CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2017

Transcription

1 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2017 RUN AIRPORTS DEVELOP AIRPORTS GROW OUR FOOTPRINT

2 GENERAL INFORMATION Country of incorporation and domicile South Africa Company registration number 1993/004149/30 Directors Independent Non executive Directors S Macozoma 1 B Luthuli 2 C Mabude 2 K Moroka 2 K Matlou 2 J Lamola M Mabela S Simelane Executive Directors B Maseko M Manyama 3 Non-executive Directors R Morar D Botha Registered office The Maples Riverwoods Office Park 24 Johnson Road Bedfordview 2008 Postal address PO Box Gardenview 2047 Bankers Standard Bank Nedbank Auditors Auditor-General South Africa Secretary N Kekana 1 Resigned as at 30 November Resigned on 16 February Reinstated on 31 May Resigned as at 4 January 2017 These consolidated annual financial statements were prepared under the supervision of: Dirk Kunz CA(SA). These consolidated annual financial statements have been audited in compliance with the applicable requirements of the Companies Act No. 71 of 2008.

3 1 AIRPORTS COMPANY SOUTH AFRICA 1 CONTENTS 2 REPORT OF THE BOARD AUDIT AND RISK COMMITTEE 3 DIRECTORS RESPONSIBILITIES AND APPROVAL 4 GROUP SECRETARY S CERTIFICATION 5 REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON AIRPORTS COMPANY SOUTH AFRICA DIRECTORS REPORT DETAILED INDEX TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION 17 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS 21 NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

4 2 AIRPORTS COMPANY SOUTH AFRICA REPORT OF THE BOARD AUDIT AND RISK COMMITTEE The Board Audit and Risk Committee (Committee) of the Airports Company South Africa consists of five non-executive directors. The skills and competencies of the members are outlined in the Board and executive curricula vitae supplementary report, which can be found at The Committee operated under terms of reference which are approved by the Board. The Committee has carried out its duties as per the Companies Act and the Public Finance Management Act, including the special mandates that are assigned by the Board from time to time. The Committee reports that it has discharged its responsibilities as it relates to the following, namely review of: The Group s policies and procedures for detecting and preventing fraud. The effectiveness of the Group s policies, systems and procedures. The controls over significant financial and operational risks. Any other matters referred to it by the Board of Directors. The Group s compliance with significant legal and regulatory provisions. The significant reported cases of employee conflicts of interest, misconduct or fraud, or any other unethical activity by employees and/or Group. The internal audit charter to ensure internal audit function discharges its responsibilities with independence and objectivity in accordance with the International Standards for The Professional Practice of Internal Auditing (Standards). The effectiveness and adequacy of the Internal Audit department and adequacy of its annual work plan. Considered whether the independence, objectives, organisation, resourcing plans, financial budgets, audit plans and standing of internal audit function provide adequate support to enable the Committee to meet its objectives. The results of the work performed by the internal audit function in relation to financial reporting, corporate governance, risk areas, internal control, significant investigation and management response. The independence and objectivity of external auditors. The external auditor s findings and reports submitted to management. The accounting and auditing concerns identified by internal and external auditors. The adequacy, reliability and accuracy of financial information provided by management. The integrated report, annual consolidated financial statements, performance and prospects of the Group and recommendations for approval to the Board of Directors. The Committee acknowledges an increase in irregular expenditure reported. The primary cause for the largest component of this transgression is non-compliance to internal supply chain procedures. Management is in the process of improving the compliance to supply chain management procedures through the implementation of the new supply chain management operating model. The Committee is continuously monitoring the status of irregular expenditure and all corrective measures implemented. The Committee is of the opinion that there are areas of internal financial controls that need improvement to ensure that the financial records may be relied upon in the preparation of the consolidated annual financial statements, and accountability for assets and liabilities is maintained. The conclusion has been reached based on the discussions and explanations obtained from management, external and internal auditors based on the results of their audits. The Committee obtained assurance from the external auditors that their independence was not impaired and confirmed that no reportable irregularities were identified and reported by the external auditors in terms of the Auditing Profession Act No. 26 of The Committee is satisfied that the accounting policies adopted in the preparation of the consolidated annual financial statements are appropriate. The Committee is of the view that the process followed on accounting judgement and estimates used in the preparation of the financial statements needs to be reviewed. The Committee reviewed the going concern of the Company and is satisfied that the adoption of the going concern premise in the preparation of the consolidated annual financial statements is appropriate. We therefore recommend that the consolidated annual financial statements, as submitted, be approved. On behalf of the Board Audit and Risk Committee, S Simelane Chairman 31 August 2017

5 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS DIRECTORS RESPONSIBILITIES AND APPROVAL The Directors are required in terms of the Companies Act No. 71 of 2008, Treasury Regulations and the Public Finance Management Act No. 1 of 1999 as amended, to maintain adequate accounting records and are responsible for the content and integrity of the consolidated annual financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated annual financial statements fairly present the state of affairs of the Group as at the end of the financial period and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards (IFRS). The external auditors are engaged to express an independent opinion on the consolidated annual financial statements. The consolidated annual financial statements are prepared in accordance with IFRS and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The Directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The consolidated annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The external auditors are responsible for independently auditing and reporting on the Group s consolidated annual financial statements. The consolidated annual financial statements have been examined by the Group s external auditors, and their report is presented on page 5 to 11. The consolidated annual financial statements set out on pages 16 to 78, which have been prepared on the going concern basis, were approved by the Board of Directors on 31 August 2017 and were signed on its behalf by: R Morar S Simelane Chairman Chairman of Audit and Risk Committee 31 August August 2017

6 4 AIRPORTS COMPANY SOUTH AFRICA GROUP SECRETARY'S CERTIFICATION DECLARATION BY THE GROUP SECRETARY IN RESPECT OF SECTION 88(2)(E) OF THE COMPANIES ACT NO. 71 OF 2008 In terms of Section 88(2)(e) of the Companies Act, No. 71 of 2008, as amended, I certify that the Group has lodged with the Companies and Intellectual Property Commission all such returns and notices as are required of a state owned company in terms of the Companies Act and that all such returns and notices are true, correct and up to date. In terms of Section 8(1) of the Airports Company Act No. 44 of 1993, as amended, I certify that, for the financial year ended 31 March 2017, Airports Company South Africa SOC Limited has lodged, with the Minister of Transport, the consolidated annual financial statements in respect of the preceding financial year. I declare that, to the best of my knowledge, the Group has lodged with the Commissioner of Companies all such returns as are required of a public company in terms of the Companies Act No. 71 of 2008, as amended, and that all such returns are true, correct and up to date. N Kekana Company Secretary 31 August 2017

7 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON AIRPORTS COMPANY SOUTH AFRICA REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS Opinion 1. I have audited the consolidated and separate financial statements of the Airports Company South Africa and its subsidiaries (the group) set out on pages 18 to 78 which comprise, the consolidated and separate statement of financial position as at 31 March 2017, and the consolidated and separate statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes to the consolidated and separate financial statements, including a summary of significant accounting policies. 2. In my opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Airports Company South Africa group as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA). Basis for opinion 3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general s responsibilities for the audit of the consolidated and separate financial statements section of my report. 4. I am independent of the Airports Company South Africa group in accordance with the International Ethics Standards Board for Accountants Code of ethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my unqualified opinion. Key audit matters 6. Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the current period. These matters were addressed in the context of my audit of the financial statements as a whole and in forming my opinion thereon and I do not provide a separate opinion or conclusion on these matters. Key audit matter How the matter was addressed in the audit Valuation of interest-bearing borrowings and derivative financial instruments The valuation of the listed interest bearing borrowings (bonds) and derivative financial instruments, as disclosed in notes C.1 and C.3 respectively, require judgement and estimation to determine the appropriate valuation techniques and to source the relevant and reliable inputs. The financial instrument comprises of Inflation linked bonds of which the calculation is based on future estimate of CPI which is added as a component to arrive at the effective interest rate used to calculate the amortised cost. Derivatives are carried at Fair value; ACSA makes use of fair values provided by the bank to record the fair value of the derivatives at year end. ACSA also assess the effectiveness of the hedging instruments at the end of each financial year by performing their own estimate of the JIBAR linked floating rate. Due to the significant management judgements applied and the high degree of estimation uncertainty, the valuation of interestbearing borrowings and derivative financial instruments at fair value is considered a matter of significance in my audit. The audit procedures performed included considering the appropriateness of the valuation techniques utilised in terms of the requirements of International Accounting Standard 39: Financial Instruments (IAS 39). I assessed the appropriateness of the valuation model with reference to approaches commonly used. I also assessed the judgements and estimates applied by management against my understanding of current market practice and conditions. In addition, I obtained independently the fair values of the financial instrument directly from the bank to compare to the fair values used by management at year end. I performed my own assessment to test the effectiveness of the hedging instrument by comparing the Fair Value movement over the interest accrued for the year and I found that management assessment of ineffectiveness was in line with my expectation.

8 6 AIRPORTS COMPANY SOUTH AFRICA REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON AIRPORTS COMPANY SOUTH AFRICA CONTINUED Key audit matter Impairment and collectability of trade receivables Trade receivables comprise a significant portion (17%) of the current assets. As indicated in Note D.1, 23% of the trade receivables are past due but not impaired, representing a total balance of R231 million. The 2016/17 receivables provision has increased by 110% (R112 million) relative to the prior year (R53 million). This increase is not proportional to the 7% increase in the trade receivables balance over the same period. Management provides for doubtful debts in relation to balances outstanding for longer than 90 days, these are further adjusted by a specific provision in relation to balances less than 90 days outstanding but whose recoverability, in the view of management, may be doubtful. Accordingly, the estimation of the allowance for trade receivables is a significant judgement area and is therefore considered a key audit matter. How the matter was addressed in the audit I assessed the validity of material long outstanding receivables by considering payments received subsequent to year-end and the outcomes of management follow-ups to identify potentially impaired balances. I further assessed the appropriateness of the determination of the allowance for doubtful debt by management. The assessment of the appropriateness of the allowance for trade receivables comprised a variety of audit procedures including: Challenging the appropriateness and reasonableness of the assumptions applied in management s assessment of the receivables allowance Consideration of the recoverability of significant trade receivables over 90 days Verification of receipts from trade receivables subsequent to year-end Consideration of the completeness and accuracy of the disclosures Valuation of investment property The carrying value of investment properties amounted to R5.2 billion and the fair value adjustment recorded in net profit for the year in respect of investment properties was R505 million. Significant judgement is required in determining the fair value of investment properties and for the purposes of our audit we identified the valuation of investment properties as representing a key audit matter due to the significance of the balance to the financial statements as a whole, combined with the judgement associated with determining the fair value. Investment properties comprise various categories of properties, the most significant being Commercial Property and Undeveloped Land (held for future use) as investment property. The models used to determine the fair values for each of the categories differ due to the different nature of each of these categories (rental history is incorporated in commercialised properties and rental potential/similar properties market values are used for properties that were never commercialised before). Independent valuators are used to determine the fair values for all of the properties held in these categories annually. The inputs with the most significant impact on these valuations are disclosed in note B.1. The income capitalisation approach was used taking into account the improvements made on the leased properties. The potential net rental income is capitalised according to its expected initial yield. In each case, the type of property, its use and efficiency, location and condition will be taken into account. I was satisfied that the trade receivables are fairly valued and adequately provided against where doubt exists. I further considered whether the provisions were misstated and concluded that they were appropriate in all material respects, and disclosures related to trade receivable in the consolidated financial statements are appropriate. I assessed the competence, capabilities and objectivity of the management s independent valuator, and verified their qualifications. In addition, I discussed the scope of their work with management and reviewed their terms of engagement to determine that there were no matters that affected their independence and objectivity or imposed scope limitations upon them. I confirmed that the approaches they used are consistent with applicable financial reporting framework (IFRS) and industry norms. I made use of more senior members in the team to evaluate the management s expert s significant assumptions and valuation methods used. I compared these inputs to the entity-specific information used (contract details with regard to leases entered into, rental amount used, actual condition of the property whether land lease or land and improvements) to confirm the appropriateness of judgements used by the expert. I was satisfied that the carrying amount of the investment properties in the financial statements is reasonable.

9 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Emphasis of matter 7. I draw attention to the matters below. My opinion is not modified in respect of this matter. Restatement of prior year amounts 8. As disclosed in note G.16 to the financial statements, the corresponding figures for 31 March 2016 and 31 March 2015 have been restated as a result of the errors discovered during the financial year. Irregular expenditure disclosure 9. As disclosed in note G.13 to the financial statements, irregular expenditure disclosed as incurred in the current year has increased significantly compared to the amount disclosed in the prior year. Other matters 10. I draw attention to the matters below. My opinion is not modified in respect of this matter. Unaudited supplementary schedules 11. The supplementary information set out on pages 2 to 4 does not form part of the financial statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon. Responsibilities of the board of directors 12. The board of directors, which constitutes the accounting authority, is responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with IFRS and the requirements of the PFMA and for such internal control as the accounting authority determines is necessary to enable the preparation of the consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. 13. In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing the group s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the group or to cease operations, or has no realistic alternative but to do so. Auditor-general s responsibilities for the audit of the consolidated and separate financial statements 14. My objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. 15. A further description of my responsibilities for the audit of the consolidated and separate financial statements is included in the annexure to the auditor s report. Introduction and scope 16. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance. 17. My procedures address the reported performance information, which must be based on the approved performance planning documents of the public entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

10 8 AIRPORTS COMPANY SOUTH AFRICA REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON AIRPORTS COMPANY SOUTH AFRICA CONTINUED 18. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives priorities presented in the annual performance report of the public entity for the year ended 31 March 2017: Objectives priorities Pages in the annual performance report Objective 1 Create value for our shareholders. 66 Objective 3 Increase stakeholder satisfaction through effective partnership. 66 Objective 4: Improve the passenger experience through demonstrated 66 operational excellence. Objective 5: Contribute to increase traffic through the airports we operate. 68 Objective 13: Provide equitable access to safe airports in all SA regions to allow more 70 people to fly. Objective 14: Improve connectivity to the regions we serve. 70 Objective 15: Reduce our environmental impact I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 20. The material findings in respect of the usefulness and reliability of the selected objectives are as follows: Objective 5: Contribute to increase traffic through the airports we operate 21. I was unable to obtain sufficient appropriate audit evidence to validate the existence of systems and processes that enable reliable reporting of actual service delivery against the indicator, as required by the Framework for managing programme performance information. This was due to ACSA not being able to obtain the actual annual number of passengers to be used in the index calculation and also using estimates which cannot be verified. I was unable to validate the existence of systems and processes by alternative means. 22. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following objectives: Objective 1: Create value for our shareholders Objective 3: Increase stakeholder satisfaction through effective partnership Objective 4: Improve the passenger experience through demonstrated operational excellence Objective 13: Provide equitable access to safe airports in all SA regions to allow more people to fly Objective 14: Improve connectivity to the regions we serve Objective 15: Reduce our environmental impact Other matter 23. I draw attention to the matters below. Achievement of planned targets 24. Refer to the annual performance report on pages 66 to 91 for information on the achievement of planned targets for the year and explanations provided for the overachievement of a number of targets. This information should be considered in the context of the opinions expressed on the usefulness and reliability of the reported performance information in paragraphs of this report. Adjustment of material misstatements 25. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of Improve the passenger experience through demonstrated operational excellence and Provide equitable access to safe airports in all SA regions to allow more people to fly. As management subsequently corrected the misstatements, I did not report any material findings on the usefulness and reliability of the reported performance information.

11 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS REPORT ON AUDIT OF COMPLIANCE WITH LEGISLATION Introduction and scope 26. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the group with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance. 27. The material findings in respect of the compliance criteria for the applicable subject matters are as follows: Annual financial statements 28. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1) (b) of the PFMA and section 29(1)(a) of the Companies Act. Material misstatements of non-current assets and disclosure items were identified by the auditors in the submitted financial statements but were subsequently corrected which resulted in the financial statements receiving an unqualified audit opinion. Procurement and contract 29. We were unable to obtain sufficient appropriate audit evidence that all contracts were awarded as per legislation because information relating to one contract awarded could not be provided for audit purpose. 30. Goods, works or service were not procured through a procurement process which is fair, equitable, transparent and competitive, as required by section 51(1) (a) (iii) of the PFMA. 31. The preferential point system was not applied in some procurement of goods and services above R30 000, as required by section 2(a) of the Preferential Procurement Policy Framework Act. 32. Contracts were awarded to and quotations accepted from bidders based on preferential points that were not allocated and calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulations. 33. Contracts were awarded to and quotations accepted from bidders that had not scored the highest points in the evaluation process, as required by section 2(1)(f) of Preferential Procurement Policy Framework Act and Preferential procurement regulations. 34. Contracts were awarded to and quotations accepted from bidders based on functionality criteria that were not stipulated and differed from those stipulated in the original invitation for bidding and quotations, in contravention of Preferential Procurement Regulation Construction contracts were awarded to contractors that were not registered with the Construction Industry Development Board (CIDB) and did not qualify for the contract in accordance with section 18(1) of the CIDB Act and CIDB regulations 17 and 25(7A) Expenditure management 36. Effective steps were not taken to prevent irregular expenditure and fruitless and wasteful expenditure, as required by section 51(1) (b) (ii) of the PFMA. OTHER INFORMATION 37. The Airports Company South Africa and its subsidiaries accounting authorities are responsible for the other information. The other information comprises the information included in the annual report which includes the director s report, the audit committee s report and the company secretary s certificate as required by the Companies Act. The other information does not include the consolidated and separate financial statements, the auditor s report thereon and those selected objectives presented in the annual performance report that have been specifically reported on in the auditor s report. 38. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon. 39. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements and the selected objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor s report, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

12 10 AIRPORTS COMPANY SOUTH AFRICA REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON AIRPORTS COMPANY SOUTH AFRICA CONTINUED INTERNAL CONTROL DEFICIENCIES 40. I considered internal control relevant to my audit of the consolidated and separate financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon. Leadership Oversight responsibility 41. There has been slow response in implementing the commitments made in the prior year to address the internal control deficiencies in the areas of financial and performance reporting and compliance. Action plans to address internal control deficiencies 42. Effective action plan was not developed and implemented to ensure that the repeat findings and related internal control deficiencies are addressed. Financial and performance management Regular, accurate and complete financial and performance reports 43. The financial statements contained misstatements which resulted in material adjustments being made pertaining to property, plant and equipment, Investment property, trade and other payables, trade and other receivables, Revenue, Expenditure, capital commitments, prior period error adjustments, related party disclosure, fruitless and wasteful expenditure and irregular expenditure disclosure.this was mainly due to financial statements submitted for audit that were not accurate and complete as a result deficiencies in the review process. Pretoria 31 August 2017

13 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS ANNEXURE AUDITOR GENERAL S RESPONSIBILITY FOR THE AUDIT 1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the consolidated and separate financial statements, and the procedures performed on reported performance information for selected objectives and on the entity s compliance with respect to the selected subject matters. FINANCIAL STATEMENTS 2. In addition to my responsibility for the audit of the consolidated and separate financial statements as described in the auditor s report, I also: identify and assess the risks of material misstatement of the consolidated and separate financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors, which constitutes the accounting authority. conclude on the appropriateness of the board of directors, which constitutes the accounting authority s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Airports Company South Africa and its subsidiaries ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of the auditor s report. However, future events or conditions may cause entities to cease to continue as a going concern. evaluates the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. I am responsible for the direction, supervision and performance of the group audit. COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE 3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. 4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and here applicable, related safeguards.

14 12 AIRPORTS COMPANY SOUTH AFRICA DIRECTORS REPORT GENERAL INFORMATION The Directors have pleasure in submitting their report on the consolidated annual financial statements of Airports Company South Africa SOC Limited for the year ended 31 March 2017, published on 15 September The Company was established in terms of the Airports Company Act No. 44 of 1993 as amended. NATURE OF BUSINESS The principal activities of the Company are the acquisition, establishment, development, provision, maintenance, management, control and operation of airports or part of any airport or any facilities or services that are normally performed at an airport. There have been no material changes to the nature of the Group s business from prior years. REVIEW OF OPERATIONS Revenue for the Group amounted to R8.6 billion (March 2016: R8.3 billion), including non-aeronautical revenue of R3.2 billion (March 2016: R3.1 billion). Profit before income tax for the Group amounted to R2.5 billion (March 2016: R2.6 billion). The profit for the year for the Group was R2.0 billion (March 2016: R1.8 billion) after taxation expense of R495 million (March 2016: R789 million). DIVIDENDS The Board of Directors has approved but not yet paid an ordinary dividend of R358 million for the 2017 financial period (March 2016: ordinary dividend of R343 million). CAPITAL EXPENDITURE During the current year, R893 million (March 2016: R1.3 billion) was spent on capital expenditure relating to improvements, expansions and replacements by the Group (Refer to notes B.1, B.2 and G.1 for more details). SHARE CAPITAL There were no changes to the authorised and issued share capital of the Company and the Group during the financial period. GOING CONCERN The consolidated annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES There were no acquisitions or disposals during the year ended 31 March Airports Company South Africa SOC Limited is the ultimate parent of the Group. The Group has a 100% interest in Airports Company South Africa Global Limited, a management Company incorporated in Mauritius. Airports Company South Africa Global Limited is registered in Mauritius with a financial year end of 31 March. The investment has been accounted for as a subsidiary. Airports Company South Africa Global Limited holds a 10% interest in the Mumbai International Airport Private Limited (MIAL). The investment has been accounted for as an associate. Airports Company South Africa SOC Limited holds a 100% interest in JIA Piazza Park Proprietary Limited with a financial year end of 31 March. The investment has been accounted for as a subsidiary. Airports Company South Africa SOC Limited holds a 100% interest in Precinct 2A Proprietary Limited with a financial year end of 31 March. The investment has been accounted for as a subsidiary. The Group has a 50% interest in Airport Logistics Property Holdings Proprietary Limited with a financial year end of 30 June, which is a joint venture between the Company and The Bidvest Group Limited. The investment has been accounted for as a joint venture using the equity method of accounting. Airports Company South Africa SOC Limited has a 40% interest in the La Mercy JV Property Investments Proprietary Limited with a financial year end of 31 March, a property holding, development and letting company. The investment has been accounted for as an associate using the equity method of accounting.

15 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Airports Company South Africa SOC Limited holds a 20% interest in Aeroporto de Guarulhos Participações S.A. Aeroporto de Guarulhos Participações S.A. is registered in Brazil with a financial year end of 31 December. The investment has been accounted for as an associate using the equity method of accounting. Airports Company South Africa SOC Limited holds 100% of Sakhisizwe Community Programme NPC which is a special purpose entity (SPE) created and controlled by Airports Company South Africa from a government grant received from the Department of Transport. Details of the assets, liabilities, revenues and expenses of the subsidiaries, joint ventures and associates that are included in the consolidated statement of comprehensive income and the consolidated statement of financial position are set out in notes E.1, E.2 and E.3 of the consolidated annual financial statements. DIRECTORS AND SECRETARY Details of the Directors and the Company Secretary are given on the inside front cover of this report. INTERESTS OF DIRECTORS AND OFFICERS No contracts were entered into in which directors and officers of the Company had an interest and which affect the business of the Group. The Directors had no interest in any third party or company responsible for managing any of the business activities of the Group. The emoluments of directors are determined by the board remuneration committee (Directors emoluments can be found in note G.11). INFORMATION REQUIRED IN TERMS OF THE PUBLIC FINANCE MANAGEMENT ACT (PFMA) In terms of the materiality framework agreed with the shareholder and as per section 55(2)(b)(i) and (ii) of the PFMA, any losses due to criminal conduct or irregular or fruitless and wasteful expenditure that individually (or collectively where items are closely related) exceed R60 million for the Group, must be disclosed separately, including any criminal or disciplinary steps taken as a consequence of such losses or irregular or fruitless and wasteful expenditure. Fruitless and wasteful expenditure amounted to R37 million (March 2016: R6 million). The fruitless and wasteful expenditure relates mainly to non-compliance with National Treasury cost containment measures. Cumulative irregular expenditure is R603 million (March 2016: R446 million). The irregular expenditure incidents relate to contravention of the supply chain management policy and the Preferential Procurement Policy Framework Act No. 5 of 2000 (PPPFA) and regulations. Management has controls in place to monitor and report on this type of expenditure on a regular basis. This information is considered and presented to the Executive Committee (Exco) and the Audit and Risk Committee for review on a quarterly basis.

16 14 AIRPORTS COMPANY SOUTH AFRICA DETAILED INDEX TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Page number Statement of Financial Position 16 Statement of Comprehensive Income 17 Statement of Changes in Equity 18 Statement of Cash Flows 20 Notes to the Consolidated Annual Financial Statements Basis of preparation and accounting policies New Standards and Interpretations Segmental information 25 A. Managing EBITDA 29 A.1 Revenue 29 A.2 Other income 30 A.3 Employee costs 31 A.4 Other operating expenses 32 B. Assets 33 B.1 Investment property 33 B.2 Property and equipment 34 C. Debt and cash management 42 C.1 Interest-bearing borrowings 42 C.2 Finance income and expenses 44 C.3 Derivative financial instruments and hedging information 44 D. Managing working capital 46 D.1 Trade and other receivables 46 D.2 Cash and cash equivalents 47 D.3 Trade and other payables 47 Page number E. Investments 50 E.1 Investments in subsidiaries 50 E.2 Investments in joint ventures 51 E.3 Investments in associates 52 E.4 Commitments 54 F. Financial instruments and financial instruments risk management 56 F.1 Financial instruments 56 F.2 Financial risk management 60 G. Other 63 G.1 Intangible assets 63 G.2 Deferred tax 64 G.3 Retirement benefit obligation 65 G.4 Investments 68 G.5 Share capital 68 G.6 Other reserves 68 G.7 Deferred income 69 G.8 Provisions and contingencies 70 G.9 Taxation 71 G.10 Earnings per share and Dividends per share 72 G.11 Related parties 72 G.12 Events after the reporting period 74 G.13 Irregular expenditure 74 G.14 Fruitless and wasteful expenditure 75 G.15 Contingencies 76 G.16 Prior period errors 76 D.4 Cash generated from operations 48 D.5 Tax paid 49 D.6 Other non-current assets 49

17 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

18 16 AIRPORTS COMPANY SOUTH AFRICA STATEMENT OF FINANCIAL POSITION As at 31 March 2017 Figures in Rand thousand Note Mar 2017 GROUP Restated Mar 2016 Restated Mar 2015 Mar 2017 COMPANY Restated Mar 2016 Restated Mar 2015 ASSETS Non-current assets Property and equipment B Investment property B Intangible assets G Investments in subsidiaries E Investments in joint ventures E Investments in associates E Other non-current assets D Current assets Inventories Derivative financial instruments C Current tax receivable Trade and other receivables D Investments G Cash and cash equivalents D Total assets EQUITY AND LIABILITIES EQUITY Share capital ordinary G Share premium G Treasury share reserve (44 024) (44 024) (44 024) Other reserves G Retained earnings LIABILITIES Non-current liabilities Derivative financial instruments C Retirement benefit obligation G Deferred income G Deferred tax liability G Interest-bearing borrowings C Current liabilities Derivative financial instruments C Current tax payable Trade and other payables D Deferred income G Provisions G Interest-bearing borrowings C Total liabilities Total equity and liabilities

19 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 March 2017 GROUP COMPANY Figures in Rand thousand Note Mar 2017 Restated Mar 2016 Mar 2017 Restated Mar 2016 Revenue A Other income A Employee costs A.3 ( ) ( ) ( ) ( ) Operating expenses A.4 ( ) ( ) ( ) ( ) Earnings before interest, tax, depreciation and amortisation Fair value gains on investment properties B Depreciation, amortisation and impairments B.2 & G.1 ( ) ( ) ( ) ( ) Loss from equity accounted investments E.2 & E.3 ( ) ( ) Finance income C Finance costs C.2 ( ) ( ) ( ) ( ) Gains on remeasurement and disposal of financial instruments C (Gains)/losses on property and equipment (9 603) 546 (9 603) 546 Profit before taxation Taxation G.9 ( ) ( ) ( ) ( ) Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss: Actuarial gains (150) (150) Income tax relating to items that will not be reclassified 42 (340) 42 (340) Gains on investment property valuation Total items that will not be reclassified to profit or loss Items that may be reclassified to profit or loss: Exchange differences on translating foreign operations Deferred tax relating to foreign currency translation differences (43 435) ( ) Effects of cash flow hedges Deferred tax relating to cash flow hedges (2 726) (9 293) (2 726) (9 293) Total items that may be reclassified to profit or loss Other comprehensive income for the year net of taxation Total comprehensive income for the year Earnings per share Per share information Basic earnings per share (cents) G Diluted earnings per share (cents) G

20 18 AIRPORTS COMPANY SOUTH AFRICA STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2017 GROUP Figures in Rand thousand Share capital Share premium Treasure share reserve Other reserves Retained income Total equity Balance at 1 April 2015 previously stated (44 024) Adjustments prior period error Balance at 1 April 2015 restated (44 024) Profit for the year Other comprehensive income: Actuarial gains on defined benefit post-retirement medical aid liability, net of tax Foreign currency translation differences, net of tax Cash flow hedge reserve on derivative financial instruments, net of tax Dividends declared ( ) ( ) Total other comprehensive income ( ) Balance at 1 April 2016 previously stated (44 024) Adjustments prior period error Balance at 1 April 2016 restated (44 024) Profit for the year Other comprehensive income: Actuarial gains on defined benefit post-retirement medical aid liability, net of tax (108) (108) Gains on investment property valuation Cash flow hedge reserve on derivative financial instruments, net of tax Foreign currency translation differences, net of tax Dividends declared ( ) ( ) Total other comprehensive income ( ) ( ) Balance at 31 March (44 024) Note G.5 G.5 G.6

21 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS COMPANY Figures in Rand thousand Share capital Share premium Other reserves Retained income Total equity Balance at 1 April 2015 previously stated Adjustments prior period error Balance at 1 April 2015 restated Profit for the year Other comprehensive income: Actuarial losses on defined benefit post-retirement medical aid liability, net of tax Cash flow hedge reserve on derivative financial instruments, net of tax Dividends declared ( ) ( ) Total other comprehensive income ( ) ( ) Balance at 1 April 2016 previously stated Prior period errors Balance at 1 April 2016 restated Profit for the year Other comprehensive income: Actuarial gain on defined benefit post-retirement medical aid liability, net of tax (108) (108) Gains on investment property valuation Cash flow hedge reserve on derivative financial instruments, net of tax Dividends declared ( ) ( ) Total other comprehensive income ( ) ( ) Balance at 31 March Note G.5 G.5 G.6

22 20 AIRPORTS COMPANY SOUTH AFRICA STATEMENT OF CASH FLOWS For the year ended 31 March 2017 GROUP COMPANY Figures in Rand thousand Note Mar 2017 Mar 2016 Mar 2017 Mar 2016 Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) ( ) ( ) Cash generated from operations D Interest income Tax paid D.5 ( ) ( ) ( ) ( ) Net cash inflow from operating activities Cash flows from investing activities Purchase of property and equipment ( ) ( ) ( ) ( ) Sale of property and equipment Purchase of investment property B.1 (55 107) (55 107) Purchase of other intangible assets G.1 (1 337) (2 566) (1 317) (2 262) Loans to Group companies (advanced)/repaid (27 330) (8 442) Increase in short-term investments ( ) ( ) ( ) ( ) Increase in investments in associates E.3 ( ) ( ) ( ) ( ) Net cash outflow from investing activities ( ) ( ) ( ) ( ) Cash flows from financing activities Financial instruments held for trading (2 592) (44 611) (2 592) (44 613) Interest-bearing borrowings repaid ( ) ( ) ( ) ( ) Dividends paid ( ) ( ) ( ) ( ) Interest paid ( ) ( ) ( ) ( ) Net cash outflow from financing activities ( ) ( ) ( ) ( ) Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year D

23 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS For the year ended 31 March BASIS OF PREPARATION AND ACCOUNTING POLICIES 1.1 Accounting policies The most significant accounting policies have been moved next to the relevant notes in the consolidated annual financial statements. The remainder of the accounting policies not relating to a specific note are dealt with here. All accounting policies are consistent with the previous period. 1.2 Statement of compliance and basis of preparation The consolidated and separate annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board (IASB), as well as the requirements of the South African Companies Act No. 71 of 2008, as amended and the Public Finance Management Act No. 1 of 1999, as amended. The financial statements have been prepared on the historical cost basis, except for investment property and certain financial instruments that are carried at fair value. 1.3 Basis of consolidation The Group controls and consolidates an entity where the Group has power over the entity s relevant activities; is exposed to variable returns from its involvement with the investee; and has the ability to affect the returns through its power over the entity, including structured entities. Determining whether the Group controls another entity requires judgement by identifying an entity s relevant activities, being those activities that significantly affect the investee s returns, and whether the Group controls those relevant activities by considering the rights attached to both current and potential voting rights, de facto control and other contractual rights, including whether such rights are substantive. 1.4 Estimates and assumptions In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. The significant judgements have been disclosed in the applicable notes. These include: Accounting for investment in associates note E.3 Fair value of financial instruments note F.1 Post-retirement medical aid obligation note G.3 Fair value of investment property note B.1 Useful lives and residual values of assets note B.2 Contingencies note G.15 Property and equipment note B.2 Current and Deferred Tax notes G.9 and G Changes in accounting policy and disclosures The accounting policies are consistent with those adopted in the prior period and the accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities. 1.6 Functional and presentation currency These financial statements are presented in South African Rand, which is the Company s functional currency. All financial information presented in Rand has been rounded to the nearest thousand unless otherwise indicated. 1.7 Comparative figures Comparative figures are restated in the event of a change in accounting policy, prior period error or reclassification. 2. NEW STANDARDS AND INTERPRETATIONS 2.1 Standards and interpretations effective and adopted in the current year There were a number of new standards and interpretations effective and adopted in the current period; none of these are considered to have a material impact on the Group.

24 22 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March NEW STANDARDS AND INTERPRETATIONS (CONTINUED) 2.2 Standards and interpretations not yet effective There are a number of new standards and amendments which will only be effective after the 2017 financial year end. None of these are expected to have a significant impact on the Group, except for IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial instruments. Management has not opted to early adopt any of the standards and interpretations. Topic Key requirements Effective date IFRS 9 'Financial Instruments' IFRS 15 Revenue from Contracts with Customers IFRS 7 Financial Instruments: Disclosures IFRS 16 Leases The complete version of IFRS 9 replaces most of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value, through profit or loss. Management is currently in the process of assessing the impact of this new standard. This is the converged standards on revenue recognition. It replaces IAS 11 Construction Contracts, IAS 18 Revenue and related interpretations. Revenue is recognised when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of land and obtain the benefits from the good or service. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation. IFRS 15 also includes a cohesive set of disclosure requirements that will result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity s contracts with customers. Management is currently in the process of assessing the impact of this new standard. Additional disclosures (and consequential amendments) resulting from IFRS 9. Management is currently in the process of assessing the impact of this new standard. IFRS 16 specifies how an entity will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16 s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. Management is currently in the process of assessing the impact of this new standard. Annual periods beginning on or after 1 January 2018 Annual periods beginning on or after 1 January 2018 Concurrent with adoption of IFRS 9 Annual periods beginning on or after 1 January 2019

25 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS NEW STANDARDS AND INTERPRETATIONS (CONTINUED) 2.2 Standards and interpretations not yet effective (continued) Topic Key requirements Effective date IAS 7 Statement of Cash Flows IAS 12 Income Taxes Amendments to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. Management is currently in the process of assessing the impact of this new standard. Amendments regarding the recognition of deferred tax assets for unrealised losses. Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument s holder expects to recover the carrying amount of the debt instrument by sale or by use. The carrying amount of an asset does not limit the estimation of probable future taxable profits. Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. Annual periods beginning on or after 1 January 2017 Annual periods beginning on or after 1 January2017 IFRS 10 Consolidated Financial Statements IAS 28 Investment in Associates IAS 40 Investment Property Management is currently in the process of assessing the impact of this new standard. Amendments to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows: Require full recognition in the investor s financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations ) Require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated investors interests in that associate or joint venture. Amendments to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows: Require full recognition in the investor s financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations ) Require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated investors interests in that associate or joint venture. The amendment in paragraph 57 was made to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management s intentions for the use of a property by itself does not constitute evidence of a change in use. Management is currently in the process of assessing the impact of this new standard. Effective date deferred indefinitely Effective date deferred indefinitely Annual periods after 1 January 2018

26 24 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March NEW STANDARDS AND INTERPRETATIONS (CONTINUED) 2.2 Standards and interpretations not yet effective (continued) Annual Improvements to IFRS Standards Cycle Topic Key requirements Effective date IFRS 12 Disclosure of Interests in Other Entities IAS 28 Investment in Associates Clarifies the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10 B16, apply to an entity s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Clarifies that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition. Annual periods beginning on or after 1 January 2017 Annual periods beginning on or after 1 January Foreign currency Foreign operations The assets and liabilities of foreign operations, including fair value adjustments arising on acquisition, are translated to South African Rand at closing rate. The income and expenses of foreign operations are translated at the dates of the transactions using an average rate. Differences arising upon the translation of the foreign operation into South African Rand are recognised directly in other comprehensive income and are recognised in the statement of changes in equity as part of the foreign currency translation reserve account Foreign currency transactions and balances Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities are retranslated at year end at the closing rate (exchange rate at year end). Non-monetary assets and liabilities are measured at historical cost are not retranslated at year end, while non-monetary assets and liabilities measured at fair value are retranslated at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on translation are recognised in profit and loss. Refer to note F.2 (price risk) for the significant exchange rates that applied throughout the period. 2.4 Impairment of non-financial assets The carrying amounts of property and equipment, and intangible assets are reviewed at each reporting date to determine whether there is an indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Assets are grouped together into the smallest groups of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit ). An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.

27 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS SEGMENTAL INFORMATION The Group s reported segments are based on reports reviewed by the Executive Committee (Exco) to make strategic decisions. Five reportable segments were identified, namely: O.R. Tambo International; Cape Town International; King Shaka International; Regional Airports; and Corporate and Other 1. The Regional Airports segment comprises the smaller airports in South Africa which the Group manages, namely: Bram Fischer International Airport; East London Airport; Port Elizabeth International Airport; George Airport; Kimberley Airport; and Upington International Airport. 1 Other comprises the results of the subsidiaries, joint ventures and associates outlined in the directors report on pages 12 and 13 of these consolidated annual financial statements. Information regarding the operations of each reportable segment is included below. Exco assesses the performance of the operating segments as a measure of earnings before interest, taxation, depreciation and amortisation expense (EBITDA). The Group calculates EBITDA as follows: Profit/(loss) before tax; Add Interest expense; Less Interest income; Add Depreciation, amortisation and any impairment; Subtract/Add Loss/gain from equity accounted investments. Items not allocated to segments Current and deferred tax liabilities, derivative financial instruments and interest-bearing liabilities have not been allocated to operating segments as these are managed centrally. Similarly, interest income and expenditure are not allocated to operating segments as they are driven largely by the Corporate division, which manages the cash requirements of the Company. Corporate overhead expenses are not allocated to the reportable segments.

28 26 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March SEGMENTAL INFORMATION (CONTINUED) O.R. Tambo International Cape Town International King Shaka International Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Revenue Aeronautical Non-aeronautical Total revenue EBITDA Fair value gains/(loss) on investment properties Depreciation, amortisation and impairments investments ( ) ( ) ( ) ( ) ( ) ( ) Loss from equity accounted investments Segment profit/(loss) before tax Reportable total assets* Reportable total liabilities * The negative assets are mainly as a result of the sweeping bank account that has bank transfers from the airports to the corporate account, which is then used for operations.

29 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Regional Airports Corporate and Other Elimination Total Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar (61 237) (55 822) (61 237) (55 822) ( ) ( ) (1 329) (5 812) (42 408) (39 378) (25 990) ( ) ( ) (86 484) (70 659) (275) ( ) ( ) ( ) ( ) ( ) ( ) (10 680) ( ) ( ) (71 583) (32 077) ( ) ( ) ( ) ( ) ( ) (8 029)

30 28 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March SEGMENTAL INFORMATION (CONTINUED) Below is the reconciliation of the segmental information to that presented in the statement of financial position and statement of comprehensive income. Figures in Rand thousand Mar 2017 Mar 2016 Reportable segment revenue are reconciled to total revenue as follows: Segment revenue for reportable segments Corporate and Other segment revenue Total revenue per statement of comprehensive income Reportable segment profit before tax are reconciled to total profit before tax as follows: Segment profit before tax for reportable segments Corporate and Other segment profit before tax ( ) ( ) Total profit before tax per statement of comprehensive income Reportable segment assets are reconciled to total assets as follows: Segment assets for reportable segments Corporate and Other segment assets ( ) ( ) Reportable assets Unallocated Total assets per statement of financial position Reportable segment liabilities are reconciled to total liabilities as follows: Segment liabilities for reportable segments Corporate and Other segment liabilities Reportable liabilities Unallocated Total liabilities per statement of financial position Comprises current and deferred tax liabilities/assets, derivative financial instruments and interest-bearing liabilities, as these are carried at the Corporate and Other segments. Figures in Rand thousand Reportable segments Corporate and Other 2017 Other material items: Fair value gains on investment properties (19 479) Depreciation, amortisation and impairments ( ) (86 484) ( ) Loss from equity accounted investments ( ) ( ) 2016 Other material items: Fair value gains on investment properties Depreciation, amortisation and impairments ( ) (70 933) ( ) Loss from equity accounted investments ( ) ( ) Major customer Included in revenue are amounts of R1.7 billion and R920 million from the top two customers (2016: R1.71 billion). There are no other customers who represent more than 10% of revenue for both 2017 and Total

31 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS A. MANAGING EBITDA A.1 Revenue Accounting policy The Group and Company earn revenue from aeronautical and non-aeronautical goods and services: Aeronautical revenue Aeronautical revenue is recognised when the services are provided to the customer. Type of revenue Landing fees Passenger service charges Aircraft parking Determination Using regulated tariffs for aircraft landings based on the maximum take-off weight of landing aircrafts for each landing. Using regulated tariffs for each departing passenger at an airport of departure. On regulated tariffs for each aircraft parked for over four hours, based on the maximum take-off weight of aircraft parking per 24-hour period. Non-aeronautical revenue Non-aeronautical revenue is recognised when services are provided to the customer. Type of revenue Determination Examples Advertising* Retail* Based on the higher of a minimum guaranteed rental and/or a percentage of turnover. Based on the higher of a minimum guaranteed rental and/or a percentage of turnover. Rental of advertising space to concessionaires. Rental of retail space to concessionaires. Parking* Based on time-based tariffs. Providing short- and long-term parking facilities. Car hire* Property rental* Hotel operations Recoveries Finance income Rental is based on the higher of a minimum guaranteed rental and/or a percentage of turnover. Based on medium- and long-term rental agreements with tenants. Accommodation income is recognised at the date the guests are invoiced. Recoveries include water, electricity and other utility charges recovered from tenants. Finance income comprises interest income on funds invested and overdue debtors. Finance income is recognised as it accrues in profit and loss, using the effective interest method. Concession fees and the rental of space and kiosks to car hire companies. Rentals of offices, air lounges, aviation fuel depots, warehousing, logistics facilities, hotels and filling stations. Invoice value of accommodation and sale of food and beverages. Water and electricity invoices. Charges on overdue debtor accounts, and interest earned on bank balance. Revenue is recognised when it is probable that future economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Revenue is recognised to match the period in which the services are provided. Operating leases Group and Company as a lessor All leases that do not meet the criteria of a financial lease are classified as operating leases. * Operating lease income net of any incentives given to lessees, is recognised on the straight-line basis or a more representative basis where applicable over the lease term and is recognised in revenue. When an operating lease is terminated before the lease period has expired, any payment required by the Group by way of a penalty is recognised as income in the period in which termination takes place.

32 30 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 A. MANAGING EBITDA (CONTINUED) A.1 Revenue (continued) GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Aeronautical Landing fees Passenger service charges Aircraft parking Non-aeronautical Advertising Retail Parking Car hire Property rental Hotel operations Recoveries Other Recoveries include water, electricity and other utility charges recovered from tenants. 2 Other includes permits and airports management services At the reporting date, the Group has contracted with tenants for the following future minimum cash lease payments in respect of advertising, retail and property leases: GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Contractual future cash lease payments (unrecognised) Within one year Two to five years After five years A.2 Other income Other income is any income that accrued to the Group from activities that are not part of the normal operations and is recognised as earned. GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Other Other includes training income and rates refunds.

33 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS A. MANAGING EBITDA (CONTINUED) A.3 Employee costs Accounting policy Employee costs are recognised as an operating expense in the period during which services are rendered by the employees. Type of benefit Defined contribution plans Policy Obligations for contributions to defined contribution pension plans and medical aid schemes are recognised as an employee benefit expense in profit and loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Defined benefit plans Short-term benefits The Group operates a number of defined benefit retirement and medical aid plans. Employer companies contribute to the cost of benefits taking account of the recommendations of the actuaries. Net interest income/(expense) is determined on the defined benefit asset/(liability) by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit asset/(liability). Other expenses related to the defined benefit plans are also recognised in operating expenses. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in employee costs. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. Past service cost is recognised as an expense at the earlier of plan amendment curtailment, and recognition of related restructuring or termination benefits. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or incentive scheme plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Basic Performance bonus Medical aid Company contributions Pension benefits

34 32 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 A. MANAGING EBITDA (CONTINUED) A.4 Other operating expenses GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Repairs and maintenance Security Electricity and water Auditors remuneration Operating lease expense* Impairment of trade and other receivables Information systems expenses Rates and taxes Cleaning Marketing Managerial, technical and other fees Travel local Travel overseas Insurance Administration Training Foreign currency losses Consumables Socio-economic and enterprise development Telephone and fax Recruitment expenses Legal expenses Other expenses Bank charges Service standards monitoring Membership fees Loss on sale of assets * Accounting policy Operating leases expense Company and Group as a lessee Accounting policy Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability. This liability is not discounted. Any contingent rents are expensed in the period they are incurred. The Company leases properties for their Group (Corporate) head offices and for their Regional Airports head office. At the reporting date, the Group has outstanding commitments under non-cancellable operating leases for future minimum lease payments. The commitments comprise a number of separate operating leases in relation to properties, none of which is individually significant to the Group or Company. GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Contractual future cash lease payments (unrecognised) Within one year One to two years Two to five years After five years

35 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS B. ASSETS B.1 Investment property Accounting policy Investment property comprises a number of commercial properties that are leased to third parties. Investment property is carried at fair value, determined annually using discounted cash flow projections. Changes in fair values are recorded in profit or loss. Significant judgement, estimate and source of estimation uncertainty The discounted cash flow analysis valuation technique uses transactions observable in the market at the reporting date. The Group and Company use their judgement to select a variety of methods and make assumptions relating to market yields, escalation rates and key valuation inputs that are mainly based on market conditions existing at each reporting date. Reconciliation of investment property GROUP Figures in Rand thousand Mar 2017 Mar 2016 Mar 2015 Balance at 1 April Previously reported Restatement Improvements/additions Write-offs (4 125) (30) Change in fair value Recognised in statement of comprehensive income Reclassification from property and equipment Balance at 31 March COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2015 Balance at 1 April Previously reported Restatement Improvements/additions Write-offs (4 125) (30) Change in fair value Recognised in statement of comprehensive income Reclassification from property and equipment Balance at 31 March The amount of rental income from investment properties recognised in profit for the period was as follows: GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Rental payments received Per statement of comprehensive income Operating expenses directly incurred in relation to investment properties amounted to R8 million (2016: R8.8 million) in the current financial year.

36 34 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 B. ASSETS (CONTINUED) B.1 Investment property (continued) Fair values Investment properties are stated at fair value, which has been determined based on valuations performed by accredited independent valuers, as at 31 March 2017 and 31 March Where there was a lack of comparable data, a valuation model in accordance with that recommended by the International Valuation Standards Committee has been applied. The following main inputs have been used: GROUP AND COMPANY Mar 2017 Mar 2016 Market yield of comparable properties (%) Average escalation of lease rentals (%) Average duration of lease (years) Fair value hierarchy The fair values of these investment properties are determined using valuation techniques which use inputs that are directly or indirectly observable. They are therefore classified as Level 2 on the fair value hierarchy. B.2 Property and equipment Accounting policy Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Gains and losses on disposal are recognised within profit and loss. The costs of day-to-day maintenance are recognised in profit and loss. Depreciation is recognised on a straight-line basis to reduce the assets to their residual values over their estimated useful lives. Land is not depreciated. A summary of the changes in the estimated useful lives of different asset groups is as follows: Category Equipment Motor vehicles Pavements Buildings Useful lives 3 50 years 5 30 years 3 60 years 6 50 years

37 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS B. ASSETS (CONTINUED) B.2 Property and equipment (continued) Impairment The carrying amounts of property and equipment, and intangible assets are reviewed at each reporting date to determine whether there is an indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where it is not possible to determine recoverable amounts for individual assets, assets are grouped together into the smallest groups of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit ). An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (group of units) on a pro rata basis. Derecognition The gain or loss arising from the derecognition of an item of property and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount.

38 36 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 B. ASSETS (CONTINUED) B.2 Property and equipment (continued) Figures in Rand thousand Cost GROUP Mar 2017 Accumulated depreciation Carrying value Land Buildings ( ) Equipment ( ) Motor vehicles ( ) Pavements ( ) Work in progress Total ( ) Figures in Rand thousand Cost COMPANY Mar 2017 Accumulated depreciation Carrying value Land Buildings ( ) Equipment ( ) Motor vehicles ( ) Pavements ( ) Work in progress Total ( )

39 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Cost GROUP Mar 2016 Accumulated depreciation Carrying value Cost GROUP Mar 2015 Accumulated depreciation Carrying value ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Cost COMPANY Mar 2016 Accumulated depreciation Carrying value Cost COMPANY Mar 2015 Accumulated depreciation Carrying value ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )

40 38 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 B. ASSETS (CONTINUED) B.2 Property and equipment (continued) GROUP Figures in Rand thousand Land Buildings Opening balance at 1 April 2014 restated Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals (1 008) Reclassifications to investment property (2 978) Transfers* Depreciation ( ) Opening balance at 1 April 2015 restated Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals Reclassifications to investment property (20 899) Transfers* Depreciation and impairment ( ) Reconstruction reclassification* ( ) Reclassification relating to investment property and intangible assets (40 901) Opening balance at 1 April 2016 restated Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals (8 254) Transfers Write-offs Depreciation and impairment ( ) Reclassification relating to Investment property and intangible assets (13 580) Closing balance at 31 March * Reconstruction reclassification relates to all the transfers that occurred through the fixed assets verification project to ensure the assets have been recognised in the correct category.

41 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS GROUP Equipment Motor vehicles Pavements Work in progress Total (30) ( ) (72 730) (1 395) (1 099) (76 232) (4 737) (7 715) ( ) ( ) (32 831) ( ) ( ) (26) ( ) (1 043) (2 273) (34 851) (38 167) (9 915) (30 814) ( ) ( ) (41 030) ( ) ( ) ( ) ( ) (38 942) ( ) ( ) (10 006) (658) (8 685) (27 603) ( ) ( ) (27 042) (27 042) ( ) (49 762) ( ) ( ) (8 691)

42 40 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 B. ASSETS (CONTINUED) B.2 Property and equipment (continued) COMPANY Figures in Rand thousand Land Buildings Opening balance at 1 April Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals (1 008) Reclassification relating to investment property and intangible assets (2 978) Transfers Depreciation ( ) Opening balance at 1 April 2015 restated Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals Reclassifications to investment property and intangible assets (20 899) Transfers* Depreciation and impairment ( ) Reconstruction reclassification* ( ) Reclassification relating to investment property and intangible assets (40 901) Opening balance at 1 April 2016 restated Opening balance previously reported Adjustments prior period error (25 863) ( ) Additions Disposals (9 330) Transfers Write-offs Depreciation and impairment ( ) Reclassification relating to investment property and intangible assets (13 580) Closing balance at 31 March * Reconstruction reclassification relates to all the transfers that occurred through the fixed assets verification project to ensure the assets have been recognised in the correct category. The reclassifications to investment property and Intangible assets which amounted to R8.7 million have been disclosed above. No property and equipment have been pledged or used as collateral to the Group s and Company s contractual commitments and obligations.

43 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS COMPANY Equipment Motor vehicles Pavements Work in progress Total (30) ( ) (72 551) (1 395) (1 099) (76 053) (4 737) (7 715) ( ) ( ) (32 831) ( ) ( ) (26) ( ) (231) (2 273) (34 851) (37 355) (9 915) (30 814) ( ) ( ) (41 030) ( ) ( ) ( ) ( ) (2) (38 942) ( ) ( ) (8 181) (658) (8 685) (26 854) ( ) ( ) (27 042) (27 042) ( ) (49 762) ( ) ( ) (8 691)

44 42 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 C. DEBT AND CASH MANAGEMENT C.1 Interest-bearing borrowings Figures in Rand thousand GROUP Mar 2017 Mar 2016 Carrying Fair Carrying value value value Fair value Unsecured Long-term bonds Infrastructure finance Southern Sun Hotel Interests (Pty) Ltd L Agence Francaise de Developpement (AFD) L Agence Francaise de Developpement (AFD1) Figures in Rand thousand COMPANY Mar 2017 Mar 2016 Carrying Fair Carrying value value value Fair value Unsecured Long-term bonds Infrastructure finance L Agence Francaise de Developpement (AFD) L Agence Francaise de Developpement (AFD1) Term and debt repayment schedule Figures in Rand thousand Interest rate GROUP Maturity date Mar 2017 Carrying value Mar 2016 Carrying value Nominal Long-term bonds amount AIR01 R2 billion 8.85% Mar AIR02 R1.712 billion 11.30% Apr AIRL01 R999 million Inflationlinked Apr AIR04U R500 million 11.59% Oct AIR04 R544 million 9.25% May AIR05 R232 million 10.00% May Long-term loans Southern Sun Hotel Interests (Pty) Ltd 2% N/A L Agence Francaise de Developpement (AFD) 10.35% Nov L Agence Francaise de Developpement (AFD1) 10.55% Jan Infrastructure Finance Corporation Ltd (INCA) JIBAR-linked Nov

45 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS C. DEBT AND CASH MANAGEMENT (CONTINUED) C.1 Interest-bearing borrowings (continued) The table below analyses the Group s interest-bearing borrowings in terms of their maturities. Figures in Rand thousand Carrying amount Contractual cash flows 6 months or fewer Between 6 12 months Between 1 2 years Between 2 5 years More than 5 years The cash to meet these maturities will be obtained from operating activities and reserves. List of the persons (natural and incorporated) who hold beneficial interests equal to or in excess of 5% of the total number of listed securities of that class issued by the Group as at the 31st of March Bond holder Holding % Bond: AIR01 GEPF bonds 18% Old Mutual Life Assurance Co SA Ltd 10% Sasol Pension Fund 8% Stanlib Income Fund 8% RMB Custody and Trustee Services 13% MMI Group Ltd 6% Bond: AIR04 GEPF Bonds 22% Old Mutual Multi-Managers 17% Investec Asset Management 14% PIC UIF 9% AIPF-NT (STD007) 6% Allan Gray Life Global 5% Bond: AIRL01 MMI Group Ltd 30% SBSA ITF Prud Infl Plus Fnd 9% Investment Solution Ltd ISL Coronation FDL AM 9% Standard Chartered Bank as trustee for Coro balanced plus fund COBP 9% Stanlib Inflation Linked 9% Old Mutual Life Assurance Co SA Ltd 5% Bond holder Holding % Bond: AIR02 Investec Corporate Bond Fund 24% Nedcor Capital Treasury 16% Old Mutual Life Assurance Co SA Ltd 10% GEPF Bonds 9% SBSA ITF Prudential Corporate Bond Fund 5% Metal Industries Provident Fund in-house Bond Account 5% Bond: AIR05 Prudential Corporate Bond Fund 21% Investment Solution Ltd 12% Allan Gray Balanced Fund 25% Rand Mutual Assurance Company Ltd OMIG 5%

46 44 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 C. DEBT AND CASH MANAGEMENT (CONTINUED) C.2 Finance income and expenses Accounting policy Finance income comprises of interest income on funds invested and is recognised using the effective interest method in profit and loss. Finance expenses comprise of interest expense on borrowings and are recognised using the effective interest method in profit and loss. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised to the cost of those assets until such time as the assets are substantially ready for their intended use. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised as an expense in the period in which they are incurred. GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Interest received Finance income Finance costs ( ) ( ) ( ) ( ) Gains on remeasurement and disposal of trading financial instruments* Total finance expense ( ) ( ) ( ) ( ) Net finance expense ( ) ( ) ( ) ( ) * Interest rate swaps. C.3 Derivative financial instruments and hedging information Accounting policy Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss or the hedged item affects profit or loss. If the forecast transaction is no longer expected to occur, the hedge no longer meets the criteria for hedge accounting, the hedging instrument expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss. The following information relates to derivative financial instruments included in the consolidated annual financial statements: GROUP AND COMPANY Mar 2017 Mar 2016 Figures in Rand thousand Assets Liabilities Assets Liabilities Interest rate swaps cash flow hedges Forward foreign exchange contracts held for trading Current Non-current

47 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS C. DEBT AND CASH MANAGEMENT (CONTINUED) C.3 Derivative financial instruments and hedging information (continued) Interest rate swaps cash flow hedge The Group entered into an interest rate swap contract relating to the INCA loan in order to fix the interest rate on these loans. Under the interest rate swap contract, the Group and Company agree with other parties to exchange, at specified quarterly and semi-annual intervals, the difference between fixed rates and floating rate interest amounts that are calculated by reference to the agreed notional principal amounts. During the current financial year, the hedging relationship was revoked as it is not effective, nor is it expected to be in the future. All changes in the interest rate swap will be recognised in the profit or loss. The ineffective portion recognised in profit or loss that arises from cash flow hedges amounts to a loss of R7.9 million (2016: R34 million) for both the Group and Company. The notional principal amounts of the outstanding derivative contracts were as follows (figures in Rand thousand): Notional amount Fair value Interest rate swaps Receive Pay Mar 2017 Mar 2016 Mar 2017 Mar November month JIBAR +1.90% 10.98% (5 673) (5 658) (5 673) (5 658) Forward foreign exchange contracts 1 (712) Total derivatives (5 673) (6 370) 1 The notional principle amounts of the outstanding forward foreign exchange contracts at 31 March 2017 were Rnil (2016:$2.3 million). The exchange rates may vary (2016: R to R ). The table below analyses the Group and Company s derivative financial instruments in terms of their maturities. The amounts disclosed are the contractual undiscounted cash flows: Figures in Rand thousand Carrying amount Contractual cash flows 6 months or fewer Between 6 12 months Between 1 2 years Between 2 5 years More than 5 years Mar Mar

48 46 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 D. MANAGING WORKING CAPITAL D.1 Trade and other receivables GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Trade receivables Impairment of trade receivables (55 559) ( ) (53 095) Loan to joint venture/associate Loans and receivables Taxation receivable 834 Prepayment Insurance receivable* Lease receivables Other receivables * Includes a contingency policy underwritten by Guardrisk. The amount receivable represents the balance of the special experience account. The special experience account is payable on demand. The average credit period is 31 days (2016: 33 days). Trade receivables are carried at cost which normally approximates their fair value due to short-term maturity thereof. An adjustment for impairment of receivables has been made for estimated irrecoverable amounts. Loans to joint ventures and associates bear no interest and have no fixed repayment terms. The maximum exposure to credit risk for trade receivables at the reporting date before the impairment provision, guarantees and deposits held by type of customer was: GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Aeronautical Commercial Other Figures in Rand thousand Trade and other receivables GROUP Allowance for impairment Trade and other receivables COMPANY Allowance for impairment March 2017 Not past due Past due 0 30 days Past due days Past due 61 days and above ( ) Total trade and other receivables ( ) March 2016 Not past due Past due 0 30 days Past due days Past due 61 days and above (55 559) (53 095) Total trade and other receivables (55 559) (53 095)

49 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS D. MANAGING WORKING CAPITAL (CONTINUED) D.1 Trade and other receivables (continued) Impairment The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Any subsequent reversals of impairment, or recoveries of amounts previously impaired (including debts that have been written off), are reflected within impairment of trade receivables credit impairment charges in profit or loss. GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Balance at 1 April Increase/(decrease) in allowance (609) (609) Bad debts written-off (1 405) (31 379) (1 373) (33 843) Balance at 31 March Credit quality of financial instruments The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about the customer. Before accepting any new customer, the Group and Company use an external credit scoring system to assess the potential customer s credit quality and define credit limits by customer. Limits and scoring attributed to customers are reviewed periodically. 60% of the trade receivables that are neither past due nor impaired were recovered within one month after the reporting date. Of the trade receivables balance, for both the Group and Company, at the end of the year, R150 million (March 2016: R147 million) is due from one significant client. There are no other customers who represent more than 10% of the total balance of trade receivables. As at 31 March 2017, the Group and Company had no significant concentration of credit risk (March 2016: Nil). The allowance account in respect of trade receivables is used to record impairment losses unless the Group and Company are satisfied that no recovery of the amounts owing is possible; at that point the amounts considered irrecoverable are written off against the allowance account. D.2 Cash and cash equivalents Cash and cash equivalents consist of: GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Cash on hand Bank balances Money markets The Group and Company s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note F.2. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term, highly-liquid investments with original maturities of three months or fewer, and bank overdrafts and is available for use by the Group and Company. Cash and cash equivalents are classified as Level 2 on the fair value hierarchy. D.3 Trade and other payables GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Trade payables VAT Bonuses payable Leave payable Deposits received Lease payable Other payables* * Other payables includes overtime accruals

50 48 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 D. MANAGING WORKING CAPITAL (CONTINUED) D.3 Trade and other payables (continued) The Group and Company s exposure to liquidity risk related to trade and other payables is disclosed in note F2. The table below analyses the Group and Company s trade and other payables in terms of their maturities. The amounts disclosed are the contractual undiscounted cash outflows: Figures in Rand thousand Carrying amount Contractual cash flows 6 months or fewer Between 6 12 months Between 1 2 years Between 2 5 years More than 5 years Group March March Figures in Rand thousand Carrying amount Contractual cash flows 6 months or fewer Between 6 12 months Between 1 2 years Between 2 5 years More than 5 years Company March March D.4 Cash generated from operations GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Profit before taxation Adjustments for: Depreciation and amortisation Impairment of trade receivables Loss on sale of assets Loss from equity accounted investments Finance income ( ) ( ) ( ) ( ) Finance costs Foreign exchange differences (4 863) (11 178) (4 844) Movements in retirement benefit obligation (678) 746 (678) Movements in provisions (12 836) (17 679) Deferred income Gains/(losses) on property and equipment (546) (546) Unrealised fair value gains and losses ( ) ( ) ( ) ( ) Changes in working capital: Inventories (778) (68) (436) (352) Other non-current assets ( ) ( ) Trade and other receivables ( ) ( ) Trade and other payables ( ) ( )

51 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS D. MANAGING WORKING CAPITAL (CONTINUED) D.5 Tax paid GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Balance at beginning of the year (57 019) (61 999) Current tax for the year recognised in profit or loss ( ) ( ) ( ) ( ) Prior period overprovision ( ) ( ) Interest accrued Balance at end of the year (60 824) (56 263) D.6 Other non-current assets ( ) ( ) ( ) ( ) GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Lease receivable non-current portion Investments* * Investments relate to the acquisition made by the Company of 100% shareholding in a cell captive with Guardrisk Life Limited in September 2003 to fund its obligation arising from 2002, whereby the Company agreed to increase the minimum pension payout to employees. Guardrisk performs a half-yearly review per individual covered to establish the present value of the Company s obligation on the prescribed valuation basis (as approved by Guardrisk Life Statutory Actuaries) in order to assess the Company s commitment as per the assets and expressed liabilities and ensure sufficient life funds are transferred to the non-distributable reserves.

52 50 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 E. INVESTMENTS E.1 Investments in subsidiaries Accounting policy Subsidiaries are all entities (including structured entities) over which the Company has control. The Company uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Company recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. Intra-group transactions, balances and unrealised gains/(losses) are eliminated on consolidation. Unrealised losses are eliminated in the same manner as unrealised gains, but only to the extent that there is no evidence of impairment. The Company s investments in subsidiaries are carried at cost, net of accumulated impairment losses. The Company treats transactions with non-controlling interests that do not result in a loss of control, as equity transactions. Gains or losses on disposals to non-controlling interests are also recorded in equity. COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Indebtedness Total interest in subsidiaries Directors valuation Aggregate after tax (losses)/profits of subsidiary companies ( ) Details of the Company s subsidiaries at 31 March 2017 are indicated below. All subsidiaries are incorporated in South Africa except for Airports Company South Africa Global Limited which is incorporated in Mauritius. Subsidiaries Principal activity Interest held Indebtedness Mar 2017 Mar 2016 Mar 2017 Mar 2016 OSI Airport Systems (Pty) Ltd Dormant 51% 51% Precinct 2A (Pty) Ltd Property owning 100% 100% JIA Piazza Park (Pty) Ltd Hotel operations 100% 100% Airports Company South Africa Global Ltd Management company 100% 100% Special purpose entities* Lexshell 342 Investment Holdings (Pty) Ltd Airport Management Scheme Incentive Scheme Company (Pty) Ltd Sakhisizwe Community Programme (NPC) Employee share option plan % % Employee share option plan % % Non-profit company (Education) % % * The Company s accounts include the consolidation of the Airport Management Share Incentive Scheme Company Proprietary Limited and Lexshell 342 Investment Holdings Proprietary Limited. Although the Airport Management Share Incentive Scheme Company Proprietary Limited is wholly owned by the Airport Management Share Incentive Scheme Trust and Lexshell 342 Investment Holdings Proprietary Limited is wholly owned by the ACSA Kagano Trust, in terms of IFRS 10: The Group consolidates these entities as it is exposed to significant risks that are associated with loans extended to the entities to acquire shares of the Company. Sakhisizwe Community Programme NPC is a Special Purpose Entities created and controlled by ACSA from a government grant received from the Department of Transport (refer to Note G.7).

53 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS E. INVESTMENTS (CONTINUED) E.2 Investments in joint ventures Accounting policy The Group holds a 50% interest in Airports Logistics Property Holdings (Pty) Ltd. It has been classified as a joint venture due to the decisions about the relevant activities requiring unanimous consent of the parties sharing control. Associates and joint ventures are initially measured at cost per Group and Company purposes. Subsequently they are accounted for using the equity method for Group purposes at an amount that reflects the Group s share of the net assets of the associate or joint venture (including goodwill). Equity accounting is applied from the date on which the entity becomes an associate or joint venture up to the date on which the Group ceases to have significant influence or joint control. Equity accounting of losses is restricted to the interests in these entities, including unsecured receivables or other commitments, unless the Group has an obligation or has made payments on behalf of the associate or joint ventures. Unrealised profits from transactions are eliminated in determining the Group s share of equity accounted profits. Unrealised losses are eliminated in the same way as unrealised gains (but only to the extent that there is no evidence of impairment). Where there is an indicator of impairment, the carrying amount of the investment is tested for impairment by comparing its recoverable amount with its carrying amount. Impairment losses are recognised through non-trading and capital related items. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, but only to the extent that the investment s carrying amount does not exceed the carrying amount that would have been determined, net of equity accounted losses, if no impairment loss had been recognised. For a disposal of an associate or joint venture, being where the Group loses significant influence over an associate or loses joint control over a joint venture, the difference between the sales proceeds and any retained interest and the carrying value of the equity accounted investment is recognised as a gain or loss in non-trading and capital related items. On disposal of an associate or joint venture that is a foreign operation, the relevant amount in the Foreign Currency Translation Reserve (FCTR) is reclassified to non-trading and capital related items at the time at which the profit or loss on disposal is recognised. Any gains or losses in other OCI reserves that relate to the associate or joint venture are reclassified to non trading and capital related items at time of the disposal. Distributions (dividends) received from the entities reduce the carrying amount of the investment. If the entity incurs losses, the Group will only recognise these losses until the carrying amount of the investment reaches zero, unless the Group has incurred obligations or made payments on behalf of the entity. The Company subsequently measures its investment in joint venture at cost less accumulated impairment losses. The following represents the Group s share of assets, liabilities, revenue and expenses of the joint venture: Figures in Rand thousand Airport Logistics Property Holdings (Pty) Ltd Opening balance at 1 April Share of profits Opening balance at 1 April Share of profits Closing balance at 31 March GROUP Figures in Rand thousand Mar 2017 Mar 2016 Summarised statement of comprehensive income Revenue Profit for the period Total comprehensive income Summarised statement of financial position Non-current assets Current assets Non-current liabilities ( ) ( ) Current liabilities (517) (516) Total net assets

54 52 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 E. INVESTMENTS (CONTINUED) E.3 Investments in associates Accounting policy The Group accounts for its investments in associates using the equity method of accounting (refer to the investment in joint ventures accounting policy for more detail). The Company accounts for its investment in associates at cost less any impairment losses. Significant judgement, estimates and sources of estimation uncertainty Associates are entities that the Group and Company believe that they have the ability (and power) to participate in the financial and operating policy decisions of the entities, which gives the Group and Company significant influence over them. The following associates exist in the Group and Company: Investment in Mumbai International Airport Private Limited The Group and Company have a 10% equity interest through Airports Company South Africa Global Limited, in the 30-year concession (with an option for a further 30 years) to modernise the Chhatrapati Shivaji International Airport in Mumbai. Airports Company South Africa is an integral investor in the project, as well as being the designated airport operator. Aeroporto de Guarulhos Participações S.A. The Group and Company have a 20% equity interest in the 20-year concession to modernise the Guarulhos International Airport. Airports Company South Africa is an integral investor in the project, as well as being the designated airport operator for a five-year period. La Mercy Joint Venture Company Proprietary Limited (Dube Trade Port) Airports Company South Africa and the Dube Trade Port Company Limited (LMJVC) have 40% and 60% interest in La Mercy Joint Venture Company Proprietary Limited respectively. This joint venture arrangement objective is to commercially enable land holdings in excess of 848 hectares. The vast majority of the land is zoned undetermined and the objective is to rezone and service the properties to unlock development opportunities. Investments in associate: Company Name of company % ownership interest Carrying amount 2017 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Country of incorporation Direct associates La Mercy JV Property Investments (Pty) Ltd 40% 40% South Africa Aeroporto de Guarulhos Participações S.A 20% 20% Brazil Indirect associates Mumbai International Airport Private Ltd 10% 10% India Guarantees issued Equity guarantee an Airport Operator guarantee has been issued by Airports Company South Africa Global Limited to Mumbai International Airport Private Limited for an amount of INR3 billion, R672 million for March 2017 (2016: R727 million). This guarantee is limited to Airports Company South Africa Global s performance fee of USD1.2 million for both years.

55 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS E. INVESTMENTS (CONTINUED) E.3 Investments in associates (continued) Reconciliation of movement in investments in associates Group Figures in Rand thousand La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A Total Investment at 31 March Acquisitions Share of losses (3 273) (84 614) ( ) ( ) Share of OCI Investment at 31 March Acquisitions/equity injection Share of losses (13 714) ( ) ( ) ( ) Share of OCI (67 543) Investment at 31 March Summarised financial information of associates for March 2017 Figures in Rand thousand La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A Total Summarised statement of comprehensive income Revenue Loss for the period (5 886) ( ) ( ) ( ) Total comprehensive loss (5 886) ( ) ( ) ( ) Summarised statement of financial position Non-current assets Current assets Non-current liabilities ( ) ( ) ( ) Current liabilities (1 772) ( ) ( ) ( ) Total net assets ( )

56 54 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 E. INVESTMENTS (CONTINUED) E.3 Investments in associates (continued) Summarised financial information of associates for March 2016 Figures in Rand thousand La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A Summarised statement of comprehensive income Revenue Loss for the period (8 783) ( ) ( ) ( ) Total comprehensive loss (8 783) ( ) ( ) ( ) Summarised statement of financial position Non-current assets Current assets Non-current liabilities (169) ( ) ( ) ( ) Current liabilities (2 185) ( ) ( ) ( ) Total net assets ( ) E.4 Commitments Capital commitments GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Contracted for Within one year One to two years Two to five years After five years Not yet contracted for Not yet contracted for and authorised by directors Total

57 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

58 56 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT F.1 Financial instruments F.1.1 A Accounting classifications and fair values The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. In the 2017 financial year, derivative financial instruments of R5.7 million were transferred from Level 2 to a Level 1 in the hierarchy. This is due to quoted prices becoming more reliably available. There were no other transfers in the 2017 or 2016 financial years. All fair value measurements are recurring. March 2017 Figures in Rand thousand Note Financial assets not measured at fair value Trade and other receivables 1 D.1 Investments G.4 Cash and cash equivalents D.2 Financial liabilities measured at fair value Derivative financial instruments C.3 Financial liabilities not measured at fair value Interest-bearing borrowings C.1 Trade payables 2 D.3 * The Group has not disclosed fair values for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of their fair values. 1 Prepayments and lease receivables (R11 million) that are not financial assets are not included. 2 VAT (R79 million ) that is not a financial liability is not included. March 2016 Figures in Rand thousand Note Financial assets not measured at fair value Trade and other receivables 1 D.1 Investments G.4 Cash and cash equivalents D.2 Financial liabilities measured at fair value Derivative financial instruments C.3 Financial liabilities not measured at fair value Interest-bearing borrowings C.1 Trade payables 2 D.3 * The Group has not disclosed fair values for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of their fair values. 1 Prepayments and lease receivables (R33 million) that are not financial assets are not included. 2 VAT and lease payables (R47 million and R67 million) that are not financial liabilities are not included.

59 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS Loans and receivables Carrying amount Fair value derivatives Fair value Other financial liabilities Total Level 1 Level 2 Total * * * * * * * * * * * Loans and receivables Carrying amount Fair value derivatives Fair value Other financial liabilities Total Level 1 Level 2 Total * * * * * * * * * * * *

60 58 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT (CONTINUED) F.1 Financial instruments (continued) F1.1 B Measurement of fair values The fair value of financial instruments may require some judgement or may be derived from readily available sources. The degree of judgement involved is reflected in the fair value measurements section below, although this does not necessarily indicate that the fair value is more or less likely to be realised. Financial assets The fair values of the investments and derivative financial instruments are determined with reference to quoted market prices and are therefore classified as Level 1 on the fair value hierarchy. Financial liabilities Financial liabilities at amortised cost The fair value of the Group and Company s financial liabilities carried at amortised cost, which includes trade and other payables and interest-bearing borrowings approximates their fair value. Financial liabilities at fair value through profit or loss The Group and Company s financial liabilities carried at fair value consist of its derivatives which includes forward foreign exchange contracts and interest rate swaps. The fair values of forward foreign exchange contracts are determined using forward exchange rates at the balance sheet date. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows based on observable yield curves. The fair values of these derivatives are therefore determined using valuation techniques which uses inputs that are directly or indirectly observable. They are therefore classified as Level 2 on the fair value hierarchy. Valuation techniques and significant unobservable inputs The following tables show the valuation techniques used in measuring Level 2 fair values. There are no Level 3 fair values and no unobservable inputs. Financial instruments measured at fair value Valuation technique type Derivative financial instruments Discounted cash flows: The valuation model considers the present value of expected payment, discounted using a risk free adjusted discount rate. Interest-bearing borrowings Discounted cash flows (unlisted instruments): The valuation model considers the present value of expected payment, discounted using a risk free adjusted discount rate. Market comparison technique (listed instruments): The fair values are based on bank values.

61 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT (CONTINUED) F.1 Financial instruments (continued) F.1.2 Initial recognition and measurement The Group and Company initially record both financial assets and financial liabilities at fair value. Where transaction costs are incurred they are recognised as part of the initial cost of the financial instrument, unless the financial assets or liabilities are classified as at fair value through profit or loss, in which case the transactional costs are recognised in profit or loss. F.1.3 Subsequent measurement The majority of the Group and Company's financial assets are categorised as 'loans and receivables' and are therefore subsequently measured at amortised cost. Amortised cost is the basis of moving the initial amount of the financial instrument (fair value of the instrument) to the maturity value of the instrument on a systematic basis using a fixed interest rate (effective interest rate) taking into account repayment dates and initial premiums or discounts. The carrying amount of amortised cost financial assets is adjusted for impairments. Investments and derivative financial instruments are classified as financial assets at fair value through profit or loss and are subsequently measured at their fair values. The majority of the Group and Company's financial liabilities are classified as 'financial liabilities at amortised cost' and are therefore subsequently measured at amortised cost. The derivative financial instruments are however classified as financial liabilities at fair value through profit or loss and are subsequently measured at their fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. F.1.4 Impairment of financial assets Financial assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment is normally determined based on a realistic assessment of future cash flows discounted using the original effective interest rate compared with contractual amounts. For amounts due to the Group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment. Impairment losses are recognised in profit or loss. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit and loss.

62 60 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT (CONTINUED) F.2 Financial risk management The Group s comprehensive risk management process involves identifying, understanding and managing the risks associated with each of the Group s business units. Risk awareness, control and compliance are embedded in the Group s day-to-day activities. The Group Risk Management unit independently monitors, manages and reports risk as mandated by the Board of Directors through the Audit and Risk Committee, and the Economic Regulations Committee. The Executive Committee and business units are ultimately responsible for managing risks that arise. A sound financial risk management framework is in place at the Group, based on a best-practice Enterprise Risk Management Framework, built on rigorous governance structures. Credit risk Credit risk is the risk of loss to the Group as a result of the failure by a customer or counterparty to meet its contractual obligations. This is mitigated by the guarantees held for the exposure at a given period. Credit risks can also arise from cash and cash equivalents, accounts receivable and derivative financial instruments. These risks are effectively managed in terms of the Board-approved financial risk management framework that specifies the investment and counterparty policies. Trade and other receivables The Group s exposure is influenced mainly by the individual characteristics of each customer. The demographics of the Group s customer base, including the default rate of the industry and country in which customers operate, has less of an influence on credit risk. Approximately 18% (March 2016: 26%) of the Group s aeronautical revenue is attributable to transactions with a single customer. The main concentration of credit risk is in the Johannesburg region, which approximates 61% (March 2016: 63%) of the trade receivables of the Group. Each new customer is analysed individually for creditworthiness before the Group s standard payment terms and conditions are offered. The Group s review includes external ratings, where available, and in some cases bank references. Credit limits are established for each customer, which represents the maximum open amount, and these limits are reviewed on an ongoing basis. Customers that fail to meet the Group s benchmark creditworthiness may transact with the Group only on a prepayment/cash basis. More than 60% of the Group s customers have been transacting with the Group for over 16 years, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are aeronautical, commercial or retail customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Customers that are graded as high risk are placed on a restricted customer list, and future transactions are made on a prepayment basis with approval of the Financial Risk Management Committee. Customers are considered to be 'high risk' when they have not met the credit terms as stipulated in their trading contracts. Investments and cash and cash equivalents In complying with the Treasury Regulations, Airports Company South Africa s Financial Risk Management Framework limits the Group to investments in A short-term rated instrument or AAA rated instruments and counterparts. For banks and financial institutions, only independently rated parties with a minimum rating of A are accepted with respect to cash and cash equivalents. Market risk Market risk is the risk that the Group s earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, foreign exchange rates and commodity prices. Interest rate risk The Group s interest rate risk arises from its borrowings. The Group s policy is to maintain a mix of fixed to floating rate debt within the Board-approved parameters. As at 31 March 2017, the Group s fixed to floating rate profile after hedging, on net debt was 73% (2016: 79%) fixed. At the reporting date, the interest profile of the Group s interest-bearing financial instruments was: Fixed-rate instruments Variable-rate instruments Total Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Carrying amount Interest-bearing borrowings % 79 % 27 % 21 %

63 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT (CONTINUED) F.2 Financial risk management (continued) Tariff risk Aeronautical revenues contributing 63% (March 2016: 63%) of the Group s revenue are regulated by an independent Economic Regulator using a price cap methodology. The regulated tariff is linked to the CPI index. A change in CPI has a positive or a negative impact on the revenue earned by the Group. However, the Group is allowed to adjust the difference between actual and forecast CPI in future tariffs. The tariff is determined for a five-year period every three years with a two-year overlap. The Board has approved a regulatory strategy which seeks to proactively influence the regulatory approach in line with best practice. In this regard, the Group proactively manages the economic regulatory risk while balancing the interests of both the Group and the customers. Price risk The Group is exposed to price risk on various investments which is based on quoted prices. A 5% change in the quote price of the Stanlib Income Fund as at 31 March 2017 would have had the effect of changing profit for the period by R79 million (March 2016: R33 million). Foreign exchange risk The Group has two foreign investments that give rise to limited exposure to foreign currency risk, arising primarily with respect to the Brazilian real and Indian rupee. All foreign debt instruments are issued in rand and the Group also uses foreign exchange contracts to hedge material expenditure once the project or purchase cash flows are certain refer to note C.3. In order to manage risks from fluctuations in currency rates, the Group makes use of forward exchange contracts to manage exposure to fluctuations in foreign currency rates on importation of equipment. The Group s exposure to foreign currency risks was as follows, based on notional amounts: Figures in thousands of Dollars Mar 2017 Mar 2016 Trade receivables Cash and cash equivalents Trade payables (52) (116) Foreign exchange contracts (2 263) Gross balance sheet exposure 759 (1 676) Figures in thousands of Euros Mar 2017 Mar 2016 Foreign exchange contracts (1 000) Gross balance sheet exposure (1 000) Average rate Reporting spot rate Figures in Rand Mar 2017 Mar 2016 Mar 2017 Mar 2016 The following significant exchange rates applied during the year: USD INR BRS Sensitivity analysis A 10% weakening of the rand against the following currencies at 31 March 2017 would have increased/(decreased) equity, and profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for March Equity Profit or loss Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 USD (37 075) (51 541) INR (20 312) ( ) BRS (19 051) 455 (19 051) ( ) (1 125)

64 62 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 F. FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENT RISK MANAGEMENT (CONTINUED) F.2 Financial risk management (continued) A 10% strengthening of the Rand against the above currencies at 31 March would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Liquidity risk Liquidity risk is the risk of not being able to generate sufficient cash to honour financial commitments. From the Group s perspective, this would include the Group not being able to advance funds for capital expenditure, redeem and service loans, finance operational costs and service unanticipated financial commitments. The objective of the Financial Risk Management Framework is to ensure continuity of funding and flexibility, ensuring debt maturities are spread over a range of dates to manage refinancing risks. The Group is not exposed to excessive refinancing risk in any one year. As at 31 March 2017, the Group had facilities of R3.25 billion (31 March 2016: R4.0 billion), of which R2.25 billion (2016: R1.3 million) has been utilised for both periods respectively. Facility Amount Figures in Rand thousand Mar 2017 Mar 2016 Total facilities Utilised facilities ( ) ( ) Total unutilised Uncommitted facilities represent undrawn lines of credit where the bank has an agreement with the Group entity to make available an amount (up to the maximum specified) in loans on demand from the Group. The Group is under no obligation to actually take out a loan at any particular time. Committed facilities are those lines of credit where the Group and the bank have clearly defined terms and conditions which bind the bank to lend the Group up to the amounts stated in the agreement. Please refer to the following notes for details on the Group and Company s financial liabilities in terms of their maturities: Unsecured borrowings note C.1 Trade and other payables note D.3 Derivative financial instruments note C.3 Capital risk management The Group s capital management strategy is designed to ensure that the Group is adequately capitalised in a manner consistent with the Group s risk profile, economic regulatory requirements and maintaining an investment rating level. The Group monitors capital adequacy through the gearing ratio, as represented by net interest-bearing debt to total capital. Net debt is calculated as total interest-bearing borrowings (including current and non-current borrowings as shown in the statement of financial position) less cash and cash equivalents plus short-term investments. Total capital is calculated as equity as shown in the consolidated statement of financial position, plus net debt. The Group s maximum gearing ratio is up to 60% (2016: up to 60%). The gearing ratio is determined by the Treasury department and approved by Airports Company South Africa s Board. The objective is to minimise the weighted average cost of debt. The gearing ratios as at 31 March 2017 and 2016 were as follows: GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Total borrowings Less: cash and cash equivalents and short-term investments ( ) ( ) ( ) ( ) Net debt Total equity Total capital Gearing ratio (net debt divided by total capital) 24% 31% 24% 32% None of the entities in the Group are subject to externally imposed capital requirements.

65 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER G.1 Intangible assets Accounting policy Intangible assets comprise of computer software and are measured initially at cost and are carried at cost less accumulated amortisation and impairment losses. Amortisation is provided to write down the computer software on a straight-line basis to its residual value over three to five years. Changes in accounting estimate In March 2016, the Company reassessed and adjusted the useful lives of certain property and equipment based on past experience and assessment of condition following a physical verification performed. The effect of this change in accounting estimate was recognised prospectively from 1 April 2015 onward. As a result of this change, depreciation expense for the year ended 31 March 2016 changed by approximately R17.3 million. It is impracticable to determine the effect of the change in future years. GROUP Mar 2017 Mar 2016 Accumulated Carrying Accumulated Carrying Figures in Rand thousand Cost amortisation value Cost amortisation value Computer software ( ) ( ) Figures in Rand thousand Cost COMPANY Mar 2017 Mar 2016 Accumulated Carrying Accumulated amortisation value Cost amortisation Carrying value Computer software ( ) ( ) Reconciliation of intangible assets Figures in Rand thousand Opening balance Previously reported Adjustments Prior period error GROUP Opening balance Restated Additions Transfers Reclassification Amortisation Total 2017 Computer software (4 889) (80 887) Computer software (1 959) (49 343) Reconciliation of intangible assets Figures in Rand thousand Opening balance Previously reported Adjustments Prior period error COMPANY Opening balance Restated Additions Transfers Reclassification Amortisation Total 2017 Computer software (4 889) (80 782) Computer software (1 959) (49 271)

66 64 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.2 Deferred tax Accounting policy Deferred tax assets and liabilities represent amounts of tax that will become recoverable and/or payable in future accounting periods. They generally arise as a result of temporary differences, where the time at which profits and losses are recognised for tax purposes differs from the time at which the relevant transaction is recorded in the accounts. A deferred tax asset represents a tax reduction that is expected to arise in a future period. A deferred tax liability represents taxes which will become payable in a future period as a result of a current or an earlier transaction. In respect of deferred tax assets, the Group and Company only recognise a deferred tax asset when the availability of future profits necessary to support the deferred tax asset is probable. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the asset is realised or liability is settled, based on tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would flow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The most significant management assumption is the forecasts used to support the probability assessment that sufficient taxable profits will be generated by the entities in the Group in order to utilise the deferred tax assets. GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2015 Mar 2017 Mar 2016 Mar 2015 Deferred tax liability Property and equipment Investment property Intangible assets Lease receivables Investments in associates Impairment of trade and other receivables (11 150) (18 385) (11 150) (18 385) Other assets and liabilities ( ) (33 190) ( ) Prepayments Provisions (69 020) (65 745) (56 023) (69 021) (65 745) (55 485) Derivative financial instruments (20 810) (20 810) The deferred tax liability relates to income tax in the same jurisdiction, and the law allows net settlement.

67 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.2 Deferred tax (continued) Reconciliation of deferred tax liability GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 At beginning of year Prior period overprovision: Recognised in the statement of comprehensive income ( ) ( ) Timing differences ( ) ( ) Movements during the year: Change in estimate recognised in the statement of comprehensive income ( ) ( ) (29 096) (49 148) recognised directly in other comprehensive income Deferred tax liabilities expected to be recovered after more than 12 months Deferred tax liabilities expected to be recovered within the next 12 months (68 570) (65 183) (68 570) (52 169) G.3 Retirement benefit obligation GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Post-retirement medical benefit plan asset (4 189) (3 686) Post-retirement medical benefit plan liability A. Net Post-retirement medical benefit liability defined benefit plan B. Life fund plan liability defined benefit plan Total employee benefit liabilities A. Post-retirement medical benefit The Company makes contributions to a defined benefit plan that provides medical benefits to employees upon retirement. The employees eligible for the post-retirement benefit are those who were in employment at 1 August The plan entitles retired employees to receive a reimbursement of certain medical costs.

68 66 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.3 Retirement benefits (continued) Movement in net defined benefit liability: GROUP AND COMPANY Present value of plan liability Fair value of plan asset Net liability Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Balance at 1 April (3 686) (3 739) Included in other comprehensive income: Actuarial (gains)/ losses arising from: 503 (2 975) (54) (2 573) Financial assumptions 345 (3 432) (54) (3 030) Demographic assumptions Included in profit or loss: (375) (307) Current service cost Interest cost Return on plan assets (375) (307) (375) (307) Other: Benefits paid (615) (561) (116) (130) Contributions by employer (573) (473) (573) (473) Balance at 31 March (4 189) (3 686) Plan asset An insured annuity policy was purchased from Sanlam Life, in the Company's name, to fund the contribution subsidies paid to current pensioners. The policies will pay a level amount each month to the relevant medical schemes on behalf of the Company, for as long as the pensioners and/or the pensioners spouses are still alive. The insured annuity policy can only be used to fund medical aid contributions, and is not available as an asset to the Company's creditors. The full fair value of R4.2 million (2016: R3.7 million) per the reconciliation above relates to that annuity policy. The Company has also set aside an amount of R13.4 million (2016: R13.5 million) as a funding vehicle. As this amount is not protected against its creditors, it has not been included as a plan asset but rather as cash and cash equivalents in note D.2. The Company does not expect to pay contributions to this plan in Net expense recognised in profit or loss GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Current service cost Interest cost Return on plan asset (307) Cumulative expenses recognised in other comprehensive income Balance at 1 April 2016 (23 780) (26 353) Actuarial gains recognised during the year Balance at 31 March 2017 (23 331) (23 780)

69 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.3 Retirement benefits (continued) GROUP AND COMPANY Mar 2017 Mar 2016 Principal assumptions at the reporting date: Discount rates used 9.90% 9.90% Healthcare cost inflation 7.50% 7.50% Average retirement age (years) The assumptions used by actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. The gap between the assumptions has remained unchanged at 2.4% p.a. over the valuation period. Assumed healthcare cost trend rates have a significant effect on the amounts recognised. A one percentage point change in assumed healthcare cost trend would have the following effects: GROUP AND COMPANY 1% increase 1% decrease Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Effect on liability (10 125) (2 259) GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 B. Life Fund Balance at 1 April Actuarial (gains)/losses recognised in other comprehensive income during the year (299) (1 372) Balance at 31 March The Company acquired a 100% shareholding in a cell captive with Guardrisk Life Limited in September 2003 to fund its obligation arising from 2002, whereby the Company agreed to increase the minimum pension pay-out to employees. Guardrisk performs a half-yearly review per individual covered to establish the present value of the Company s obligation on the prescribed valuation basis (as approved by Guardrisk Life Statutory Actuaries) in order to assess the Company s commitment as per the assets and expressed liabilities and ensure sufficient life funds are transferred to the non distributable reserves.

70 68 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.4 Investments GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Current investments Stanlib Income Fund Cadiz Money Market Fund Investec SteFi Plus Fund Nedgroup Investments Core Income Fund Account G.5 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. There were no changes to the number of shares outstanding (in issue) at 31 March 2017 and 31 March Authorised ordinary shares of R1 par value each. GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Issued Ordinary Share premium Unissued ordinary shares of R1 par value each. The unissued ordinary shares are under the general authority of the Board of Directors. Shareholder Shareholding (%) South African Government 74.6% Public Investment Corporation 20% Empowerment investors 4.2% Staff share incentive scheme 1.2% G.6 Other reserves GROUP Figures in Rand thousand Total Fair value Foreign currency translation reserve Actuarial reserve Balance at 1 April (19 088) Actuarial gains, net of tax Loss on remeasurement of financial instruments Foreign currency translation differences, net of tax Balance at 1 April (15 498) Actuarial gain, net of tax (108) (108) Gains on investment property Loss on remeasurement of financial instruments Foreign currency translation differences, net of tax Balance at 31 March (15 606)

71 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.6 Other Reserves (continued) COMPANY Figures in Rand thousand Total Fair value Actuarial reserve Balance at 1 April (19 088) Actuarial losses, net of tax Loss on remeasurement of financial instruments Balance at 1 April (15 498) Actuarial gain, net of tax (108) (108) Gains on investment property Loss on remeasurement of financial instruments Balance at 31 March (15 606) G.7 Deferred income Deferred income consists of the following balances: GROUP Figures in Rand thousand Mar 2017 Mar 2016 Dube Trade Port rentals Gautrain development Government grants Other COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Dube Trade Port rentals Gautrain development Government grants Other Gautrain development relates to a grant received by the Group in the 2009 financial year from the Gautrain operator. Assets belonging to the Group, located at the O.R. Tambo International Airport's central terminal building are being used by the Gautrain operator. The assets will become the property of the Group at the end of the 34-year term of the agreement with the operator. Government grants Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in profit or loss on a systematic basis over the useful life of the asset. Government grants of the Group and Company are the following: A grant of R35.1 million was received in the 2010 financial year. This grant was used for the construction of the road within the Cape Town International Airport precinct. A grant of R7.5 million was received in the 2006 financial year. This grant is being used to fund engineering students from disadvantaged backgrounds. There are no outstanding conditions required to be met for this grant.

72 70 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.8 Provisions and contingencies Accounting policy Provisions are recognised when the Group and Company have a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision. Currently the Group and Company provide for staff incentive bonuses. The provision for bonuses is payable within three months of finalisation of the audited consolidated annual financial statements. As such it is not present valued as the effect of the time value of money is not expected to be material. Provisions are not recognised for future operating losses. If an entity has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. Levies on infrastructure projects, where these levies do not meet the probability criteria defined within IFRS, are not provided for, but disclosed as contingent liabilities. Reconciliation of provisions GROUP Figures in Rand thousand Long-term incentive Staff incentive bonus Environmental rehabilitation Other provisions Total Opening balance at 1 April Additions Utilised during the year (9 463) ( ) (14 253) ( ) Closing balance at 31 March Additions Utilised during the year ( ) (9 634) (11 688) ( ) Effect of passage of time Unused amounts reversed during the period (3 331) (3 331) Closing balance at 31 March Reconciliation of provisions Figures in Rand thousand Long-term incentive Staff incentive bonus COMPANY Environmental rehabilitation Other provisions Total Opening balance at 1 April Additions Utilised during the year (9 463) ( ) (14 253) ( ) Closing balance at 31 March Additions Utilised during the year ( ) (9 634) (15 132) ( ) Effect of passage of time Unused amounts reversed during the period (3 331) (3 331) Closing balance at 31 March The staff incentive bonus represents the liability at year-end provided for the planned employee incentive bonus payment. The environmental provision is in terms of a Record of Decision issued by the Minister of Environmental Affairs and Tourism in 2008 to rehabilitate the property at the farm La Mercy no in Durban at King Shaka International Airport, as follows: Rehabilitation and maintenance of the wetlands in terms of a long-term phased plan. Implementation of a waste water management plan, including the decommissioning of a package plant used during construction of the airport.

73 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.9 Taxation Accounting policy The Group s foreign subsidiary Airports Company South Africa Global, is a tax resident in South Africa, therefore Airports Company South Africa Global and other companies within the Group will pay taxes according to the rates applicable in South Africa. Most taxes are recorded in the statement of comprehensive income and relates to taxes payable for the reporting period (current tax). The charge also includes benefits and charges relating to when income and expenses are recognised in a different period for tax and accounting purposes (deferred tax). The Group and Company recognise provisions for tax based on objective estimates of the amount of taxes that may be due. Where the final tax determination is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions respectively, in the period in which such determination is made. There may be transactions and calculations for which the ultimate tax determination has an element of uncertainty during the ordinary course of business. Uncertain tax positions, which do not meet the probability criteria defined within IFRS, are not provided for but are rather disclosed as contingent liabilities or assets as appropriate. There are no income tax implications on dividends paid by Airports Company South Africa to its shareholders. This is because all Airports Company South Africa shareholders are exempt beneficial owners of Airports Company South Africa shares in terms of section 64F of the Income Tax Act. Major components of the tax expense (income) GROUP COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Mar 2017 Mar 2016 Current Current year Prior period (10 446) (10 446) Total current tax Deferred Current year ( ) ( ) (6 789) (49 148) Overprovision prior year ( ) ( ) Total deferred tax ( ) ( ) ( ) (49 148) Total Reconciliation of the tax rate expense Reconciliation between applicable tax rate and average effective tax rate. GROUP COMPANY Figures in % Mar 2017 Mar 2016 Mar 2017 Mar 2016 Applicable tax rate Non-deductible expenses (1.50) 0.55 (1.61) 0.55 CGT differential* 2.36 Overprovision current tax (0.17) 0.74 (0.29) 0.74 Prior year adjustments (2.83) (2.83) Other (6.84) (0.10) (7.05) * The CGT rate differential is attributable to the taxes on the equity accounted profits

74 72 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.10 Earnings per share and dividends per share (Group only) Accounting policy Basic earnings per share Earnings per share (EPS) is calculated using the weighted average number of ordinary shares in issue during the period and is based on the net profit attributable to ordinary shareholders. For the purpose of calculating EPS, treasury shares are deducted from the number of ordinary shares in issue. Diluted earnings per share Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of dilutive options and other dilutive potential ordinary shares. The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS. Dividends per share Dividends per share is calculated by using the total dividends paid out over an entire year (including annual dividends but not including special dividends) divided by the weighted average number of outstanding ordinary shares issued. Earnings per share Figures in Rand thousand Mar 2017 Mar 2016 Total profit for the year attributable to shareholders Weighted average number of ordinary shares in issue Basic earnings per share (cents per share) Dividend per share Figures in Rand thousand Mar 2017 Mar 2016 Final dividend declared Weighted average number of ordinary shares in issue Dividend per share (cents per share) G.11 Related parties Airports Company South Africa SOC Limited is one of the 21 Schedule 2 major public entities in terms of the Public Finance Management Act No. 1 of 1999 as amended and therefore falls within the national sphere of government. As a consequence, Airports Company South Africa SOC Limited has a significant number of related parties that are public entities. In addition, the Company has a related party relationship with its subsidiaries, associates and with its directors and executive officers (key management). Unless specifically disclosed, these transactions are concluded on an arm s length basis and the Group and Company are able to transact with any entity. Key management personnel has been defined as Airports Company South Africa s Board of Directors and prescribed officers effective for 2017 and Non-executive Directors are included in the definition of key management personnel as required by IFRS. The definition of key management includes the close family members of key management personnel and any entity over which key management exercises control or joint control. Close family members are those family members who may be expected to influence, or be influenced by, that person in their dealings with the Group. They may include the person s domestic partner and children, the children of the person s domestic partner, and dependants of the person or the person s domestic partner.

75 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.11 Related parties (continued) Related party transactions Figures in Rand thousand Services rendered Services received Amounts due from Amounts due to Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 National departments (0.44) Constitutional institutions Major public entities (51) National government business 178 Other national public entities* (1) Subsidiaries and joint ventures Included in the amounts disclosed are transactions concluded with related parties, that were completed at less than market value. Executive Directors Figures in Rand thousand Salary Pension fund contributions Other benefits* Total Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 B Maseko M Manyama Appointed 15 May Resigned 4 January * Other benefits comprise of cash bonuses and long service awards. Non-executive Directors Directors fees Figures in Rand thousand Appointment date Resignation date Mar 2017 Mar 2016 S Macozoma (Retired Chairman) 1 March November R Morar (Chairman effective 1 December 2016) 1 January D Botha (fees payable to the PIC) 1 August J Lamola 1 December K Moroka 1 December February B Luthuli 1 December February C Mabude 1 December February K Matlou 1 March February M Mabela 1 March S Simelane 1 March

76 74 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.11 Related parties (continued) Prescribed officers Figures in Rand thousand Salary Pension fund contributions Other benefits* Total Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 Mar 2017 Mar 2016 DA Cloete PM du Plessis H Jeena TS Mekgoe B Mbomvu T Delomoney JR Neville G Vracar Y Schoeman A Vermeulen S Mmakau B Pityi R Shinners G Gopal* B Matshego C Shilowa J Phateng*** S Ngwenya** J Khambule**** D Kunz # * G Gopal (Group Executive: Technical Services and Solutions, appointed 1 May Acting Chief Operating Officer, appointed 1 January 2017). ** S Ngwenya (Chief Audit Executive, appointed 21 November 2016). *** T Phateng (Acting General manager: Regional Airports). **** J Khambule ( General Manager: Regional Airports, appointed 1 April 2016). # D Kunz (Acting Chief Financial Officer, effective 5 January 2017). G.12 Events after the reporting period No matter which is material to the financial affairs at the Company has occurred between 31 March 2017 and the approval date of the financial statements. The Board of Directors has approved but not yet paid an ordinary dividend of R358 million. G.13 Irregular expenditure Group and Company Irregular expenditure is recorded in the notes to the financial statements when confirmed. The amount recorded is equal to the value of the irregular expenditure incurred unless it is impractical to determine in which case reasons therefore will be provided in the notes. Irregular expenditure defined in section 1 of the Public Finance Management Act No. 1 of 1999 (PFMA) as expenditure other than unauthorised expenditure incurred in contravention of or that is not in accordance with a requirement of any applicable legislation including (a) this Act; or (b) the State Tender Board Act No. 86 of 1968 or any regulations made in terms of that Act; or (c) any provincial legislation providing for procurement procedures in that provincial government.

77 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.13 Irregular expenditure (continued) GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Opening balance Add: irregular expenditure adjustment Add: irregular expenditure current year Less: amounts condoned in the current year ( ) Irregular expenditure awaiting condonation Current year Prior years Total Current year and prior year The irregular expenditure identified in the prior year relates to various incidents reported. These incidents relate to contravention of the Supply Chain Management policy and the Preferential Procurement Policy Framework Act (PPPFA) and Regulations. G.14 Fruitless and wasteful expenditure Section 1 of the PFMA defines fruitless and wasteful expenditure as expenditure which was made in vain and would have been avoided had reasonable care been exercised. GROUP AND COMPANY Figures in Rand thousand Mar 2017 Mar 2016 Opening balance Add: fruitless and wasteful expenditure adjustment 33 Add: fruitless and wasteful expenditure current year Less: amounts recovered/written off (214) (13 122) Fruitless and wasteful expenditure not yet closed (awaiting appropriate action) Current year Prior years Add: fruitless and wasteful expenditure adjustment Total Details of fruitless and wasteful expenditure Current year The fruitless and wasteful expenditure identified in the current year relates to the following incidents reported. The fruitless and wasteful expenditure relates mainly to non-compliance with National Treasury cost containment measures: 1) interest on provisional payment; and 2) financial misconduct. Prior year The fruitless and wasteful expenditure identified in the prior year relates to the following incidents reported. These mainly related to: 1) losses in relation to cancelled tenders; 2) interest on provisional payment; and 3) financial misconduct.

78 76 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.15 Contingencies Contingent assets Accounting Policy Contingent assets are not recognised in the annual financial statements but are disclosed when, as a result of past events, it is probable that economic benefits will flow to the Group, but this will only be confirmed by the occurrence or non occurrence of one or more uncertain future events which are not wholly within the Group s control. Contingent liabilities Accounting Policy Contingent liabilities include certain guarantees (other than financial guarantees) and letters of credit and are not recognised in the annual financial statements but are disclosed in the notes to the annual financial statements unless they are considered remote. Nedbank has provided guarantees of R27.4 million to Airports Company South Africa SOC Limited. The Company has signed levy agreements in respect of infrastructure projects relating to the City of Cape Town for R13 million. The obligation to pay these levies are contingent upon the city choosing to invoke their right in terms of the agreement. Contingencies relating to interests in joint ventures There are no contingencies relating to interests in joint ventures. G.16 Prior period errors The prior year adjustments relate to a physical asset verification that was performed in March 2017, an error in the accounting of prepaid insurance premiums and certain expenses recorded in the incorrect financial period. Asset verification The Company reassessed and adjusted the useful lives of certain intangible assets carried at zero net carrying amount, that were determined to be still in use. During the physical verification there were assets that were identified on the floor and could not be traced or linked due to the insufficient documentation in the old fixed assets register. There were also assets that were in the old intangible assets register which could not be linked to the assets found on the floor. These were accounted for in the prior financial year as this was the most practical period to restate, an amount of R130 million in write-offs. The Company also identified buildings which were incorrectly classified as property and equipment instead of investment property or investment property instead of property and equipment. There were reclassifications where assets were moved from one asset class to another within property and equipment. Provisions, trade receivables (prepayments) An error in the treatment of prepaid insurance premiums has been corrected in the current year, wherein there was as misclassification between trade receivables and payables, as well as an error in the accuracy of the amount. The error has been retrospectively corrected in the financial statements. Operating expenses, trade payables Certain expense items were found to have been recorded in the incorrect financial year, resulting in an error. The error has been retrospectively corrected in the financial statements. The correction of these errors affect both the Group s and Company s results, and has been applied retrospectively.

79 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS G. OTHER (CONTINUED) G.16 Prior period errors (continued) A summary of the changes to the prior year is as follows: Effect on Statement of Financial Position GROUP COMPANY Figures in Rand thousand Mar 2016 Mar 2015 Mar 2016 Mar 2015 Investment property Previously stated Restatement due to investment properties Restated amount Property and equipment Previously stated Restatement due to property and equipment ( ) ( ) ( ) ( ) Restated amount Intangible assets Previously stated Restatement due to intangible assets Restated amount Trade and other receivables Previously stated Restatement Restated amount Retained earnings Previously stated Restatement Restated amount Trade and other payables Previously stated Restatement (33 956) (18 983) (33 951) (18 982) Restated amount Provisions Previously stated Restatement Restated amount

80 78 AIRPORTS COMPANY SOUTH AFRICA NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS CONTINUED For the year ended 31 March 2017 G. OTHER (CONTINUED) G.16 Prior period errors (continued) Effect on Statement of Comprehensive Income GROUP COMPANY Figures in Rand thousand Mar 2016 Mar 2015 Mar 2016 Mar 2015 Depreciation, amortisation and impairments Previously stated Restatement due to computer software ( ) ( ) Restatement due to property and equipment (5 486) (5 486) Restated amount Operating expense Previously stated Restatement (32 201) (31 000) (32 201) (31 000) Restated amount Gains/(losses) on property and equipment Previously stated Restatement due to property and equipment 546 (3) 546 (3) Restated amount Fair value gains on investment property Previously stated Restatement due to incorrectly classified property (1 700) (1 700) Restated amount

81 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

82 80 AIRPORTS COMPANY SOUTH AFRICA NOTES

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