, are recognised in the Statement of line basis (in twelfths) in order to allocate their cost to their residual values, Comprehensive Income. depending on the estimated useful life.

Aeroportos da Madeira ‹ Annual Report 2012 141 NOTES TO THE FINANCIAL STATEMENTS

Gains or losses arising from write-offs or disposals are determined by the dif- January 2009, for comparative purposes), IFRIC 12 (Service Concession ference between the proceeds from the disposals and the carrying amount Arrangements) will be adopted in the recognition of the Assets allocated of the asset, and are recognised as income or expenses in the Statement of to the Concession: Comprehensive Income. • The activities under concession provide a public service; The average useful life of the main Tangible Fixed Assets is summarised as • The Concession Agreement regulates the activities to be pursued by the follows: concession operator; Tools and Utensils 1 to 8 years Transport Equipment 4 to 7 years • The services under the contract are available to all operators (air opera- Office Equipment 3 to 10 years tors) and users (passengers) of the airport infrastructure;

Tangible Assets in Progress • The prices charged (rates) are set by the Regional Government;

Includes Assets that will be capitalised under Tangible Fixed Assets at the • The Authority controls the infrastructure, as the Concession Operator may time of their commissioning. not encumber assets or dispose of them, despite owning them, without the approval of the Authority; 2.6 INTANGIBLE ASSETS • At the end of the concession, all assets of the concession automatically The Intangible Assets relate solely to software and are stated at cost, net of revert to the Authority, with no right to compensation. amortisation, calculated within the period of useful life (3 years) in accordance with the provisions of IAS 38. Such characteristics make the agreement of the type: Build-Operate-Transfer.

2.7 CONCESSION RIGHTS The Concession Agreement provides that ANAM, SA assumes the obligations of investing in infrastructure and construction, funding, avail- The characteristics of the Concession Agreement between the Govern- ability and demand risks. Thus, the accounting model used by the Com- ment of the Autonomous Region of Madeira and ANAM, SA have de- pany was the intangible asset model. termined that, with effect from 01.JAN.2010 (with values restated at 01

Aeroportos da Madeira ‹ Annual Report 2012 142 NOTES TO THE FINANCIAL STATEMENTS

Thus, the Concession Rights include all assets acquired by ANAM, SA Whenever the carrying amount of the set of assets that constitutes the that are deployed on land and property in the public domain, these cash-generating unit exceeds the recoverable amount, it is reduced to the goods being returnable to the Authority at the end of the Concession recoverable amount, with this impairment loss being recognised in the in- term, whereby ANAM, SA may not freely dispose of them. come statement.

The Concession Property comprising the Concession Rights has the follow- The recoverable amount is the higher of the current use value – calculated ing nature: based on the continued use of the asset and its disposal at the end of its useful life – and the fair value minus selling costs – value to be obtained in Buildings and Other Structures; a sale under market conditions minus costs of disposal. Basic Equipment; Impairment losses on assets (other than goodwill) are reversed, where indi- Land and Natural Resources; cators of impairment are reduced or cease to exist. Transport Equipment allocated to the airport activity. In the context of the concession agreement concluded on 14 December Amortisation of the Concession Rights and respective Grants were calcu- 2012 between ANA, SA and the Portuguese State, the economic regulation lated on a straight-line basis over the term of the Concession. of the provision of airport public services is applied to the Group’s network of airports, which includes the airports belonging to ANAM, thus putting 2.8 IMPAIRMENT into practice the principle of integrated management of the business and consolidating a single cash-generating unit in 2013. The Company’s assets are reviewed at each reporting date in order to de- tect any Impairment losses. In order to ensure the legal formalisation of the management model stated above, the Autonomous Region of Madeira, through Resolution 53/2013 of In determining the recoverable value of the Assets, and given that the as- 06 February, mentions its intention to promote the sale of its stake (20%) in sets of the Company, in themselves, do not generate independent cash the share capital of ANAM, SA to ANA, SA. flows, the airport system, with all of the Company’s assets, is considered the cash-generating unit.

Aeroportos da Madeira ‹ Annual Report 2012 143 NOTES TO THE FINANCIAL STATEMENTS

In this context and considering the irreversibility of the management by ii) Loans and Receivables – includes Non-derivative Financial Assets with networking of the airports belonging to the ANA Group enshrined in the fixed or determinable payments that are not quoted in an active market; ANA acquisition agreement, which was concluded in the meantime with Loans and Receivables are classified in the balance sheet as “Trade and VINCI Concessions SAS, it may be concluded that, regardless of the legal Other Receivables” and are carried at amortised cost using the effective model that may be adopted for incorporating ANAM, SA into ANA, SA, the interest rate method, less any impairment loss. A provision for impair- fair value of the assets of economic and business reality of the Group was ment of trade receivables is made when there is objective evidence that obtained through the market, in a transparent and competitive process. ANAM, SA will not be able to collect all amounts due according to the original terms of the transaction that gave rise to them. 2.9 INVENTORIES iii) Held-to-Maturity Investments – include non-derivative financial assets Inventories are valued at the lower of cost or net realisable value. They refer with fixed or determinable payments and fixed maturities that the entity to materials used for internal activities of maintenance and upkeep. Inven- has the intention and ability to hold to maturity; tories are initially recognised at acquisition cost, which includes all costs incurred in the purchase. Cost is determined using the weighted average iv) Financial assets available for sale – include non-derivative financial assets cost method. that are designated as available-for-sale at initial recognition, or which do not fit into the above categories. They are recognised as Non-current Assets unless 2.10 FINANCIAL ASSETS there is an intention to sell them within 12 months of the balance sheet date.

The classification of Financial Assets is determined at the date of initial Financial Assets are derecognised when the rights to receive cash flows recognition in accordance with the purpose of their purchase, with this from the investments expire or are transferred, as well as all risks and reclassification being reassessed at each reporting date. wards of ownership.

Financial assets may be classified as: 2.11 TRADE AND OTHER RECEIVABLES i) Financial Assets at Fair Value through Income – include Non-derivative The balances receivable from customers and other debtors are recognised Financial Assets held for trading relating to short-term investments and As- initially at fair value and subsequently at amortised cost, less any impair- sets at Fair Value through Income at the date of initial recognition; ment losses.

Aeroportos da Madeira ‹ Annual Report 2012 144 NOTES TO THE FINANCIAL STATEMENTS

Impairment losses of accounts receivable are recognised where there is ob- Financial Liabilities at Fair Value Through Profit and Loss refer to derivatives jective evidence that the Company will not receive the full amount due, ac- employed in the management of the financial risks of the Company. cording to the original terms of the receivables. Various indicators are used in the identification of situations of impairment: Other Financial Liabilities include Loans (Note 2.15) and Payables and Other i) Analysis of default; Liabilities (Note 2.16). ii) Default for more than 6 months; Financial Liabilities are derecognised when the underlying obligations are iii) Financial difficulties of the debtor. extinguished by payment, are cancelled or expire.

Impairment Losses represent the difference between the asset’s carrying amount 2.14 LOANS and the present value of estimated future cash flows (considering the recovery period), discounted at the original effective interest rate of the financial asset. Loans are initially recognised at fair value net of transaction costs in- Impairment Losses are recognised in the Statement of Comprehensive Income. curred. Loans are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the amortised 2.12 CASH AND CASH EQUIVALENTS value is recognised in the Statement of Comprehensive Income over the period of the loan, using the effective interest rate method. The caption Cash and Cash Equivalents includes cash, bank deposits, other short-term, highly liquid investments with maturities of up to 3 months and Loans are classified as Non-current Liabilities, except for amounts tobe bank overdrafts. Bank overdrafts are shown in the Statement of Financial repaid in the next financial year, which are transferred to Current Liabilities. Position, under Current Liabilities, under the caption “Current Loans”.

2.13 FINANCIAL LIABILITIES 2.15 PAYABLES AND OTHER LIABILITIES

IAS 39 provides for the classification of Financial Liabilities into two categories: Payables and Other Liabilities are recognised initially at fair value and i) Financial Liabilities at fair value through profit or loss; subsequently measured at amortised cost, in accordance with the effec- ii) Other Financial Liabilities. tive interest rate method.

Aeroportos da Madeira ‹ Annual Report 2012 145 NOTES TO THE FINANCIAL STATEMENTS

2.16 PROVISIONS 2.17 FINANCIAL DERIVATIVES

Provisions are measured at the present value of the estimated expenditure Derivative Financial Instruments are initially recorded at fair value at the required to settle the obligation using a pre-tax rate that reflects the mar- transaction date, and subsequently valued at fair value. The method of rec- ket assessment for the discount period and for the risk of the provision ognising gains and losses in fair value depends on the designation made of in question. the Derivative Financial Instruments.

Provisions for Restructuring Costs and Legal Claims are recognised where Where they are Trading Derivative Financial Instruments, gains and losses the Company has: in fair value are recognised in the income statement, under the captions expenses or financial income. • A legal, contractual or customary obligation, as a result of past events; • It is probable that an outflow of resources will be required to extinguish When designated as Hedging Derivative Financial Instruments, the recog- the obligation; nition of gains and losses in fair value depends on the nature of the item • A reliable estimate may be made of the amount of the obligation. being hedged, which may be treated as a fair value hedge or a cash flow hedge. Provisions for restructuring include penalties usually derived from termination of lease contracts and payment of compensation for termination of Gains and losses on fair value hedge operations are recognised in the State- employment contracts of employees. ment of Comprehensive Income. In turn, gains and losses on cash flows hedges are initially recognised in equity capital and subsequently recycled Provisions are not recognised for future operating losses. through profit or loss, simultaneously with the pattern of recognition of gains and losses of the hedged instrument. When there are a number of similar obligations, the probability of generating an outflow is determined jointly. A Provision is recognised even where ANAM, SA does not have any Traded Derivative Financial Instruments for the likelihood of an outflow relative to an element included in the same the annual periods presented. class of obligations may be low.

Aeroportos da Madeira ‹ Annual Report 2012 146 NOTES TO THE FINANCIAL STATEMENTS

2.18 INVESTMENT GRANTS Deferred Tax is recorded in the Statement of Comprehensive Income, except where it relates to items recognised directly in Equity Capital. Grants are recognised at their fair value where there is reasonable assur- ance that they will be received and that the ANAM, SA will fulfil the inher- Deferred Tax is recognised as a whole, using the liability method, on temporary ent obligations. differences arising from the difference between the tax base of assets and liabilities and their carrying amounts in the Financial Statements. However, if • Non-refundable grants received to fund acquisitions of tangible assets the Deferred Tax arises from the initial recognition of an asset or liability in a are recorded as liabilities, as deferred income, and recognised in the State- transaction other than a business combination that at the time of the transac- ment of Comprehensive Income in proportion to the depreciation of the tion affects neither accounting result nor the result for tax purposes, it is not tangible assets subsidised. reported. Deferred Taxes are calculated based on tax rates (and laws) enacted Grants are classified as Non-current Liabilities, under the caption “Paya- or substantially enacted at the financial reporting date and that are expected to bles and Other Liabilities”, where the deferral period is longer than 12 apply in the period of realisation of the Deferred Tax Asset or settlement of the months. The remaining balance is classified as “Payables and Other Li- Deferred Tax Liability. abilities – Current”. Deferred Tax Assets are recognised to the extent that it is probable that future • Grants allocated to Concession Rights are recognised deducted from the taxable profits will be available for use from the temporary difference. value of invested assets, and are recognised in the Statement of Compre- hensive Income on a systematic (straight-line) basis, according to the amor- 2.20 LEASES tisation/depreciation of the asset subsidised. a) Financial Leasing 2.19 INCOME TAX Tangible Assets acquired under Leasing contracts in which ANAM, SA is subject to all the risks and rewards incidental to the ownership thereof Income Tax includes Current Tax and Deferred Tax. are reported using the financial method, whereby assets and the corresponding liabilities are recognised in the Statement of Financial Position. The estimate for Income Tax is recorded based on the taxable income earned in Consequently, depreciation of those assets and the interest included in the annual period, in accordance with applicable law. the lease amounts are recorded in profit or loss for the annual period to which they relate.

Aeroportos da Madeira ‹ Annual Report 2012 147 NOTES TO THE FINANCIAL STATEMENTS

Financial Leases are capitalised at the inception of the lease by the lower tially encompasses the provision of services in the areas of traffic, passen- of fair value of the leased asset and the present value of the minimum ger safety, ground handling, occupancy rates and other service provisions lease payments, determined at the date of inception of the contract. The related to the commercial area. debt arising from a financial leasing contract is recorded, net of financial charges, under the caption “Current and Non-current Loans”. The Financial b) Construction Service Expenses included under the lease and the depreciation of the leased assets This records the revenue resulting from the acquisition/construction of ad- are recognised in the Statement of Comprehensive Income in the period to ditional Assets for the infrastructure of the Concession, which increase the which they relate. economic rewards obtained under the Concession Rights.

Given their nature (vehicles), Tangible Fixed Assets acquired through financial c) Supplementary Income leasing are depreciated over a useful life of 4 years. These are recognised as per subparagraph a) above and include: transfer of personnel, provision of materials and invoicing for telephones, among b) Operating leases others. Leases are regarded as Operating Leases provided that a significant portion of the risks and rewards of ownership of the asset is retained by the lessor. 2.22 FINANCIAL COSTS

Leases paid under Operating Leasing contracts are recorded as expenses in Financial Costs represent the cost of using borrowings, primarily intended to the annual period in which they occur during the period of the lease. ensure the investments made by the Company. This caption includes interest income from the investment of cash surpluses with Corporate Banking. 2.21 REVENUE 2.23 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Revenue comprises the fair value of services, net of taxes and discounts. Revenue is recognised as follows: In determining the Fair Value of a Financial Asset or Liability, where there is a) Provision of Services an active market, the market price is applied. This constitutes level 1 of the The Provision of Services is recognised in the accounting period in which fair value hierarchy, as defined in IFRS 7 and used by ANAM, SA. the services are rendered, by reference to the stage of completion of the transaction at the date of the Statement of Financial Position. It essen-

Aeroportos da Madeira ‹ Annual Report 2012 148 NOTES TO THE FINANCIAL STATEMENTS

Where there is no active market, which is the case for some financial as- With respect to receivables from financial institutions, the following table sets and liabilities, valuation techniques generally accepted by the market summarises, at 31 December 2012 and 2011, the credit quality of the depos- are used, based on market assumptions. This constitutes level 2 of the fair its, investments and derivative financial instruments with positive fair value: value hierarchy, as defined in IFRS 7 and used by ANAM, SA. Financial Institutions 2012 2011 At the financial reporting date and for the comparative period, ANAM, SA Rating (*) did not have any assets or liabilities measured at fair value. Baa2 -- 1.552.163,00

Ba1 2.841.844,36 -- 3. FINANCIAL RISK MANAGEMENT Ba2 -- 10.371.987,37 Ba3 15.178.247,81 13.275.346,09

3.1 FINANCIAL RISK FACTORS B1 7.239.600,65 --

B2 127.238,82 -- The Company’s activities are exposed to a variety of financial risk factors: credit risk, liquidity risk and cash flow risk associated with interest rates. Other 1.000,00 1.000,00

Until 2009, the Company used derivative financial instruments to hedge * Source: Bloomberg / Bank websites certain risks to which it was exposed, which were subsequently cancelled. a) Credit Risk

Credit risk arises from Cash Balances and Cash Equivalents, deposits and derivative financial instruments in financial institutions, as well as the balance of accounts receivable from customers and other debtors.

Aeroportos da Madeira ‹ Annual Report 2012 149 NOTES TO THE FINANCIAL STATEMENTS

In relation to Customers and Other Debtors, it is note- 2012 0 to 6 months 6 to 12 months 1 to 5 years > 5 years worthy that there is a concentration of 67% of turnover among 10 customers. It is considered that the risk of this Suppliers current account 1.347.403,81 0,00 0,00 0,00 concentration is mitigated through the definition of poli- Suppliers Fixed Assets 175.234,91 0,00 0,00 0,00 cies that ensure that credit is granted to entities with an Related Parties 340.105,52 0,00 0,00 0,00 appropriate credit history, limiting risk, as well as the prior securing of guarantees covering part of the operations. Other Creditors 6.771,78 405.220,20 0,00 74.572,03 Guarantees Issued by Third Parties 13.295,53 36.414,70 45.111,51 27.433,88 b) Liquidity Risk Accrued Expenses 4.794.553,27 3.323.598,43 16.440.225,87 0,00

Bank Loans* 4.229.811,07 3.123.235,09 160.478.949,79 46.288.828,03 The management of Liquidity Risk involves maintaining a sufficient level of Cash and Cash Equivalents, consolidat- 10.907.175,89 6.888.468,42 176.964.287,17 46.390.833,94 ing floating debt through an adequate amount of credit Un: euros facilities and the opportunity to liquidate market positions against future needs. 2011 0 to 6 months 6 to 12 months 1 to 5 years > 5 years

Due to the dynamics of the business, the Company intends Suppliers current account 1.820.416,03 0,00 0,00 0,00 to ensure the flexibility of the floating debt, maintaining Suppliers Fixed Assets 416.259,10 0,00 0,00 0,00 short-term lines of credit stable. Related Parties 700.376,61 0,00 0,00 0,00

The following is an analysis of the Company’s liquidity, Other Creditors 3.192,66 0,00 437.448,16 74.572,03 broken down into maturity bands, considering within the Guarantees Issued by Third Parties 74.743,52 100,00 21.865,32 62.494,01 contractual cash flows the expected settlement dates of Accrued Expenses 1.991.816,37 2.459.126,53 16.019.375,72 0,00 the respective liabilities. Bank Loans* 5.126.370,96 3.695.521,30 171.795.997,05 51.857.055,02

10.133.175,25 6.154.747,83 188.274.686,25 51.994.121,06

Un: euros * This caption includes Financial Charges.

Aeroportos da Madeira ‹ Annual Report 2012 150 NOTES TO THE FINANCIAL STATEMENTS

The management of liquidity risk is ensured by: c) Cash Flow Risk and Fair Value Risk Associated with Interest Rates i. Cash Surpluses, which, at the end of 2012, amounted to 25,395,000 The Company’s interest-bearing assets, earnings and operating cash flows euros; generated are dependent on changes in market interest rates. The Company’s interest rate risk arises from long-term borrowings. Where: ii. Medium and long-term investments, totalling 20,000,000 euros, as per loans issued at variable rates expose the Company to cash flow risk associ- subparagraph b) of Note 29. ated with interest rate; loans issued at fixed rates expose the Company to fair value risk on the debt. iii. The restitution of Equity Capital, to achieve compliance with article 35 of the Companies Act, by means of cash injections in the estimated amount of An analysis of sensitivity to changes in the interest rate allows the following 20,000,000 euros, in a phased manner over the next 5 years; impact on Results to be ascertained: iv. The possibility of renegotiating/extending of the deadline for resched- 2012 Scenario with Scenario +0.5% Scenario -0.5% Current Rate* uling of debt repayments. From the outset, the Financing Agreement of Borrowing at Var. Rates (910.842,32) (1.653.911,16) (302.432,52) Tranche B of the EIB (71,079,000 euros), with a repayment period that be- ABN (240.256,17) (417.176,80) (76.343,75) gan in 2011 and ends in 2020, has presented an option to enable the bor- BGB (306.053,75) (546.345,41) (96.116,67) rower to ask the Bank in 2019 for the repayment of the balance of capital owed, corresponding to the instalment due in March 2020 (41,151,000 eu- BEI (364.532,41) (690.388,95) (129.972,10) ros), to be made in consecutive and constant annual instalments in capital, Borrowing at Fixed Rates (2.670.000,00) (2.670.000,00) (2.670.000,00) the first maturing in 2020 and the last in March 2030; Interest Received DP – ANA, SA 385.450,98 486.284,31 284.617,65

Interest Received DP 862.219,65 862.219,65 862.219,65 v. The release of future financial Cash Flows, due to the Company’s activity. Net Total (2.333.171,69) (2.975.407,19) (1.825.595,22)

Approximate Impact on Results --- (642.235,51) 507.576,46 / Scenario Current Rate Un: euros

* Interest costs in 2013. Forward rates of variable rate loans are less than 1%.

Aeroportos da Madeira ‹ Annual Report 2012 151 NOTES TO THE FINANCIAL STATEMENTS

2011 Scenario with Scenario +0.5% Scenario -0.5% iii) to create long-term value for shareholders. Current Rate* Borrowing at Var. Rates (2.048.769,20) (2.653.136,05) (1.444.402,35) This management is accomplished through measures such as: the issue of ABN (444.862,06) (610.139,83) (279.584,28) debt instruments (debenture loan); the negotiation and rescheduling of BGB (691.554,68) (857.454,68) (525.654,68) debt; and capital contributions from Shareholders.

BEI (912.352,47) (1.185.541,54) (639.163,40)

Borrowing at Var. Rates (2.670.000,00) (2.670.000,00) (2.670.000,00)

Interest Received DP – ANA, SA 378.831,38 454.873,04 302.789,71 4. SIGNIFICANT ACCOUNTING ESTIMATES Interest Received DP 666.543,68 666.543,68 666.543,68 AND JUDGEMENTS Net Total (3.673.394,15) (4.201.719,33) (3.145.068,97)

Approximate Impact on Results --- (528.325,18) 528.325,18 Estimates and judgements are continually evaluated and are based on historical / Scenario Current Rate experience and other factors, including expectations regarding future events, Un: euros which are believed to be reasonable under the circumstances concerned. * Interest costs in 2012. 4.1 IMPAIRMENT OF ASSETS

3.2 CAPITAL RISK MANAGEMENT Whenever the carrying amount of the set of assets that constitutes the cash-generating unit exceeds the recoverable amount, corresponding to The objective of the Company in relation to capital management, which the higher of the current use value and the fair value less selling costs, it is is a broader concept than the equity capital shown in the Statement of reduced to the recoverable amount, with this impairment loss being recog- Financial Position, is: nised in the Income Statement. i) to safeguard the Company’s ability to continue its activity and make the In 2012, no indication of impairment was found and, accordingly, no im- investments required to achieve the purpose of the concession; pairment loss was recorded. ii) to maintain an optimal capital structure that allows the cost of capital to be reduced; and

Aeroportos da Madeira ‹ Annual Report 2012 152 NOTES TO THE FINANCIAL STATEMENTS

a) Impairment of Receivables of 25 years, which was followed, pursuant to Regional Legislative Decree 7-A/2000/M of 15 March, by an extension for periods of 5 years, up to a The credit risk of the balances of receivables is assessed at each re- limit of 15 years, i.e. until 2033. porting date, taking into account historical information regarding the customer and their risk profile. Accounts receivable are adjusted by the In view of the economic and financial rebalancing of the Concession, stud- assessment made by management of the estimated collection risks ex- ies conducted later pointed to the need to extend the Concession until isting at the date of the statement of financial position, which may dif- 2053, twenty more years, which deserved to be accepted by the Authority. fer from the actual risk incurred. Therefore, as mentioned in paragraph 1.2 above, since 2010 the Compa- b) Estimate for renewal and replacement liabilities associated with the ny’s accounting records have reflected the adjustment of the Concession Concession Agreement of ANAM, SA term until 2053.

The provision for renewal and replacement liabilities associated with the b) Deferred Tax Assets concession is constituted in accordance with the quality parameters required for concession infrastructure and estimated wear, taking into ac- In 2012, the Company recognised the estimated value of Deferred Tax As- count its state of repair and use. This liability is assessed annually both sets, related to the best expectations of future recovery of reported tax as regards its amount and the date of occurrence, the provision recorded losses in future years (to 2015). corresponding to the present value of the best estimate of the liabilities assumed at each financial reporting date, resulting from the application of the “yield curves” of the cost of financing of the Portuguese State at 31.DEC.2012.

4.2 JUDGEMENTS a) Concession Agreement

The Concession Agreement was initially granted (01.OCT.1993) for a period

Aeroportos da Madeira ‹ Annual Report 2012 153 NOTES TO THE FINANCIAL STATEMENTS

5. SEGMENT REPORTING

2012 2012

Airports Commercial ANAM Airports Commercial ANAM

Operating Income excl. Grants 31.780.714,17 5.054.912,28 36.835.626,45 EBITDA 7.890.049,68 1.488.803,38 9.378.853,06

Revenue 31.319.115,95 5.050.006,78 36.369.122,73 Investment Grants 4.022.085,09 0,00 4.022.085,09

Provision of Services – Aviation 25.905.619,61 0,00 25.905.619,61 Amortisation ( 8.578.706,05) 0,00 ( 8.578.706,05)

Provision of Services – Security 3.032.901,60 0,00 3.032.901,60 Operating Income 3.333.428,72 1.488.803,38 4.822.232,10

Provision of Services – PRM 688.619,85 0,00 688.619,85 Financial Costs/Income ( 3.255.061,12)

Provision of Services – Non-aviation 1.169.000,47 5.043.785,70 6.212.786,17 Income Tax 4.847.159,82

Other Revenue 37.984,44 6.221,08 44.205,52 Net Income 6.414.330,80

Construction Service 484.989,98 0,00 484.989,98 Tangible Fixed Assets 330.550,06 330.550,06

Other Operating Income 198.870,99 4.905,50 203.776,49 Intangible Fixed Assets 180.963.350,81 180.963.350,81

Inter-segment Income 262.727,23 0,00 262.727,23 Investment 530.677,58 530.677,58

Operating Costs excl. Amortisation ( 23.890.664,49) ( 3.566.108,90) ( 27.456.773,39)

Operating Costs excl. Amortisation ( 23.890.664,49) ( 3.303.381,67) ( 27.194.046,16)

Inter-segment Costs 0,00 ( 262.727,23) ( 262.727,23)

Aeroportos da Madeira ‹ Annual Report 2012 154 NOTES TO THE FINANCIAL STATEMENTS

2011 2011

Airports Commercial ANAM Airports Commercial ANAM

Operating Income excl. Grants 33.399.368,37 5.126.991,63 38.526.360,00 EBITDA 8.176.624,29 1.985.633,83 10.162.258,12

Revenue 32.972.164,32 5.125.718,45 38.097.882,77 Investment Grants 4.012.582,31 0,00 4.012.582,31

Provision of Services – Aviation 27.508.609,06 0,00 27.508.609,06 Amortisation ( 8.724.794,47) 0,00 ( 8.724.794,47)

Provision of Services – Security 3.133.233,86 0,00 3.133.233,86 Operating Income 3.464.412,13 1.985.633,83 5.450.045,96

Provision of Services – PRM 727.002,88 0,00 727.002,88 Financial Costs/Income ( 3.875.043,50)

Provision of Services – Non-aviation 1.151.796,92 5.119.663,04 6.271.459,96 Income Tax 4.027.618,48

Other Revenue 38.464,60 6.055,41 44.520,01 Net Income 5.602.620,94

Construction Service 413.057,00 0,00 413.057,00 Tangible Fixed Assets 458.271,81 458.271,81

Other Operating Income 148.124,95 1.273,18 149.398,13 Intangible Fixed Assets 185.224.769,36 185.224.769,36

Inter-segment Income 279.079,10 0,00 279.079,10 Investment 448.381,25 448.381,25

Operating Costs excl. Amortisation ( 25.222.744,08) ( 3.141.357,80) ( 28.364.101,88)

Operating Costs excl. Amortisation ( 25.222.744,08) ( 2.862.278,70) ( 28.085.022,78)

Inter-segment Costs 0,00 ( 279.079,10) ( 279.079,10)

Aeroportos da Madeira ‹ Annual Report 2012 155 NOTES TO THE FINANCIAL STATEMENTS

6. MOVEMENTS IN CAPITAL ASSETS, TANGIBLE ASSETS IN PROGRESS AND OTHER INTANGIBLE ASSETS

IN 2012

Property Other In Total Intangible Progress Transport Tools and Fixtures Administrative Other Tangible Equip. Equip. Assets Gross Value

Balance at 01.01.2012 533.851,70 177.811,46 6.987.736,42 95.213,69 734.663,48 0,01 8.529.276,76

Increases ------13.163,86 --- 0,00 32.523,74 45.687,60

Transfers ------32.523,74 ------(32.523,74) 0,00

Write-offs ------(18.946,05) --- (3.002,76) 0,00 (21.948,81)

Disposals ------(20.759,96) ------(20.759,96)

Balance at 31-12-2012 533.851,70 177.811,46 6.993.718,01 95.213,69 731.660,72 0,01 8.532.255,59

Accumulated Depreciation

Balance at 01-01-2012 521.830,24 169.261,50 6.575.646,13 69.603,60 726.384,80 --- 8.062.726,27

Top-ups 8.404,43 3.307,59 152.125,24 9.572,09 7.219,65 --- 180.629,00

Write-offs ------(18.946,05) --- (3.002,76) --- (21.948,81)

Disposals ------(20.759,96) ------(20.759,96)

Balance at 31-12-2012 530.234,67 172.569,09 6.688.065,36 79.175,69 730.601,69 --- 8.200.646,50

Net Value

Balance at 01-01-2012 12.021,46 8.549,96 412.090,29 25.610,09 8.278,68 0,01 466.550,49

Balance at 31-12-2012 3.617,03 5.242,37 305.652,65 16.038,00 1.059,03 0,01 331.609,09

Aeroportos da Madeira ‹ Annual Report 2012 156 NOTES TO THE FINANCIAL STATEMENTS

IN 2011

Property Other In Total Intangible Progress Transport Tools and Fixtures Administrative Other Tangible Equip. Equip. Assets Gross Value

Balance at 01.01.2011 533.851,70 175.256,16 6.956.867,65 95.213,69 734.663,48 2.903,34 8.498.756,02

Increases --- 2.555,30 32.768,95 --- 0,00 0,00 35.324,25

Transfers ------1.508,00 ------(1.508,00) 0,00

Write-offs ------(3.408,18) ------(1.395,33) (4.803,51)

Disposals ------0,00

Balance at 31-12-2011 533.851,70 177.811,46 6.987.736,42 95.213,69 734.663,48 0,01 8.529.276,76

Accumulated Depreciation

Balance at 01-01-2011 507.009,16 163.798,02 6.326.655,46 60.031,51 669.389,44 --- 7.726.883,59

Top-ups 14.821,08 5.463,48 252.398,85 9.572,09 56.995,36 --- 339.250,86

Write-offs ------(3.408,18) ------(3.408,18)

Disposals ------0,00 ------0,00

Balance at 31-12-2011 521.830,24 169.261,50 6.575.646,13 69.603,60 726.384,80 --- 8.062.726,27

Net Value

Balance at 01-01-2011 26.842,54 11.458,14 630.212,19 35.182,18 65.274,04 2.903,34 771.872,43

Balance at 31-12-2011 12.021,46 8.549,96 412.090,29 25.610,09 8.278,68 0,01 466.550,49

Tangible Fixed Assets include capital assets acquired that are not allocated to the Concession, which are already in operation.

Intangible Assets relate solely to software and are stated at cost, net of depreciation, calculated within the period of useful life (3 years).

Aeroportos da Madeira ‹ Annual Report 2012 157 NOTES TO THE FINANCIAL STATEMENTS

7. CONCESSION RIGHTS

The figures relating to Concession Rights are as follows:

In 2012 Asset Grant In Net In 2011 Asset Grant In Net

Gross Gross

Balance at 01-01-2012 587.852.781,41 276.419.881,40 800.866,98 312.233.766,99 Balance at 01-01-2011 587.845.170,24 276.147.323,00 395.421,15 312.093.268,39

Increases 0,00 338.979,59 484.989,98 146.010,39 Increases 7.611,17 272.558,40 405.445,83 140.498,60

Transfers 766.589,48 - (766.589,48) 0,00 Balance at 31-12-2011 587.852.781,41 276.419.881,40 800.866,98 312.233.766,99

Write-offs (10.082,27) - - (10.082,27) Accumulated Amortisation

Balance at 31-12-2012 588.609.288,62 276.758.860,99 519.267,48 312.369.695,11 Balance at 01-01-2011 227.267.735,01 104.647.637,07 --- 122.620.097,94

Accumulated Amortisation Top-ups 8.385.543,61 3.988.365,24 --- 4.397.178,37

Balance at 01-01-2012 235.653.278,62 108.636.002,31 --- 127.017.276,31 Balance at 31-12-2012 235.653.278,62 108.636.002,31 --- 127.017.276,31

Top-ups 8.398.077,05 3.997.867,76 --- 4.400.209,29 Net Value

Write-offs (10.082,27) (10.082,27) Balance at 01-01-2011 360.577.435,23 171.499.685,93 395.421,15 189.473.170,45

Balance at 31-12-2012 244.041.273,40 112.633.870,07 --- 131.407.403,33 Balance at 31-12-2011 352.199.502,79 167.783.879,09 800.866,98 185.216.490,68

Net Value

Balance at 01-01-2012 352.199.502,79 167.783.879,09 800.866,98 185.216.490,68

Balance at 31-12-2012 344.568.015,22 164.124.990,92 519.267,48 180.962.291,78

Aeroportos da Madeira ‹ Annual Report 2012 158 NOTES TO THE FINANCIAL STATEMENTS

Grants related to assets allocated to the Concession are deducted from the Amortisations of the Concession Rights and respective Grants were calcu- value of the Concession Rights, as they are not an expense incurred by the lated on a straight-line basis over the term of the Concession. Concession Operator, but a Financial Asset Received. In 2011, the increase of 413,057 euros refers to the following projects: i) In 2012, the increase (of 484,990 euros) observed is related to the fol- Multi-storey Car Park Project in the amount of 64,748 euros, still in progress; lowing projects: i) Acquisition of a Virtualisation Solution and Storage for ii) Redesign of the Data Network, amounting to 340,698 euros, with a reim- the data network belonging to Madeira Airport, in the amount of 252,234 bursement of 80%, or 272,558 euros. euros, in relation to which a co-financing contribution of 80%, or 201,787 euros, is recorded; ii) Implementation of the Energy and Water Network Monitoring System at Madeira Airports totalling 112,392 euros, also with a reimbursement of 80%, or 89,914 euros; iii) Enforcement of Ordinance W amounting of 61,265 euros; iv) Acquisition of an Interactive Information System, currently in progress, in the amount of 59,099 euros, with a reimbursement of 80%, or 47,279 euros.

Aeroportos da Madeira ‹ Annual Report 2012 159 NOTES TO THE FINANCIAL STATEMENTS

8. FINANCIAL ASSETS AND LIABILITIES BY CATEGORY

The accounting policies for financial instruments were applied to the following financial assets and liabilities, in accordance with IAS 39.

2012 Credits and Amounts Liabilities at Fair Value Other Financial Other Assets /Liabilities Total Receivable through Profit or Loss Liabili outside IAS 39 ties

Assets

Cash and Cash Equivalents 25.395.211,04 - - - 25.395.211,04

Trade and Other Receivables 25.808.100,47 - - 1.129.095,96 26.937.196,43

Other Assets - - - 252.261,18 252.261,18

Total Financial Assets 51.203.311,51 0,00 0,00 1.381.357,14 52.584.668,65

Liabilities

Loans Received - - 199.387.273,22 - 199.387.273,22

Derivatives and other Financial Liabilities - - - - 0,00

Payables and Other Liabilities 3.124.060,04 - 27.412.850,09 - 30.536.910,13

Total Financial Liabilities 3.124.060,04 0,00 226.800.123,31 229.924.183,35

Aeroportos da Madeira ‹ Annual Report 2012 160 NOTES TO THE FINANCIAL STATEMENTS

2011 Credits and Amounts Liabilities at Fair Value Other Financial Other Assets /Liabilities Total Receivable through Profit or Loss Liabilities outside IAS 39

Assets

Cash and Cash Equivalents 25.207.975,86 - - - 25.207.975,86

Trade and Other Receivables 22.158.182,11 - - 1.199.436,05 23.357.618,16

Other Assets - - - 167.284,18 167.284,18

Total Financial Assets 47.366.157,97 0,00 0,00 1.366.720,23 48.732.878,20

Liabilities

Loans Received - - 202.988.739,42 - 202.988.739,42

Derivatives and other Financial Liabilities - - - - 0,00

Payables and Other Liabilities 4.227.709,82 - 24.146.815,67 - 28.374.525,49

Total Financial Liabilities 4.227.709,82 0,00 227.135.555,09 0,00 231.363.264,91

ANAM, SA does not disclose the fair value hierarchy used in measuring financial assets and liabilities as there were no assets or liabilities measured at fair value at the financial reporting dates.

Aeroportos da Madeira ‹ Annual Report 2012 161 NOTES TO THE FINANCIAL STATEMENTS

9. TRADE AND OTHER RECEIVABLES 9.2 CURRENT RECEIVABLES

At 31 December, this caption, with a balance of 7,189,458 euros, was bro- 9.1 NON-CURRENT RECEIVABLES ken down as follows:

2012 2011 2012 2011

Customers 5.213.984,30 5.732.445,95 Other Shareholders 20.000.000,00 15.000.000,00

VAT Receivable 156.490,53 203.997,47 Total Receivables – Non-current 20.000.000,00 15.000.000,00

Accrued Income 1.129.095,96 1.199.436,05

Deferred Costs – Prepayments 251.869,41 167.354,82 In 2012, this caption reports a value of 20,000,000 euros relating to loans granted to ANA, SA. These loans have a time limit of July 2014, the date of Other Debtors 1.608.907,97 1.588.817,69 amortisation of the debenture loan: 15 million euros at 1 year renewable and Other Debtors – Grants 595.768,96 1.392.558,40 5 million euros at 6 months renewable. The rates currently applicable are set out in Note 29 subparagraph b). Sub-Total 8.956.117,13 10.284.610,38

Impairment Losses on Trade Debtors (1.766.659,52) (1.759.708,04)

Sub-Total (1.766.659,52) (1.759.708,04)

Total 7.189.457,61 8.524.902,34

Aeroportos da Madeira ‹ Annual Report 2012 162 NOTES TO THE FINANCIAL STATEMENTS

a) Customers c) Accrued Income and Prepayments

The carrying value less any impairment losses on trade and other receiva- 2012 2011 bles approximates to their fair value. Assets The amount of 5,213,984 euros, presented under the caption Custom- ers, includes an overdue amount of 741,758 euros and an impairment of Accrued Income 1,766,659 euros, for which an impairment loss was recognised due to a risk Interest receivable on Demand and Term Deposits 296.132,50 370.331,73 of uncollectability. Airport Income 832.963,46 829.104,32 In 2011, this caption had a balance of 5,732,446 euros and 1,759,708 eu- 1.129.095,96 1.199.436,05 ros in impairment. Prepayments

Other 251.869,41 167.354,82 b) VAT Receivable

251.869,41 167.354,82 In 2012, the total amount of VAT recoverable from the State is 156,490 euros, corresponding to a refund already requested. In 2011, the indicative amount of 203,957 euros has already been recovered. Under Accrued Airport Income, the amount of 807,108 euros relating to the Security Fees (Component A) receivable from INAC should be highlighted. This balance includes the amount of 250,247 euros withheld by INAC under paragraph 5 of article 3 of Decree-Law 72-A/2010, of 18 June, payment of which has already been claimed by the Company.

In 2011, the amount receivable from INAC was 823,085 euros (which also included the value from INAC, which at the time had already been withheld).

Aeroportos da Madeira ‹ Annual Report 2012 163 NOTES TO THE FINANCIAL STATEMENTS

Prepayments essentially include insurance premiums, the 9.3 MATURITY OF BALANCES RECEIVABLE cost of which relates to subsequent periods. At 31 Decem- ber 2012, insurance premiums recorded under Prepayments The following map show an analysis of the Maturity of Balances Receivable. This map does totalled 216,588 euros, against 102,505 euros in 2011. not include, however, the State Balances and Grants Receivable, as they are assets not subject to credit risk: d) Other Debtors Default without Impairment Of the outstanding balance at 31 December 2012, of Normal 0 to 6 months 6 to 12 months > 12 months Impaired 1,608,908 euros, the following should be noted: i) 1,149,221 euros relating to default interest charged to Customers 2.641.820,76 539.166,78 202.597,00 --- 1.766.659,52 the ARM for delays in payment for work on the construc- Other Debtors 61.092,27 ------395.019,21 --- tion of ER101 – Phase 2 of the Funchal Airport Expansion Project, carried out by ANAM, SA under the responsibility Loans Granted - 20.000.000,00 ------Rel. Parties of the ARM. This amount is owed from previous years; ii) Related Parties 63.865,02 ------1.149.220,86 --- 313,871 euros relating to VAT from Bairro dos Pescadores, Guarantees ------3.059,08 --- where the proceedings have been filed with higher courts; to Third Parties iii) 113,896 euros relating to balances of personnel ac- 22.766.778,05 539.166,78 202.597,00 1.547.299,15 1.766.659,52 counts to be settled by advance payment of health and Un: euros sickness insurance. e) Other Debtors – Grants Actions to reduce credit risks:

From an analysis of the above table, it can be seen that Financial Assets Impaired at the reporting date are fully provisioned, the amount of ANAM, SA has an amount of 595,769 euros receivable re- 1,766,659 euros being fully hedged with debt certificates delivered to the Tax Office or lating to the allocation of a Grant – ERDF, under the SITI credit claims submitted to the Directors of the insolvency masses. Currently, the Company – Integrated Telecommunications and Information System has nine cases outstanding: six involving insolvency and three tax enforcement. – Project.

Aeroportos da Madeira ‹ Annual Report 2012 164 NOTES TO THE FINANCIAL STATEMENTS

The debt of 1,149,221 euros, related to the ARM (see 9.4 MOVEMENT IN IMPAIRMENT OF ASSETS CAPTIONS Note 9.2, subparagraph d), has a maturity greater than

12 months. Impairment Losses Opening Increases Reversal/ Closing on Debts Receivable Balance Use Balance In 2008, a repayment plan in 24 monthly instalments Doubtful Receivables 1.759.708,04 6.951,48 0,00 1.766.659,52 (letter 465 of March 2008) was agreed, which never materialised. 1.759.708,04 6.951,48 0,00 1.766.659,52

Un: euros Subsequently, by means of letter 2356 of the SRTT, a request was made to include this amount in the PIDDAR Increases and reversals of impairment, calculated for the annual period, were recognised in 2010 Budget, which in budgetary terms ended up not the Statement of Comprehensive Income as Impairment of Debts Receivable, as detailed in being implemented by the ARM, with no other develop- Note 22. ments having occurred in this regard, despite the steps taken by the Company.

Aeroportos da Madeira ‹ Annual Report 2012 165 NOTES TO THE FINANCIAL STATEMENTS

10. DEFERRED TAXES

The temporary differences that originated deferred tax assets and liabilities have the following nature:

Temporary Opening 2011 Movements 2011 2012 Movements 2012 Closing Balance 2012 broken down by rate Differences Balance Closing Closing Adjustment Movements Adjustment Movements Tax Use Use >2013 - 2011 Balance Balance Losses -25% 2013 - 27.35% 26.80%

Deferred Tax Assets

Tangible Assets Tax 105.665,30 (7.909,05) (24.439,06) 73.317,19 -- (24.439,06) 48.878,13 -- 24.439,06 24.439,06 Transition Intangible assets 15.247.440,95 1.477.187,67 1.860.438,58 18.585.067,20 1.509.112,85 589.743,20 20.683.923,25 -- 274.556,96 20.409.366,27 Responsibilities Optimisation of ------2.942.952,37 2.942.952,37 2.942.952,37 -- Number of Workers Employed and SSLCI Recoverable Tax ------15.593.747,00 15.593.747,00 15.593.747,00 -- -- Losses Total – Deferred Tax 15.353.106,25 1.469.278,62 1.835.999,52 18.658.384,39 1.509.112,85 19.102.003,51 39.269.500,75 15.593.747,00 3.241.948,39 20.433.805,34 Assets

Deferred Tax Liabilities

Int. Assets Conces- 19.955.786,75 (11.671.461,40) (2.071.081,27) 6.213.244,08 -- (2.071.081,36) 4.142.162,72 -- 2.071.081,36 2.071.081,36 sion Right Tax Transition Total – Deferred Tax 19.955.786,75 (11.671.461,40) (2.071.081,27) 6.213.244,08 -- (2.071.081,36) 4.142.162,72 -- 2.071.081,36 2.071.081,36 Liabilities

Aeroportos da Madeira ‹ Annual Report 2012 166 NOTES TO THE FINANCIAL STATEMENTS

Movements in Deferred Tax captions are detailed as follows:

Deferred Tax Assets

Tangible Assets 21.133,06 (2.803,76) 18.329,30 -- (6.109,77) 1.014,22 13.233,75 -- 6.684,08 6.549,67

Intangible assets – 3.049.488,19 1.596.778,61 4.646.266,80 377.278,21 147.435,80 373.820,68 5.544.801,49 -- 75.091,33 5.469.710,16 Responsibilities Optimisation of ------804.897,47 -- 804.897,47 804.897,47 -- Number of Workers Employed and SSLCI Recoverable ------3.898.437,00 -- 3.898.437,00 3.898.437,00 -- -- Tax Losses Total – Deferred 3.070.621,25 1.593.974,85 4.664.596,10 377.278,21 4.844.660,50 374.834,90 10.261.369,71 3.898.437,00 886.672,88 5.476.259,83 Liabilities

Deferred Tax Liabilities

Int. Assets – 3.991.157,41 (2.437.846,40) 1.553.311,01 -- (517.770,34) 85.949,87 1.121.490,54 -- 566.440,74 555.049,80 Concession Right – Tax Transition Total – Deferred 3.991.157,41 (2.437.846,40) 1.553.311,01 -- (517.770,34) 85.949,87 1.121.490,54 -- 566.440,74 555.049,80 Tax Liabilities

Aeroportos da Madeira ‹ Annual Report 2012 167 NOTES TO THE FINANCIAL STATEMENTS

The rate of income tax (IRC) was amended, with effect from 01 January 11. INVENTORIES 2012, to 25%, through approval of the elimination of the reduction in income tax rate applicable to the ARM. Inventories in storage are composed mainly of replacement/maintenance parts related to the buildings/equipment allocated to the activity of the In 2012, ANAM, SA ascertained Deferred Tax Assets of reported tax losses, Company. No impairment losses were detected. in the amount that the Company expects to recover, as per the map below:

Movements during the year are as follows:

Year Tax Losses Estimated 75% Taxable Tax (25%) Goods Sold and Consumed Materials 2012 2011 reported Taxable Income Income (2013/2014/2015) Opening Inventories 313.415,63 318.005,34 2006 10.151.375,08 ------Purchases 86.661,79 98.842,47 2007 8.165.959,32 6.575.636,00 4.931.727,00 1.232.932,00 Inventory Adjustments 0,00 (23,49) 2008 10.265.003,76 8.334.880,00 6.251.160,00 1.562.790,00 Closing Inventories 312.220,97 313.415,63 2009 8.558.535,28 5.881.147,00 4.410.860,00 1.102.715,00 Costs for the Annual Period 87.856,45 103.408,69 37.140.873,44 20.791.663,00 15.593.747,00 3.898.437,00

The Cost of Inventories recognised as an expense and included in the cost of goods consumed amounted to 87,856 euros; in 2011, 103,409 euros.

Aeroportos da Madeira ‹ Annual Report 2012 168 NOTES TO THE FINANCIAL STATEMENTS

12. CURRENT TAX 13. CASH AND CASH EQUIVALENTS

The balance of 562,043 euros relates to the withholding of tax on income Breakdown of the components of cash and cash equivalents: from immovable property and capital, as well as the special and additional payment on account of IRC.

2012 2011 Captions 2012 2011

Estimated Tax (618.324,79) (4.302,75) Cash* 7.279,40 7.479,40

Withholdings by third parties 717.311,73 621.872,45 Bank Deposits

Special payment on account 294.000,00 467.489,17 Demand Deposits 1.128.978,66 119.562,18

Additional payment on account 169.056,15 1.784,55 Financial Investments 24.258.952,98 25.080.934,28

562.043,09 1.076.843,42 Total 25.395.211,04 25.207.975,86

* Fixed Cash Fund.

The financial investments shown constitute cash on hand in short-term bank deposits. The average rate of the Financial Assets invested in 2012 was 1.87%, and in 2011, 1.75%. It should be noted that the cash on hand includes the Social Fund DRA, the current amount of 405,220 euros (capitalised value) which, as mentioned in Note 31.3, is still awaiting a decision and the amount of 433,733 euros, also capitalised under the caption ADSE, which remains open.

Aeroportos da Madeira ‹ Annual Report 2012 169 NOTES TO THE FINANCIAL STATEMENTS

14. CAPITAL 15. RESERVES

The Capital of ANAM, SA is 67,500,000 euros, represented by 13,500,000 2012 2011 book entry shares with a nominal value of 5 euros each. General Legal Reserve (161.246,06) (161.246,06) The number of shares into which the Capital was divided and their nominal Legal Reserve of Investments 17.393.192,18 17.393.192,18 value was as follows: (Property in the Public Domain) Other Reserves 22.317,01 22.317,01

Shareholder No. Shares No. Shares Holding % Total 17.254.263,13 17.254.263,13 2012 2011 ANA, SA 9.450.000 9.450.000 47.250.000,00 70,00

ARM 2.700.000 2.700.000 13.500.000,00 20,00

Portuguese State 1.350.000 1.350.000 6.750.000,00 10,00 Reserves remained unchanged during the year. 13.500.000 13.500.000 67.500.000,00 100,00 The General Legal Reserve is negative as a result of the differences arising from the restatement of Share Capital from escudos to euros being re- The subscribed capital is fully paid up. flected therein, in 2001.

The Legal Reserve of Investments – was established to record amortisation related to proprietary assets transferred and, since 2000, no movements have occurred.

Other Reserves – these relate to capital assets of the GARAM office in Lis- bon, which were incorporated into ANAM, SA when it was formed.

Aeroportos da Madeira ‹ Annual Report 2012 170 NOTES TO THE FINANCIAL STATEMENTS

16. LOANS 16.2 TERMS AND DEADLINES FOR REIMBURSEMENT OF LOANSS

The maturity of the Non-current Loans is as follows: 16.1 NON-CURRENT AND CURRENT LOANS

This caption, which includes bank loans and debenture loans, is broken 2012 2011 down as follows: between 1 and 2 years 53.642.460,08 3.601.466,20

2012 2011 between 3 and 5 years 93.510.551,78 96.020.729,52

Non-current Loans > 5 years 48.632.795,16 99.765.077,50

Bank Loans 145.826.800,98 149.510.255,02 195.785.807,02 199.387.273,22

Bond Loans 49.959.006,04 49.877.018,20

195.785.807,02 199.387.273,22

Current Loans

Bank Loans – Short Term 3.601.466,20 3.601.466,20

3.601.466,20 3.601.466,20

The change in the rise in Bank Loans refers to the repayment of the EIB loan, which began in 2011, see 3.1 b).

Aeroportos da Madeira ‹ Annual Report 2012 171 NOTES TO THE FINANCIAL STATEMENTS

The issuing costs of Loans Received are to be depreciated over their term, resulting in a difference against the following table:

Capital outstanding

Contract Year of Disbursement First date Last date Interest rate Average Rate (*) Non-current Current

EIB - Tranche B 2000 15-03-2011 15-03-2020 Variable E 3m 0,89% 63.596.731,96 3.740.984,20

ABN AMRO Bank 2001 26-07-2016 26-07-2016 Variable E 6m 1,16% 35.000.000,00 -

Deutsche Pfandbriebank 2002 24-04-2017 24-04-2017 Variable E 6m 1,15% 47.400.000,00 -

Debenture Loan 2004 29-04-2014 29-04-2014 Fixed - 5,34% 50.000.000,00 -

195.996.731,96 3.740.984,20

* Average Rate in the Annual Period.

All loans taken out by ANAM, SA originated in foreign markets and are denominated in euros, there being no assets offered as collateral security (the first three are guaranteed by the State and the fourth has the endorsement of ANA, SA).

It should be noted that the Fair Value of the debenture loan was 49,725,667 euros at 31.DEC.2011 and 51,177,691 euros at 31.DEC.2012. These valuesare calculated based on the discounted Cash Flows at period-end rates.

16.3 DEBENTURE LOAN

In July 2004, ANAM, SA issued non-convertible bonds with a nominal value of 1,000, 10,000 and 100,000 euros, listed on the Luxembourg Stock Exchange at a rate of 5.34% to finance its working capital requirements. The bonds are repayable in full in July 2014.

Aeroportos da Madeira ‹ Annual Report 2012 172 NOTES TO THE FINANCIAL STATEMENTS

16.4 FINANCIAL LEASE LIABILITIES 17.1 NON-CURRENT PAYABLES

As at 31 December 2012, ANAM, SA has no financial lease liabilities. This caption consists of:

16.5 LINES OF CREDIT 2012 2011

Investment Grants 48.454,92 1.052.634,64 Given its positive cash situation, ANAM, SA has not currently negotiated any conditions for credit lines. Contractual Liabilities 16.428.094,40 16.013.160,18

Total 16.476.549,32 17.065.794,82

17. PAYABLES AND OTHER LIABILITIES See Note 2.3 b): Recognition of Liabilities associated with Renewal/Replace- ment Investments. 2012 2011

Trade Accounts Payable and Other Creditors 28.959.705,72 25.944.925,08

Investment Grants 544.734,02 1.076.850,14

Debts with Related Parties 379.974,22 736.507,89

Social Security and other Taxes 652.496,17 616.242,38

30.536.910,13 28.374.525,49

Aeroportos da Madeira ‹ Annual Report 2012 173 NOTES TO THE FINANCIAL STATEMENTS

17.2 CURRENT PAYABLES a) State or Other Public Bodies

The amount recorded in this account consists of: The caption State or Other Public Bodies comprises the following:

2012 2011 Liabilities 2012 2011

Current Trade Creditors 1.569.603,44 2.152.984,63 Withholdings of Income Tax 180.729,07 136.520,99

Suppliers of Fixed Assets - except Leases 175.234,91 685.768,20 Employer Contributions 469.801,65 478.165,33

State or Other Public Bodies 652.496,17 616.242,38 Other Taxes 1.965,45 1.556,06

Other Creditors 608.819,63 674.415,70 Total 652.496,17 616.242,38

Accrued Expenses 7.316.236,46 3.663.037,62 b) Other Creditors Contractual Liabilities 2.272.934,00 2.571.907,00

Deferred Income (advanced payments received) 968.757,10 920.159,64 The balance of the caption Other Creditors essentially reflects:

Investment Grants 496.279,10 24.215,50 The figure relating to the Social Fund – DRA, including capitalised interest Total 14.060.360,81 11.308.730,67 on the investments, totalling 405,220 euros and is explained in Note: 31.3.

The detail of some of the captions identified above can be found below.

Changes witnessed in the captions: i) Current Trade Creditors, a decrease of 548,000 euros is related to the deferral of traffic incentives paid to airlines; ii) Accrued Expenses and Contractual Liabilities, see detail under subparagraphs c) and d).

Aeroportos da Madeira ‹ Annual Report 2012 174 NOTES TO THE FINANCIAL STATEMENTS

c) Accruals and Deferrals (Current) The caption Supplies and Services includes 2,272,934 euros, related to commitments relating to investments to be made under the Concession

Liabilities 2012 2011 Agreement, relating to the planned Replacement/Renewal of infrastructure and equipment. Accrued Expenses

Remuneration 4.561.034,15 1.054.813,18 d) Contractual Liabilities (Current and Non-current)

Interests Payable 1.340.981,40 1.679.487,27 The quantification of commitments by virtue of the application of IFRIC 12

Supplies and Services 3.687.154,91 3.500.644,17 and its use are given in the table below:

9.589.170,46 6.234.944,62 2012 2011 Deferred Income Non-current Commitments Airport Income 968.757,10 920.159,64 Opening Balance 16.013.160,18 12.255.919,70

Investment Grants 496.279,10 24.215,50 Increases in the Annual Period 775.639,68 5.006.066,78

1.465.036,20 944.375,14 Change to Current (360.705,46) (1.248.826,30)

Closing Balance 16.428.094,40 16.013.160,18 The increase in salaries in 2012 corresponds to: i) the recognition in 2012 of Current Commitments the cost of termination by mutual agreement, in the amount of 2,943,000 euros to occur in the 1st half of 2013; ii) the specificity of the holiday pay Opening Balance 2.571.907,00 2.422.091,00 and allowance payable in 2013 and respective charges, in the amount of Change to Current 360.705,46 1.248.826,30 1,560,000 euros. Uses for the Annual Period (659.678,46) (1.099.010,30)

Interest payable correspond to accrual of interest on loans that mature in Closing Balance 2.272.934,00 2.571.907,00

2013. Net Value of Liabilities 18.701.028,40 18.585.067,18

Aeroportos da Madeira ‹ Annual Report 2012 175 NOTES TO THE FINANCIAL STATEMENTS

The change in the caption Contractual Liabilities of 115,961 euros is justi- 2012 2011 fied by the increase in liabilities in the amount of 775,640 euros to cover future Investments and use in the period of 659,678 euros. Aviation 25.905.619,61 27.508.609,06 Traffic 24.430.906,68 25.924.296,29

In 2012, the main commitments for the replacement/repair of equipment Ground Handling 1.398.524,51 1.515.398,39 and systems was broken down as follows: Other 76.188,42 68.914,38

PRM 688.619,85 727.002,88 2012 PRM 688.619,85 727.002,88 Hold Baggage Screening (HBS) Equipment – MA 1.278.436,54 Security 3.032.901,60 3.133.233,86

Reinforcement and Re-profiling of the Runway – MA 5.677.126,58 Security Fee (comp. A) 1.181.020,16 1.177.997,98

HBS Security (comp. B) 1.851.881,44 1.955.235,88 Reinforcement and Re-profiling of the Runway – PSA 5.309.792,32 Non-aviation 6.212.786,17 6.271.459,96 Periodic maintenance on main Structure – MA 2.115.274,66 Retail 2.891.573,50 2.992.254,53

Other Equipment and Systems 4.320.398,30 Real Estate 1.169.000,47 1.151.796,92

Car Park 499.545,30 541.799,93 Value of Liabilities 18.701.028,40 Advertising 331.437,99 313.338,27

Rent-a-Car 1.165.647,29 1.135.755,65 18. REVENUE Other 155.581,62 136.514,66 Construction Service(*) 484.989,98 413.057,00

Revenue from the provision of services declined by 1,728,000 euros in Construction Service 484.989,98 413.057,00 2012, this reduction being related to a fall in traffic of 4.6% recorded in the Total Provision of Services 36.324.917,21 38.053.362,76 Company’s activity. Supplementary Income 44.205,52 44.520,01

Revenue 36.369.122,73 38.097.882,77

(*) Relates to the acquisition of Assets for the Concession, added to the Intangible Assets – Concession Rights (see Note 7).

Aeroportos da Madeira ‹ Annual Report 2012 176 NOTES TO THE FINANCIAL STATEMENTS

19. OTHER INCOME 20. SUPPLIES AND SERVICES

2012 2011 2012 2011

Recognition Grants (Liabilities) 168.919,20 140.037,61 Surveillance and Security 1.740.652,91 1.711.258,41

Maintenance and Repairs 1.605.807,32 1.667.998,48 Other 34.857,29 9.360,52

Subcontracts 1.260.863,09 376.402,83 Other Income 203.776,49 149.398,13 Commitments 882.050,52 5.006.066,78

Cleaning, Hygiene and Comfort 873.383,05 929.254,77 The amount of 168,919 euros results from the recognition in Earnings of Electricity 808.953,78 846.511,15 Grants relating to expenses already incurred by the Company. Other Specialised Work 617.499,60 1.359.398,06

The caption Other includes gains on the sale of Tangible Fixed Assets and Studies, Projects, Advisory Opinions 455.669,51 466.583,12 contractual penalties to suppliers. Insurance 405.913,46 362.212,98

Gardening Services 294.092,04 294.998,04

Other 237.479,47 266.089,62

Water 186.084,48 185.951,41

Leases and Rents 167.694,59 108.034,30

Assistance Personnel 166.083,69 159.072,37

Travelling and Accommodation 134.038,70 164.641,97

Fees 90.695,83 56.073,30

Advertising and Promotion 75.608,53 77.846,25

Communication 47.583,96 50.694,92

10.050.154,53 14.089.088,76

Aeroportos da Madeira ‹ Annual Report 2012 177 NOTES TO THE FINANCIAL STATEMENTS

In the evolution of the main captions, the following stands out: 21. PERSONNEL COSTS

Subcontracts: the variation of this account stems from a contract with 2012 2011 EFACEC being recorded therein for the first time with effect from 2012, which relates to the provision of rescue services, and also the transfer to Remuneration 8.801.227,92 9.055.383,12 this same account of SANAS (Sea Rescues) and PRM Contracts, which were Charges on Remuneration 1.933.927,54 1.953.679,65 reported in Specialised Work. Social Action Costs 464.660,57 347.140,86

Commitments: to address Investments in future spare parts/replacement. Other Costs 4.338.727,56 560.737,70 The significant variation in the caption is justified by the fact that some adjustments for accrued liabilities to 2010 were made in 2011, due to their 15.538.543,59 11.916.941,33 being considered insufficient and due to a delay in the Reinforcement and Re-profiling of the Runways at MA and PSA, causing in 2012 a substantial The average number of employees in service during the year 2012 was 311, reduction in Commitments. and in 2011, 323.

Other Specialised Work: includes a range of contracts of a different na- The amount indicated under the caption Other Costs relates to charges for ture, notably, among others: Protocols concluded with ANA, SA; Compu- the termination of contracts by mutual consent and early retirement of 10 ter Licensing Systems; Nursing, Legal Assistance and Auditing Services. The employees, which occurred in 2012, totalling 1,389,154 euros, and also the major reduction was due to the reclassification of some captions that were extra cost of 21 redundancies in the amount of 2,942,952 euros, which is transferred to subcontracts. recognised in 2012, but with the payment thereof and the actual redundancies only taking place in the 1st half of 2013.

Aeroportos da Madeira ‹ Annual Report 2012 178 NOTES TO THE FINANCIAL STATEMENTS

The remuneration paid to the members of the Decision-making Bodies of In July 2009, the new levels of remuneration for the Decision-making Bod- ANAM, SA is as follow: ies were established, backdated to the date of their appointment. However, pursuant to Law 12-A/2010, of 30 June, they were reduced by 5%, starting Caption 2012 2011 in June 2010. In 2011 and 2012, these were reduced by another 10% as a

General Meeting 450,00 815,00 result of Law 55-A/2010, of 31 December and Law 64-B/2011. Also in 2012, holiday and Christmas allowances were suspended. Board of Directors 131.623,96 162.447,62

Audit Committee 38.016,00 44.352,00 22. CONSTITUTION AND REVERSAL Statutory Auditor 16.864,00 15.264,00 OF IMPAIRMENT 186.953,96 222.878,62 This account, which expresses the balance between the constitution by Im- The Board of Directors of ANAM, SA was considered to be the only “key” el- pairment Losses and Reversals made, is broken down as follows: ement of management. During the year ended 31.DEC.2012, remuneration of the Board of Directors totalled 132,000 euros (2011, 162,000 euros). 2012 2011

Impairment Losses on Debts Receivable (6.951,48) (39.591,13) There are no commitments in relation to short-term benefits or post-employment benefits. Similarly, there are no liabilities for retirement pensions Reversal of Impairment Losses 0,00 19,73 for former members of the Decision-making Bodies. (6.951,48) (39.571,40)

The Board of Directors was elected at the General Meeting of 16 May 2008. Impairment Losses on Debts Receivable recorded in 2012 relate to the Its composition, with 5 members, is described in paragraph 1.5 of Chapter constitution of impairment concerning the customer AGROAR, Trabal- I, Corporate Governance. hos Aéreos, Lda.

Aeroportos da Madeira ‹ Annual Report 2012 179 NOTES TO THE FINANCIAL STATEMENTS

23. OTHER EXPENSES In 2012, as they fulfilled the necessary requirements, financial incentives were awarded to fourteen air operators totalling 1,214,147 euros (see Sub- 2012 2011 paragraph 9.1.2 of the Management Report).

Taxes 41.667,77 68.315,66 Spending on Banking Services 6.886,19 7.970,89 24. DEPRECIATION AND AMORTISATION Donations 37.218,23 10.334,01 2012 2011 Losses on Inventories 0,00 52,33 Investment Grants Losses on Assets 3.034,40 0,00 Tangible Fixed Assets 24.217,33 24.217,07 Incentives 1.214.147,18 1.637.484,62 Concession Right Assets 3.997.867,76 3.988.365,24 Other Expenses 207.586,34 211.855,09 Investment Grants 4.022.085,09 4.012.582,31 1.510.540,11 1.936.012,60 Amortisation

Incentives Tangible and Other Intangible Fixed Assets (180.629,00) (339.250,86)

Concession Right Assets (8.398.077,05) (8.385.543,61) In order to boost traffic at the Madeira Airports, ANAM, SA runs two Incen- tive Programmes for Airports of Madeira, for which it is wholly responsible. Amortisation (8.578.706,05) (8.724.794,47)

Total Depreciation and Amortisation (4.556.620,96) (4.712.212,16) With the same objective, it also participates in two other funds: Fund for Investment in the Promotion of Tourism and Initiative:pt –Developing Tour- ism and Aviation.

Aeroportos da Madeira ‹ Annual Report 2012 180 NOTES TO THE FINANCIAL STATEMENTS

25. FINANCIAL INCOME 25.2 OTHER FINANCIAL INCOME 2012 2011 25.1 BORROWING COSTS Interest Expenses (5.062,97) 0,00 2012 2011 Other Financial Expenses (52,12) 0,00 Net Interest from Loans (3.250.046,42) (3.874.961,64) Interest Received 68,57 0,00 Interest from Financial Leasing 00 (81,86) Other Financial Gains 31,82 0,00 (3.250.046,42) (3.875.043,50) (5.014,70) 0,00

An explanation of the main captions listed in the above table shows:

Financing Costs, in a total of (3,250,046) euros, includes: 26. INCOME TAX • The cost of the use of the financing obtained, to ensure the Company’s 2012 2011 investments, in an amount of (4,552,925) euros; Current Tax (618.324,79) (14.302,75)

• Financial Income of 1,302,878 euros, which arises from temporary invest- Estimate Shortfall (319.620,30) 10.099,98 ments resulting from cash surpluses (see subparagraph 9.1.3 of the Man- agement Report). Cancellation SGP (243.489,17) ---

Deferred Tax (Note 10) 6.028.594,08 4.031.821,25

4.847.159,82 4.027.618,48

Aeroportos da Madeira ‹ Annual Report 2012 181 NOTES TO THE FINANCIAL STATEMENTS

Reconciliation between Current Tax and Effective Tax is as follows: 27. EARNINGS PER SHARE

2012 2011 Basic earnings per share are calculated by dividing Net Profit by the weight-

Profit before Tax 1.567.170,98 1.575.002,46 ed average number of common shares.

2012 2011 Tax Rate 27,35% 20,00%

Net Income 6.414.330,80 5.602.620,94 428.621,26 315.000,49

Average number of common shares issued (thousands) 13.500.000 13.500.000 Non-deductible Expenses 3.843.808,23 5.010.209,94

Basic Earnings per Share (€ per share) 0,48 0,42 Non-taxable Income (448.807,00) (379.708,38)

Changes in Equity – Tax Transaction 2.046.642,21 2.046.642,21 Basic earnings per share are equal to diluted earnings per share, as no

Effect of correction on Deferred Tax (6.028.594,08) (4.031.821,25) changes occurred in the number of shares issued and paid up.

Autonomous Taxation 15.009,46 14.302,75

(143.319,93) 2.974.625,76 28. COMMITMENTS

Current Income Tax 1.181.434,26 4.202,77 Commitments for Investment and Services Not Rendered assumed at the date Deferred Income Tax (6.028.594,08) (4.031.821,25) of the Statement of Financial Position, but not yet registered, are:

Income Tax (4.847.159,82) (4.027.618,48) 2012 2011 Effective Tax Rate (309,3%) (255,7%) Contracts concluded with performance in progress 471.734,94 477.720,75

Commitments with services not rendered * 11.993.128,30 3.711.369,15

12.464.863,24 4.189.089,90

* Includes Contracts for Services with a term of more than 1 year, specifically subcontracts, cleaning and system maintenance contracts.

Aeroportos da Madeira ‹ Annual Report 2012 182 NOTES TO THE FINANCIAL STATEMENTS

Multiannual contracts were concluded with EFACEC, for the operation of During the year 2012, transactions were carried out with these entities, Rescue Services (5 years) and with SERLIMA to collect baggage cars and whose balances at 31 December 2012 and 2011 are as follows: supply consumables (2 years). Balances with related parties 2012 2011 In December 2012, two Operating Lease contracts totalling 59,615 euros, ANA, SA 20.005.047,15 14.726.947,14 with a term of 4 years, were signed with FINLOG, with the related rents being paid only with effect from 2013. Shareholders – Loans 20.000.000,00 15.000.000,00 Trade Creditors (173.917,63) (445.621,26)

Other Debtors 124,78 701,40

29. BALANCES AND TRANSACTIONS WITH Deferred Costs 19.257,96 20.385,32

RELATED PARTIES Accrued Expenses (117.905,89) (98.298,91)

Accrued Income 277.487,93 249.780,59 ANAM, SA is owned by ANA, SA, the Regional Government of Madeira and the Portuguese State, which hold respectively 70%, 20% and 10% of the PORTWAY (19.389,48) 55.223,11

Company’s Capital. Customers 63.740,24 247.810,83

Trade Creditors (48.282,00) (156.456,44) PORTWAY is a handling company 100% owned by ANA, SA. Accrued Income 5.020,98 0,00

In addition to being a Shareholder, the Autonomous Region of Madeira is Deferred Income (39.868,70) (36.131,28) also the Authority and the Regulator. AUTONOMOUS REGION OF MADEIRA 1.149.220,86 1.149.220,86

Arrears Interest 1.149.220,86 1.149.220,86

Total Debts of related parties 21.134.878,53 15.931.391,11

Aeroportos da Madeira ‹ Annual Report 2012 183 NOTES TO THE FINANCIAL STATEMENTS

a) Transactions with Related Parties, by nature PORTWAY is a company 100% owned by ANA, SA, and is licensed to perform handling operations at the Madeira Airports. In that capacity and as 2012 2011 a customer, the fees paid to the ANAM, SA are those established above.

ANA, SA In parallel, it has a Contract for Services with the ANAM, SA, at market Revenue 2.400,00 5.623,63 prices, for hiring labour with appropriate training to support passengers Supplies and Services (863.389,74) (880.719,95) with disabilities and persons with reduced mobility (PRM).

Personnel Expenses (1.200,00) (26.400,00) b) Loans to Related Parties Borrowing Costs 440.658,73 375.829,63

PORTWAY 2012 2011

Revenue 666.030,85 640.783,53 Beginning of the year 15.000.000,00 15.000.000,00

Supplies and Services (491.054,92) (491.054,92) Loans in the year 5.000.000,00 0,00

NAER Stamp Duty 25.000,00 0,00

Revenue 0,00 4.968,93 Net interest charged 309.713,54 235.516,69

ANA, SA holds 70% of the Share Capital of ANAM, SA and the relation- Billed amounts received (334.713,54) (235.516,69) ships with the Company include, specifically: a Contract for the Provision Amount outstanding at 31.DEC 20.000.000,00 15.000.000,00 of Advisory Services for Development of the Management and Operation of the Airports of the ARM, Protocols for the area of Information and Communication Systems and Technologies, a Protocol Specific to the area of Personnel Management and a Protocol Specific to the area of Occupa- tional Safety, Hygiene and Health and also an Occupancy Permit for the premises in Lisbon.

Aeroportos da Madeira ‹ Annual Report 2012 184 NOTES TO THE FINANCIAL STATEMENTS

In early 2009, and in light of a positive cash position, the Company con- 30. INFORMATION ON ENVIRONMENTAL ducted a study to assess the possible alternatives for investing the surpluses. MATTERS

Of the various solutions investigated, ANAM, SA opted to conclude a con- Since 2007, ANAM, SA, has been certified under the Quality Management tract with ANA, SA for a medium- and long-term loan of 15 million euros, System, initially according to NP EN ISO 9001:2000 and, from 2009, under renewable at the date of maturity of interest with a limit time to 2014 (date the new standard, NP EN ISO 9001:2008. of amortisation of the debenture loan). In 2011, implementation began of Food Safety and Hygiene Audits, this Since then, the cash on hand has primarily been recorded within ANA, SA, process culminating in the “Hygiene Monitored” mark being awarded by which, in 2012, led to an increase in the investment in the form of another our partner in this process, SGS. loan of 5 million euros. These loans were granted under the following terms: In parallel, the Company continues to implement measures aimed at ensuring:

• 5 million euros for a period of one year, renewable for equal periods, • Awareness regarding the various themes of the environment, across the bearing interest semi-annually at the 6-month Euribor, with a spread of entire Company, covering Stakeholders in general. 60 base points; • Maintenance at Madeira Airport of a space dedicated to the storage of • 10 million euros with a time limit of 2014, bearing interest annually at the hazardous waste produced, in order to provide this Airport with the nec- 1-year Euribor, with a spread of 80 base points; essary means for temporary storage;

• 5 million euros with a time limit of 2014, bearing interest annually at the • Utilisation of water collection through own reservoirs for irrigation of 1-year Euribor, with a spread of 300 base points. green spaces in order to reduce the consumption of potable water;

• Collection of hydrocarbons at Porto Santo Airport through separation tanks installed at locations most likely to produce effluents contaminated with these substances;

Aeroportos da Madeira ‹ Annual Report 2012 185 NOTES TO THE FINANCIAL STATEMENTS

• Implementation of a multiannual plan to reduce energy consumption, Intended not only to ensure certification for public buildings and services implementing the recommendations of the Energy Audit performed at at Madeira and Porto Santo Airports, but also to create a tool that, in con- this Airport, in order to obtain Energy and IAQ Certification of the Ma- junction with the operationalization of the Carbon Footprint, will allow a deira Airports; reduction in energy consumption and ensure the quality of ambient air inside the Air Terminal. • Maintenance of specific infrastructure at Porto Santo Airport for the dis- charge of wastewater from aircraft. 31. LAWSUITS AND OTHER CONTINGENCIES In 2012, various specific measures were adopted in this context, particularly: 31.1 LEGAL PROCEEDINGS IN WHICH ANAM, SA IS A PARTY Noise Monitoring System In compliance with applicable legislation (article 34 of the General Regula- Legal Proceedings in respect of which no increased liabilities are expected tion on Noise), the Noise Monitoring System installed at Airports of Ma- to result for ANAM, SA: deira and Porto Santo was upgraded to ensure the emergency regime for the maintenance of aircraft operations at night. Nature 2012 2011

Expropriation Proceedings for public interest, under Appeal 10.474,76 779.208,00 Carbon Footprint (difference claimed in Court) Incorporated into the Quality, Environment and Safety Policy, the Company Actions against ANAM, under the AFU Expansion Project 167.085,03 298.979,00 initiated the Voluntary Carbon Management Programme with a view to fu- Administrative Proceedings 211.412,49 148.206,74 ture implementation of new European regulations aimed at creating syner- gies with energy regulation, providing the Company with the basic tools to UN: EUROS protect the activity from the risks associated with climate change. In relation to the expropriation proceedings, the arbitration amounts have Energy Audit, Energy Certification and Internal Quality been deposited. Despite the fact that the expropriated owners concerned The Energy Audit, Energy Certification and Internal Quality measures have have launched an appeal, the Court usually does not change the established been completed. value.

Aeroportos da Madeira ‹ Annual Report 2012 186 NOTES TO THE FINANCIAL STATEMENTS

31.2 PROCESSES AND INSOLVENCY AND TAX ENFORCEMENT Corporation Tax Inspections

For failure to pay airport charges, several tax enforcement proceedings were Under the scope of inspections of the years 2008, 2009 and 2010, ANAM, brought against customers, most of whom had already been declared insolvent: SA was notified of a failure to take account of amortisations of land acquired by the Company as tax cost under the Funchal Airport Expansion Nature 2012 2011 Project and which, at the end of the Concession, revert, without any bur-

Lodgement of Claims in Insolvency 1.745.546,06 1.728.585,25 den, to the Authority.

Tax Enforcement Proceedings 21.113,46 21.559,71 Not satisfied with the adjustments made, ANAM, SA will present a Tax As- Un: euros sessment Appeal, requiring: Impairments were recorded for these values, as from the development of the proceedings, the expectation of achieving success in reimbursement of a) The reversal of the annulment of the notice of correction to material the debt is minimal. relevant to taxation;

31.3 OTHER PROCEEDINGS AND LIABILITIES b) The acceptance of reinstatement of the land allocated to the Conces- sion, given that it reverts to the Authority at termination, without any right Nature 2012 2011 to compensation or damages;

1. Administrative Proceedings – Claim for Refund of Tax 303.871,00 303.871,00 (in which ANAM, SA is Claimant – VAT B. Pescadores) c) The corrections made in tax losses carried forward. 2. Civil Proceedings 5.750,00 5.750,00

3. Case 1100/12-1st Court – Social Fund – DRA 405.220,20 437.448,00 It should be remembered that the adjustments made and about which the

Un: euros Company is now complaining, did not result in any tax payment, given the existence of tax losses carried forward, only the settlement of the state surcharge in 2010.

Aeroportos da Madeira ‹ Annual Report 2012 187 NOTES TO THE FINANCIAL STATEMENTS

31.4. GUARANTEES TO THIRD PARTIES Declaration

There are no financial guarantees or collateral security to third parties. These Financial Statements were approved by the Board of Directors at meeting no. 06 of 08 May 2013.

32. SUBSEQUENT EVENTS It is the opinion of the Board of Directors that these Financial Statements reflect fairly and properly the Company’s operations, as well as its Position In 2013, Resolution 53/2013 (published in the Official Journal on 06 Febru- and Financial Performance and Cash Flows. ary 2013) of the Council of the Government of the Autonomous Region of Madeira became public knowledge, which approved the Programme to Pri- vatise and Restructure the Corporate Sector in the Autonomous Region of Madeira, where section 2.10 is devoted to the Airport Sector (ANAM, SA). BOARD OF DIRECTORS

“The Regional Government intends to promote the sale of the share capital owned in Aeroportos e Navegação Aérea da Madeira, ANAM, SA to Aero- portos e Navegação Aérea, ANA, SA, in the context of the privatisation of António José do Amaral Ferreira de Lemos the latter, and to adjust the current Concession Agreement covering the Chairman Region’s Airports to the ANA Concession Agreement elapsing in 2013”.

António dos Santos Morgado Member

Duarte Nuno Fraga Gomes Ferreira Member

Aeroportos da Madeira ‹ Annual Report 2012 188 AUDIT REPORTS AND STATUTORY AUDIT V

Aeroportos da Madeira ‹ Annual Report 2012 AUDIT REPORTS AND STATUTORY AUDIT

2012 REPORT AND OPINION OF THE AUDIT COMMITTEE

Aeroportos da Madeira ‹ Annual Report 2012 190 AUDIT REPORTS AND STATUTORY AUDIT

Aeroportos da Madeira ‹ Annual Report 2012 191 AUDIT REPORTS AND STATUTORY AUDIT

Aeroportos da Madeira ‹ Annual Report 2012 192 AUDIT REPORTS AND STATUTORY AUDIT

OFFICIAL REVIEWER’S OPINION ON FINANCIAL STATEMENTS AND AUDIT REPORT OF THE CHARTERED ACCOUNTANT

Aeroportos da Madeira ‹ Annual Report 2012 193 AUDIT REPORTS AND STATUTORY AUDIT

Aeroportos da Madeira ‹ Annual Report 2012 194 AUDIT REPORTS AND STATUTORY AUDIT

PWC AUDIT REPORT ON INDIVIDUAL FINANCIAL INFORMATION

Aeroportos da Madeira ‹ Annual Report 2012 195 ANAM - Aeroportos e Navegação Aérea da Madeira, S.A. Aeroporto da Madeira 9100-105 Santa Cruz Madeira Portugal T +351 291 520 700 [email protected] www.aeroportodamadeira.pt

Aeroportos da Madeira ‹ Annual Report 2012