ANNUAL REPORT AND ACCOUNTS 2018 1 TABLE OF CONTENTS Message from the Chairman .................................................................................................... 4 Nature of the Report ................................................................................................................ 7 i. Metropolitano de Lisboa Group ........................................................................................ 8 1. Organization’s profile ...................................................................................................................... 8 2. Mission, Vision and Values ............................................................................................................ 10 3. Corporate Bodies ........................................................................................................................... 12 4. Management Policies and Mechanisms ........................................................................................ 14 ii. The Metropolitano de Lisboa’s Activity ........................................................................... 17 1. Macroeconomic Framework ......................................................................................................... 17 2. Passenger Transport Service ......................................................................................................... 27 3. Other activities .............................................................................................................................. 33 4. ML’s SDG ........................................................................................................................................ 39 5. Risk Management .......................................................................................................................... 40 6. Strategy and Prospects .................................................................................................................. 42 iii. The Performance ......................................................................................................... 44 1. Financial Capital............................................................................................................................. 44 2. Human Capital ............................................................................................................................... 58 3. Intellectual Capital ......................................................................................................................... 64 4. Share Capital .................................................................................................................................. 65 5. Natural Capital ............................................................................................................................... 70 iv. Proposal for Application of Profits ............................................................................... 72 v. Attachments ................................................................................................................... 73 1. Compliance with Legal Guidelines ................................................................................................. 73 2. Financial Statements and Corresponding Notes (Separate Accounts) ......................................... 86 3. Financial Statements and Corresponding Notes (Consolidated Accounts) ................................. 140 4. Statement pursuant to the article 245(1)(c) of the Portuguese Securities Code ........................ 204 5. GRI Table and Indicators ............................................................................................................. 205 6. Materiality Analysis and Reporting Limits ................................................................................... 224 I. Glossary ....................................................................................................................................... 228 II. Abbreviations and Acronyms ...................................................................................................... 231 2 3 Message from the Chairman The Metro group’s Integrated Report describes, in a detailed and accurate manner, the activity of Metropolitano de Lisboa and of the companies held by it - Ferconsult, Metrocom, TREM and TREM II - as well as the profits obtained in the year 2018. In 2018, Metropolitano de Lisboa has effected the resumption of infrastructure investment, the increase of the recovery of the rolling stock and continued to reinforce its staff and to steer the company’s operations towards a more Customer-focused approach, having witnessed a progressive improvement of Metropolitano de Lisboa’s performance and a consequent increase in the service quality provided by the company. As the most relevant of all the planned Investments, ML launched, on the 26th of September, the tender named Network Modernization project of Metropolitano de Lisboa regarding the replacement of the current rail signalling system with a Communications-Based Train Control (CBTC) system. It should be highlighted that this bold project will change a system which is over 40 years old, technically out-of-date, obsolete and the manufacture of which has been discontinued, and will replace it with a system with the most up-to- date technological developments and suitable for the company’s demands, a fundamental condition for the current and future needs for purposes of quality, reliability and safety of the service provided. Metropolitano de Lisboa, by means of the tender mentioned above, also wishes to acquire 14 new triple units (sets of 3 cars), as well as to adapt 70 existing triple units to the new signalling system (CBTC). And in line with the priority investments and in parallel with the Modernization project, major steps have been taken regarding the network Expansion project, by continuing the works on the Rato - Cais do Sodré extension, which have culminated in the launching, in January 2019, of the tender for the Construction of the Structures of the Lots Rato – Santos and Santos – Cais do Sodré, in the scope of the Metropolitano de Lisboa’s Expansion Plan - Yellow and Green Lines Extensions - Rato - Cais do Sodré. Concerning rolling stock, in March 2018, Metropolitano de Lisboa launched the procedure for the purchase and installation of an electric system for the passenger doors of the ML90 series’ rolling stock and the full review of the remaining series’ door opening systems. It should also be highlighted the start of implementation of the awarding project for the refurbishment of the Technical Installations Supervision System (TISS), carried out in May, and the launch of the procedure for the purchase and installation of equipment for the video surveillance-CITV system of the Blue, Yellow, Green and Red Lines and the Track Intrusion Detection Systems, carried out in October. In what concerns the modernization and refreshing of the current infrastructure, the refurbishment of the Arroios station was continued, aiming to extend the platform to accommodate six-car trains, and the refurbishment and modernization of some stations was initiated, especially concerning lighting, cleaning, refreshing and the improvement of equipment, signalling and accessibilities and, in this regard, it should be highlighted the completion of the installation of the surface elevator at the Roma station, the substitution of two flights of escalators at the Baixa- Chiado station, the procedure launch for the Colégio Militar station, the project revision for the Areeiro station and, in addition, the replacement of the Rato surface elevator, among others. Following the renovation and improvement project of the network’s accessibility conditions, Metropolitano de Lisboa also continued with the implementation of the plan which foresees the evolution of the current 38 fully accessible stations to a total of 50 stations by 2022. 4 On the other hand, in the course of 2018, Metropolitano de Lisboa began investment in systems which will, in the short term, secure an increase of customer information, as well as investment in developing the bases for a very significant future change in the ticketing system, which shall impact greatly the improvement and ease of use of customer access to our network. In parallel, at an internal level, ML followed up on the implementation of actions to consolidate the management’s solidity, in particular through the creation of internal control systems, of which we highlight the creation of supporting tools for Procurement, Compliance, the implementation of the new General Data Protection Regulation and the initiation of the SAP IT database update. In response to the staff needs observed in 2018, Metropolitano de Lisboa reinforced its staff by hiring 17 Maintenance Officers (10 of which are new Officers and the remaining 7 will replace workers departed in 2018) and by obtaining authorization to hire 20 Station Agents and 10 more Maintenance Officers during the course of 2019. This recruiting process was carried out based on the provisions on this matter set forth in Metropolitano de Lisboa’s 2018 Activity and Budget Plan, and upon approval by the financial supervision authority for this purpose. In terms of human capital management, it is also worth highlighting the company’s continuous appreciation of collective bargaining as an indispensable instrument for the promotion of social peace. On the other hand, in 2018, Metropolitano de Lisboa continued developing