AUSTRALIA PACIFIC AIRPORTS (MELBOURNE) PTY LIMITED (incorporated with limited liability in Australia with ABN )

Transcription

1 OFFERING CIRCULAR AUSTRALIA PACIFIC AIRPORTS (MELBOURNE) PTY LIMITED (incorporated with limited liability in Australia with ABN ) EUR 3,000,000,000 Secured Euro Medium Term Note Programme guaranteed on a limited recourse basis by AUSTRALIA PACIFIC AIRPORTS CORPORATION LIMITED (incorporated with limited liability in Australia with ABN ) fully and unconditionally guaranteed by APAC (HOLDINGS NO. 2) PTY LIMITED (incorporated with limited liability in Australia with ABN ) Under this EUR 3,000,000,000 Secured Euro Medium Term Note Programme (the Programme), Australia Pacific Airports (Melbourne) Pty Limited (the Issuer) may from time to time issue notes (the Notes) denominated in any currency agreed between the Issuer and the relevant Dealer (as defined below). The Notes will be unsubordinated and secured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) in priority to all existing and future unsecured obligations of the Issuer, from time to time outstanding. The payment obligations under the Notes will be guaranteed pursuant to the terms of the guarantees (each a Guarantee, and together, the Guarantees) contained in the Note Trust Deed (as defined herein), including on a limited-recourse basis by Australia Pacific Airports Corporation Limited (the Parent Guarantor or APAC and such guarantee, the Parent Guarantee) and on a full and unconditional basis by APAC (Holdings No. 2) Pty Ltd (APAH2 and such guarantee, the APAH2 Guarantee). From time to time and in accordance with the terms of the Note Trust Deed and the terms and conditions of the Notes (the Conditions) (a) certain Subsidiaries (as defined herein) of the Parent Guarantor (other than APAH2) may be appointed as an additional guarantor (each such guarantor, an Additional Guarantor) and (b) one or more Guarantors (other than the Parent Guarantor) may be released from their guarantee(s) in respect of the Notes. The Parent Guarantor, APAH2 and any Additional Guarantors but excluding any such released guarantors are referred to herein as the Guarantors. A list of the current Guarantors, which may change from time to time in accordance with the Note Trust Deed and the Conditions, is available from the Issuer and/or the Principal Paying Agent upon request, see Summary of the Guarantees. The obligations of the Issuer under the Notes and of the Guarantors under their respective Guarantees will be secured under security arrangements more fully described in Description of the Security. The Notes will be constituted by a note trust deed (the Note Trust Deed) dated 16 September 2013 between the Issuer, the Guarantors and the Bank of New York Mellon, London Branch (the Note Trustee). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed EUR 3,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under Overview of the Programme and any additional Dealer appointed under the Programme from time to time by the Issuer (each a Dealer and together the Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe for such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks, see Investment Considerations. Application has been made to the Singapore Exchange Securities Trading Limited (the SGX-ST) for permission to deal in, and for a quotation of, any Notes to be issued pursuant to the Programme and which are agreed at or prior to the time of issue thereof to be so listed on the SGX-ST. Such permission will be granted when such Notes have been admitted to the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Official List of the SGX-ST and quotation of any Notes on the SGX-ST are not to be taken as an indication of the merits of the Issuer, the Guarantors, the Programme or the Notes. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other information which is applicable to each Tranche (as defined under Terms and Conditions of the Notes ) of Notes will be set out in the pricing supplement (the Pricing Supplement) which, with respect to Notes to be listed on the SGX-ST, will be delivered to the SGX-ST on or before the date of issue of the Notes of such Tranche. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. Each Tranche of Notes of each Series (as defined in Overview of the Programme ) of Notes in bearer form will be represented on issue by a temporary global note in bearer form (each a Temporary Global Note) or a permanent global note in bearer form (each a Permanent Global Note). Notes in registered form will initially be represented by a global note in registered form (each a Registered Global Note and together with any Temporary Global Notes and Permanent Global Notes, the Global Notes and each a Global Note). Global Notes may be deposited on the issue date with a common depositary for Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg). The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act) or any U.S. State securities laws and may not be offered or sold in the United States (or, in certain circumstances, to, or for the account or benefit of, U.S. persons) unless an exemption from the registration requirements of the U.S. Securities Act is available and in accordance with all applicable securities laws of any state of the United States and any other jurisdiction. Accordingly, the Notes are being offered and sold only in offshore transactions as defined in and in reliance on Regulation S under the U.S. Securities Act (Regulation S). See Form of the Notes for a description of the manner in which Notes will be issued. The Notes are subject to certain restrictions on transfer, see Subscription and Sale. The Issuer and the Guarantors may agree with any Dealer, the Note Trustee (as defined herein) and the Principal Paying Agent (as defined herein) that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a supplemental Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. The Programme has been rated A- by Standard & Poor s Ratings Services and A3 by Moody s Investors Service Limited Notes issued under the Programme may be rated or unrated. Where an issue of a certain series of Notes is rated, such rating will not necessarily be the same as the rating assigned to the Programme and (where applicable) such rating will be specified in the applicable Pricing Supplement. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Credit ratings in respect of the Notes or the Issuer are for distribution to persons who are not a retail client within the meaning of section 761G of the Australian Corporations Act (defined below) and are also sophisticated investors, professional investors or other investors in respect of whom disclosure is not required under Part 6D.2 of the Australian Corporations Act and in all cases in such circumstances as may be permitted by applicable laws in any jurisdiction in which an investor may be located. Anyone who is not such a person is not entitled to receive this Offering Circular and anyone who receives this Offering Circular must not distribute it to any person who is not entitled to receive it. Arranger J.P. Morgan Dealers BNP PARIBAS Citigroup J.P. Morgan The date of this Offering Circular is 29 March 2017

2 The Issuer accepts responsibility for the information contained in this Offering Circular and each Guarantor accepts responsibility for the information in this Offering Circular relating to itself and its Guarantee. To the best of the knowledge of the Issuer, with regard to the information contained in this Offering Circular, and each Guarantor, with regard to the information relating to itself and its Guarantee, (each having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information. Each Tranche of Notes will be issued on the terms set out herein under Terms and Conditions of the Notes as amended and/or supplemented by the Pricing Supplement specific to such Tranche. This Offering Circular must be read and construed together with any amendments or supplements hereto and with any information incorporated by reference herein and, in relation to any Tranche of Notes, must be read and construed together with the applicable Pricing Supplement. Subject as provided in the applicable Pricing Supplement, the only persons authorised to use this Offering Circular in connection with an offer of Notes are the persons named in the applicable Pricing Supplement as the relevant Dealer or the Managers, as the case may be. Copies of Pricing Supplements will be available from the registered office of the Issuer and the specified office set out below of the Principal Paying Agent (as defined below) (save that a Pricing Supplement relating to an unlisted Note will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Issuer or the Principal Paying Agent as to its holding of Notes and identity). This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see Documents Incorporated by Reference ). This Offering Circular shall be read and construed on the basis that such documents are incorporated and form part of this Offering Circular. None of the Arranger, the Dealers, the Note Trustee, the Paying Agents (as defined below), the Transfer Agent (as defined below) or the Registrar have independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar as to the accuracy or completeness of the information contained or incorporated in this Offering Circular or any other information provided by the Issuer or the Guarantors in connection with the Programme. None of the Arranger, the Dealers, the Note Trustee, any Paying Agent, the Transfer Agent or the Registrar accepts any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by the Issuer or the Guarantors in connection with the Programme. To the fullest extent permitted by law, none of the Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar accepts any responsibility for the contents of this Offering Circular or for any other statement made or purported to be made by the Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar or on their behalf in connection with the Issuer, the Guarantors or the issue and offering of the Notes. The Arranger, each Dealer, the Note Trustee, each Paying Agent, the Transfer Agent and the Registrar accordingly disclaims all and any liability, whether arising in tort or contract or otherwise which it might otherwise have in respect of this Offering Circular or any such statement. No person is or has been authorised by the Issuer, the Guarantors, the Arranger, any of the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar to give any information or to make any representation not contained in or not consistent with this Offering Circular or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Guarantors, the Arranger, any of the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar. Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, the Guarantors, the Arranger, any of the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar that any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Guarantors. Neither this Offering Circular nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer or the Guarantors, the Arranger, any of the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar to any person to subscribe for or to purchase any Notes. Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer and/or the Guarantors is correct ii

3 at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as at any time subsequent to the date indicated in the document containing the same. The Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent and the Registrar expressly do not undertake to review the financial condition or affairs of the Issuer or the Guarantors during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. The Notes and the Guarantees have not been and will not be registered under the U.S. Securities Act and are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (see Subscription and Sale ). The Notes have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission in the United States or any other U.S. regulatory authority, nor has any of the foregoing authorities passed upon or endorsed the merits of any offering of notes or the accuracy or the adequacy of this Offering Circular. Any representation to the contrary is a criminal offence in the United States. This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Guarantors, the Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent and the Registrar do not represent that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantors, the Arranger, the Dealers, the Note Trustee, the Paying Agents, the Transfer Agent or the Registrar which is intended to permit a public offering of any Notes or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong Kong, Singapore, the People s Republic of China and Australia, see Subscription and Sale. PROHIBITION OF SALES TO EEA RETAIL INVESTORS The Notes are not intended, from 1 January 2018, to be offered, sold or otherwise made available to and, with effect from such date, should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (EEA). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (MiFID II); (ii) a customer within the meaning of Directive 2002/92/EC (IMD), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the Prospectus Directive). Consequently no key information document required by Regulation (EU) No 1286/2014 (the PRIIPs Regulation) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation. In this Offering Circular, references to: PRESENTATION OF INFORMATION A320 refers to an Airbus 318, 319, 320 and 321 aircraft; A330 refers to an Airbus 330 aircraft; A340 refers to an Airbus 340 aircraft; A350 refers to an Airbus 350 aircraft; A380 refers to an Airbus 380 aircraft; AASB means Australian Accounting Standards Board, the body responsible for developing, issuing and maintaining AASBs; AASBs means Australian Accounting Standards and related pronouncements, as adopted by the AASB; ACCC means the Australian Competition and Consumer Commission; iii

4 ACI refers to Airports Council International; AFP means Australia Federal Police aircraft movement means each time that an aircraft arrives at, or departs from, an airport; Airport Lease means the fully prepaid lease, pursuant to which APAM leases Melbourne Airport from the Australian Government, dated 2 July 1997; Airport Licence means any licence or similar authorisation required to operate Melbourne Airport (including any licence referred to in clause 17 of the Airport Lease); Airports Act means the Australian Airports Act 1996; Airservices Australia refers to Airservices Australia, a government-owned commercial authority, which is responsible for air traffic control and airspace management services at all major airports in Australia, including Melbourne Airport; ANZ means Australia and New Zealand Banking Group Limited; APAC means Australia Pacific Airports Corporation Limited, the Parent Guarantor, and the ultimate parent of the Issuer; APAC Share Mortgages means the equitable share mortgages over the shares of APAH2 and APAC (Holdings) Pty Ltd given by the Parent Guarantor to the security trustee; APAH1 means APAC (Holdings) Pty Ltd, a wholly owned subsidiary of APAC, and the 90% owner of APAL. APAH1 is not a guarantor under the Notes; APAH2 means APAC (Holdings No.2) Pty Limited, a wholly owned subsidiary of APAC, and the 100% owner of APAM; APAL, or Launceston Airport means Australia Pacific Airports (Launceston) Pty Ltd, the airport-lessee company for Launceston airport; APAM, or Melbourne Airport, means Australia Pacific Airports (Melbourne) Pty Ltd, the Issuer and the airport-lessee company for Melbourne airport; ASA means Aeronautical Service Agreement; B737 refers to a Boeing 737 aircraft; B747 refers to a Boeing 747 aircraft; B767 refers to a Boeing 767 aircraft; B777 refers to a Boeing 777 aircraft; B787, or Dreamliner, refers to a Boeing 787 aircraft; BITRE means the Australian Bureau of Infrastructure, Transport and Regional Economics; CAGR means compound annual growth rate; CASA means Civil Aviation Safety Authority; Cash Flow Cover Ratio means the ratio calculated using defined terms contained in the Issuer s debt documents which can be summarised as cash flow divided by senior debt interest expense for the six months ended 31 December or the six months ended 30 June as appropriate; CATIIIb refers to an instrument landing system that provides aircraft with horizontal and vertical guidance before and during landing and, at certain fixed points, indicates the distance to the reference point of landing; Code C aircraft refers to an aircraft that has a wingspan of between 24 metres and up to but not including 36 metres. Examples are the A320 series and the B /800 series; Code D aircraft: refers to an aircraft that has a wingspan of between 36 metres and up to but not including 52 metres. An example is B ; Code E aircraft: refers to an aircraft that has a wingspan of between 52 metres and up to but not including 65 metres. Examples are the Airbus A330 and A340 and B747 or 777/787; iv

5 Code F aircraft: refers to an aircraft that has a wingspan of between 65 metres and up to but not including 80 metres. An example is the A380; CPI means consumer price index, an inflation measure based on consumer goods and services purchased by households; DIAC means the Australian Department of Immigration and Citizenship; domestic passengers means passengers travelling on interstate and regional flights within Australia; Euro, EUR, euro and refer to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the Treaty establishing the European Community, as amended; Exposures means commitments to provide financial accommodation by secured creditors that are subject to the Intercreditor Deed; First Security Trustee means Westpac Administration Pty Limited (ABN ); Gearing Ratio means the ratio calculated using the defined terms contained in the Issuer s debt documents, which can be summarised as the ratio of its senior debt to the sum of senior debt and Tangible Net Worth as determined by an independent valuation conducted by an internationally recognised accounting firm; the Group refers to the Parent Guarantor and its subsidiaries, including the Issuer; IATA means International Air Transport Association; Intercreditor Deed means the Amended and Restated Intercreditor Deed, dated as of 23 May 2001, as amended and restated by the First Amendment Deed on 13 May 2004, the Second Amendment Deed on 27 July 2009, and the Third Amending Deed dated 11 June 2010, among the Issuer, the Guarantors, the First Security Trustee, the Second Security Trustee, certain senior lenders to the Issuer and certain other parties, which operates to ensure that all financiers under senior finance documents will be treated equally; international passengers means passengers travelling on flights between Australia and other countries; Jetstar means Jetstar Airways Pty Limited and its controlled entities, on a consolidated basis, which is a wholly owned subsidiary of the Qantas Group; Launceston Airport means either APAL or the Launceston airport, as the context requires; LCC means low-cost carrier; MDP means Major Development Plan, which means any plan to build, landside, on an airport site, works valued at A$20 million or more; Melbourne Airport means either APAM or the Melbourne Airport, as the context requires; Minister means the Minister for Infrastructure and Transport, unless otherwise stated; MTOW means maximum take-off weight, a pre-determined weight assigned to the aircraft at the time of its registration; net lettable area means the sum of the whole floor lettable area as defined by the Property Council of Australia; passenger means each person who arrives at, or departs from, an airport by plane, excluding general aviation passengers; Qantas means Qantas Airways Limited and its controlled entities, on a consolidated basis, excluding Jetstar; Qantas Group means Qantas and its controlled entities, on a consolidated basis, including Jetstar; RPT means Regular Passengers transport; Second Security Trustee means Westpac Banking Corporation (ABN ); Security Trust Deed means the security trust deed, dated on or about 7 April 1997, between the Issuer, the Parent Guarantor, the First Security Trustee, the Second Security Trustee and certain other parties; Singapore dollars and S$ refer to the legal currency of Singapore; slots means an allocation permitting a specified aircraft movement at a specified time on a specified day; stands or aircraft stands refer to parking positions for aircraft; v

6 Sterling and refer to pounds sterling; T1 or Terminal 1 refers to the Issuer s domestic terminal, called Terminal 1; T2 or Terminal 2 refers to the Issuer s international terminal, called Terminal 2; T3 or Terminal 3 refers to the Issuer s domestic terminal, called Terminal 3; T4 or Terminal 4 refers to the Issuer s domestic terminal, called Terminal 4; Tangible Net Worth means the amount calculated using defined terms in the Issuer s debt documents which can be summarised as the market value of such equity as determined by an independent valuation conducted by an internationally-recognised accounting firm on or about 31 December or 30 June of each year; TFA means Terminal Facility Agreement; Tigerair means Tigerair Australia, a fully owned subsidiary of Virgin Australia Holdings; transit passenger means a passenger who arrives at an airport in one aircraft and departs from the airport in the same aircraft; U.S. dollars, USD and U.S.$ refer to United States dollars; and Virgin Australia mean Virgin Australia Holdings Limited Group, consisting of Virgin Australia Holdings Limited and its controlled entities; Virgin Group means Virgin Australia Holdings Limited and its subsidiaries, including Tigerair, on a consolidated basis The following table sets forth the conversion from metric measures into imperial equivalents: 1 hectare = acres 1 kilometre = miles 1 square metre = square feet 1 tonne = 2, pounds 1 tonne = tons (short) Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. FORWARD LOOKING STATEMENTS All statements contained in this Offering Circular, statements made in press releases and oral statements that may be made by the Issuer, the Guarantors or each of their respective officers, directors or employees acting on the Issuer s or either Guarantor s behalf that are not statements of historical fact constitute forward-looking statements. All statements other than statements of historical facts included in this Offering Circular, including, without limitation, those regarding the financial position of the Group, business strategy plans and objectives of management for future operations, are forward-looking statements. Potential investors can identify some of these forward-looking statements by terms such as will, would, aim, aimed, is likely, are likely, believe, expect, expected to, will continue, anticipated, estimate, estimating, intend, plan, seeking to, future, objective, should, can, could, may or similar words. However, investors should note that these words are not the exclusive means of identifying forward-looking statements. All statements regarding the Issuer s or the Group s expected financial position, business strategy, plans and prospects are forward-looking statements. These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Issuer s or the Group s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. All forward-looking statements speak only as at the date of this Offering Circular. Given the risks and uncertainties that may cause the Issuer s or the Group s actual future results, performance or achievements to be materially different than expected, expressed or implied by the forward-looking statements in this Offering Circular, potential investors are advised not to place undue reliance on those statements. The Issuer makes no representation or warranty that its actual future results, performance or achievements, or that of the Group s, will be as discussed in those statements. Each of the Issuer and the Guarantors expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change vi

7 in the Issuer s or either of the Guarantor s expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based. These risks, uncertainties and other important factors include, among others: a decline in the number of passengers that use Melbourne Airport; changes in government policy or regulation; the operational performance and position of major airline customers to the extent that this impacts their ability to pay fees incurred under contract or causes them to reduce or remove services from Melbourne Airport; aircraft accidents; public health crises; terrorist attacks and the threat of war; accidents that adversely affect the Issuer s airport or infrastructure; the ability of the Issuer to obtain adequate insurance for its properties and assets; the ability of the Issuer to maintain its Airport Lease or aerodrome certificate; the ability of the Issuer to renegotiate its contractual arrangements with its customers and lessees on commercially reasonable terms and in a timely manner; a deterioration in the Issuer s retail, property or car parking operations; the performance of third parties upon whose cooperation the Issuer depends; the ability of the Issuer to execute its planned capital projects in a safe, timely and efficient manner; the impact of interest rate or exchange rate fluctuations; the ability of the Issuer to finance its capital expenditure plans; competition from other airports in Australia; macroeconomic conditions in Australia and globally; and other factors referred to in this Offering Circular. See Investment Considerations. The Issuer cautions that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Issuer or the Guarantors, investors should carefully consider the foregoing factors and other uncertainties and events. These forward-looking statements speak only as of the date of this Offering Circular, and the Issuer does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. See Investment Considerations for a discussion of some of the key risks that the Issuer faces. vii

8 CONTENTS Page Documents Incorporated by Reference... 1 Overview of the Programme... 2 Investment Considerations... 8 Form of the Notes Summary of the Guarantees Form of Pricing Supplement Terms and Conditions of the Notes Use of Proceeds Summary Historical Consolidated Financial Information Description of the Group Industry Overview Regulation Management Principal Shareholders Description of the Security Taxation Subscription and Sale General Information In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Pricing Supplement may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules. viii

9 DOCUMENTS INCORPORATED BY REFERENCE The following documents which have previously been prepared or are issued from time to time after the date of this Offering Circular shall be incorporated in, and form part of, this Offering Circular: (a) the audited consolidated annual financial statements of the Parent Guarantor for the financial years ended 30 June 2014, 30 June 2015 and 30 June Financial statements are available free of charge upon request from the Principal Paying Agent and the Issuer; (b) the audited consolidated annual financial statements of the Issuer for the financial years ended 30 June 2014, 30 June 2015 and 30 June Financial statements are available free of charge upon request from the Principal Paying Agent and the Issuer; (c) (d) (e) the most recently prepared audited consolidated annual financial statements and, if prepared later, the most recently prepared unaudited consolidated interim financial statements (if any) of the Parent Guarantor, in each case together with any audit or review reports prepared in connection therewith (where relevant). Financial statements are available free of charge upon request from the Principal Paying Agent and the Issuer; the most recently prepared audited consolidated annual financial statements and, if prepared later, the most recently prepared unaudited consolidated interim financial statements (if any) of the Issuer, in each case together with any audit or review reports prepared in connection therewith (where relevant). Financial statements are available free of charge upon request from the Principal Paying Agent and the Issuer; and all supplements or amendments to this Offering Circular circulated by the Issuer and the Guarantors from time to time, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Offering Circular to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular. Any unaudited interim financial statements of the Parent Guarantor which are, from time to time, deemed to be incorporated by reference in this Offering Circular will not have been audited or reviewed by the auditors of the Parent Guarantor. Accordingly, there can be no assurance that, had an audit or review been conducted in respect of such financial statements, the information presented therein would not have been materially different, and investors should not place undue reliance upon them. The Issuer will provide, without charge, to each person to whom a copy of this Offering Circular has been delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated herein by reference unless such documents have been modified or superseded as specified above. Requests for such documents should be directed to the Issuer at its registered office set out at the end of this Offering Circular. Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered office of the Issuer and from the specified offices of the Principal Paying Agent for the time being in at The Bank of New York Mellon, London Branch at One Canada Square, London E14 5AL. Any documents themselves incorporated by reference in the documents incorporated by reference in this Offering Circular shall not form part of this Offering Circular. Website addresses in this Offering Circular are, except as otherwise stated herein, included for reference only and the contents of any such websites are not incorporated by reference into, and do not form part of, this Offering Circular. 1

10 OVERVIEW OF THE PROGRAMME The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Pricing Supplement. The Issuer, the Guarantors and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event, in the case of listed Notes only and if appropriate, a supplement to the Offering Circular or a new Offering Circular will be published. Words and expressions defined in Form of the Notes and Terms and Conditions of the Notes shall have the same meanings in this Overview. Issuer: Parent Guarantor: Other Guarantors: Investment Considerations: Description: Arranger: Dealers: Certain Restrictions: Australia Pacific Airports (Melbourne) Pty Limited Australia Pacific Airports Corporation Limited. See Summary of the Guarantees. APAC (Holdings No. 2) Pty Ltd (APAH2, and, together with the Parent Guarantor and any Additional Guarantors but excluding any released guarantors, the Guarantors). See Summary of the Guarantees. APAL, the owner and operator of Launceston Airport, is not a Guarantor. There are certain factors that may affect the Issuer s ability to fulfil its obligations under Notes issued under the Programme. These are set out under Investment Considerations below. There are also certain factors that relate to the Guarantees. These are also set out under Investment Considerations below. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under Investment Considerations and include risks relating to the structure of particular Series of Notes and certain market risks. Secured Euro Medium Term Note Programme J.P. Morgan Securities plc BNP Paribas Citigroup Global Markets Limited J.P. Morgan Securities plc and any other Dealers appointed in accordance with the Programme Agreement. Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see Subscription and Sale ) including the following restrictions applicable at the date of this Offering Circular. Notes denominated in Singapore dollars will have a minimum board lot size of at least S$200,000 Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 unless they are issued to a limited class of professional investors and have a denomination of at least 100,000 or its equivalent, see Subscription and Sale. 2

11 Note Trustee: Security Trustees: Principal Paying Agent: Registrar: Transfer Agent: Programme Size: Guarantees: The minimum specified denomination of each Note to be admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU, to the extent implemented in the relevant Member State, as amended, the Prospectus Directive) shall be 100,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes). The Bank of New York Mellon, London Branch Westpac Administration Pty Limited (ABN ) (the First Security Trustee) Westpac Banking Corporation (ABN ) (the Second Security Trustee) The Bank of New York Mellon, London Branch The Bank of New York Mellon (Luxembourg) S.A. The Bank of New York Mellon (Luxembourg) S.A. Up to EUR 3,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time. The Issuer and the Guarantors may increase the amount of the Programme in accordance with the terms of the Programme Agreement. The payment of principal sums and interest on principal sums (including interest owing on such interest) in respect of the Notes will be unconditionally guaranteed, jointly and severally, by the Guarantors. The Guarantee provided by APAH2 is unconditional. The liability of the Parent Guarantor under the Parent Guarantee in respect of the Notes is limited to the total amount available to holders of the Notes as a result of a realisation of the APAC Share Mortgages. For a summary of the terms of, and certain risks relating to, the Guarantees, see Summary of the Guarantees and Investment Considerations. Security: Pursuant to the terms of the Security Trust Deed, dated 7 April 1997 between the Issuer, the Parent Guarantor, the First Security Trustee, the Second Security Trustee and certain other parties (the Security Trust Deed), the obligations of the Issuer under the Notes and of each Guarantor under their respective Guarantees will be secured by a mortgage over the Airport Lease, fixed and floating charges over all assets of the Issuer and APAH2, and the APAC Share Mortgages. Intercreditor arrangements: There is no security over the assets of Launceston Airport. See Description of the Security. The Notes will be subject to the terms of the Amended and Restated Intercreditor Deed, dated as of 23 May 2001, as amended and restated by the First Amendment Deed on 13 May 2004, the Second Amendment Deed on 27 July 2009, and the Third Amending Deed dated 11 June 2010, among the Issuer, the Guarantors, the First Security Trustee, the Second Security Trustee, certain senior lenders to the Issuer and certain other parties, which operates to ensure that all financiers under senior finance documents will be treated equally (the Intercreditor Deed). The Intercreditor Deed also limits remedies available to the Note Trustee and holders of Notes upon the occurrence of an Event of Default in certain respects. See Overview of the Programme Remedies and Condition

12 Distribution: Currencies: Maturities: Issue Price: Form of Notes: Fixed Rate Notes: Floating Rate Notes: Index Linked Notes: Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis. Notes will be issued in series (each a Series) having one or more issue dates and on terms otherwise identical (or identical other than in respect of the first payment of interest, if any), the Notes of each Series being intended to be interchangeable with all other Notes of that Series. Each Series may be issued in tranches (each a Tranche) on the same or different issue dates. The specific dates of each Tranche of the Notes (which will be supplemented, where necessary, with supplemental terms and conditions and, save in respect of the issue date, issue price, first payment of interest and nominal amount of the Trance, will be identical to the terms of other Tranches of the same Series) will be set out in the applicable Pricing Supplement. Notes may be denominated in euro, Sterling, Australian dollars, New Zealand dollars, U.S. dollars, yen, Renminbi, Singapore dollars and, subject to any applicable legal or regulatory restrictions, any other currency agreed between the Issuer and the relevant Dealer. The Notes will have such maturities as may be agreed between the Issuer and the relevant Dealer, subject to such minimum and maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency. Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par. The Notes will be issued in bearer form (Bearer Notes) or in registered form (Registered Notes) as described in Form of the Notes. Bearer Notes will not be exchangeable for Registered Notes and vice versa. Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer. Floating Rate Notes will bear interest at a rate determined: (a) (b) (c) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or on such other basis as may be agreed between the Issuer and the relevant Dealer. The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes. Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer may agree. 4

13 Other provisions in relation to Floating Rate Notes and Index Linked Interest Notes: Dual Currency Notes: Partly Paid Notes: Notes redeemable in instalments: Zero Coupon Notes: Redemption: Denomination of Notes: Taxation: Cross Default: Floating Rate Notes and Index Linked Interest Notes may also have a maximum interest rate, a minimum interest rate or both. Interest on Floating Rate Notes and Index Linked Interest Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer. Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree. The Issuer may issue Notes in respect of which the issue price is paid in separate instalments in such amounts and on such dates as the Issuer and the relevant Dealer may agree. The Issuer may issue Notes which may be redeemed in separate instalments in such amounts and on such dates as the Issuer and the relevant dealer may agree. Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest. The applicable Pricing Supplement will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the Issuer and/or the Noteholders upon giving notice to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer. Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see Certain Restrictions Notes having a maturity of less than one year above. The Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see Certain Restrictions Notes having a maturity of less than one year above, and save that the minimum denomination of each Note will be 100,000 unless otherwise specified in the Pricing Supplement (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency). All payments made by the Issuer in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction as provided in Condition 9. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 9, be required to pay additional amounts to cover the amounts so deducted. All payments made by the Guarantors under the Guarantees will be made subject to deduction for or on account of withholding taxes imposed by any Tax Jurisdiction. In the event that any such deduction is made, the Guarantors will, save in certain limited circumstances, be required to pay additional amounts to cover the amounts so deducted. The terms of the Notes will contain a cross default provision as further described in Condition 11. 5

14 Status of the Notes: Status of the Guarantees: Rating: Listing and admission to trading: Restrictive Covenants: Remedies: Clearing Systems: The Notes will be direct, unconditional, unsubordinated and secured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) in priority to all other existing and future unsecured obligations of the Issuer from time to time outstanding and will rank senior in right of payment to all existing and future subordinated indebtedness of the Issuer. The Guarantees will be direct, unconditional, unsubordinated and secured obligations of each of the Guarantors and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) in priority to all other existing and future unsecured obligations of the Guarantors from time to time outstanding. The Programme has been rated A- by Standard & Poor s Ratings Services and A3 by Moody s Investors Service Limited. Series of Notes issued under the Programme may be rated or unrated. Where a Series of Notes is rated, such rating will not necessarily be the same as the rating assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Application has been made for Notes issued under the Programme to be listed on the SGX-ST. The Notes may also be listed on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer in relation to each Series. If the application to the SGX-ST to list a particular Series of Notes is approved, such Notes listed on the SGX-ST will be traded on the SGX-ST in a minimum board lot size of at least S$200,000 (or equivalent in any other currency). Unlisted Notes may also be issued. The Notes may also be listed on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer in relation to each Series of Notes. The applicable Pricing Supplement will state whether or not the relevant Notes are to be listed and, if so, on which stock exchange(s). The Issuer and the Guarantors have agreed in the Note Trust Deed to observe certain covenants, including, among other things, a covenant limiting the incurrence of security interests and a covenant restricting asset disposal transactions. See Condition 5(g) and Condition 5(h) Remedies available to the Note Trustee and the holders of Notes upon the occurrence of an Event of Default are limited in certain respects by the Intercreditor Deed. In particular, following notification of an Event of Default, a standstill period of two days (in the case of a payment default) or five days (in the case of any other default) will commence. At the expiration of the applicable standstill period (or during the standstill period upon the vote of two-thirds of voting senior creditors), the Security Trustees may be instructed to enforce the security under the Security Trust Deed by (i) if there is a payment default, the requisite number of the Noteholders as required by the Note Trust Deed or (ii) in the event of any other default, by in excess of 33 per cent. of the Issuer s Exposures. See Investment Considerations Enforcement Action. In the case of a default, the Note Trustee is bound by the requirements of the Security Trust Deed and the Intercreditor Deed in respect of the actions it may take. Euroclear, Clearstream, Luxembourg and in relation to any Tranche, such other clearing system as may be agreed between the Issuer, the Principal Paying Agent, the Note Trustee and the relevant Dealer as specified in the applicable Pricing Supplement, see Form of the Notes. 6

15 Governing Law: Selling Restrictions: United States Selling Restrictions: The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and shall be construed in accordance with, English law. The Guarantees are governed by, and shall be construed in accordance with, English law. The Security Trust Deed is governed by, and shall be construed in accordance with, the laws of the Australian Capital Territory, Australia. The Intercreditor Deed is governed by, and shall be construed in accordance with, the laws of the State of Victoria, Australia. There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong Kong, Singapore, People s Republic of China and Australia and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see Subscription and Sale. Regulation S, Category 2. TEFRA C or D/TEFRA not applicable, as specified in the applicable Pricing Supplement. 7

16 INVESTMENT CONSIDERATIONS The Issuer and each Guarantor believe that the following factors may affect their ability to fulfil their obligations under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantors are in a position to express a view on the likelihood of any such contingency occurring. In purchasing Notes, investors assume the risk that the Issuer and the Guarantors may become insolvent or otherwise be unable to make all payments due in respect of the Notes. There is a wide range of factors which individually or together could result in the Issuer and the Guarantors becoming unable to make all payments due in respect of the Notes. It is not possible to identify all such factors or to determine which factors are most likely to occur, as the Issuer and the Guarantors may not be aware of all relevant factors, and certain factors which it currently deems not to be material may become material as a result of the occurrence of events outside the Issuer s and the Guarantors control. The Issuer and the Guarantors have identified in this Offering Circular a number of factors which could materially adversely affect its business and its ability to make payments due under the Notes. In addition, factors which are material for the purpose of assessing the Guarantees, the Security and the market risks associated with Notes issued under the Programme are also described below. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision. FACTORS THAT MAY AFFECT THE ISSUER S ABILITY TO FULFIL ITS OBLIGATIONS UNDER NOTES ISSUED UNDER THE PROGRAMME Risks associated with the business and industry of APAC and its airports APAC s and the Issuer s business operations and revenues are dependent on the number of, and mix of, passengers that use Melbourne Airport, which may decline due to factors beyond its control The principal factor affecting APAC s financial performance and business prospects is the number of passengers that use Melbourne Airport, and the domestic/international mix of those passengers, which together directly determines the majority of revenues that APAC derives from aeronautical services and indirectly determines a significant portion of the revenues it derives from its commercial services, including its retail operations. Passenger numbers and their mix may be influenced by a number of factors, including: macroeconomic conditions that affect the propensity of people to undertake air travel, including adverse economic conditions in Australia and globally; significant events, such as acts of terrorism or war, civil unrest in the Middle East and other regions, or acts of nature such as volcanic or seismic activity in certain regions; public health-related pandemics such as Severe Acute Respiratory Syndrome (or SARS), avian influenza and the H1N1 swine influenza; an increase in airfares due to increased airline costs, including fuel surcharges in response to increased jet fuel prices, or other possible surcharges, including increased regulatory compliance costs, such as an airport or airline emissions tax, carbon price mechanism or an increase in the government passenger movement charge; an increase in airfares due to lower levels of competition among airlines domestically or a withdrawal or reduction in the number of airlines using Melbourne Airport, airline seat supply or the number of routes offered by carriers to and from Melbourne Airport; insurance coverage may not be adequate or available in all circumstances; currency exchange rate fluctuations; cancellation or delay in expenditure by airlines on modernised aircraft, or the insolvency or bankruptcy of airline carriers; aircraft accidents; accidents that adversely affect APAC s airports or infrastructure; industrial action by airline employees, refuelers, ground transport operators or air traffic controllers resulting in significant flight cancellations, particularly in peak travel periods; changes in governmental policy or regulations that impose a curfew or aircraft movement cap at Melbourne Airport; 8

17 interruptions in fuel supply preventing aircraft from refueling at Melbourne Airport; an increase in the competitiveness of other airports on the east coast of Australia, such as Sydney airport, or of local airports such as Avalon airport, which, respectively, could reduce Melbourne Airport s share of international passengers traveling to or from Australia or could reduce Melbourne Airport s share of domestic passengers; and failure of the government to provide sufficient road and rail infrastructure to efficiently bring passengers to Melbourne Airport. These factors are generally beyond the control of APAC and the Issuer. Any decline in passenger numbers to or from Melbourne Airport could materially adversely affect the business and financial results of APAC and the Issuer. APAC s revenues could be materially adversely affected by the imposition of additional regulations, particularly greater regulatory price controls on the fees the Issuer charges its airline customers or regulation of the prices it charges for car parking APAC and its airports are subject to a variety of governmental laws and regulations at the federal, state and local level that regulate its aeronautical operations. Much of this regulation has been in place since prior to the privatisation of Melbourne Airport in 1997 and Launceston Airport in 1998 and the business of the airports has been operated within these restrictions since their privatisation, however, there can be no assurance that the Australian Government or relevant state or local governments will not impose additional or more onerous regulatory controls on the airports aeronautical operations, which may influence airport traffic, passenger numbers or aeronautical revenue and may increase its operating and capital expenditure requirements. For the year ended 30 June 2016, APAC derived 46% of its revenues from its aeronautical services. The fees that APAC s airports charge are set through commercial agreements between APAC and its international and domestic airline customers. These charges are not subject to government approval, although they are monitored by the ACCC. The ACCC monitors the fees that APAC s airports charge and the quality of the aeronautical services that they provide to their airline customers. In addition, the Productivity Commission periodically reviews the effectiveness of the regulatory regime for Australian airports and the need for future airport price regulation, including advising on any changes to the regulatory regime. The Productivity Commission most recently reported its findings in December 2011, and on 30 March The Australian Government announced that it broadly accepted the Productivity Commission s findings, and specifically that: the ACCC should consider publishing a draft monitoring report each year and, following consultation with the monitored airports, a final report; monitoring should continue through June 2020, with a subsequent review by the Productivity Commission in The monitoring should apply to Melbourne, Sydney, Perth and Brisbane airports; assessments of airport behaviour should continue to be governed by the existing Pricing Principles, which, in general, means that prices should promote the efficient use of each airport while allowing a return on assets that is commensurate with the regulatory and commercial risks involved; neither an airport-specific arbitration regime nor mandatory access undertakings should be introduced; and improvements should be made to the ACCC quality of service monitoring. There can be no assurance that the ongoing ACCC monitoring and the subsequent review by the Productivity Commission (PC) will not result in a stricter level of regulation being imposed on APAC s airports operations or a reduction in the fees that it charges to its airline customers, any of which may have a material adverse effect on its business and financial results. For the year ended 30 June 2016, APAC derived 22% of its revenues from its airports car parking operations. The fees that APAC s airports charge for car parking are set commercially, and are not subject to government approval, although they are monitored by the ACCC. Where the Productivity Commission identifies a systemic failure of the existing economic regulatory model in the course of its routine (six to eight yearly) review, it may recommend the re-introduction of price controls to the Commonwealth Government. The Commonwealth is not bound to accept or enact the recommendations of the PC. Within the existing framework, an aggrieved party may seek to have monitored services provided by APAC 9

18 declared, in which case, prices would require the approval of the ACCC. Services may only be declared where it can be demonstrated that a market participant with substantial market power has acted for the purpose of damaging a competitor, preventing the entry of new participants to the market or deterring competitive conduct. The next Productivity Commission review will commence in 2017, with findings to be reported in APAC s airports airline customers may experience adverse financial and operating conditions, which could materially adversely impact aeronautical revenues APAC s airports business and results of operations could be materially adversely affected if they do not continue to generate comparable aeronautical revenues from their key airline customers. The global airline industry has experienced periods of financial and operating difficulties, particularly during the global financial crisis and during periods of fuel price volatility. Most airlines depend on reliable access to credit to finance their fleet of aircraft or make other capital investments. Restrictions on accessing such credit, among other things, may adversely affect many airlines, resulting in the cancellation of routes and the cancellation or postponement of scheduled investments. The domestic airline industry has experienced periods of financial difficulties, including the liquidation of Ansett Australia in 2002 (then Australia s second largest domestic airline), and the closure of other smaller domestic airlines from time to time. APAC s airports largest airline customers are the Qantas Group, which operates Qantas and Jetstar, and the Virgin Group which operates Virgin Australia and Tigerair. For the year ended 30 June 2016, approximately half of the passengers of APAC s airports were handled by the Qantas Group and approximately a quarter of the passengers of APAC s airports were handled by the Virgin Group. The Issuer also has a number of agreements in place with the Qantas Group, including ASAs and the T1 Lease at Melbourne Airport. Accordingly, APAC s airports operations depend on the Qantas Group for a significant percentage of its revenue, and the loss of the Qantas Group as a customer or any disruption in its services or payment of aeronautical charges to APAC s airports could significantly affect their financial performance. APAC s airports airline customers are regulated by the Australian Government s CASA. The investigation of safety incidents by CASA may result in suspensions of APAC s airports airline customers operations. For example, Tigerair was temporarily grounded by CASA in July 2011 but resumed domestic services a month later. Suspensions imposed on APAC s airports airline customers by CASA or international airline safety regulators may cause disruptions and a temporary reduction in traffic at its airports, which may adversely impact aeronautical revenues. Any increases in the costs borne by airlines either through increased fuel, funding costs or deterioration in financial performance may result in higher airline ticket prices, cancellation of routes or withdrawal from services at APAC s airports. To the extent that the additional capacity was not taken up by another airline, APAC s passenger numbers would decline and APAC s operations and financial results could be materially adversely affected. In the event that one or more of APAC s key airline customers were to withdraw its operations from APAC s airports or become financially distressed or insolvent, there could be a material adverse effect on the business and financial results. Many of APAC s airline customers employees are represented by labour unions. In October 2011, the Qantas Group grounded its entire fleet of aircraft for three days due to a breakdown in negotiations with labour unions which caused widespread disruption and a temporary reduction in Melbourne Airport traffic. To the extent that the relationships between APAC s airports airline customers and their labour unions are hostile or deteriorating, there can be no assurance that a work stoppage or other adverse union or airline activity will not occur in the future. In addition, international prices for fuel represent a significant cost for airlines and have been the subject of extreme volatility over the past five years. The price of fuel may be subject to further fluctuations resulting from a reduction or increase in the output of petroleum by oil-producing countries, a general increase in international hostilities, clean energy legislation in Australia, which includes a carbon pricing mechanism, and other general market conditions. See Regulation Environmental regulation Emissions regulation for more information in relation to the carbon pricing scheme in Australia. While airlines may use hedges to protect against volatility in oil prices, any decrease in oil prices may result in an increase in their derivative liabilities. APAC faces risks and liabilities associated with aircraft accidents The risk of aircraft accidents is inherent in airline travel and airport operations. Aircraft accidents may be caused by a number of factors, including, but not limited to extreme weather conditions, equipment failure, bird/bat strikes, objects on or near the runway, human error and terrorist activities. An aircraft accident at APAC s airports may expose it to reputational loss or liability in connection with any resultant property damage or personal injury. Damage incurred as a result of, and any subsequent investigation into, an aircraft accident may also cause 10

19 some of APAC s airports facilities to be unavailable for a period of time, pending repairs or the conclusion of investigations. While APAC s airports are covered by a comprehensive insurance programme, it can make no assurance that such insurance will continue to be available on economically reasonable terms, or at all, or that such insurance will be sufficient to cover the cost of liabilities incurred or profits lost in connection with an aircraft accident. In the event that an aircraft accident occurs at APAC s airports, there may be a material adverse effect on its business and financial and operating results, particularly if such an accident is not covered by insurance. APAC s business operations could be materially adversely affected by terrorist attacks and the threat of war Terrorism and acts of war have historically had a material adverse effect on international air travel and tourism. The acts of terrorism on 11 September 2001 had a material adverse effect on APAC s results of operation due to the resulting decrease in air travel and the corresponding decrease in the number of passengers departing from and arriving at APAC s airports. Any future event of war or terrorism may result in a reduction in passenger numbers and a temporary cessation of flights to some or all destinations serviced by APAC s airports, due to either government action or passengers deciding to postpone or cease air travel. Any such reduction in passenger numbers could have a material adverse impact on APAC s airports aeronautical revenues (which are principally charged on a per-passenger basis) and would also be likely to affect its commercial revenues, particularly those derived from its retail operations. In addition, events of war or terrorism may lead to a requirement for heightened security measures, such as the increased luggage screening requirements imposed by the Australian Government in The Issuer may also be required to comply with additional security measures that are introduced by countries that are serviced by Melbourne Airport, for example, the secondary screening procedures that it is required to undertake with respect to passengers flying to the United States. While the Issuer has historically recovered from its airline customers any capital and operating costs it has incurred in connection with government-mandated security measures for both domestic and international flights, it cannot provide any assurances that such recovery of costs will be effective, or that it will not be required to bear some or all of these additional costs. Any additional security measures may also lead to congested passenger facilities and greater time spent at security, which would have the effect of reducing capacity and the time passengers are able to spend in the Issuer s retail areas, which would materially adversely affect its commercial revenues. Further, to the extent acts of terrorism occur at APAC s airports, there may be significant damage to its assets which would require the re-construction of those assets and/or the suspension of its operations throughout some or all of its airports. Although the Australian Terrorism Insurance Act 2003 may partially protect APAC against the losses incurred in connection with such terrorist activities, any such activity could have a material adverse effect on APAC s airports business operations and potentially affect the appeal of Melbourne as a tourist destination. Such actions could also increase the Issuer s insurance costs and may materially adversely impact its ability to obtain insurance. APAC s insurance coverage may not be adequate or available in all circumstances APAC benefits from insurance coverage to protect against key insurable risks including aviation liability, terrorism and war, property damage and business interruption. Insurance coverage may not be adequate to cover lost income, reinstatement of costs, increased expenses or other liabilities. Moreover, there can be no assurance that if insurance cover is cancelled or not renewed, replacement cover will be available at commercially reasonable rates or at all. Insurance cover for APAC is currently, and may in the future be, provided by insurance market entities. Insurers could cease to offer current insurance cover, become insolvent or lose their licences or authorization. Any failure to obtain insurance or collect under relevant insurances may materially adversely effect APAC s business and financial results. APAC could face operational disruption, inconvenience to passengers and long-term reputational damage as a result of compromises to the safety and security of those affected by activities at the airport APAC has both a statutory and moral responsibility to ensure aviation security and safeguard the welfare and safety of staff, business partners and the public who may be affected by activities at the airports. APAC s safety management system includes risk assessment processes for activities entailing significant risk and proportionate control measures employed to safeguard everyone impacted by APAC s business. APAC also operates robust asset management processes to ensure property and equipment remains safe. Governance led by the airport s senior management teams and assurance processes are used to ensure the aforementioned remain effective and encourages continuous improvement. 11

20 Security risks are mitigated by adopting and enforcing rigorous policies and procedures supported by professional training and by investment in leading edge security technology. APAC works closely with airlines, government and law enforcement agencies building a framework to establish joint accountabilities for airport security and shared ownership of risks, thus ensuring security measures remain both flexible and proportionate to the prevailing threat environment. While APAC takes steps to discharge these responsibilities effectively and to avoid compromises to safety and security of all parties utilising the airports facilities, there can be no guarantee that steps taken by APAC will be effective. APAC cannot provide complete assurance to avoid a security or terrorist incident which may have an adverse impact on financial and operational performance. The Issuer s business depends on its ability to maintain the aerodrome certificate and the lease over the Melbourne Airport site The Issuer operates Melbourne Airport under the terms of its aerodrome certificate, which was granted to it by CASA under the Australian Civil Aviation Safety Regulations The current certificate was issued on 13 August 2004, and remains in force unless it is suspended or cancelled. CASA may suspend or cancel the certificate if there are reasonable grounds to believe that the airport facilities, operations or maintenance are not of the standard necessary in the interests of safe air navigation or if the Issuer does not allow CASA the required access to the airport facilities, equipment or records. See Description of the Group Overview of material agreements and authorisations for more information. Without its certificate, the Issuer would not have the authority to operate Melbourne Airport and, therefore, it could not operate its primary asset. In addition, the Issuer occupies the Melbourne Airport site pursuant to the terms of its 99-year arrangement with the Australian Government, comprising a fully prepaid lease which expires in 2047, together with a free option to renew for a further 49 years. The Issuer s lease is subject to certain conditions and failure to comply with those conditions may result in a breach of its lease terms and the termination of its lease. If the Issuer breaches the terms of its certificate or of its lease, and that breach leads to financial penalties or the loss of its certificate or its lease, its financial and operating results would be materially adversely affected. The Aeronautical Services Agreements with all of the Issuer s passenger airline customers, which represent approximately 88% of its contracted aeronautical revenue arrangements, will expire in 2017 The Issuers current ASAs are due to expire on 30 June 2017 and APAC is currently under negotiations to renew. The ASAs represented approximately 88% of the Issuer s aeronautical revenues for the year ended 30 June The ASAs also provide for the recovery of certain capital expenditure associated with providing services under the ASAs. If the Issuer was unable to renew the ASAs with its airline customers on favourable terms or at all, and it was unable to find alternative customers to take up the additional available capacity, APAC s operations and financial results could be materially adversely affected. See Description of the Group Principal operations and revenue streams Aeronautical services for more information on the ASAs. The Issuer faces competition for new business from other airports and it may face increased competition if the Australian federal or state governments expand other modal transport in the Melbourne region The Issuer encounters competition from other airports for international airline customers who are seeking to introduce new Australian routes from existing airports in major Australian cities such as Sydney (more than 860 kilometres (534 miles) by road from Melbourne) and Brisbane (more than 1,685 kilometres (1,047 miles) by road from Melbourne). These airports may undertake significant marketing to potential customers, offering more favourable terms or routes than those offered by Melbourne Airport. In Sydney, construction of a second airport may induce some of the Issuer s airline customers to shift some of their routes to the Sydney region. In addition, if these airports receive increased state governmental assistance or if the regulations imposed on these airports (such as restrictions on aircraft movements, or curfews) are relaxed, these airports may be able to offer improved terms to airlines. Airlines may also make their decision as to which Australian city to fly to on the basis of the lower fees charged by other airports in Australia or on the level of state tourism funding they receive from other Australian states. Additionally, for some key domestic routes, such as the Melbourne-Sydney and Melbourne-Canberra routes, alternate forms of transport, such as the introduction of a fast train service, may provide a competitive alternative to airline travel for those routes. Any of these factors could result in the Issuer s airline customers moving from Melbourne Airport, which could decrease its passenger numbers to the extent those slots were not taken up by another airline, which could materially adversely affect the Issuer s business and results of operations. 12

21 While there are currently no major international airports in the Melbourne region that compete with Melbourne Airport, Avalon airport (which is located approximately 60 kilometres away from Melbourne Airport) does provide passengers with a limited number of domestic flights, and this competition both domestically and internationally may intensify in the future. A deterioration in APAC s non-aeronautical operations may materially adversely affect its revenues For the year ended 30 June 2016, APAC derived 54% of its revenues from its airports retail, car parking operations, property and other revenue charges. There are a number of factors that could negatively impact these operations, which in turn could materially adversely affect APAC s revenues. In particular, APAC s airports retail operations may be impacted by: adverse economic conditions and fluctuations in exchange rates which result in changes in retail behaviour and reduced spending in APAC s airports retail outlets, including tax and duty free (in situations where APAC s airports tenants pay it rent on the basis of a percentage of the sales that they transact); changes in government regulations, including limitations on duty free allowances; shifts in consumer behaviour away from brick and mortar locations and towards online channels; lower passenger numbers or significant changes in passenger profiles, such as a reduction in international passenger numbers; lower retail yields or guaranteed incomes per passenger on lease renegotiations; redevelopments of its retail precincts, which may temporarily result in a decline in retail revenues; and insolvency of a major retailer. APAC s car parking operations at Melbourne Airport or Launceston Airport may be adversely affected by increased competition from other modes of transport, such as buses and trains to the airport as opposed to cars; increased competition from offsite car parks; or increased regulation or monitoring of pricing behaviour in relation to its car parking operations. In addition, APAC s property operations may be adversely affected by reduced demand from commercial tenants, such as logistics companies, and a subsequent increase in property vacancy rates; the inability to renegotiate rental terms and conditions as it expects; and property construction projects having costs greater than anticipated. The operation of APAC s airports may be adversely affected by the performance of third parties APAC depends on the cooperation of a large number of third parties, including government agencies and business partners, to provide its airports with essential functions, including air traffic control, re-fueling, rescue and firefighting services, catering, baggage handling, ground transportation for passengers (including taxi services), quarantine, and customs and passport control. These service providers may experience operational disruptions for a variety of reasons, including labour disputes and claims, financial/liquidity problems or poor performance. APAC s airports business operations may be affected if these service providers do not adequately perform the services they are required to provide. Further, a failure by these third parties to appropriately respond to accidents, fire, electrical shortages, technical defects, failures in data processing, external interference and other disruptions at APAC s airports could cause flight delays, damage to its facilities or, in extreme cases, the cancellation of airport services. Although disruptions of this nature are outside the direct control of APAC and its airports, their occurrence could have a material adverse effect on its business and financial and operating results. If these service providers were to halt operations at APAC s airports, it would be required to seek new service providers or provide services itself, either of which could result in increased capital or operating expenditures or costs and could have a material adverse impact on its business, financial and operating results. Any such disruptions could also adversely impact APAC s reputation. The operation of APAC s airports may be adversely affected by a failure or disruption of information, technology and systems APAC depends on the successful and uninterrupted functioning of information technologies to securely manage operations and various business functions including the storage, processing and reporting of information and interaction with customers, vendors and employees. Any damage, disruption or shutdown may adversely affect operational performance and adversely impact APAC s reputation. 13

22 APAC s airports may require greater than expected capital expenditures to maintain the service levels, safety, efficiency and quality of its facilities APAC s airports undertake capital expenditure in order to maintain the safety and efficiency of their facilities and to meet the service levels that they are contractually obligated to deliver to their airline customers. Based on APAC s forecasts of aircraft movement and passenger numbers, it creates a schedule of growth capital expenditure necessary to meet service levels in light of predicted passenger numbers. The Issuer may be required to incur capital expenditures in excess of its forecast amounts, and may face additional costs or lost revenues if one or more of the events outlined below were to occur: a significant increase in the number of passengers or aircraft that arrive during a peak period; additional security, safety, operating or environmental requirements are imposed on it; inaccurate costing of new projects or insufficient contingencies with respect to new developments or strategic acquisitions it may undertake; its environmental management costs and obligations increase; specific airline requirements that require changes or upgrades to existing infrastructure, for example, the upgrades undertaken at T2 to accommodate aircraft models such as the Airbus A380; the asset life of key infrastructure such as its terminals and airfield is less than it expects; unexpected difficulties in carrying out maintenance in a timely and cost effective manner; loss of a major airport building, for example, from fire or natural hazards; and complex projects involving new technologies experiencing unforeseen implementation failure. If an airport underestimates the costs of its forecast capital expenditure at the time it negotiates the ASAs or TFAs, it may be unable to recover this shortfall when its contracts with its airline customers are renewed, which could materially adversely affect its financial position. The successful implementation of the Issuer s capital expenditure programme could be affected by unanticipated construction and planning issues The Issuer s capital expenditure programme to support forecast growth in aircraft movements and passenger numbers includes major construction projects including the planned construction of a third runway and associated airfield and terminal works and is subject to a number of risks. For example, difficulties in obtaining any requisite government approvals, permits, consents, including environmental consents, licences, planning permissions, compulsory purchase orders or easements could adversely affect the design or increase the cost of the capital expenditure projects or delay or prevent the completion of a project or the commencement of its commercial operation. The Issuer may face higher than expected construction costs and delays, not all of which may be covered by its per passenger aeronautical charges. The Issuer s construction contracts may contain restricted remedies or limitations on liability such that any such sums claimed or amounts paid may be insufficient to cover the financial impact of any breach of contract. The ability of contractors to meet their financial or other liabilities cannot be assured. The Issuer s planned capital expenditure programme has a large number of interdependent programs of work and a reliance on suitably qualified and experienced personnel for the delivery of projects. Delays in project delivery may give rise to increased costs and may adversely affect the timing and project delivery. Unanticipated delays may adversely affect APAC s future revenue profile. The commencement of a commercial operation of a newly constructed runway and associated airfield and terminal works may also give rise to start-up problems, such as the breakdown or failure of equipment or processes or lack of readiness of operators, which may result in closure of facilities and disruptions to the Issuer s operations. For works valued at over A$20 million, the Issuer is required to engage in an environmental assessment and community consultation and prepare and lodge a Major Development Plan with the Minister. There is no guarantee that the Issuer will receive consent from the Minister for all of its planned capital works. The Issuer s failure to recognise, plan for and manage the extent of the impact of construction projects could result in projects overrunning budgets, operational disruptions, unsatisfactory facilities at the airports, safety and security performance deficiencies and higher than expected operating costs. Any of these could affect its day to day operations and have a material adverse effect on its business, financial condition and results of operations. 14

23 The Issuer is exposed to interest rate and foreign exchange fluctuations, which may increase its debt funding costs The Issuer s financial performance is affected by fluctuations in interest rates and foreign exchange rates primarily due to increases associated with borrowing on a floating rate and in foreign currencies, including the Notes to be issued under the Programme. Variations in interest rates and adverse currency movements against the Australian dollar which are not effectively hedged may increase the Issuer s debt funding costs. The Issuer manages its interest rate and currency risk by using swaps. As of 30 June 2016, after hedges, less than 15% of the Issuer s approximately A$3.2 billion of drawn senior debt was exposed to floating interest rates. The Issuer s debt is Australian-dollar denominated, other than U.S.$600 million of U.S.-dollar-denominated debt and 900 million of Euro denominated notes. All of APAC s foreign denominated debt was 100% hedged as of 30 June The Notes to be issued under the Programme may be denominated in Euros or other foreign currencies. There can be no assurance that the Issuer will successfully manage its interest rate or foreign exchange risk, that a hedge provider will not default on its obligations under a swap agreement, or that changes in interest rates or foreign exchange rate fluctuations will not have a material adverse effect on the Issuer s business, financial condition or results of operations. The Issuer has significant indebtedness, and it may not be able to successfully refinance its expiring debt facilities on commercially favourable terms or at all, or raise money to fund its planned capital expenditure As at 30 June 2016, the Issuer had a total of approximately A$3.2 billion of drawn committed financing, and A$780 million in committed undrawn bank facilities. A$500 million of funding matured in calendar year 2016 (A$250m drawn bank debt and A$250 AMTN). The next maturity of committed bank facilities matures in calendar The Issuer may be unable to refinance this indebtedness on commercially favourable terms or at all. The Issuer s ability to refinance its maturing indebtedness may be materially adversely affected if global credit markets tighten and there is a resultant shortage of available credit. Continued and future disruptions in the global financial marketplace, including the bankruptcy or restructuring of financial institutions, could make debt markets less accessible and materially adversely affect the availability of credit already arranged and the availability and cost of credit in the future. Any limitations on the Issuer s access to external capital, including limitations caused by volatility in the capital markets, may impair its ability to refinance its expiring debt facilities on commercially favourable terms or at all. If the Issuer is unable to obtain additional financing to meet its maturing debt obligations or new financing requirements, it could be forced to reduce or delay capital expenditures or forgo strategic business opportunities, sell assets, raise additional equity, restructure or refinance existing debt on terms that are disadvantageous to it or take other protective measures. The Issuer s inability to repay its indebtedness or a negative change in its credit ratings, which has a material adverse effect on its ability to borrow or its cost of funds, may have a material adverse effect on its business and financial condition. The Issuer s indebtedness may affect the way it carries on its business in the future and its ability to meet its obligations under the relevant Notes Some of the Issuer s indebtedness is governed by documents that contain covenants, including financial and operating covenants. The Issuer s debt levels and the covenants to which it is subject could have important consequences to Noteholders. For example, they could: make it more difficult for the Issuer to satisfy its obligations with respect to the relevant Notes and its other indebtedness, which could in turn result in an event of default on such other indebtedness or the relevant Notes; impair its ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes; diminish its ability to withstand a continued or future downturn in its business or the economy generally; and limit its flexibility in planning for, or reacting to, changes in its business and the industry in which it operates. The Issuer s incurrence of significant additional indebtedness would exacerbate the negative consequences mentioned above and could materially adversely affect its ability to pay the interest on, and principal of, the relevant Notes. APAC s airports are subject to environmental regulations that could impose significant costs or liabilities on them Airport operations in Australia are subject to, among other regulatory requirements, the Australian Airport (Environmental Protection) Regulations 1997 and the Airports Act, which require airport operators to take all reasonable and practicable measures to prevent and minimise air, water and soil pollution, as well as excessive 15

24 noise. If certain prescribed pollution and noise standards are not met, an owner or operator of an airport may be subject to penalties and may be liable for the costs of remediation or abatement of such pollutants located on or in, or emanating from, the airport, as well as related costs of investigation and any damages. These regulations may impose liability without regard to whether the owner or operator of the airport knew of, or was responsible for, the presence of such pollutants. Any changes to existing environmental legislation or the imposition of new regulations, for example with respect to aviation emissions or noise reductions, could also directly impact APAC s airports aircraft movements, or prevent or restrict the development of its assets, which could materially adversely affect its business and results of operations. APAC s shareholders are managed or represented by one of five entities, who are in a position to affect its ongoing operations, corporate transactions and other matters, and their interests may conflict with or differ from the interests of Noteholders APAC is a privately held corporation owned by institutional investors, predominantly long-term superannuation/ pension funds, whose shareholdings are ultimately managed or represented by the following five entities: Hastings Funds Management (in its capacity as custodian for Utilities of Australia), NSW Treasury Corporation as manager for SAS Trustee Corporation (J.P. Morgan Nominees Australia Ltd in its capacity as custodian for SAS Trustee Corporation); IFM Investors (Nominees), Future Fund; and AMP Investments (the Principal Shareholders). The Principal Shareholders collectively have the ability to control the voting rights of all of APAC s ordinary shares. See Principal shareholders for additional information concerning rights of the Principal Shareholders. The interests of the Principal Shareholders and their affiliates may not be consistent with the interests of Noteholders. The interests of APAC s Principal Shareholders may conflict with one another, which could result in disagreements and disputes between them. This could, in turn, adversely impact APAC s business and may result in some of the Principal Shareholders taking actions that may be adverse to the interests of a Noteholder. The Issuer s results of operations and financial condition are affected by general economic conditions The Issuer s results of operations and financial condition are affected by the general economic conditions existing in Australia and in those countries that are serviced by airlines at Melbourne Airport. A deterioration in general economic conditions is likely to negatively affect the propensity of passengers to fly, as well as their retail spending behaviour. As the Issuer s aeronautical revenues are generally derived on the basis of per-passenger fees and some of its retail tenants pay it rents that are based on passenger spending, this may have a material adverse effect on the Issuer s operating and financial results. For example, during the global financial crisis beginning in 2007, the Issuer s results of operations were negatively impacted as passenger numbers grew more slowly. Major economic events such as the global financial crisis or the European sovereign debt crisis have had an adverse impact on the Issuer s revenues and financial condition. FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET RISKS ASSOCIATED WITH NOTES ISSUED UNDER THE PROGRAMME The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor may wish to consider, either on its own or with the help of its financial and other professional advisers, whether it: (a) (b) (c) (d) (e) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement; has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; understands thoroughly the terms of the Notes and is familiar with the behaviour of any relevant indices and financial markets; and is able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. 16

25 Legal investment considerations may restrict certain investments. The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. Risks related to the structure of a particular issue of Notes A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features: If the Issuer has the right to redeem any Notes at its option, this may limit the market value of the Notes concerned and an investor may not be able to reinvest the redemption proceeds in a manner which achieves a similar effective return An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. If the Issuer has the right to convert the interest rate on any Notes from a fixed rate to a floating rate, or vice versa, this may affect the secondary market and the market value of the Notes concerned Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing market rates. Notes which are issued at a substantial discount or premium may experience price volatility in response to changes in market interest rates The market values of securities issued at a substantial discount (such as Zero Coupon Notes) or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for more conventional interest-bearing securities. Generally, the longer the remaining term of such securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. There are particular risks associated with an investment in certain types of Notes, such as Index Linked Notes and Dual Currency Notes. In particular, an investor might receive less interest than expected or no interest in respect of such Notes and may lose some or all of the principal amount invested The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a Relevant Factor). In addition, the Issuer may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that: (i) (ii) the market price of such Notes may be volatile; they may receive no interest; (iii) payment of principal or interest may occur at a different time or in a different currency than expected; (iv) they may lose all or a substantial portion of their principal; (v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; 17

26 (vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable will likely be magnified; and (vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield. The historical experience of an index or other Relevant Factor should not be viewed as an indication of the future performance of such Relevant Factor during the term of any Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any Notes linked to a Relevant Factor and the suitability of such Notes in light of its particular circumstances. Where Notes are issued on a partly paid basis, an investor who fails to pay any subsequent instalment of the issue price could lose all of his investment The Issuer may issue Notes where the issue price is payable in more than one instalment. Any failure by an investor to pay any subsequent instalment of the issue price in respect of his Notes could result in such investor losing all of his investment. Variable rate Notes which are issued with variable interest rates or which are structured to include a multiplier or other leverage factor are likely to have more volatile market values than more standard securities Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features. Inverse Floating Rate Notes will have more volatile market values than conventional Floating Rate Notes Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes. Risks related to Notes generally Set out below is a brief description of certain risks relating to the Notes generally: The conditions of the Notes contain provisions which may permit their modification without the consent of all investors and confer significant discretions on the Note Trustee which may be exercised without the consent of the Noteholders and without regard to the individual interests of particular Noteholders The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The conditions of the Notes also provide that the Note Trustee may, without the consent of Noteholders and without regard to the interests of particular Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or (ii) determine without the consent of the Noteholders that any Event of Default or potential Event of Default shall not be treated as such, in the circumstances described in Condition 16. The value of the Notes could be adversely affected by a change in English law or administrative practice The conditions of the Notes will be based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular and any such change could materially adversely impact the value of any Notes affected by it. 18

27 Investors who purchase Bearer Notes in denominations that are not an integral multiple of the Specified Denomination may be adversely affected if definitive Bearer Notes are subsequently required to be issued In relation to any issue of Bearer Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Bearer Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination. If such definitive Bearer Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade. Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk: An active secondary market in respect of the Notes may never be established or may be illiquid and this would adversely affect the value at which an investor could sell his Notes Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. If an investor holds Notes which are not denominated in the investor s home currency, he will be exposed to movements in exchange rates adversely affecting the value of his holding. In addition, the imposition of exchange controls in relation to any Notes could result in an investor not receiving payments on such Notes The Issuer will pay principal and interest on the Notes and the Guarantors will make any payments under the Guarantees in the Specified Currency. This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to the Specified Currency would decrease (1) the Investor s Currency equivalent yield on the Notes, (2) the Investor s Currency-equivalent value of the principal payable on the Notes and (3) the Investor s Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate or the ability of either the Issuer or Guarantor to make payments in respect of the Notes. As a result, investors may receive less interest or principal than expected, or no interest or principal. The value of Fixed Rate Notes may be adversely affected by movements in market interest rates Investment in Fixed Rate Notes involves the risk that if market interest rates subsequently increase above the rate paid on the Fixed Rate Notes, this will adversely affect the value of the Fixed Rate Notes. Credit ratings assigned to the Issuer, the Guarantors, the Programme or any Notes may not reflect all the risks associated with an investment in those Notes One or more independent credit rating agencies may assign credit ratings to the Issuer, the Guarantor, the Programme or the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the rating agency at any time. 19

28 Risks related to the Security The ability of the Note Trustee to exercise rights on behalf of holders of the relevant Notes will be limited in several respects by the Intercreditor Deed, which limits the rights of senior creditors of APAC, APAH2 and the Issuer The Note Trustee will not have any independent power to enforce any of the security documents or to exercise any other rights or powers arising under the security documents except through the Security Trustees (which are also the Security Trustees for the other secured creditors under the security documents) as provided in the Security Trust Deed and the Intercreditor Deed. A senior secured creditor can request that the Security Trustees seek the consent of senior secured creditors, which requires the affirmative vote of more than one-third of Exposures (or two-thirds of Exposures during the standstill period, unless an administrator has been appointed or the Airport Lease or any licence or similar authorisation required to operate Melbourne Airport have become subject to termination or revocation) in order to enforce the securities if such senior secured creditor has first notified the Security Trustee of an event of default. Remedies available to the Note Trustee and the holders of relevant Notes upon the occurrence of an event of default are limited in certain respects by the Intercreditor Deed. In particular, following notification of an event of default, a standstill period of two business days (in the case of a payment default) or five business days (in the case of any other default) will commence. At the expiration of the applicable standstill period (or during the standstill period if two-thirds of the Issuer s senior creditors vote), the Security Trustees may be instructed to enforce the security under the Security Trust Deed by (i) if there is a payment default, the requisite number of the Noteholders as required by the Note Trust Deed or (ii) in the event of any other default, in excess of 33% of Exposures. It may be difficult for holders of the Notes to enforce their rights under the Notes, the Intercreditor Deed and the security documents as holders do not have the unilateral right to enforce the Notes after a default. In the case of a default, the Note Trustee is bound by the requirements of the Security Trust Deed and the Intercreditor Deed in respect of the actions it may take. Except in the case of a payment default under the Notes, if the aggregate outstanding principal amount of the Notes represents less than 33% of Exposures, the holders of Notes (through the Note Trustee) will be unable to direct any enforcement action under the Intercreditor Deed without the consent of the Issuer s other senior secured creditors. See Description of the security Enforcement actions for a more detailed discussion of the enforcement procedures under the Intercreditor Deed. Holders of the Notes may be bound by the enforcement voting decisions of other senior creditors under certain circumstances Under the Issuer s Intercreditor Deed, voting to instruct the Security Trustees to enforce the security typically requires two-thirds of the Exposures of voting creditors (voting by their total exposure, rather than their funded amount) during standstill periods (which are two business days for non payment and five business days for other defaults) and one-third of the Exposures of voting creditors (voting by their total exposure, rather than their funded amount) following the end of standstill periods. In requesting instructions, the Security Trustees will specify a reasonable time period for creditors to respond. In certain circumstances, the Note Trustee under the Note Trust Deed will have the ability to request within this initial period that they can provide instructions within a further reasonable time period. The factors that will be taken into account in determining the reasonableness of the period include the number of financiers the representative represents, the time taken to liaise with these financiers and credit requirements of the financiers. Any votes not received in the time specified by the Security Trustees to vote will be counted as zero for the purposes of determining whether there is the requisite majority of voting creditors. It is possible that a vote to take enforcement action may not include the votes of the holders of the Notes, and action may be taken that is averse to the interests of the holders of the Notes. It may be difficult for holders of the Notes to enforce their rights under the Notes, the Intercreditor Deed and the security documents as holders do not have the unilateral right to enforce their rights under the Notes as a class after a default In connection with the closing of an offering of relevant Notes, the Note Trustee will accede to the Intercreditor Deed as a new representative for the holders of the relevant Notes and become a beneficiary under the Security Trust Deed. As the new representative for holders of the relevant Notes, the Note Trustee will have the sole power to take any actions on behalf of the holders of the relevant Notes, under the Security Trust Deed and the Intercreditor Deed. Consequently, the holders of the relevant Notes will not have a unilateral right to declare an event of default, to accelerate the Notes after an event of default or to instruct the Security Trustees to take any actions under the Intercreditor Deed or the security documents or to consent to any matter relating to such documents or the collateral securing the relevant Notes. The Note Trustee will have no obligation to provide any 20

29 such instruction or consent unless directed to do so by the holders in accordance with the Conditions and the provisions of the Trust Deed. Voting and consent rights of holders of the Notes are subject to the Intercreditor Deed, which limits the ability of holders of Notes to control voting and consents Holders of the relevant Notes may be unable to obtain an amendment to, or grant a waiver under, any finance document (other than the Indenture) to which the Security Trustees are a party which requires the consent of more than two thirds of Exposures without the consent of the Issuer s other senior secured creditors. Additionally, if the principal amount outstanding under the relevant Notes does not represent more than 33% of Exposures, holders of the relevant Notes may be unable to block such an amendment or waiver. In addition, failure by the Note Trustee to provide instructions to the Security Trustees within certain timeframes may result in holders of the relevant Notes being unable to vote on those requested instructions under the Intercreditor Deed. If the Security Trustees receive notice of an event of default under any of the finance documents that have the benefit of the Intercreditor Deed, they are required to promptly notify the senior secured creditors under the Intercreditor Deed and seek instructions. The Security Trustees may specify a reply period which they consider to be reasonable. The Note Trustee will be required to provide notice of any such instructions received by it to each holder of the relevant Notes within two business days, together with a request for a reply. Depending on the applicable timeframe specified by the Security Trustees, it may be difficult for the holders of the relevant to provide instructions to the Note Trustee with sufficient time to ensure that the Note Trustee can provide instructions to the Security Trustees by the deadline. If the Note Trustee does not provide instructions to the Security Trustees by the applicable deadline, under the terms of the Intercreditor Deed the holders of the relevant Notes will be deemed to have no principal outstanding under the relevant Notes for purposes of voting on those requested instructions under the Intercreditor Deed. The requirements of the Security Trustees to act are limited in certain respects The Security Trustees are not required to take any enforcement action (even where instructed to do so) where such Security Trustee believes that all moneys recovered under the Security Documents will not be sufficient to reimburse the Security Trustee for its costs, charges or expenses in relation to that enforcement action. Under the Intercreditor Deed and the Security Trust Deed, the Security Trustees have the benefit of an indemnity from each of the beneficiaries under the Security Trust Deed (rateably in accordance with their respective Exposures) against all costs, losses, liabilities, expenses or damages that the Security Trustees may sustain or incur (directly or indirectly) under or in relation to the finance documents. The Note Trust Deed, the Security Trust Deed and the Intercreditor Deed will not require the Note Trustee to expend its own funds to satisfy any demand under this indemnity. The Note Trustee s sole obligations under the Note Trust Deed with respect to such an indemnity request will be to (a) notify the holders of the relevant Notes within two business days of its receipt of any request for such an indemnity and (b) promptly remit to the Security Trustees any funds provided by the holders of the relevant Notes to satisfy such demand. The Security Trustees obligation to commence any enforcement action may, at the Security Trustees discretion, be subject to the granting of a suitable indemnity. If such indemnity was not provided, the Security Trustees may not proceed with enforcement action, which would materially adversely affect the holders of the relevant Notes. The Issuer may be able to incur liens in respect of certain of its assets for the benefit of other creditors Under the terms of the Note Trust Deed, the Issuer is permitted to incur liens securing indebtedness other than in respect of the relevant Notes. In particular, among other exceptions, the Issuer is permitted under the terms of the Note Trust Deed to incur liens securing assets or obligations up to 10% of its Total Assets, and the Issuer is permitted to create liens on any of its assets for the sole purpose of financing or refinancing the acquisition and/ or development of such assets so long as the secured indebtedness is non-recourse to the Issuer or the Guarantors. Consequently, certain assets that may be owned by the Issuer or a Guarantor from time to time may not be secured in favour of the holders of the relevant Notes and/or other lenders may have priority claims in respect of such assets. In some situations, the Issuer and the Guarantors may dispose of the collateral securing the Notes and such collateral may subsequently be released by the Security Trustees The Issuer and the Guarantors must comply with restrictions on disposal under the Note Trust Deed. Where a disposal is permitted under the Note Trust Deed or the Issuer s other financing documents, the Security Trustees are required to release the collateral, which may result in a decrease in the value of the collateral securing the relevant Notes. 21

30 Any future security interest over collateral may be avoidable Any future security interest over collateral in favour of the Security Trustee might be avoidable by a liquidator of the pledgor if certain events or circumstances exist or occur, including, among others, if the pledge or granting of the security interest is deemed a fraudulent conveyance or transfer or the pledgor is insolvent at the time of the pledge or granting of the security interest, the pledge permits the holders of the relevant Notes to receive a greater recovery than if the pledge had not been given and a winding-up proceeding (including as deemed under Part 5.6 of the Corporations Act) in respect of the pledgor is commenced within six months following the pledge, or, in certain circumstances, a longer period. Covenants in the Issuer s financing documents limit its flexibility, and breaches of these covenants could materially adversely affect the Issuer s financial condition Some of the Issuer s principal financing documents require it to comply with a number of customary financial covenants, such as maintaining certain financial ratios, including a Gearing Ratio, a Cash Flow Cover Ratio and a Tangible Net Worth covenant and other general undertakings. These covenants limit the flexibility of the Issuer s operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness and the acceleration of such indebtedness. Certain of the Issuer s financing documents also contain cross-default or cross-acceleration provisions that would permit the lenders thereunder to accelerate indebtedness in the event of a default or acceleration of other of the Issuer s material indebtedness. Any breaches of the Issuer s covenants could have a materially adverse impact on the Issuer s financial condition and its ability to pay the interest on, and principal of, the relevant Notes. If the Issuer defaults on the Notes, or any Guarantor defaults on its Guarantee, Noteholders rights to receive payments on the relevant Notes or the Guarantee may be materially adversely affected by Australian insolvency laws The Issuer and each of the Guarantors is organised under the laws of Australia and, therefore, insolvency proceedings with respect to them would be likely to proceed under, and be governed by, Australian insolvency law, which is different from the insolvency laws of the United Kingdom. If the Issuer or any Guarantor becomes insolvent, the treatment and ranking of holders of the relevant Notes, other creditors and shareholders under Australian law may be different than the resulting treatment and ranking if the Issuer were subject to the bankruptcy laws of the United Kingdom or other jurisdictions. Fraudulent conveyance laws or similar provisions or principles have been enacted or exist for the protection of creditors in a number of jurisdictions, including Australia, and upstream or sister Guarantees may be subject to claims that they should be subordinated or avoided in favour of direct or other creditors of the Guarantors. To the extent that any Guarantee is voided as a fraudulent conveyance or otherwise held to be unenforceable, Noteholders claims against that Guarantor could be lost or limited, and they could be required to return payments previously received from any such Guarantor. Under Australian law, if an order to wind up were to be made against any Guarantor and a liquidator was appointed for any such Guarantor, the liquidator would have the power to investigate the validity of past transactions and may seek various court orders, including orders to void certain transactions entered into prior to the winding-up of such Guarantor and for the repayment of money. These include transactions entered into within a specified period of the winding up that a court considers uncommercial transactions or transactions entered into when winding-up was imminent that had the effect of preferring a creditor or creditors or otherwise defeating, delaying or interfering with the rights of creditors. In addition to the matters described above, under the laws of Australia and other relevant jurisdictions the Guarantees may be set aside, subordinated or otherwise avoided by the application of fraudulent conveyance, financial assistance, bankruptcy, insolvency and administration, statutory management, equitable subordination principles or other similar provisions or principles existing under the laws of Australia or the relevant jurisdiction, including as a result of the application of laws in relation to the duties of directors to act in good faith and for proper purposes. In addition, other debts and liabilities of the Guarantors and of the Issuer, such as certain employee entitlements or an administrator s indemnity for debts and remuneration, may rank ahead of claims under the relevant Notes and the Guarantees in the event of administration or insolvency or statutory management or similar proceedings. If one or more of the Guarantees are set aside or otherwise avoided, claims of Noteholders against the Guarantors giving those Guarantees could be lost or limited and it is possible that Noteholders will only have a claim against the Issuer and any remaining Guarantors. 22

31 Certain limitations on remedies and other claims with priority over claims of holders of relevant Notes could materially adversely affect the rights of security holders in insolvency proceedings The right of the Security Trustees to enforce and sell the collateral securing the relevant Notes upon the occurrence of a default will be subject to limitations under applicable law. For example, in the event of a voluntary administration, some or all of the Security Trustees enforcement rights may be affected. The Personal Property Securities Act 2009 (Cth) of Australia (the PPSA) establishes a national system for the registration of security interests, and a system of priority and other provisions which will affect most collateral other than land (and therefore does not directly affect the security over the Airport Lease). Among other things, security interests perfected by control over financial assets like bank accounts, purchase money security interests, leases of goods and retention of title arrangements registered as such, subject to limited exceptions, would rank in priority over prior secured interests regardless of notice. In addition, in certain circumstances, purchasers and lessees of collateral can acquire it free of a security interest even when they had notice of that security interest. In relation to security over land, where such security is a registered torrens title security interest (which is the case in relation to the Airport Lease), its priority will be subject to any interest noted on the title register before register of the security interest. It is also subject to claims which may have obtained priority by virtue of applicable law which may affect the priority of the security interest. For example, liens arising by operation of law or charges lien arising under statute over the relevant property (including, without limitation, local government rates and land taxes applicable to real property) may have priority over the security interest. Proceeds from any sale of the collateral upon enforcement may be insufficient to repay the Notes in full The Issuer and the Guarantors cannot assure Noteholders that the net proceeds from a sale of the collateral securing the relevant Notes would be sufficient to repay all of the relevant Notes following a foreclosure upon the collateral or a liquidation of their assets. The value of the collateral and the amount to be received by the holders of Notes upon a sale of the collateral will depend upon many factors including, among others, the quantum of other secured indebtedness existing at the time, the condition of the collateral, the ability to sell the collateral in an orderly sale, the condition of the international, national and local economies, the availability of buyers and similar factors. The book value of the collateral should not be relied on as a measure of realisable value for these assets. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. 23

32 FORM OF THE NOTES The Notes of each Series will be in either bearer form, with or without interest coupons attached, or registered form, without coupons attached. Notes (whether in bearer or registered form) will be issued outside the United States in reliance on Regulation S under the U.S. Securities Act (Regulation S). Bearer Notes Each Tranche of Bearer Notes will be in bearer form and will be initially issued in the form of a temporary global note (a Temporary Global Note) or, if so specified in the applicable Pricing Supplement, a permanent global note (a Permanent Global Note and, together with the Temporary Global Note, each a Bearer Global Note) which will be delivered on or prior to the original issue date of the Tranche to a common depositary (the Common Depositary) for, Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg). Whilst any Note is represented by a Temporary Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made against presentation of the Temporary Global Note only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear or Clearstream, Luxembourg and (in the case of a Temporary Global Note delivered to a Common Depository for Euroclear and Clearstream, Luxembourg) Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent. On and after the date (the Exchange Date) which is 40 days after a Temporary Global Note is issued, interests in such Temporary Global Note will be exchangeable (free of charge) upon a request as described therein either for (a) interests in a Permanent Global Note of the same Series or (b) for definitive Bearer Notes of the same Series with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Pricing Supplement and subject, in the case of definitive Bearer Notes, to such notice period as is specified in the applicable Pricing Supplement), in each case against certification of beneficial ownership as described above unless such certification has already been given. The holder of a Temporary Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Global Note for an interest in a Permanent Global Note or for definitive Bearer Notes is improperly withheld or refused. Payments of principal, interest (if any) or any other amounts on a Permanent Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Global Note without any requirement for certification. The applicable Pricing Supplement will specify that a Permanent Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached only upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of Default (as defined in Condition 11) has occurred and is continuing, or (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor or alternative clearing system satisfactory to the Note Trustee is available, or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Global Note or Registered Global Note (as defined below) in definitive form and a certificate to such effect signed by two Directors of the Issuer is given to the Note Trustee. The Issuer will promptly give notice to Noteholders in accordance with Condition 15 if an Exchange Event occurs in respect of a Permanent Global Note. In the event of the occurrence of an Exchange Event in respect of a Permanent Global Note, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) or the Note Trustee may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event in respect of a Permanent Global Note as described in (iii) above, the Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent. The following legend will appear on all Bearer Notes where TEFRA D is specified in the applicable Pricing Supplement and on all receipts and interest coupons relating to such Notes: ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 24

33 The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Bearer Notes, receipts or interest coupons and will not be entitled to capital gains treatment in respect of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons. Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg as the case may be. Registered Notes Each Tranche of Registered Notes will initially be represented by a global note in registered form (a Registered Global Note and, together with the Bearer Global Notes, each a Global Note). Registered Global Notes will be deposited with a common depositary for, and registered in the name of a common nominee of the common depositary on behalf of, Euroclear and Clearstream, Luxembourg or its nominee. Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form. Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 7.4) as the registered holder of the Registered Global Notes. None of the Issuer, the Guarantors, the Note Trustee, any Paying Agent, Transfer Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising, investigating, monitoring or reviewing any records relating to such beneficial ownership interests. Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 7.4) immediately preceding the due date for payment in the manner provided in that Condition. Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of an Exchange Event. The Issuer will promptly give notice to Noteholders in accordance with Condition 15 if an Exchange Event occurs in respect of a Registered Global Note. In the event of the occurrence of an Exchange Event in respect of a Registered Global Note, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Registered Global Note) or the Note Trustee may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event in respect of a Registered Global Note as described in part (iii) of the definition Exchange Event above, the Issuer may also give notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar. General Pursuant to the Agency Agreement (as defined under Terms and Conditions of the Notes ), the Principal Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes at a point after the Issue Date of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series until such time as the Tranches are consolidated and form a single Series, which shall not be prior to the expiry of the distribution compliance period (as defined in Regulation S under the U.S. Securities Act) applicable to the Notes of such Tranche. Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing Supplement. No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantors unless the Note Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing. 25

34 SUMMARY OF THE GUARANTEES Subject to the limitation on liability of the Parent Guarantor set out below, the Parent Guarantor and APAH2 (and any Additional Guarantors) will fully and unconditionally guarantee the due and punctual payment of the principal of, and interest on, any Notes and of any other amounts payable by the Issuer under the Note Trust Deed (and, in each case, any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, whether at the Maturity Date of the Notes, by declaration of acceleration, call or put for redemption or otherwise, in accordance with the terms of the Note Trust Deed. The liability of the Parent Guarantor under its Guarantee is limited to the net realisation proceeds of the APAC Share Mortgages and no payment of any amount whatsoever shall be made by the Parent Guarantor except to the extent funds are available therefor from the net realisation proceeds of the APAC Share Mortgages. No recourse shall be had for the payment of any amount owing under the Note Trust Deed, whether for the payment of any fee or other amount or any other obligation or claim arising out of or based upon the Note Trust Deed or any Notes, against the Parent Guarantor to the extent the net realisation proceeds of the APAC Share Mortgages have been exhausted following which all obligations of the Parent Guarantor shall be extinguished. The obligations of the Guarantors, pursuant to the Guarantees, will be secured under the Intercreditor Deed and the Security Trust Deed. Noteholders will also have the benefit of the Intercreditor Guarantees and the security under the Intercreditor Deed and the Security Trust Deed. See Description of Security. Additional Guarantors In addition to the Guarantors, each of the Issuer and APAH2 will cause any of its Subsidiaries (other than an Excluded Subsidiary (as defined in the Note Trust Deed)), that is not a Guarantor that provides an outstanding guarantee with respect to Material Indebtedness (or is otherwise an obligor or co-obligor with respect to Material Indebtedness) to, within 30 days of providing such guarantee, execute and deliver to the Note Trustee a Guarantor Assumption Deed pursuant to which such Subsidiary will assume, from the date of such deed, the obligations of a Guarantor under the Note Trust Deed as if originally named as a party thereto and fully and unconditionally guarantee the due and punctual payment of any amounts due under the Note Trust Deed on the same terms and subject to the same conditions and limitations as set forth in the Note Trust Deed, provided that such Subsidiary s guarantee may contain any limitation required under the law of the jurisdiction in which such Subsidiary is organised. In addition if the obligation of such Subsidiary under the Material Indebtedness is secured, the Subsidiary will (a) give the Security Trustees an equivalent-ranking security interest over its assets to secure the amounts outstanding under the Note Trust Deed in a form reasonably acceptable to the Security Trustees such that its Guarantee and its obligation under the applicable Material Indebtedness rank equally and (b) accede to the Intercreditor Deed as a Guarantor and become a Security Provider under the Security Trust Deed. Release of Guarantors Any Guarantor (other than the Parent Guarantor and APAH2) may be released at any time from its Guarantee without the consent of any holder of Notes if such Guarantor certifies in writing to the Note Trustee that, at such time, (a) such Guarantor will not upon release of its obligations under the Note Trust Deed and applicable Guarantee and any other obligations released concurrently with such release, provide a guarantee or be an obligor or co-obligor with respect to any Material Indebtedness and (b) no potential Event of Default or Event of Default exists in respect of any Notes. 26

35 FORM OF PRICING SUPPLEMENT Set out below, subject only to the deletion of non-applicable provisions, is the form of Pricing Supplement which will be completed for each Tranche of Notes issued under the Programme. [PROHIBITION OF SALES TO EEA RETAIL INVESTORS The Notes are not intended[, from 1 January 2018,] to be offered, sold or otherwise made available to and[, with effect from such date,] should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (EEA). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (MiFID II); (ii) a customer within the meaning of Directive 2002/92/EC (IMD), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the Prospectus Directive). Consequently no key information document required by Regulation (EU) No 1286/2014 (the PRIIPs Regulation) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.] [Date] AUSTRALIA PACIFIC AIRPORTS (MELBOURNE) PTY LIMITED (ABN ) Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] Guaranteed on a limited recourse basis by AUSTRALIA PACIFIC AIRPORTS CORPORATION LIMITED (ABN ) and fully and unconditionally by APAC (HOLDINGS NO. 2) PTY LTD (ABN ) under the EUR 3,000,000,000 Secured Euro Medium Term Note Programme This document constitutes the Pricing Supplement relating to the issue of the Notes described herein. Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated [date] [and the supplement[s] to it dated [date] [and [date]] (the Offering Circular). This document constitutes the final terms of the Notes described herein and must be read in conjunction with the Offering Circular. Full information on the Issuer, the Guarantors and the offer of the Notes is only available on the basis of the combination of this Pricing Supplement and the Offering Circular. [The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date. Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the Conditions) set forth in the Offering Circular dated [original date]. This document is the Pricing Supplement for the Notes described herein and must be read in conjunction with the Offering Circular dated [current date] [and the supplement[s] to it dated [date] [and [date]], save in respect of the Conditions which are extracted from the Offering Circular dated [original date] and are attached hereto. Full information on the Issuer, the Guarantors and the offer of the Notes is only available on the basis of the combination of this Pricing Supplement and the Offering Circulars dated [current date] and [original date]. [Include whichever of the following apply or specify as Not Applicable (N/A). Note that the numbering should remain as set out below, even if Not Applicable is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Pricing Supplement.] [If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination [must/ may need to] be 100,000 or its equivalent in any other currency.] 1. (a) Issuer: Australia Pacific Airports (Melbourne) Pty Limited (b) Parent Guarantor: Australia Pacific Airports Corporation Limited (c) Other Guarantors: APAC (Holdings No. 2) Pty Ltd and [specify Additional Guarantors] 27

36 2. (a) Series Number: [ ] (b) Tranche Number: [ ] 3. Specified Currency or Currencies: [ ] 4. Aggregate Nominal Amount: (a) Series: [ ] (b) Tranche: [ ] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible) 5. (a) Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] (b) [Net Proceeds: [ ] (required only for listed issues) 6. (a) Specified Denominations: [ ] (N.B. In the case of Registered Notes, this means the minimum integral amount in which transfers can be made) (Note in the case of Bearer Notes, where multiple denominations above [ 100,000] or equivalent are being used the following sample wording should be followed: [ 100,000] and integral multiples of [ 1,000] in excess thereof up to and including [ 199,000]. No Notes in definitive form will be issued with a denomination above 199,000]. ) (b) Calculation Amount: [ ] (If only one Specified Denomination, insert the Specified Denomination. 7. (a) Issue Price: [ ] If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.) (b) Interest Commencement Date: [specify/issue Date/Not Applicable] (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.) 8. Maturity Date: [Fixed rate denominated in a currency other than Renminbi specify date/floating rate or fixed rate denominated in Renminbi Interest Payment Date falling in or nearest to [specify month]] 9. Interest Basis: [ ] per cent. Fixed Rate] [[LIBOR/EURIBOR/SIBOR/SOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other]] (further particulars specified below) 28

37 10. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other] 11. Change of Interest Basis or Redemption/Payment Basis: [Specify details of any provision for change of Notes into another Interest Basis or Redemption/Payment Basis] 12. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars specified below)] 13. (a) Status of the Notes: [Senior] (b) Status of the Guarantees: [Senior] (c) [Date [Board] approval for issuance of Notes obtained: [ ] [and [ ], respectively] (N.B. Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes) 14, Listing: [SGX-ST/specify other/none] 15. Method of distribution: [Syndicated/Non-syndicated] PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 16. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Rate(s) of Interest: [ ] per cent. per annum payable in arrear on each Interest Payment Date (b) Interest Payment Date(s): [[ ] in each year up to and including the Maturity Date]/[specify other] (Amend appropriately in the case of irregular coupons) (c) (d) Fixed Coupon Amount(s): (Applicable to Notes in definitive form.) Broken Amount(s): (Applicable to Notes in definitive form.) [ ] per Calculation Amount [[ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ] [Not Applicable] (e) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or [specify other]] (N.B. For fixed rate Notes denominated in Renminbi, specify Actual/365 (Fixed)) (f) [Determination Date(s): [ ] in each year (Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon N.B. Only relevant where Day Count Fraction is Actual/ Actual (ICMA))] (g) Other terms relating to the method of calculating interest for Fixed Rate Notes: [None/Give details] 17. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Specified Period(s)/Specified Interest Payment Dates: [ ] 29

38 (b) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/ [specify other]] (c) Additional Business Centre(s): [ ] (d) (e) (f) (g) Manner in which the Rate of Interest and Interest Amount is to be determined: Party responsible for calculating the Rate of Interest and Interest Amount (if not the Principal Paying Agent): Screen Rate Determination: [Screen Rate Determination/ISDA Determination/specify other] [ ] Reference Rate: [ ] (Either LIBOR, EURIBOR, SIBOR, SOR or other, although additional information is required if other including fallback provisions in the Agency Agreement) Interest Determination Date(s): [ ] (Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR) Relevant Screen Page: [ ] (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately) ISDA Determination: Floating Rate Option: [ ] Designated Maturity: [ ] Reset Date: [ ] (In the case of a LIBOR or EURIBOR based option, the first day of the Interest Period) (h) Margin(s): [+/-] [ ] per cent. per annum (i) Minimum Rate of Interest: [ ] per cent. per annum (j) Maximum Rate of Interest: [ ] per cent. per annum (k) Day Count Fraction: Actual/Actual (ISDA)][Actual/Actual] Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 [30/360][360/360][Bond Basis] [30E/360][Eurobond Basis] 30E/360 (ISDA) Other] (See Condition 6.2(c) for alternatives) (l) [Fall back provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: [ ] 30

39 18. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Accrual Yield: [ ] per cent. per annum (b) Reference Price: [ ] (c) (d) Any other formula/basis of determining amount payable: Day Count Fraction in relation to Early Redemption Amounts and late payment: [ ] [Conditions 8.5 and 8.10] apply/specify other] (Consider applicable day count fraction if not U.S. dollar denominated) 19. Index Linked Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Index/Formula: [give or annex details] (b) Calculation Agent: [give name] (c) (d) (e) Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Calculation Agent): Provisions for determining Coupon where calculation by reference to Index and/or Formula is impossible or impracticable: Specified Period(s)/Specified Interest Payment Dates: [ ] [need to include a description of market disruption or settlement disruption events and adjustment provisions] [ ] (f) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention/specify other] (g) Additional Business Centre(s): [ ] (h) Minimum Rate of Interest: [ ] per cent. per annum (i) Maximum Rate of Interest: [ ] per cent. per annum (j) Day Count Fraction: [ ] 20. Dual Currency Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) (b) (c) (d) Rate of Exchange/method of calculating Rate of Exchange: Party, if any, responsible for calculating the principal and/or interest due (if not the Principal Paying Agent): Provisions applicable where calculation by reference to Rate of Exchange impossible or impracticable: Person at whose option Specified Currency(ies) is/are payable: [give or annex details] [ ] [need to include a description of market disruption or settlement disruption events and adjustment provisions] [ ] 31

40 PROVISIONS RELATING TO REDEMPTION 21. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ] (b) (c) (d) Optional Redemption Amount and method, if any, of calculation of such amount(s): If redeemable in part: [[ ] per Calculation Amount/specify other/see Appendix] (i) Minimum Redemption Amount: [ ] per Calculation Amount (ii) Maximum Redemption Amount: [ ] per Calculation Amount Notice period (if other than as set out in the Conditions): [ ] (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Principal Paying Agent or Note Trustee) 22. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ] (b) (c) Optional Redemption Amount and method, if any, of calculation of such amount(s): Notice period (if other than as set out in the Conditions): [[ ] per Calculation Amount/specify other/see [ ] (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Principal Paying Agent or Note Trustee) 23. Final Redemption Amount: [[ ] per Calculation Amount/specify other/see Appendix] 24. Early Redemption Amount payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required or if different from that set out in Condition 8.5): [[ ] per Calculation Amount/specify other/see Appendix] GENERAL PROVISIONS APPLICABLE TO THE NOTES 25. Form of Notes: [Bearer Notes:] [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes only upon an Exchange Event] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date] 32

41 [Permanent Global Note exchangeable for Definitive Notes only upon an Exchange Event] [Registered Notes: 26. Governing law of the Notes: English law 27. Additional Financial Centre(s) or other special provisions relating to Payment Days: 28. Talons for future Coupons or Receipts to be attached to Definitive Bearer Notes (and dates on which such Talons mature): 29. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment: 30. Details relating to Instalment Notes: Regulation S Registered Global Note ([U.S.$][ ] nominal amount) registered in the name of a nominee for a common depositary for Euroclear or Clearstream, Luxembourg or its nominee] (Ensure that this is consistent with the wording in the Form of the Notes section in the Offering Circular and the Notes themselves. N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 6 includes language substantially to the following effect: [ 100,000] and integral multiples of [ 1,000] in excess thereof up to and including [ 199,000]. Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary Global Note exchangeable for Definitive Notes.) [Not Applicable/give details] (Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub paragraphs 17(c) and 19(g) relate) [Yes/No. If yes, give details][not Applicable] [Not Applicable/give details. N.B. a new form of Temporary Global Note and/or Permanent Global Note may be required for Partly Paid issues] (a) Instalment Amount(s): [Not Applicable/give details] (b) Instalment Date(s): [Not Applicable/give details] 31. Redenomination applicable: Redenomination [not] applicable [(If Redenomination is applicable, specify the applicable Day Count Fraction and any provisions necessary to deal with floating rate interest calculation (including alternative reference rates))] 32. Other terms: [Not Applicable/give details] 33

42 DISTRIBUTION 33. (a) If syndicated, names of Managers: [Not Applicable/give names] (b) Date of Subscription Agreement: [ ] (c) Stabilising Manager(s) (if any): [Not Applicable/give name] 34. If non-syndicated, name of relevant Dealer: [Not Applicable/give name] 35. U.S. Selling Restrictions: [Reg. S Compliance Category [1/2]; TEFRA D/TEFRA C/TEFRA not applicable] 36. Additional selling restrictions: [Not Applicable/give details] OPERATIONAL INFORMATION 37. ISIN Code: [ ] 38. Common Code: [ ] 39. Any clearing system(s) other than Euroclear and Clearstream, Luxembourg and the relevant identification numbers(s): [Give name(s) and number(s)] 40. Delivery: Delivery [against/free of] payment 41. Names and addresses of additional Paying Agent(s) (if any): [ ] 42. Registrar: [ ] (include in respect of Registered Notes only) 43. Rating: [Not applicable/give details] LISTING APPLICATION This Pricing Supplement comprises the final terms required for issue and admission to trading on [the Singapore Exchange Securities Trading Limited] of the Notes described herein pursuant to the EUR 3,000,000,000 Secured Euro Medium Term Note Programme of Australia Pacific Airports (Melbourne) Pty Limited. 34

43 RESPONSIBILITY The Issuer and each of the Guarantors accepts responsibility for the information contained in this Pricing Supplement. Signed on behalf of AUSTRALIA PACIFIC AIRPORTS (MELBOURNE) PTY LIMITED: By: Duly authorised Signed for and on behalf of AUSTRALIA PACIFIC AIRPORTS CORPORATION LIMITED: By: Duly authorised Signed for and on behalf of APAC (HOLDING NO. 2) PTY LTD: By: Duly authorised [Signed for and on behalf of [specify any other Guarantors]: By: Duly authorised] 35

44 TERMS AND CONDITIONS OF THE NOTES The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below), each Definitive Bearer Note (as defined below) and each Definitive Registered Note (as defined below), but, in the case of Definitive Bearer Notes and Definitive Registered Notes, only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such Definitive Bearer Note or Definitive Registered Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to Form of the Notes for a description of the content of each Pricing Supplement which will specify which of such terms are to apply in relation to the relevant Notes. This Note is one of a Series (as defined below) of Notes issued by Australia Pacific Airports (Melbourne) Pty Limited (ABN ) (the Issuer) constituted by a Note Trust Deed (such Note Trust Deed as modified and/or supplement and/or restated from time to time, the Note Trust Deed) dated 16 September 2013 made between the Issuer, Australia Pacific Airports Corporation Limited (ABN ) (the Parent Guarantor), APAC (Holdings No. 2) Pty Ltd (ABN ) (APAH2, and together with the Parent Guarantor and any other entity appointed as a guarantor under and as defined in the Note Trust Deed, but excluding any entity released as a guarantor, the Guarantors) and Bank of New York Mellon, London Branch, in its capacity as note trustee for the Noteholders, Receiptholders and Couponholders (as defined in the Note Trust Deed) (the Note Trustee, which expression shall include any successor as Note Trustee). References herein to the Notes shall be references to the Notes of this Series and shall mean: (a) (b) (c) (d) (e) in relation to any Notes represented by a global Note (a Global Note), units of each Specified Denomination in the currency specified therein or, if none is specified, the currency in which the Notes are denominated (the Specified Currency); any Global Note in bearer form (each a Bearer Global Note); any Global Note in registered form (each a Registered Global Note); any definitive Notes in bearer form (Definitive Bearer Notes and, together with Bearer Global Notes, the Bearer Notes) issued in exchange for a Global Note in bearer form; and any definitive Notes in registered form (Definitive Registered Notes and, together with Registered Global Notes, the Registered Notes) (whether or not issued in exchange for a Global Note in registered form). The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 16 September 2013 and made between the Issuer, the Guarantors, the Note Trustee, The Bank of New York Mellon, London Branch as issuing and principal paying agent and agent bank (the Principal Paying Agent, which expression shall include any successor agent) and the other paying agents named therein (together with the Principal Paying Agent, the Paying Agents, which expression shall include any additional or successor paying agents), The Bank of New York Mellon, (Luxembourg) S.A. as registrar (the Registrar, which expression shall include any successor registrar) and a transfer agent and the other transfer agents named therein (together with the Registrar, the Transfer Agents, which expression shall include any additional or successor transfer agents). Interest bearing Definitive Bearer Notes have interest coupons (Coupons) and, if indicated in the applicable Pricing Supplement, talons for further Coupons (Talons) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in instalments have receipts (Receipts) for the payment of the instalments of principal (other than the final instalment) attached on issue. Global Notes and Registered Notes do not have Receipts, Coupons or Talons attached on issue. Subject to the limitation on liability of the Parent Guarantor set out below, each Guarantor unconditionally and irrevocably guarantees to the Note Trustee the due and punctual payment of all moneys payable under the Note Trust Deed, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call or put for redemption or otherwise, in accordance with the terms of the Note Trust Deed (the Guarantees). 36

45 The Parent Guarantor agrees that it will directly or indirectly own 100 per cent. of the capital stock of APAH2 and APAH2 agrees that it will directly or indirectly own 100 per cent. of the capital stock of the Issuer, for so long as any Notes are outstanding. The liability of the Parent Guarantor under its Guarantee is limited to the total amount available following the realisation of the mortgaged property in accordance with the share mortgages given by the Parent Guarantor to the Second Security Trustee (the APAC Share Mortgages). The mortgaged property under the APAC Share Mortgages specified thereunder is all of the Parent Guarantor s right, title and interest at any time in all shares and any rights in relation to shares. It includes all of the shares that the Parent Guarantor holds in APAH2, and in APAC (Holdings) Pty Ltd. The Notes will be secured pursuant to the terms of a security trust deed dated 7 April 1997 (the Security Trust Deed) between the Issuer, the Guarantors, Westpac Administration Pty Limited (the First Security Trustee), Westpac Banking Corporation (the Second Security Trustee and, together with the First Security Trustee, the Security Trustees) and certain other parties. The Notes will also be subject to the terms of the amended and restated intercreditor deed dated 23 May 2001, as amended and restated by the First Amendment Deed on 13 May 2004, as further amended and restated by the Second Amendment Deed on 27 July 2009 and as further amended and restated by the Third Amendment Deed on 11 June 2010 (the Intercreditor Deed), as further amended and restated from time to time, between the Issuer, the Guarantors, the Security Trustees and certain other parties. The Note Trustee will accede on behalf of the Noteholders to the Intercreditor Deed in respect of each issue of Notes and consequently will become a beneficiary under the Security Trust Deed. Following such accession, the Noteholders will become bound by the terms of the Intercreditor Deed and the Note Trustee will act on behalf of the Noteholders under the Intercreditor Deed. The final terms for this Note (or the relevant provisions thereof) are set out in the Pricing Supplement attached to or endorsed on this Note which supplement these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the applicable Pricing Supplement are to the Pricing Supplement (or the relevant provisions thereof) attached to or endorsed on this Note. The Note Trustee acts for the benefit of the holders for the time being of the Notes (the Noteholders or holders in relation to any Notes, which expression shall mean, in the case of Bearer Notes, the holders of the Notes and, in the case of Registered Notes, the persons in whose name the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided in Condition 1 below) in accordance with the provisions of the Note Trust Deed. Any reference herein to Receiptholders shall mean the holders of the Receipts and any reference herein to Couponholders shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons. As used herein, Tranche means Notes which are identical in all respects (including as to listing and admission to trading) and Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (a) expressed to be consolidated and form a single series and (b) identical in all respects (including as to listing and admission to trading) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices. Copies of the Note Trust Deed, the Agency Agreement, the Intercreditor Deed, the Security Trust Deed and the Security Documents (as defined herein) are available for inspection during normal business hours at the specified office of the Note Trustee being at One Canada Square, London E14 5AL and at the specified office of each of the Paying Agents and the Registrar. Copies of the applicable Pricing Supplement are available for viewing at the registered office of the Issuer and each of the Paying Agents and the Registrar, in the case of Registered Notes, and at the registered office of each of the Paying Agents, in the case of Bearer Notes and copies may be obtained from those offices save that, if this Note is not listed on any stock exchange, the applicable Pricing Supplement will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer, the Note Trustee and the relevant Paying Agent (or in the case of Registered Notes) the Registrar as to its holding of such Notes and identity. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, are bound by and are entitled to the benefit of, all the provisions of the Note Trust Deed, the Agency Agreement, the Security Trust Deed and the applicable Pricing Supplement which are applicable to them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of the Note Trust Deed and the Agency Agreement. Words and expressions defined in the Note Trust Deed, the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Note Trust Deed and the Agency Agreement, the Note Trust Deed will prevail and, in the event of inconsistency between the Note Trust Deed or the Agency Agreement and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail. 37

46 1. FORM, DENOMINATION AND TITLE The Notes are issued either in bearer form or in registered form, as specified in the applicable Pricing Supplement and, in the case of Definitive Bearer Notes, serially numbered, in the currency (the Specified Currency) and the denomination(s) (Specified Denomination(s)) specified in the applicable Pricing Supplement. Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa. This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Pricing Supplement. This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/ Payment Basis shown in the applicable Pricing Supplement. Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in the Conditions are not applicable. Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to the Registered Notes will pass on registration of transfers in accordance with the Agency Agreement. The Issuer, the Guarantors, the Paying Agents, the Registrar (in the case of Registered Notes) and the Note Trustee will (except as otherwise required by law) deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph. For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V. (Euroclear) or Clearstream Banking, société anonyme (Clearstream, Luxembourg), each person (other than Euroclear, Clearstream, Luxembourg who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantors, the Paying Agents, the Registrar (in the case of Registered Notes) and the Note Trustee as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the Issuer, the Guarantors, any Paying Agent, the Registrar (in the case of Registered Notes) and the Note Trustee as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions Noteholder and holder of Notes and related expressions shall be construed accordingly. In determining whether a particular person is entitled to a particular nominal amount of Notes as aforesaid, the Note Trustee may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned. Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear and/or Clearstream, Luxembourg, as the case may be. References to Euroclear and/ or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing Supplement or as may otherwise be approved by the Issuer, the Principal Paying Agent and the Note Trustee. 2. TRANSFER OF REGISTERED NOTES 2.1 Transfers of interests in Registered Global Notes Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be exchangeable for Registered Notes in definitive form or for a beneficial interest in another Registered Global Note only in the authorised denominations set out in the applicable Pricing Supplement and only in accordance with the rules and operating procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms and conditions specified in the Note Trust Deed and the Agency Agreement. Transfers of a Registered Global Note registered in the name of a nominee of a common depository for Euroclear 38

47 or Clearstream, Luxembourg shall be limited to transfers of such Registered Global Note, in whole but not in part, to another nominee of Euroclear or Clearstream, Luxembourg (as the case may be) or to a successor of Euroclear or Clearstream, Luxembourg (as the case may be) or such successor s nominee. 2.2 Transfers of Registered Notes in definitive form Registered Notes may not be exchanged for Bearer Notes and vice versa. Subject as provided in Condition 2.5 (Closed periods) below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Definitive Registered Note may be transferred in whole or in part (in the authorised denominations set out in the applicable Pricing Supplement). In order to effect any such transfer: (a) the holder or holders must: (i) (ii) surrender the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing; and complete and deposit such other certifications as may be required by the relevant Transfer Agent; and (b) the relevant Transfer Agent must be satisfied with the documents of title and the identity of the person making the request. Any such transfer will be subject to such regulations as the Issuer, Note Trustee, Principal Paying Agent and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 4 to the Agency Agreement). Subject as provided above, the relevant Transfer Agent will, within five business days (being for this purpose a day on which banks are open for business in the city where the specified office of the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), authenticate and deliver, or procure the authentication and delivery of, at its specified office, to the transferee or (at the risk of the transferee) send by uninsured mail, to such address as the transferee may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered at the specified office of the relevant Transfer Agent or (at the risk of the transferor) sent to the transferor. 2.3 Registration of transfer upon partial redemption In the event of a partial redemption of Notes under Condition 8 (Redemption and Purchase), the Issuer shall not be required to register or procure registration of the transfer of any Registered Note, or part of a Registered Note, called for partial redemption. 2.4 Costs of registration Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer or any Transfer Agent shall require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration. No Transfer Agent will be liable for the loss of any Note in the course of delivery. 2.5 Closed periods No Noteholder may require the transfer of a Registered Note to be registered during the period of: (a) (b) (c) 15 days ending on (and including) the due date for redemption of, or payment of any Instalment Amount in respect of, that Note; 15 days before (and including) any date on which Notes may be called for redemption by the Issuer pursuant to Condition 8.3 (Redemption at the option of the Issuer (Issuer Call)); or 15 days ending on (and including) any Interest Payment Date (as defined in Condition 6.2(a) below). 2.6 Exchanges and transfers of Registered Notes generally Holders of Definitive Registered Notes may exchange such Notes for interests in a Registered Global Note of the same type at any time. 39

48 3. STATUS OF THE NOTES AND THE GUARANTEES 3.1 Status of the Notes The Notes and any related Receipts and Coupons are direct, unconditional, unsubordinated and secured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) in priority to all other existing and future unsecured obligations of the Issuer, from time to time outstanding. 3.2 Status of the Guarantees The payment of principal sums and interest on principal sums (including interest owing on such interest) in respect of the Notes has been unconditionally and irrevocably guaranteed by the Guarantors on a joint and several basis under their respective Guarantees. The obligations of the Guarantors under their respective Guarantees are direct, unconditional, unsubordinated and secured obligations of each of the Guarantors and rank pari passu among themselves and (save for certain obligations required to be preferred by law) in priority to all other existing and future unsecured obligations of the Guarantors, from time to time outstanding. 3.3 Additional Guarantors Each of the Issuer and APAH2 will cause any of its Subsidiaries (other than an Excluded Subsidiary) that is not a Guarantor that provides an outstanding guarantee with respect to Material Indebtedness (or is otherwise a co-obligor or jointly liable with respect to Material Indebtedness) to, unless, as a result of applicable law, such Subsidiary may not provide a guarantee of the Notes, within 30 days of providing such guarantee, execute and deliver to the Note Trustee a Guarantor Assumption Deed (in accordance with the terms of the Note Trust Deed) pursuant to which such Subsidiary will assume, from the date of such deed, the obligations of a Guarantor under the Note Trust Deed as if originally named as a party thereto and fully and unconditionally guarantee the due and punctual payments of any amounts due under the Note Trust Deed on the same terms and subject to the same conditions and limitations as set forth in the Note Trust Deed (such guarantee, a Subsidiary Guarantee, and such guarantor, a Subsidiary Guarantor). If the obligation of such Subsidiary Guarantor under the applicable Material Indebtedness is secured, such Subsidiary Guarantor shall (i) give the Security Trustees an equivalent ranking security interest over its assets to secure the amounts outstanding under the Note Trust Deed in a form reasonably acceptable to the Security Trustees such that its Subsidiary Guarantee and its obligation under the applicable Material Indebtedness rank equally and (ii) if the obligation of such Subsidiary Guarantor under the applicable Material Indebtedness is secured, such Subsidiary Guarantor shall (A) accede to the Intercreditor Deed and (B) become a Security Provider under the Security Trust Deed. Notwithstanding the foregoing, APAH2 shall not be obligated to cause any such Subsidiary to guarantee the Notes if such Subsidiary is precluded from doing so as a result of applicable law or otherwise. The Issuer shall promptly give notice to the Note Trustee, Principal Paying Agent, the Registrar and to the Noteholders in accordance with Condition 15 (Notices) of the appointment of any such new Guarantor. The Issuer and the Principal Paying Agent shall maintain an updated list of Guarantors, which shall be available for inspection at their respective registered offices upon request. 3.4 Release of Guarantors Any Guarantor other than the Parent Guarantor and APAH2, may be released at any time from its respective Guarantee and other obligations under the Note Trust Deed and the Notes without the consent of any holder of the Notes. Such release will occur at such time that such Guarantor delivers an officer s certificate (which the Note Trustee may conclusively rely on) to the Note Trustee certifying that (i) such Guarantor will not, upon release of its obligations under the Note Trust Deed and the applicable Guarantee and any other obligations released concurrently with such release, provide a guarantee, or be an obligor or a co-obligor, with respect to any Material Indebtedness and (ii) no potential Event of Default or Event of Default exists in respect of the Notes. The Issuer shall as soon as reasonably practicable give notice to the Note Trustee, Principal Paying Agent, the Registrar and to the Noteholders in accordance with Condition 15 (Notices) following any such release of a Guarantor. 3.5 Definitions In these conditions, the following expressions have the following meanings: Excluded Subsidiary means any direct or indirect Subsidiary of APAH2 who creates a Security Interest on its assets for the sole purpose of financing or re-financing the acquisition and/or development of such 40

49 assets, provided that such Financial Indebtedness is without any recourse to the Issuer or any Guarantor, and, provided further that such Subsidiary is not at the time a Guarantor; Financial Indebtedness means indebtedness, present or future, actual or contingent in respect of moneys borrowed or raised or any financial accommodation whatsoever, including indebtedness under or in respect of a negotiable or other financial instrument, guarantee, interest, currency exchange, hedge or arrangement of any kind, redeemable share, share the subject of a guarantee, discounting arrangement, finance or capital lease, hire purchase, deferred purchase price (for more than 90 days) of an asset or service or an obligation to deliver goods or other property or provide services paid for in advance by a financier or in relation to another financing transaction; Guarantee Assumption Deed means a deed in the form set out in Schedule 5 of the Note Trust Deed; Material Indebtedness means any Financial Indebtedness of the Issuer and the Guarantors, which in the aggregate has an aggregate principal amount outstanding greater than US$50.0 million or its equivalent in other currencies, other than Financial Indebtedness incurred by any Excluded Subsidiary; Person means any individual, corporation, partnership, joint venture, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organisation or government or any agency or political subdivision thereof; and Subsidiary means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50 per cent. interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a Subsidiary is a reference to a Subsidiary of the Parent Guarantor. 4. SECURITY 4.1 Security All Notes issued by the Issuer under the Programme will be secured by the Security Documents and guaranteed by the Guarantors. 4.2 Relationship among Noteholders and with other secured creditors The Note Trust Deed contains provisions detailing the Note Trustee s obligations to consider the interests of the Noteholders as regards all discretions of the Note Trustee. In addition, the Intercreditor Deed contains provisions detailing the Security Trustees obligations to consider the interests of the Beneficiaries (including the Note Trustee on behalf of the Noteholders). The obligations of the Issuer and the Guarantors in respect of the Note Trust Deed, the Notes and the Guarantees are secured pursuant to the Security Documents and subject to the terms of the Intercreditor Deed. 4.3 Enforceable Security Subject to the provisions of the Security Trust Deed and the Intercreditor Deed, each Security Documents may only be enforced by the Security Trustees. The Security Trustees are only required to enforce the Security Documents on receiving instructions from the requisite majority of Financiers (as defined in the Intercreditor Deed) in accordance with the provisions of the Intercreditor Deed. 4.4 Application after Enforcement After enforcement of the Security Documents all moneys received or recovered by the Security Trustees in respect of the Security Documents shall be applied in accordance with the provisions of the Intercreditor Deed. 4.5 Note Trustee not liable for security The Note Trustee will not be liable for any failure to make the usual investigations or any investigations which might be made by a security holder in relation to the property which is the subject of the Security Documents and shall not be bound to enquire into or be liable for any defect or failure in the right or title to the Security Documents whether such defect or failure was known to the Note Trustee, or might have been discovered upon examination or enquiry or whether capable of remedy or not, nor will they have any liability for the enforceability of the Security 41

50 Documents whether as a result of any failure, omission or defect in registering or filing or otherwise protecting or perfecting such Security Documents or otherwise. The Note Trustee shall have no responsibility for the value of any such Security Documents. 5. COVENANTS Save with the prior written consent of the Note Trustee (acting upon the instructions of the Noteholders), the Issuer and each Guarantor will, so long as any Notes and the Guarantees remain outstanding: (a) Corporate reporting and information: will provide the following reports to the Note Trustee and will post such reports to the Parent Guarantor s website: (i) (ii) Annual Accounts: as soon as practicable (and in any event not later than 120 days) after the close of each of its financial years, copies of the consolidated audited financial statements of the Parent Guarantor and its consolidated entities, in respect of that financial year, including the audit report of the Issuer s and the Guarantor s independent auditor; and Semi-annual Accounts: as soon as practicable (and in any event not later than 90 days) after the first half of each of its financial years, copies of the consolidated unaudited financial statements of the Parent Guarantor and its consolidated entities in respect of that half-year; and will, within 60 days of the delivery of the annual and semi-annual accounts to the Note Trustee, hold an investor briefing for Noteholders at which such accounts are discussed and at which Noteholders may ask questions of management of the Issuer and each Guarantor, provided that such briefing shall be held not later than 150 days from the end of the financial year (in respect of the annual accounts) and 120 days from the end of the first half of the financial year (in respect of the semi-annual accounts); (b) (c) (d) (e) (f) (g) Line of business: will not, in respect of APAH2 and the Issuer only, and APAH2 will not permit any Subsidiary Guarantor to, engage in any business if, as a result, the general nature of the business in which the Group would then be engaged would be substantially changed from the general nature of the business in which the Group is engaged on the date of the Note Trust Deed; Insurance: maintain, with financially sound and reputable insurers, such insurance with respect to their respective properties, assets and businesses as would prudently be effected and maintained in the case of a person carrying on the business of the Issuer and each Guarantor and owning the assets and properties similar to that of the Issuer and each Guarantor. Without limiting the foregoing, the Issuer will maintain (or procure such that it has the benefit of) insurance policies that are required under the Airport Lease; Taxes: pay all Taxes payable by it when due, except that it need not pay Taxes (i) for which it has set aside adequate reserves in accordance with A-IFRS and which are being contested in good faith, (ii) where the failure to pay those Taxes could not reasonably be expected to have a Material Adverse Effect; Preservation and protection of security: in the case of APAH2 and the Issuer only, and APAH2 will cause each Subsidiary Guarantor to, and APAC will with respect to the APAC Share Mortgages, promptly do everything necessary or reasonably required by the Noteholders and the Security Trustees (i) to preserve and protect the value and priority of any Property mortgaged or charged by the Security Documents; and (ii) to protect and enforce its title and the title of the Security Trustees as mortgagee or chargee of such Property; Commercial dealings: in the case of APAH2 and the Issuer only, not, and APAH2 will not permit any Subsidiary Guarantor to, enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any of their respective Affiliates (other than APAH2, the Issuer or another Subsidiary Guarantor), except pursuant to the reasonable requirements of APAH2 s, the Issuer s or such Subsidiary Guarantor s business and upon fair and reasonable terms no less favourable to APAH2, the Issuer or such Subsidiary Guarantor (as applicable) than would be obtainable in an arm s length transaction for valuable commercial consideration; Limitation on security interests: in the case of the Issuer and APAH2 only, not, and APAH2 will not permit any of their respective Subsidiaries to, incur, create, guarantee or permit to remain outstanding any Security Interest over any of its Property, in each case to secure any present or future Financial Indebtedness without effectively providing that the Notes shall be secured equally and rateably with (or prior to) such secured Financial Indebtedness, so long as such Financial Indebtedness shall be so secured, except for Financial Indebtedness secured by: (i) any Security Interest existing at the date of the issuance of the Notes; 42

51 (ii) any Security Interest for the benefit of the beneficiaries under the Intercreditor Deed (including the Note Trustee) and under the Security Documents; (iii) any Security Interest on the Property of a Person at the time such Person becomes a Subsidiary of the Issuer or each Guarantor or is merged or consolidated with the Issuer or each Guarantor or at such time as the Property of such Person is leased as an entirety or substantially as an entirety from such Person, provided (i) that the Security Interest was not created in contemplation of such Person becoming a Subsidiary or such merger, consolidation or lease and (ii) that the principal amount secured by any such Security Interest may not thereafter be increased and (iii) no such Security Interest shall extend to or cover any other property or assets of the Issuer and each Guarantor; (iv) any Security Interest existing at the time of acquisition on any Property acquired after the date of issuance of the Notes and not created in contemplation of that acquisition, provided that the principal amount secured by any such Security Interest may not thereafter be increased and no such Security Interest shall extend to or cover any other property or assets of any other Group Member; (v) any Security Interest created on any Property acquired, constructed, improved or developed for the sole purpose of financing or refinancing the acquisition, construction, improvement or development of such Property and securing principal moneys not exceeding the cost of that acquisition, construction, improvement or development together with interest and other costs related thereto, provided no such Security Interest shall extend to or cover any other property or assets of the Issuer and each Guarantor; (vi) a Security Interest arising by operation of law in the ordinary course of business, including for taxes, assessments or governmental charges or levies, provided that if such Security Interest secures any Financial Indebtedness of the Issuer and each Guarantor, such debt is paid when due, or is being contested in good faith; (vii) any Security Interest granted in respect of any Property purchased or acquired that is non-recourse to the property and assets of the Issuer and each Guarantor and where recourse is limited to such purchased or acquired Property or any Security Interests granted by an Excluded Subsidiary; (viii) any carriers, warehousemen s, mechanics, materialmen and landlord Liens or similar Liens, in each case incurred in the ordinary course of business for sums not yet due or that are being contested in good faith by appropriate proceedings; (ix) deposits of money or property worth not more than A$10 million in an aggregate amount at any time as security for the performance of statutory or other obligations in the ordinary course of business; (x) Liens or deposits to secure the performance of bids, tenders or contracts incurred in the ordinary course of business; (xi) Liens in respect of any judgment; provided such judgment (i) shall within 90 days after entry thereof have been discharged or stayed pending appeal and (ii) shall have been discharged within 90 days following the expiration of such stay; (xii) any Security Interest provided for by a PPS lease provided the lease does not secure payment or performance of an obligation; (xiii) any Security Interest arising from leases or sub-leases granted to others, easements, zoning restrictions, rights of way and similar charges or encumbrances on real property, in each case, that are imposed by the operation of law or incurred in the ordinary course of business and do not materially interfere with the value of such real property or the use of such real property in the ordinary conduct of the business of Issuer and each Guarantor; (xiv) any Security Interest over any or all of the assets of Issuer and each Guarantor to any other Guarantor in favour of one or more of the Issuer and each Guarantor; (xv) any other Security Interest securing assets or obligations which do not in aggregate exceed 10 per cent. of the Total Assets of the Issuer at the time of creation of the Lien; or (xvi) any extension, renewal, refinancing or replacement (or successive extensions, renewals, refinancings or replacements), in whole or in part, of any Security Interest referred to in the foregoing subclauses (i) to (xv) of this covenant for amounts not exceeding the principal amount of borrowed money secured by the Security Interest so extended, renewed, refinanced or replaced so long as such extension, renewal, refinancing or replacement Security Interest is limited to all or a part of the same property or 43

52 (h) (i) assets (plus improvements on such property or assets) that secured the Security Interest so extended, renewed, refinanced or replaced; Limitation on disposal of assets: in the case of the Issuer and APAH2 only, not, and APAH2 will not permit a Subsidiary Guarantor to, sell, transfer or otherwise dispose of, or create or allow to exist an interest in its assets that forms part of the collateral other than: (i) (ii) a Security Interest permitted under Condition 5(g); disposals, partings with possession and interests created (including sub-leases) in the ordinary course of business on arm s length commercial terms; (iii) any disposal or dealing with any asset where the aggregate value of assets disposed of in any financial year does not exceed 10 per cent. of the aggregate book value of all assets of the Issuer and APAH2 in such financial year (or its equivalent in any other currency or currencies) on a consolidated basis, determined in accordance with A-IFRS provided, that an amount equal to the net proceeds of the disposal is used within 365 days after such disposal to prepay or repay any senior, secured indebtedness of the Issuer, APAH2 or a Subsidiary Guarantor; (iv) where an amount equal to the net proceeds of the disposal is used within 365 days after such disposal to purchase, acquire, develop, redevelop or construct productive assets for use by the Issuer, APAH2 or a Subsidiary Guarantor provided that such assets are the subject of a Security Interest for the benefit of the Noteholders; (v) where both Moody s and S&P have confirmed in writing that the Notes will be rated at least Baa2 (by Moody s) and BBB (by S&P) after giving effect to the sale, transfer or disposal of its asset or creation of such interest in its assets; or (vi) to the Issuer, APAH2 or a Subsidiary Guarantor whose assets are the subject of a Security Interest for the benefit of the Noteholders; Consolidation, merger and sale of assets: not consolidate with or merge into any other Person that is not the Issuer or any Guarantor or convey, transfer or lease its properties and assets substantially as an entirety to any Person that is not the Issuer or a Guarantor, unless: (i) any Person formed by such consolidation or into which the Issuer or any Guarantor, as the case may be, is merged or to whom the Issuer, or any Guarantor, as the case may be, has conveyed, transferred or leased its properties and assets substantially as an entirety is a corporation, partnership or trust organised and validly existing under the laws of the jurisdiction governing such Person, and such Person either is the Issuer or such Guarantor or assumes the Issuer s or such Guarantor s obligations, as the case may be, on the Notes and the Guarantees and under the Note Trust Deed (including any obligation to pay any Additional Amounts) (for the avoidance of doubt, any assumption of the Parent Guarantor s obligations may be pursuant to a guarantee having limited recourse equivalent to the Parent Guarantee); (ii) immediately after giving effect to the transaction and treating any Financial Indebtedness which becomes an obligation of the Issuer or such Guarantor as a result of such transaction as having been incurred at the time of such transaction, no Event of Default (as defined in Condition 11 (Events of Default and Enforcement)), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (iii) any such Person not organised and validly existing under the laws of the Commonwealth of Australia or any state or territory thereof shall expressly agree by a supplemental agreement to the Note Trust Deed: (A) (B) to indemnify the holder of each Note and each beneficial owner of an interest therein against (X) any tax, assessment or other governmental charge imposed on such holder or beneficial owner or required to be withheld or deducted from any payment to such holder or beneficial owner as a consequence of such consolidation, merger, conveyance, transfer or lease, and (Y) any costs or expenses of the act of such consolidation, merger, conveyance, transfer or lease, and that all payments pursuant to the Notes or the Guarantees in respect of the principal and interest on the Notes, as the case may be, shall be made without withholding or deduction for, or on account of, any present or future taxes, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of the jurisdiction of organisation of such Person or any political subdivision or taxing authority thereof or therein, unless such taxes, assessments or 44

53 other governmental charges are required by such jurisdiction or any such subdivision or authority to be withheld or deducted, in which case such Person will pay such additional amounts of, or in respect of, principal and interest (Successor Additional Amounts) as will result (after deduction of such taxes, assessments or governmental charges and any additional taxes, assessments or other governmental charges payable in respect of such Successor Additional Amounts) in the payment to each holder of a Note or beneficial owner of the amounts which would have been payable pursuant to the Notes or the Guarantees, as the case may be, had no such withholding or deduction been required, subject to the same exceptions as would apply with respect to the payment by the Issuer or the Guarantors in respect of the Notes or the Guarantees (substituting the jurisdiction of organisation of such Person for the Relevant Jurisdiction); (iv) such consolidation, merger, conveyance, transfer or lease is permitted by the Intercreditor Deed and the Security Documents, and any Person formed by such consolidation or into which the Issuer or any Guarantor, as the case may be, is merged or to whom the Issuer, or any Guarantor, as the case may be, has conveyed, transferred or leased its properties and assets substantially as an entirety provides a Security Interest over all of its Property in a form satisfactory to the Security Trustees for the benefit of the beneficiaries under the Intercreditor Deed (including the Note Trustee); and (v) certain other conditions are met. In these Conditions, the following expressions have the following meanings: Affiliate of any specified Person means any other Person, directly or indirectly controlling or controlled by or under common control with such specified Person. For the purposes of this definition, control when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing; Airport Lease means the lease dated, 1 July 1997 between the Commonwealth of Australia and the Issuer in respect of Melbourne Airport, as may be amended, restated or supplemented from time to time; Group means the Parent Guarantor and its Subsidiaries, taken together as a whole; Group Member means a member of the Group; Material means material in relation to the business, operations, affairs, financial condition, assets, properties or prospects of the Group; Material Adverse Effect means a material adverse effect on the ability of the Issuer to perform its obligations under the Note Trust Deed, the Notes or any Security Document; Moody s means Moody s Investors Service, Inc, a subsidiary of Moody s Corporation, and its successors; Property means any asset, revenue or any other property, whether tangible or intangible, real or personal, including, without limitation, any right to receive income; Relevant Jurisdiction means the Commonwealth of Australia or any other jurisdiction in which the Issuer or a Guarantor becomes resident for tax purposes, whether by merger, consolidation or otherwise; S&P means Standard & Poor s Rating Services, a division of The McGraw-Hill Companies, Inc., and its successors; Security Documents means (a) (b) (c) (d) (e) (f) (g) (h) the Security Trust Deed; the deed of charge dated 9 April 1997 given by the Issuer in favour of the First Security Trustee; the deed of charge dated 27 March 2009 given by the Issuer in favour of the First Security Trustee; the deed of charge dated 3 April 2009 given by the Issuer in favour of the First Security Trustee; the mortgage of lease dated 30 June 1997 given by the Issuer in favour of the First Security Trustee; the share mortgage dated 9 April 1997 between the Parent Guarantor and the Second Security Trustee; the share mortgage dated 27 March 2009 between the Parent Guarantor and the Second Security Trustee; the deed entitled APAH2 Security dated 27 July 2009 between APAH2 and the Second Security Trustee; 45

54 (i) (j) any other collateral security given by APAH2 from time to time; and any other security defined in the Security Trust Deed; Security Interest means any mortgage, pledge, charge, security interest, lien or other encumbrance or security interest of any kind, whether or not filed, recorded or otherwise perfected under applicable law; Total Assets means, at any time, the aggregate book value of all the assets of (i) the Issuer and its Subsidiaries determined on a consolidated basis, and (ii) APAH2 and its Subsidiaries determined on a consolidated basis from and after the first day on which APAH2 has a Subsidiary other than the Issuer, in each case, as determined in accordance with A-IFRS; and Taxes means includes any tax, levy, impost, deduction, charge, rate, duty, compulsory loan or withholding which is levied or imposed by a government agency, and any related interest, penalty, charge, fee or other amount. 6. INTEREST 6.1 Interest on Fixed Rate Notes Each Fixed Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date. If the Notes are in definitive form, except as provided in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Pricing Supplement, amount to the Broken Amount so specified. As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date. Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Pricing Supplement, interest shall be calculated in respect of any period by applying the Rate of Interest to: (a) (b) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or in the case of Fixed Rate Notes in definitive form, the Calculation Amount; and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding. Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 6.1: (a) if Actual/Actual (ICMA) is specified in the applicable Pricing Supplement: (i) (ii) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the Accrual Period) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (I) the number of days in such Determination Period and (II) the number of Determination Dates (as specified in the applicable Pricing Supplement) that would occur in one calendar year; or in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of: (A) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such 46

55 (B) Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and (b) if 30/360 is specified in the applicable Pricing Supplement, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with day months) divided by 360. In the Conditions, the following expressions have the following meanings: Determination Period means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent. 6.2 Interest on Floating Rate Notes and Index Linked Interest Notes (a) Interest Payment Dates Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either: (i) (ii) the Specified Interest Payment Date(s) in each year specified in the applicable Pricing Supplement; or if no Specified Interest Payment Date(s) is/are specified in the applicable Pricing Supplement, each date (each such date, together with each Specified Interest Payment Date, an Interest Payment Date) which falls the number of months or other period specified as the Specified Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. Such interest will be payable in respect of each Interest Period. In the Conditions, Interest Period means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date). If a Business Day Convention is specified in the applicable Pricing Supplement and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is: (i) (ii) in any case where Specified Periods are specified in accordance with Condition 6.2(a)(ii) above, the Floating Rate Convention, such Interest Payment Date A) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis mutandis or (B) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (I) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (II) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or (iii) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or (iv) (the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day. 47

56 In the Conditions, Business Day means a day which is both: (v) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in Melbourne, London and each Additional Business Centre specified in the applicable Pricing Supplement; and (b) (vi) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (B) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the TARGET2 System) is open. Rate of Interest The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Pricing Supplement. (i) ISDA Determination for Floating Rate Notes Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any). For the purposes of this subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the ISDA Definitions) and under which: (A) (B) the Floating Rate Option is as specified in the applicable Pricing Supplement; the Designated Maturity is a period specified in the applicable Pricing Supplement; and (C) the relevant Reset Date is either (I) if the applicable Floating Rate Option is based on the London interbank offered rate (LIBOR) or on the Euro-zone interbank offered rate (EURIBOR), the first day of that Interest Period or (II) in any other case, as specified in the applicable Pricing Supplement. For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option, Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions. Unless otherwise stated in the applicable Pricing Supplement the Minimum Rate of Interest shall be deemed to be zero. (ii) Screen Rate Determination for Floating Rate Notes Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (A) the offered quotation; or (B) the arithmetic mean (rounded if necessary to the fifth decimal place, with being rounded upwards) of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as determined by the Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears or, in the case 48

57 (c) of (B) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph. If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Pricing Supplement as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Pricing Supplement. Minimum Rate of Interest and/or Maximum Rate of Interest If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest. If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest. (d) Determination of Rate of Interest and calculation of Interest Amounts The Principal Paying Agent, in the case of Floating Rate Notes, the Calculation Agent, in the case of Index Linked Interest Notes or, in the case of Notes where another Paying Agent is specified in the relevant Pricing Supplement, such Paying Agent, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent or, in the case of Notes where another Paying Agent is specified in the relevant Pricing Supplement, such Paying Agent, will notify the Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same. The Principal Paying Agent, the Calculation Agent (or other Paying Agent, as specified in the relevant Pricing Supplement), as applicable, will calculate the amount of interest (the Interest Amount) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to: (i) (ii) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount; and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding. Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 6.2: (i) (ii) if Actual/Actual (ISDA) or Actual/Actual is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (II) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365); if Actual/365 (Fixed) is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365; (iii) if Actual/365 (Sterling) is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366; (iv) if Actual/360 is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 360; 49

58 (v) if 30/360, 360/360 or Bond Basis is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction = (360 x (Y 2 Y 1 ) + [30 x (M 2 M 1 )] + (D 2 D 1 ) where: Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; 360 Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D 1 is greater than 29, in which case D 2 will be 30; (vi) if 30E/360 or Eurobond Basis is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction = (360 x (Y 2 Y 1 ) + [30 x (M 2 M 1 )] + (D 2 D 1 ) where: Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; 360 Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D 2 will be 30; (vii) if 30E/360 (ISDA) is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction = (360 x (Y 2 Y 1 ) + [30 x (M 2 M 1 )] + (D 2 D 1 ) where: Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; 360 Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D 2 will be

59 (e) Notification of Rate of Interest and Interest Amounts The Principal Paying Agent will (provided that, if applicable, it is notified by the Calculation Agent or other Paying Agent of the Rate of Interest) cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer, the Note Trustee and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed (subject to receiving the contact details of the relevant stock exchange from the Issuer) and notice thereof to be published in accordance with Condition 15 (Notices) as soon as possible after their determination but in no event later than the fourth Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 15 (Notices). For the purposes of this Condition, the expression Business Day means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in Melbourne and Sydney. (f) Determination or Calculation by Note Trustee If for any reason at any relevant time the Principal Paying Agent, the Calculation Agent or other Paying Agent (as specified in the relevant Pricing Supplement), as the case may be, defaults in its obligation to determine the Rate of Interest or the Principal Paying Agent defaults in its obligation to calculate any Interest Amount in accordance with subparagraph (b)(i) or subparagraph (b)(ii) above or as otherwise specified in the applicable Pricing Supplement, as the case may be, and in each case in accordance with paragraph (d) above, the Note Trustee or its appointee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Pricing Supplement), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Note Trustee or its appointee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Principal Paying Agent, the Calculation Agent or other Paying Agent (as specified in the relevant Pricing Supplement), as applicable. (g) Certificates to be final All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 6.2 (Interest on Floating Rate Notes and Index Linked Interest Notes), whether by the Principal Paying Agent or, if applicable, the Calculation Agent or other Paying Agent (as specified in the relevant Pricing Supplement), shall (in the absence of wilful default, fraud or manifest error) be binding on the Issuer, the Guarantors, the Note Trustee, the Principal Paying Agent, the Registrar (if applicable), the Calculation Agent (if applicable), the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence of wilful default or fraud) no liability to the Issuer, the Guarantors, the Noteholders, the Receiptholders or the Couponholders shall attach to the Principal Paying Agent or, if applicable, the Calculation Agent, other Paying Agent (as specified in the relevant Pricing Supplement) or the Note Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions. 6.3 Interest on Dual Currency Interest Notes The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in the manner specified in the applicable Pricing Supplement. 6.4 Interest on Partly Paid Notes In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Pricing Supplement. 6.5 Accrual of interest Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of: (a) (b) the date on which all amounts due in respect of such Note have been paid; and as provided in the Note Trust Deed. 51

60 7. PAYMENTS 7.1 Method of payment Subject as provided below: (a) (b) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee. Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 9 (Taxation) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official interpretations thereof, or (without prejudice to the provisions of Condition 9 (Taxation)) any law implementing an intergovernmental approach thereto. 7.2 Presentation of Definitive Bearer Notes, Receipts and Coupons Payments of principal in respect of Definitive Bearer Notes will (subject as provided below) be made in the manner provided in Condition 7.1 (Method of payment) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Definitive Bearer Notes, and payments of interest in respect of Definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and any other areas subject to its jurisdiction)). Payments of instalments of principal (if any) in respect of Definitive Bearer Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in Condition 7.1 (Method of payment) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in Condition 7.1 (Method of payment) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Definitive Bearer Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the Definitive Bearer Note to which it appertains. Receipts presented without the Definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any Definitive Bearer Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof. Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Notes or Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 3 years after the Relevant Date in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 10 (Prescription)) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter. Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof. Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note. 52

61 If the due date for redemption of any Definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant Definitive Bearer Note. 7.3 Payments in respect of Bearer Global Notes Payments of principal and interest (if any) in respect of Bearer Notes represented by any Global Note will (subject as provided below) be made in the manner specified above in relation to Definitive Bearer Notes or otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note at the specified office of the Principal Paying Agent or any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Global Note in bearer form, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented and such record shall be prima facie evidence that the payment has been made. 7.4 Payments in respect of Registered Notes Payments of principal (other than instalments of principal prior to the final instalment) in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the Register) (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business and a day on which it is a business day in Sydney and London) before the relevant due date and (ii) where in definitive form, at the close of business on the third business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) before the relevant due date. Notwithstanding the previous sentence, if (a) a holder does not have a Designated Account (as defined below) or (b) the principal amount of the Notes held by a holder is less than U.S.$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead be made by a cheque in favour of such holder in the Specified Currency drawn on a Designated Bank (as defined below). For these purposes, Designated Account means the account (which, in the case of a payment in Japanese yen to a non resident of Japan, shall be a non resident account) maintained by a holder with a Designated Bank and identified as such in the Register and Designated Bank means (in the case of payment in a Specified Currency other than euro) a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively) and (in the case of a payment in euro) any bank which processes payments in euro. Payments of interest and payments of instalments of principal (other than the final instalment) in respect of each Registered Note (whether or not in global form) will be made by a cheque in favour of such holder in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city where the specified office of the Registrar is located immediately preceding the relevant due date to the holder (or the first named of joint holders) of the Registered Note appearing in the Register (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear or Clearstream, Luxembourg are open for business) before the relevant due date and (ii) where in definitive form, at the close of business on the fifteenth day (whether or not such fifteenth day is a business day) before the relevant due date (the Record Date) at his address shown in the Register on the Record Date and at his risk. Upon application of the holder to the specified office of the Registrar not less than three business days in the city where the specified office of the Registrar is located before the due date for any payment of interest or payment of instalment of principal in respect of a Registered Note, the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any such application for transfer shall be deemed to relate to all future payments of interest (other than interest due on redemption) and instalments of principal (other than the final instalment) in respect of the Registered Notes which become payable to the holder who has made the initial application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect of each Registered Note on redemption and the final instalment of principal will be made in the same manner as payment of the principal amount of such Registered Note. Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes. None of the Issuer, the Guarantors, the Note Trustee, the Paying Agents, the Transfer Agents or the Registrar will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, 53

62 beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 7.5 General provisions applicable to payments The holder of a Global Note (or as provided in the Note Trust Deed, the Note Trustee) shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer or, as the case may be, the Guarantors will be discharged by payment to, or to the order of, the holder of such Global Note (or the Note Trustee, as the case may be) in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream or Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantors to, or to the order of, the holder of such Global Note. Notwithstanding the foregoing provisions of this Condition 7.5, if any amount of principal and/or interest in respect of Notes is payable in U.S. Dollars such U.S. Dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if: (a) (b) (c) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in Euros at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due; payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in Euros; and such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer. 7.6 Payment Day If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, Payment Day means any day which (subject to Condition 10 (Prescription)) is: (a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in: (i) (ii) in the case of Notes in definitive form only, the relevant place of presentation; London or, if the location of the Principal Paying Agent is not London, the location of the Principal Paying Agent; (iii) each Additional Financial Centre specified in the applicable Pricing Supplement; and (b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (B) in relation to any sum payable in euro, a day on which the TARGET2 System is open. 7.7 Interpretation of principal and interest Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable: (a) (b) (c) (d) (e) any additional amounts which may be payable with respect to principal under Condition 9 (Taxation) or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Note Trust Deed; the Final Redemption Amount of the Notes; the Early Redemption Amount of the Notes; the Optional Redemption Amount(s) (if any) of the Notes; in relation to Notes redeemable in instalments, the Instalment Amounts; 54

63 (f) (g) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 8.5 (Redemption and Purchase Early Redemption Amounts)); and any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes. Any reference in these Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 9 (Taxation) or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Note Trust Deed. In these conditions, the Relevant Date means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Note Trustee or the Principal Paying Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 15 (Notices). 8. REDEMPTION AND PURCHASE 8.1 Redemption at maturity Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Pricing Supplement in the relevant Specified Currency on the Maturity Date specified in the applicable Pricing Supplement. 8.2 Redemption for tax reasons If, as the result of any change in or any amendment to the laws, regulations or published tax rulings of the Commonwealth Australia, or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in the official administration, application or interpretation by an Australian court or tribunal, government or government authority of such laws, regulations or published tax rulings either generally or in relation to the Notes or any Guarantee, which change or amendment becomes effective on or after the original issue date of the Notes or which change in official administration, application or interpretation shall not have been published prior to such issue date, the Issuer or any Guarantor would be required to pay any Additional Amounts (as defined in Condition 9 (Taxation)) pursuant to the Note Trust Deed in respect of amount on the next succeeding Interest Payment Date (as defined in the applicable Pricing Supplement) (assuming, in the case of any Guarantor, a payment in respect of such interest was required to be made by such Guarantor under the Guarantees thereof on such Interest Payment Date, in circumstances in which such Guarantor would be unable, for reasons outside such Guarantor s control, to procure payment by the Issuer), and the obligation to pay Additional Amounts cannot be avoided by the use of commercially reasonable measures available to the Issuer or the Guarantors, the Issuer may, at its option, redeem all (but not less than all) the Notes, upon not less than 30 nor more than 60 days written notice as provided in the Note Trust Deed, at a redemption price equal to 100 per cent. of the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption; provided, however, that: (a) (b) no such notice of redemption may be given earlier than 60 days prior to the earliest date on which the Issuer or a Guarantor would be obligated to pay such Additional Amounts were a payment in respect of the Notes or the Guarantees thereof then due; and at the time any such redemption notice is given, such obligation to pay such Additional Amounts must remain in effect. If: (a) (b) the Issuer or any Guarantor shall have on any date (the Succession Date) consolidated with or merged into, or conveyed or transferred or leased its properties and assets substantially as an entirety to, any Person (the successor Person in any such transaction being sometimes hereinafter referred to as a Successor Person) which is organised under the laws of any jurisdiction other than the Commonwealth of Australia, any state thereof or territory therein; and as the result of any change in or any amendment to the laws, regulations or published tax rulings of such jurisdiction of organisation, or of any political subdivision or taxing authority thereof or therein, affecting taxation, or any change in the official administration, application or interpretation of such laws, regulations or published tax rulings either generally or in relation to the Guarantees or the Notes, which change or amendment becomes effective on or after the Succession Date or which change in official administration, application or interpretation shall not have been available to the public prior to such Succession Date, the Issuer, any Guarantor or such Successor Person would be required to pay 55

64 any Successor Additional Amounts pursuant to the Note Trust Deed or the terms of the Notes or the Guarantees thereof in respect of interest on any Notes on the next succeeding Interest Payment Date (assuming, in the case of a Successor Person to such Guarantor, that a payment in respect of such interest were required to be made by such Successor Person to such Guarantor under such Guarantee on such Interest Payment Date) and such Successor Additional Amounts cannot be avoided by the use of commercially reasonable measures available to the Issuer or such Successor Person, then the Issuer or such Successor to the Issuer may, at its option, redeem all (but not less than all) of the Notes, upon not less than 30 nor more than 60 days written notice as provided in the Note Trust Deed, at a redemption price equal to 100 per cent. of the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption; provided, however, that: (a) (b) no such notice of redemption may be given earlier than 60 days prior to the earliest date on which a Successor Person to the Issuer would be obligated to pay such Successor Additional Amounts were a payment in respect of the Notes or the Guarantees, as the case may be, then due; and at the time any such redemption notice is given, such obligation to pay such Successor Additional Amounts must remain in effect. Prior to any such redemption, the Issuer or a Successor Person to the Issuer shall provide the Note Trustee with an opinion of counsel to the effect that the conditions precedent to such redemption have occurred and an officer s certificate stating that the obligation to pay Additional Amounts or Successor Additional Amounts cannot be avoided by taking measures that the Issuer, the Guarantors or any Successor Person to a Guarantor, as the case may be, believes are commercially reasonable. 8.3 Redemption at the option of the Issuer (Issuer Call) If Issuer Call is specified in the applicable Pricing Supplement, the Issuer may, having given: (a) not less than 30 nor more than 60 days notice to the Noteholders in accordance with Condition 15 (Notices); and (b) not less than 14 Business Days before the giving of the notice referred to in (a) above, notice to the Note Trustee and to the Principal Paying Agent and, in the case of Redemption of Registered Notes, the Registrar; (which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Pricing Supplement together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Pricing Supplement. In the case of a partial redemption of the Notes to be redeemed (Redeemed Notes) will be selected individually by lot, in the case of Redeemed Notes represented by Definitive Bearer Notes or Definitive Registered Notes, and in accordance with the rules of Euroclear or Clearstream, Luxembourg, in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the Selection Date). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 15 (Notices) not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this Condition 8.3 and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 15 (Notices) at least five days prior to the Selection Date. 8.4 Redemption at the option of the Noteholders (Investor Put) If Investor Put is specified in the applicable Pricing Supplement, upon the holder of any Note giving to the Issuer in accordance with Condition 15 (Notices) not less than 15 nor more than 30 days notice the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Pricing Supplement, such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed under this Condition 8.4 in any multiple of their lowest Specified Denomination. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Pricing Supplement. 56

65 To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear or Clearstream, Luxembourg, deliver, at the specified office of any Paying Agent (in the case of Definitive Bearer Notes) or the Registrar (in the case of Definitive Registered Notes) at any time during normal business hours of such Paying Agent or, as the case may be, the Registrar, falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent or, as the case may be, the Registrar (a Put Notice) and in which the holder must specify a bank account to which payment is to be made under this Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2.2 (Transfers of Registered Notes in definitive form). If this Note is a Definitive Bearer Note, the Put Notice must be accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control. If this Note is represented by a Global Note and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Principal Paying Agent of such exercise in accordance with the standard procedures of Euroclear or Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary, as the case may be, for them to the Principal Paying Agent by electronic means) in a form acceptable to Euroclear or Clearstream, Luxembourg from time to time and, if this Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global Note to the Principal Paying Agent for notation accordingly. Any Put Notice or other notice given in accordance with the standard procedures of Euroclear or Clearstream, Luxembourg given by a holder of any Note pursuant to this Condition 8.4 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and the Note Trustee has declared the Notes to be due and payable pursuant to Condition 11 (Events of Default and Enforcement), in which event such holder, at its option, may elect by notice to the Issuer and the Note Trustee to withdraw the notice given pursuant to this Condition Early Redemption Amounts For the purpose of Condition 8.2 (Redemption for tax reasons) above and Condition 11 (Events of Default and Enforcement), each Note will be redeemed at its Early Redemption Amount calculated as follows: (a) (b) (c) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Pricing Supplement or, if no such amount or manner is so specified in the applicable Pricing Supplement, at its nominal amount; or in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in accordance with the following formula: Early Redemption Amount = RP x (1 + AY)y where: RP means the Reference Price; AY means the Accrual Yield expressed as a decimal; and y is the Day Count Fraction specified in the applicable Pricing Supplement which will be either 30/360 (in which case the numerator will be equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (ii) Actual/360 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (iii) Actual/365 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be

66 8.6 Instalments Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates specified in the applicable Pricing Supplement. In the case of early redemption, the Early Redemption Amount of Instalment Notes will be determined pursuant to Condition 8.5 (Early Redemption Amounts). 8.7 Partly Paid Notes Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Pricing Supplement. 8.8 Purchases Each of the Issuer and the Guarantors may at any time purchase Notes (provided that, in the case of Definitive Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) in any manner and at any price in the open market or otherwise. All such Notes must be surrendered to any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) for cancellation. 8.9 Cancellation All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes purchased and cancelled pursuant to Condition 8.8 (Purchases) above (together with all unmatured Receipts, Coupons and Talons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold Late payment on Zero Coupon Notes If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 8.1 (Redemption at maturity), 8.2 (Redemption for tax reasons), 8.3 (Redemption at the option of the Issuer (Issuer Call)) or 8.4 (Redemption at the option of the Noteholders (Investor Put)) above or upon its becoming due and repayable as provided in Condition 11 (Events of Default and Enforcement) is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 8.5(c) (Early Redemption Amounts) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of: (a) (b) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Principal Paying Agent or the Note Trustee and notice to that effect has been given to the Noteholders in accordance with Condition 15 (Notices). 9. TAXATION All payments of, or in respect of, principal of, and any premium and interest on, the Notes, and all payments pursuant to any Guarantee, shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any taxing authority within any Relevant Jurisdiction or any political subdivision or taxing authority of any Relevant Jurisdiction, unless such taxes, duties, assessments or other governmental charges are required by the Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein to be withheld or deducted. In that event, the Issuer or a Guarantor, as applicable, will pay such additional amounts of, or in respect of, the principal of, and any premium and interest on, the Notes and all payments pursuant to a Guarantee thereof (Additional Amounts) as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or other governmental charges payable in respect of such Additional Amounts) in the payment to the holder of each Note of the amounts which would have been payable in respect of such Note or Guarantee had no such withholding or deduction been required, except that no Additional Amounts shall be so payable for or on account of: (a) any withholding, deduction, tax, duties, assessment or other governmental charge which would not have been imposed but for the fact that such holder or beneficial owner of the Note: (i) was a resident, domiciliary or national of, or engaged in business or maintained a permanent establishment or was physically present in, the Relevant Jurisdiction or otherwise had some connection with the Relevant Jurisdiction other than the mere ownership of, or receipt of payment under, such Note or Guarantee; 58

67 (b) (c) (d) (e) (f) (g) (ii) presented such Note or Guarantee (where presentation is required) for payment in any Relevant Jurisdiction, unless such Note or Guarantee could not have been presented for payment elsewhere; or (iii) presented such Note or Guarantee (where presentation is required) more than thirty (30) days after the date on which the payment in respect of such Note or Guarantee first became due and payable or provided for, whichever is later, except to the extent that the holder would have been entitled to such Additional Amounts if it had presented such Note or Guarantee for payment on any day within such period of thirty (30) days; any estate, inheritance, gift, sale, transfer, personal property or similar tax, duties, assessment or other governmental charge or any withholding or deduction on account of such tax, assessment or other governmental charge; any tax, duties, assessment or other governmental charge which is payable otherwise than by withholding or deduction from payments of (or in respect of) principal of, or any premium and interest on, the Notes or the Guarantees; any withholding, deduction, tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder of such Note or, in the case of a Global Note, the beneficial owner of such Global Note, with a request of the Issuer, any Paying Agent or a Guarantor addressed to such holder or beneficial owner, as the case may be, (a) to provide information concerning the nationality, residence or identity of such holder or such beneficial owner or an appropriate tax file number, Australian Business Number or other number or other exemption details or (b) to make any declaration or other similar claim or satisfy any information or reporting requirement, which, in the case of (a) or (b), is required or imposed by a statute, treaty, regulation or administrative practice of any Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein as a precondition to exemption from all or part of such withholding, deduction, tax, assessment or other governmental charge (including without limitation the filing of a United States Internal Revenue Service Form W-8 BEN, W-8 ECI or W-9); any withholding, deduction, tax, duties, assessment or other governmental charge which is imposed or withheld by reason of such holder being an associate of the Issuer or any of the Guarantors for the purposes of Section 128F(6) of the Income Tax Assessment Act 1936 of Australia (the Australia Tax Act) or by reason of the Australian Commissioner of Taxation giving a notice under section 255 of the Tax Act of Australia or section of Schedule One of the Taxation Administration Act 1953 of Australia; any withholding or deduction with respect to any tax, duties, assessment or other governmental charge imposed by the United States of America, any state, possession or territory thereof, the District of Columbia or any political subdivision or taxing authority of any of the foregoing; presented for payment where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; (h) any tax imposed or collected pursuant the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code; or (i) any combination of items (a), (b), (c), (d), (e), (f), (g) and (h); nor shall Additional Amounts be paid with respect to any payment of, or in respect of, the principal of, or any premium or interest on, any such Note or Guarantee to any such holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment on a Note or Guarantee would, under the laws of a Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein, be treated as being derived or received for tax purposes by a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Additional Amounts had it been the holder of the Note or Guarantee. Whenever there is mentioned, in any context, any payment of or in respect of the principal of, or any premium or interest on, any Note (or any payments pursuant to the Guarantee thereof), such mention shall be deemed to include mention of the payment of Additional Amounts provided for in the Note Trust Deed to the extent that, 59

68 in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the Note Trust Deed, and any express mention of the payment of Additional Amounts in any provisions of the Note Trust Deed shall not be construed as excluding Additional Amounts in those provisions of the Note Trust Deed where such express mention is not made. Where Additional Amounts are payable in respect of any interest payments, such Additional Amounts will not be considered to be interest for the purposes of the Note Trust Deed. 10. PRESCRIPTION The Notes, Receipts and Coupons will become void unless claims in respect of principal and/or interest are made within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7 (Payments) therefor). There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition 10 or Condition 7.2 (Presentation of Definitive Bearer Notes, Receipts and Coupons) or any Talon which would be void pursuant to Condition 7.2 (Presentation of Definitive Bearer Notes, Receipts and Coupons). 11. EVENTS OF DEFAULT AND ENFORCEMENT 11.1 Events of Default The Note Trustee at its discretion may, and if so requested in writing by the holders of at least one-fifth in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being indemnified, prefunded and/or secured to its satisfaction and to the provisions of the Intercreditor Deed), (but in the case of the happening of any of the events described in paragraph (c), only if the Note Trustee (having received instructions from at least one-fifth in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution) shall have certified in writing to the Issuer and the Guarantors that such event is materially prejudicial to the interests of the Noteholders) give notice in writing to the Issuer that each Note is, and, subject to the Intercreditor Deed, each Note shall thereupon immediately become, due and repayable at its Early Redemption Amount together with accrued interest as provided in the Note Trust Deed if any of the following events (each an Event of Default) shall occur: (a) (b) (c) (d) (e) (f) a default in the payment of any principal of or any premium on any Notes when due, whether at maturity, upon redemption, or otherwise and, provided that if such default is caused by technical or administrative error, the continuance of such default for a period of two Business Days; or a default in the payment of any interest or any Additional Amounts due and payable on any Notes and the continuance of such default for a period of 30 days; or a default in the performance or breach of any other covenant or warranty of the Issuer or any Guarantor in the Note Trust Deed, the Notes, the Guarantees, the Intercreditor Deed or the Security Documents and the continuance of such default or breach for a period of 30 days after written notice of such default has been given by the Note Trustee or the holders of at least 25 per cent. in aggregate principal amount of the Notes outstanding; or (i) if the payment of the principal of, or interest on of any Financial Indebtedness of the Issuer or any Guarantor under (x) any Financial Indebtedness that ranks pari passu with the Notes and is subject to the Intercreditor Deed or (y) any other Financial Indebtedness under one or more agreements or instruments, in each case, having an aggregate principal amount exceeding A$50.0 million (or its equivalent in any other currency or currencies) when and as that Financial Indebtedness becomes due and payable, after the expiration of any applicable grace period or (ii) if any other default (other than as set forth in clause (i) above) relating to such Financial Indebtedness under (x) any Financial Indebtedness that ranks pari passu with the Notes and is subject to the Intercreditor Deed or (y) any other Financial Indebtedness under one or more agreements or instruments having an aggregate principal amount exceeding A$50.0 million (or its equivalent in any other currency or currencies), if the effect is to cause such Financial Indebtedness to become due and payable prior to its stated maturity, except, with respect to clause (i) and (ii), where the liability of the Issuer or any Guarantor to make the payment is being contested in good faith or where such Financial Indebtedness is discharged or such acceleration is rescinded; or any of the Issuer or the Guarantors ceases or suspends the conduct of all or a substantial part of its business or disposes of a substantial part of its assets; or (i) if all or any part of the Airport Lease is terminated or is or becomes void, illegal, invalid, unenforceable or of limited force and effect; (ii) the Commonwealth of Australia (as lessor) under the 60

69 (g) (h) (i) (j) terms of the Airport Lease or the Tripartite Deed enters into possession of Melbourne Airport; or (iii) the Commonwealth of Australia terminates or revokes the Airport Licence; the Guarantees are held to be unenforceable or invalid in a judicial proceeding, or are claimed in writing by either the Issuer or a Guarantor not to be valid or enforceable, or the Guarantees are denied or disaffirmed in writing by any Guarantor except, in each case, as permitted in accordance with the terms of the Note Trust Deed; or if any security interest under the Security Documents shall, at any time, cease to be in full force and effect for any reason other than the satisfaction in full of all obligations under the Note Trust Deed or in accordance with the terms of the Intercreditor Deed and the relevant security and discharge of the Note Trust Deed or any security interest created thereunder shall be declared invalid or unenforceable or the Guarantors shall assert, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable; or if a distress, attachment or other execution for any amount exceeding A$50.0 million (or its equivalent in any other currency or currencies) is levied or enforced against any part of the property of the Issuer, any Guarantor or any of their respective Subsidiaries and is not paid out, satisfied or withdrawn within 60 days of the date of levy or enforcement; or (i) (ii) (iii) the Issuer or any Guarantor: (A) is generally not paying, or admits in writing its inability to pay, its debts as they become due; (B) (C) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganisation or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganisation, moratorium or other similar law of any jurisdiction; makes an assignment for the benefit of its creditors; (D) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property; (E) is adjudicated as insolvent or to be liquidated, or takes corporate action for the purpose of any of the foregoing, in each case, except for the purposes of a solvent reconstruction or amalgamation previously approved by the holders of not less than 50 per cent. in aggregate principal amount of the outstanding Notes (the Required Holders); or a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Issuer or a Guarantor (as applicable), a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganisation or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Issuer or a Guarantor, or any such petition shall be filed against the Issuer or a Guarantor and such petition shall not be dismissed within 60 days; or (A) (B) an administrator is appointed with respect to the Issuer or any Guarantor; except for purposes of a solvent reconstruction or amalgamation previously approved by the Required Holders, an application or order is made, proceedings are commenced, a resolution is passed or proposed in a notice of meeting or an application is made to a court or other steps are taken for the winding up, dissolution or administration of the Issuer or any Guarantor or the Issuer or any Guarantor enters into an arrangement, compromise or composition with or assignment for the benefit of its creditors or any class of them (other than any frivolous or vexatious applications, proceedings, notices and/or steps or those which are dismissed with 10 Business Days from commencement); 61

70 (C) APAH2 or the Issuer ceases, suspends or threatens to cease or suspend the conduct of all or a substantial part of its business or disposes or threatens to dispose of a substantial part of its assets; (D) the Issuer or any Guarantor is, or under legislation is presumed to taken to be, insolvent (other than as a result of a failure to pay a debt or claim that is the subject of a good faith dispute); (E) (F) the Issuer or any Guarantor stops or threatens to stop or suspend payment of all or a class of its debts; or the Issuer or any Guarantor takes any steps towards placing APAH2 or the Issuer in liquidation or administration (including commencing proceedings, passing a resolution, convening or holding a directors or other meeting or making an application to a court any case in furtherance of any such liquidation or administration); or (iv) a receiver, receiver and manager, administrative receiver or similar officer is appointed to, a Security Interest becomes enforceable or is enforced over, or a distress, attachment or other execution is levied or enforced or applied for (in respect of an asset or assets alone or together having a book value in excess of A$3,000,000), over all or any of the assets and undertakings of the Issuer or any Guarantor, and any of the aforesaid is not released or discharged within 14 days from the commencement thereof. Remedies available to the Note Trustee and holders of Notes upon the occurrence of an Event of Default are limited in certain respects by the Intercreditor Deed. In particular, following notification of an Event of Default, a standstill period of two Business Days (in the case of a payment default) or five Business Days (in the case of any other default) will commence. During this standstill period, enforcement action may be taken if two-thirds of the total exposures of voting creditors so vote. Creditors who do not vote during this period will have their exposures counted as zero for the purposes of determining whether there is a two-thirds majority of voting creditors. At the expiration of the applicable standstill period, the Note Trustee will be entitled to accelerate or otherwise declare the Notes then outstanding due and payable subject to and in accordance with the terms of the Note Trust Deed and the Conditions (including Condition 11.2). In addition, the Security Trustees may be instructed to enforce the security under the Security Trust Deed by (i) in the case of a payment default, if instructed by the Note Trustee (which must itself be instructed by the requisite number of Noteholders as required by Condition 11.2) or (ii) in the event of any other default, by Financiers (who are entitled to vote and do vote) whose combined Exposures together exceed per cent. of the aggregate Exposures of all Financiers who are entitled to vote and do vote. The Note Trustee will revise any vote if instructed to do so by holders in accordance with Condition There are limited circumstances in which the Security Trustees can take enforcement action during the standstill period including upon the appointment of an administrator to the Issuer or a Guarantor if one-third of the total Exposures of voting Financiers so vote. Except in the case of a payment default under the Notes, to the extent that the aggregate outstanding principal amount of the Notes represents less than per cent. of Exposures, the holders of Notes (through the Note Trustee) will be unable to direct any enforcement action under the Intercreditor Deed without the consent of other Financiers. In case an Event of Default shall occur and be continuing, the Note Trustee will be under no obligation to exercise any of its rights or powers under the Note Trust Deed at the request or direction of any of the holders of Notes, unless, among other things, the Note Trustee has been indemnified/secured and pre-funded to its satisfaction. Subject to such provisions for the indemnification of the Note Trustee and the limitations in the Intercreditor Deed, the holders of a majority in aggregate nominal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Note Trustee or exercising any trust or power conferred on the Note Trustee with respect to the Notes. No holder of a Note will have any right to institute any proceeding, judicial or otherwise, with respect to the Note Trust Deed, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless: (a) (b) such holder has previously given to the Note Trustee written notice of a continuing Event of Default with respect to the Notes; the holders of at least 25 per cent. in aggregate nominal amount of the outstanding Notes have made written request or directed by way of an Extraordinary Resolution to take such action, and such holder or holders have indemnified, secured and/or prefunded the Note Trustee to its satisfaction; and 62

71 (c) the Note Trustee having become bound to take action in accordance with (a) and (b) above has failed to institute such proceeding within 60 days after becoming so bound and such failure is continuing. In these Conditions, the following expression has the following meanings: Airport Licence means any licence or similar authorisation required to operate Melbourne Airport (including any licence referred to in clause 17 of the Airport Lease); Exposures means commitments to provide financial accommodation by secured creditors that are subject to the Intercreditor Deed; and Tripartite Deed means the tripartite deed dated 1 July 2013 between the Commonwealth of Australia, the Issuer and the Security Trustees Enforcement (a) Subject to the Intercreditor Deed, the Note Trustee may at any time, at its discretion and without notice, take such proceedings, steps or actions against the Issuer and/or the Guarantors as it may think fit to enforce the provisions of the Note Trust Deed, the Guarantees, the Intercreditor Deed, the Security Trust Deed, the Notes, the Receipts and the Coupons, but it shall not be bound to take any such proceedings, steps or any other action that may be required under the Intercreditor Agreement or the Security Trust Deed in relation to the Note Trust Deed, the Guarantees, the Intercreditor Deed, the Security Trust Deed, the Notes, the Receipts or the Coupons unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one-fifth in nominal amount of the Notes then outstanding and (ii) it shall have been indemnified and/or secured and/or pre-funded to its satisfaction. (b) (c) At any time the Security Documents become enforceable, the Note Trustee may at its discretion and without notice, instruct the Security Trustees to take such proceedings, steps or actions against each Security Provider as it may think fit (subject always to the provisions of the Security Trust Deed and the Intercreditor Deed) to enforce the provisions of each Security Document and the Security Trust Deed, but the Note Trustee shall not be bound to take any such proceedings or any other action in relation to each Security Document and the Security Trust Deed unless (a) the Note Trustee shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantors unless the Note Trustee, having become bound so to proceed in accordance with Condition 11.1, fails so to do within a reasonable period and the failure shall be continuing or to give any other instruction that may be required under the Intercreditor Agreement or the Security Trust Deed. 12. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent, or as the case may be, the Registrar, upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer, the Principal Paying Agent or the Registrar may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued. 13. PAYING AGENTS AND REGISTRAR The Issuer is entitled, with the prior written approval of the Note Trustee, to vary or terminate the appointment of the Registrar or any Paying Agent and/or appoint additional or other Paying Agents, Registrar or Transfer Agents and/or approve any change in the specified office through which any Paying Agent and/or Registrar and/ or Transfer Agent acts, provided that: (a) (b) (c) there will at all times be a Principal Paying Agent and a Registrar; so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority or entity, there will at all times be a Paying Agent, which may be the Principal Paying Agent, and a Transfer Agent, which may be the Registrar, with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority or entity; in the event that the Global Note representing any Series of Notes is exchanged for Notes in definitive form, there will at all times be a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; and 63

72 (d) so long as the Notes are listed on the Singapore Exchange Securities Trading Limited (SGX-ST) and the rules of the SGX-ST so require, in the event that any of the Global Notes are exchanged for Notes in definitive form, there will at all times be a Paying Agent in Singapore. In addition, an announcement of such exchange will be made through the SGX-ST. Such announcement will include material information with respect to the delivery of the Definitive Notes, including details of the Paying Agent in Singapore. In addition, the Issuer shall with the prior written approval of the Note Trustee immediately appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 7.5 (Payments General provisions applicable to payments). Notice of any variation, termination, appointment or change in Paying Agents will be given to the Noteholders promptly by the Issuer in accordance with Condition 15 (Notices). In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and, in certain circumstances specified therein, of the Note Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent. 14. EXCHANGE OF TALONS On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 10 (Prescription). 15. NOTICES All notices regarding Bearer Notes will be deemed to be validly given if published in a leading English language daily newspaper having general circulation in Australia, and for so long as the Notes are admitted to trading on, and listed on the SGX-ST, a daily newspaper of general circulation in Singapore. It is expected that any such publication in a newspaper will be made in the Australian Financial Review in Australia and the Business Times in Singapore. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. If publication as provided above is not practicable, a notice will be given in such other manner, and will be deemed to have been given on such date, as the Note Trustee shall approve. All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such mailing or publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the holders of the Notes on the day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg. Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Principal Paying Agent, the Registrar and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose. 64

73 16. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER The Note Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Note Trust Deed. Such a meeting may be convened by the Issuer or the Note Trustee and shall be convened by the Issuer if required in writing by Noteholders holding not less than 10 per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than 50 per cent. in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, the Receipts or the Coupons or the Note Trust Deed (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not less than 75 per cent. in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than 25 per cent. in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders. In addition, a resolution in writing signed by or on behalf of Noteholders of not less than 75 per cent. in principal amount of the Notes who for the time being are entitled to receive notice of a meeting of Noteholders under the Note Trust Deed will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders. The Note Trustee may, in its discretion agree, without the consent of the Noteholders, Receiptholders or Couponholders, to any modification of, any of the provisions of the Notes or the Note Trust Deed, which is of a formal, minor or technical nature or to correct a manifest error or an error which, in the opinion of the Note Trustee, is proven or to comply with mandatory provisions of law. Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 15 (Notices) as soon as practicable thereafter. In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Note Trustee shall have regard to the general interests of the Noteholders as a class (but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Coupon-holders whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Note Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantors, the Note Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to the extent already provided for in Condition 9 (Taxation) and/or any undertaking or covenant given in addition to, or in substitution for, Condition 9 (Taxation) pursuant to the Note Trust Deed. The Note Trustee may, in its sole discretion, without the consent of the Noteholders, the Receiptholders or the Couponholders at any time and from time to time sanction or concur with the Guarantors in making any modification to the Guarantees or the applicable New Finance Certificate (as defined in the Intercreditor Deed) if in the opinion of the Note Trustee such modification is of a formal, minor or technical nature or is made to correct a manifest error or an error which is, in the opinion of the Note Trustee, proven or to comply with mandatory provisions of law. Any such modification may be made on such terms and subject to such conditions (if any) as the Note Trustee may determine, shall be binding upon the Noteholders, the Receiptholders and the Couponholders and shall be notified by the Issuer to the Noteholders in accordance with Condition 15 as soon as practicable thereafter. In relation to (i) any proposed modification of a Guarantee or the applicable New Finance Certificate not falling within the scope of the preceding paragraph or (ii) any proposed revocation of each Guarantee or the applicable New Finance Certificate, the Note Trustee shall act on the instructions of the Noteholders in approving or not approving such modification or revocation. Any such approval shall require an Extraordinary Resolution of the Noteholders. For these purposes, the Note Trustee shall only be required to obtain such instructions or approval from the Noteholders of all Series together as a class, and not from the Noteholders of each issue, Tranche or Series of Notes separately. Notwithstanding the foregoing, in no case need the Note Trustee have regard to the effect 65

74 on individual Noteholders, Couponholders or Receiptholders of such modification or revocation or of any action taken or not taken with respect thereto. 17. INDEMNIFICATION OF THE NOTE TRUSTEE AND NOTE TRUSTEE CONTRACTING WITH THE ISSUER AND/OR THE GUARANTORS The Note Trust Deed contains provisions for the indemnification of the Note Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured and/or pre funded to its satisfaction. The Note Trust Deed also contains provisions pursuant to which the Note Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and/or the Guarantors and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or the Guarantors, (b) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders, Receiptholders or Couponholders and (c) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith. 18. FURTHER ISSUES The Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes. 19. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999 but this does not affect any right or remedy of any person which exists or is available apart from the relevant Act. 20. GOVERNING LAW AND SUBMISSION TO JURISDICTION 20.1 Governing law The Note Trust Deed (including the Guarantees), the Notes, the Receipts, the Coupons and any non-contractual obligations arising out of or in connection with the Note Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with English law. The Security Trust Deed is governed by, and shall be construed in accordance with, the laws of the Australian Capital Territory, Australia. The Intercreditor Deed is governed by, and shall be construed in accordance with, the laws of the State of Victoria, Australia Submission to jurisdiction The Issuer and each of the Guarantors irrevocably agrees, for the benefit of the Note Trustee, the Noteholders, the Receiptholders and the Couponholders, that the courts of England are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Note Trust Deed, the Notes, the Receipts and/or the Coupons (including a dispute relating to any non-contractual obligations arising out of or in connection with the Note Trust Deed, the Notes, the Receipts and/or the Coupons) and accordingly submits to the non-exclusive jurisdiction of the English courts. The Issuer and each of the Guarantors waives any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum or otherwise. The Note Trustee, the Noteholders, the Receiptholders and the Couponholders may take any suit, action or proceedings (together referred to as Proceedings) arising out of or in connection with the Note Trust Deed, the Notes, the Receipts and the Coupons (including any Proceedings relating to any non-contractual obligations arising out of or in connection with the Note Trust Deed, the Notes, the Receipts and the Coupons) against the Issuer or each of the Guarantors in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions Appointment of Process Agent The Issuer appoints Law Debenture Corporate Trust Services Limited at its registered office at Fifth Floor, 100 Wood Street, London EC2V 7EX as its agent for service of process, and undertakes that, in the event of 66

75 Law Debenture Corporate Trust Services Limited ceasing so to act or ceasing to be registered in England, it will appoint another person approved by the Note Trustee as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law Other documents and Security Providers The Issuer and each of the Guarantors have in the Note Trust Deed and the Agency Agreement submitted to the jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar to those set out above. The Issuer and each of the Guarantors have in the Security Trust Deed submitted to the jurisdiction of the Australian Capital Territory, Australian courts. 67

76 USE OF PROCEEDS The Issuer intends to use the net proceeds raised from each issue of Notes under the Programme to fund capital expenditure, repayment of indebtedness, working capital and for its general corporate purposes. The foregoing represents the Issuer s intended use of the net proceeds of each issue of Notes under the Programme based upon its plans and estimates regarding its anticipated expenditures as of date of this Offering Circular. Actual expenditures may vary and the Issuer may find it necessary or advisable to use the net proceeds of a particular issue of Notes for other purposes. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Pricing Supplement. 68

77 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION Selected financial data as at and for the years ended 30 June 2014, 2015 and 2016 and six months ended 31 December 2015 and 2016 has been presented in this Offering Circular. The selected historical consolidated financial data as at and for the years ended 30 June 2014, 2015 and 2016 and set forth below has been derived from APAC s audited consolidated financial statements for those periods, included in this Offering Circular. The financial data for the six months ended 31 December 2015 and 2016 has been derived from half year review procedures, where there were no matters raised by the Auditors during the course of their review. The selected historical consolidated financial data set forth below is presented on a consolidated basis for APAC. The selected historical consolidated financial data set forth below is not necessarily indicative of APAC s future results of operations or financial condition. You should read this selected historical consolidated financial data together with APAC s consolidated financial statements and related notes thereto. Selected income statement data for APAC (1) 6 months ended 31 December Year ended 30 June (A$ millions) (A$ millions) (A$ millions) (A$ millions) (A$ millions) Revenues Aeronautical Security Retail Property Outgoings/recharge Other Total revenue Operating expenses Staff costs (24.8) (27.4) (50.8) (46.0) (40.4) Service and utilities (68.7) (63.2) (130.6) (108.7) (101.1))) Maintenance costs (16.6) (12.7) (29.7) (22.7) (19.4) Administration, marketing and other (12.3) (12.0) (42.9) (25.5) (18.8) Total operating expenses (122.4) (115.3) (254.0) (202.9) (179.7) Operating Profit Change in fair value of investment property (27.1) Profit before borrowing costs, depreciation and amortisation Depreciation and amortisation (78.3) (71.7) (149.0) (106.7) (90.3) Borrowing costs (84.9) (85.6) (175.5) (160.8) (154.9) Profit/(loss) before tax Tax expense/(benefit) (58.8) (47.2) (113.9) (109.1) (78.4) Net profit/(loss) Other comprehensive income for the year net of tax.. (10.1) (7.3) (64.3) Total comprehensive income for the year Capital expenditure property, plant and equipment and investment property Melbourne Launceston Total (1) All figures are shown for APAC, which comprises both Melbourne and Launceston airports. For the year ended 30 June 2016, Melbourne Airport represented approximately 97% of the revenues and 98% of the assets of APAC. The Parent Guarantor is providing a limited-recourse guarantee for the obligations under the Notes, and APAL (the entity in APAC that owns 90% of, and operates, Launceston Airport) is not a guarantor of the Notes. The Parent Guarantee is limited to the total amount available to holders of the Notes as a result of a realisation of the APAC Share Mortgages, which includes a mortgage on the shares of APAH, which owns 90% of the shares of APAL, which in turn owns and operates Launceston Airport. The assets of APAL do not secure the obligations under the Notes. See Description of the Security. 69

78 Selected Balance sheet data for APAC (1) As at 31 December As at 30 June (A$ millions) (A$ millions) (A$ millions) (A$ millions) (A$ millions) Current assets Cash and cash equivalents Inventories Receivables Other current assets Total current assets Non-current assets Property, plant and equipment , , , , ,904.9 Investment property , , , , ,076.4 Intangible assets Financial assets Other non-current assets Total non-current assets , , , , ,754.4 Total assets , , , , ,895.0 Current liabilities Payables Borrowings Current tax liabilities Provisions Other financial liabilities Total current liabilities Non-current liabilities Borrowings , , , , ,424.7 Payables Deferred tax liabilities Provisions Financial liabilities Other liabilities Total non-current liabilities , , , , ,867.1 Total liabilities , , , , ,110.6 Net assets , Equity Issued capital Reserves (42.3) (66.3) (52.3) (62.7) (55.3) Retained earnings Total equity , (1) All figures are shown for APAC, which comprises both Melbourne and Launceston airports. For the year ended 30 June 2016, Melbourne Airport represented approximately 97% of the revenues and 98% of the assets of APAC. The Parent Guarantor is providing a limited-recourse guarantee for the obligations under the Notes, and APAL is not a guarantor of the Notes. The Parent Guarantee is limited to the total amount available to holders of Notes as a result of a realisation of the APAC Share Mortgages, which includes a mortgage on the shares of APAH, which owns 90% of the shares of APAL, which in turn owns and operates Launceston Airport. The assets of APAL do not secure the obligations under the Notes. See Description of the Security. 70

79 Selected statement of cash flows data for APAC (1) As at 31 December As at 30 June (A$ millions) (A$ millions) (A$ millions) (A$ millions) (A$ millions) Cash flows from operating activities Receipts from customers Payments to suppliers and employees (171.0) (194.5) (347.0) (266.0) (246.2) Income tax received/(paid) (33.9) (36.8) (75.7) (76.0) (74.9) Interest received Interest and other costs of finance paid (89.0) (92.5) (182.7) (175.6) (164.7) Net cash provided by operating activities Cash flows from investing activities Payment for property, plant and equipment (75.5) (150.5) (225.2) (694.3) (402.5) Proceeds from sale of property, plant and equipment Payment for investment property (14.5) (22.6) (41.1) (117.2) (17.5) Payment for master plan (0.7) Net cash used in investing activities (90.0) (171.2) (264.4) (811.5) (420.6) Cash flows from financing activities Proceeds from borrowings Repayment of borrowings (419.0) (300.0) (302.5) (100.0) (390.0) Payment for debt issue costs (5.4) (1.8) (1.9) (9.6) (17.1) Dividend paid (105.3) (75.0) (158.0) (185.4) (167.7) Net cash provided by/(used in) financing activities..... (86.6) 40.2 (47.4) Net increase/(decrease) in cash (1.7) 3.7 (69.7) 69.9 Cash at the beginning of the financial year Cash at the end of the financial year (1) All figures are shown for APAC, which comprises both Melbourne and Launceston airports. For the year ended 30 June 2016, Melbourne Airport represented approximately 97% of the revenues and 98% of the assets of APAC. The Parent Guarantor is providing a limited-recourse guarantee for the obligations under the Notes, and APAL is not a guarantor of the Notes. The Parent Guarantee is limited to the total amount available to holders of the Notes as a result of a realisation of the APAC Share Mortgages, which includes a mortgage on the shares of APAH, which owns 90% of the shares of APAL, which in turn owns and operates Launceston Airport. The assets of APAL do not secure the obligations under the Notes. See Description of the Security. 71

80 Financial metrics and operating information Set forth below are the financial metrics that APAC uses to monitor the performance of APAC s business as at 30 June 2014, 2015 and These ratios are calculated using the same method as contemplated by Melbourne Airport s debt facilities, as applied to APAM. As at 30 June 2016 As at 30 June 2015 As at 30 June 2014 Gearing Ratio % 33.5% 32.8% Cash Flow Cover Ratio (1) x 2.7x 2.9x Tangible Net Worth (A$ millions) ,105 5,987 4,936 Debt/EBITDA (2)(4) x 5.5x 4.6x FFO/Net Debt (3) % 10.2% 12.6% (1) Calculation of EBITDA(4) per APAM s debt facilities is EBITDA for period less tax paid or payable. (2) Debt/EBITDA is not a financial metric that APAC uses internally, and is being provided for illustrative purposes only. (3) FFO/Net Debt: Net Profit After Tax and Depreciation Expense and Gain/Loss in Investment Property and Income Tax Expense less Income Tax Paid divided by Net Debt. (4) EBITDA is defined as profit before borrowing costs, tax, depreciation, amortisation and the change in fair value of investment property. EBITDA is presented in APAM s financial statements as Operating Profit. Set forth below are APAC s international and domestic passenger numbers for the years ended 30 June 2012, 2013, 2014, 2015 and Figures are for APAC and include both Melbourne and Launceston airports. For the year ended 30 June 2016, Melbourne Airport accounted for approximately 95% of the domestic passengers and 100% of the international passengers of APAC. (millions of passengers) Year ended 30 June 2016 Year ended 30 June 2015 Year ended 30 June 2014 Year ended 30 June 2013 Year ended 30 June 2012 International Domestic Total passenger numbers

81 Overview DESCRIPTION OF THE GROUP APAC owns Melbourne Airport, Australia s second largest airport by passenger numbers, located in the State of Victoria. APAC also owns 90% of Launceston Airport, which is the second largest airport in the State of Tasmania by passenger numbers. APAC s airports currently support 31 airlines and handled approximately 35 million passengers in the year ended 30 June 2016, consisting of approximately 9 million international and 26 million domestic passengers, which represented approximately 26% of all international passengers travelling to and from Australia, and approximately 22% of all domestic passengers travelling within Australia. Both Melbourne and Launceston airports are operated under fully prepaid, 50-year leases from the Australian Government, each with a free option to extend the lease for an additional 49 years. Melbourne Airport is APAC s primary asset, representing 97% of its total revenue for the year ended 30 June 2016 and 98% of its total assets as at 30 June 2016, with Launceston Airport representing the balance. Melbourne Airport Melbourne Airport is Australia s second largest airport, the 20th largest airport in the Asia-Pacific region and the 54th largest airport in the world, as measured by passenger numbers for the year ended 30 June Melbourne Airport is the principal gateway to Melbourne, Australia s second largest city, with a population of more than four million people, and handles approximately 96,000 domestic and international passengers per day. Melbourne has a large, diversified industry base and, together with its surrounding areas, is a leading tourist destination in Australia. Currently, 31 airlines operate 830 international and 3,578 domestic flights weekly to over 66 destinations from Melbourne Airport, consisting of 32 domestic and 34 international destinations. During the year ended 30 June 2016, Melbourne Airport handled approximately 34 million domestic and international passengers, and Launceston handled approximately one million domestic passengers. There were 238,000 aircraft movements and over 275,000 tonnes of air freight at Melbourne Airport, which represented 36% of the total Australian export air freight market. Melbourne Airport is primarily an origin destination airport, and operates free of a regulated aircraft movement cap or curfew, which enables it to operate 24 hours per day, 365 days per year. Melbourne Airport is the only major airport located in the State of Victoria with a licence to operate internationally. With no other major international airport within at least a 460 kilometre (285 mile) radius, Melbourne Airport acts as a major international passenger gateway to south eastern Australia and is also the primary domestic airport located in the State of Victoria. Situated approximately 22 kilometres (14 miles) outside of Melbourne s central business district, Melbourne Airport has direct access to Melbourne s primary road and freeway network, enabling relatively easy transportation to and from the airport. Melbourne Airport occupies the second-largest site of any major Australian airport, comprising 2,465 hectares (6,091 acres) of land, with two runways, 21 international aircraft stands, and 61 domestic aircraft stands. Melbourne Airport s terminal building structure currently comprises a central international terminal, T2, with two interconnecting domestic terminals, T1 (leased to Qantas) and T3. A third domestic terminal, T4, which opened in August 2016 and is focused on low cost carrier (LCC) airline customers and currently occupied by Jetstar and Tigerair, is situated approximately 200 metres from the main terminal building. Melbourne Airport has a substantial retail operation, with a total net lettable area of approximately 15,209 square metres (163,708 square feet) of retail space, which was 100% leased as at 30 June Melbourne Airport also provides approximately 24,406 car parking bays. Given its land holding, the Issuer has significant scope to further develop the facilities at Melbourne Airport to meet long-term expectations for passenger growth. Launceston Airport APAC acquired a 90% stake in Launceston Airport in 1998, in partnership with the Launceston City Council, which retains a 10% stake in the airport. Launceston Airport sits on 180 hectares (480 acres) of land, and has a single runway, five domestic aircraft stands and can accommodate aircraft up to the size of a B737 or A321. An additional three aircraft can also be accommodated on the freight apron. The airport is located 15 kilometres from the city centre in northern Tasmania. As a major freight hub for Tasmania, Launceston Airport also directs freight traffic into Melbourne Airport, which is subsequently exported to destinations around the world. During the year ended 30 June 2016, Launceston Airport handled approximately 1.3 million domestic passengers and 16,000 aircraft movements. Currently, three domestic airlines operate 317 flights weekly to seven domestic destinations from Launceston. 73

82 Growth in passenger numbers Passenger numbers are the primary driver of APAC s revenues. Aeronautical fees are generally calculated on a per-passenger basis. Passenger numbers are also a key driver of the revenue generated from APAC s nonaeronautical business, as those revenue streams rely on travellers purchasing goods from retail outlets and using car parking facilities and ground transportation services at Melbourne Airport and Launceston Airport. Since the privatisation of Melbourne Airport and Launceston Airport in 1997 and 1998, respectively, total passenger numbers have increased from 14 million in the year ended 30 June 1997 to approximately 35 million in the year ended 30 June 2016, growing at a CAGR of 4.9%, with international and domestic passengers growing at CAGRs of 7.3% and 4.3%, respectively, over that time. Melbourne Airport s growth in international passenger numbers was higher than any other Australian east coast airport over the same period, compared to CAGRs of 4.2% and 4.6% for Sydney Airport and Brisbane Airport, respectively, over the same period. Sydney Airport and Brisbane Airport are APAC s main competitors for international traffic. Melbourne Airport and Launceston Airport Historical Passenger Numbers for the years ended 30 June (millions) Source: APAC Domestic - Melbourne Airport International - Melbourne Airport Domestic - Launceston Airport This growth in passenger numbers, along with APAC s commitment to the ongoing expansion of its nonaeronautical businesses, has seen its total revenues increase from A$145 million in the year ended 30 June 1998 to A$861 million in the year ended 30 June 2016, which equates to a compound annual increase of 9.8% over that period. 74

83 APAC revenues for the years ended 30 June (A$ million) Note: For each of the years shown, revenues from Launceston Airport for aeronautical, retail and property revenue comprised approximately 3% of APAC s total revenues for aeronautical, retail and property and other revenue, respectively. Property comprises Property, Rental, Outgoings/Recharge, Other Revenue and Interest income. Business divisions APAC s operations comprise of three segments: Aeronautical services (including core airport infrastructure); Retail activities (including but not limited to retail at its terminals, parking and ground transport and car rental); and Property operations. Aeronautical Retail Property & other revenue Set out below is the breakdown of APAC s aeronautical, retail and property management revenues for the year ended 30 June APAC s revenues for the year ended 30 June 2016 Property & other revenue 16% A$138.6 million Aeronautical 46% A$396.9 million Retail 38% A$325.9 million Total=A$861.3 million Note: For the year ended 30 June 2016, revenues at Launceston Airport were A$22.2 million, with 54% earned from aeronautical fees, 38% from retail and 8% from property and other revenue. Launceston Airport revenues for this period accounted for approximately 3% of APAC s total revenues. Aeronautical comprises Aeronautical and Security revenue. Property comprises Property, Rental, Outgoings/Recharge, Other revenue and Interest income. 75

84 Aeronautical services APAC (through its subsidiaries) provides aeronautical services to its airline customers, with revenue primarily generated from aircraft movement charges and terminal use charges. APAC s aeronautical operations serve 31 passenger airlines, both domestic and international, its largest domestic airline customers by passenger numbers are the Qantas Group (which includes both Qantas and Jetstar), and the Virgin Group (which includes Virgin Australia and Tigerair), which collectively serve the vast majority of its domestic passengers. APAC s largest international airline customers by passenger numbers are the Qantas Group, Emirates Airlines, Singapore Airlines and Air New Zealand, which together serve approximately 52% of its international passengers. Aeronautical services, including the costs of aeronautical security, which APAC on-charges to airlines, accounted for 46% of APAC s revenues for the year ended 30 June 2016, or A$396.9 million, of which Melbourne Airport accounted for 97%. Aeronautical fees are principally charged to passenger airlines on a per-passenger basis. International passenger charges are generally higher than those applicable to domestic passengers and are therefore an important component of APAC s aeronautical revenues. APAC s aeronautical charges for all of its passenger airline customers comprise of two main components: airfield charges and terminal charges. Both components are charged on a per-passenger basis. All of Melbourne Airport s passenger airline customers are signatories to ASAs, which govern the airfield charges for the use of its airfield by all of its domestic and international airline customers, and the terminal charges for the use of T2, its international terminal. Terminal charges for the use of T3 and T4 are imposed pursuant to Terminal Facility Agreements (TFAs) with APAC s passenger airline customers. APAC does not charge terminal charges for the use of T1; instead, the Qantas Group rents T1 from Melbourne Airport pursuant to the T1 Lease (lease expiry December 2018). APAC also charges aeronautical fees from aeronautical operations through engineering and operations, through the property business lounges and airline offices as well as to freight aircraft based on their maximum take-off weight. Retail activities Retail revenue is derived from retail outlets in APAC s terminals (including duty free and specialist shops, food and beverage and currency exchange), car parking, car rental businesses, ground transport services and advertising. Retail operations comprised 38% of APAC s revenues for the year ended 30 June 2016, of which Melbourne Airport accounted for 97%. APAC has recorded growth in retail revenue from A$58 million in the year ended 30 June 1998 (its first financial year following full privatization) to A$325.9 million in the year ended 30 June 2016, reflecting a CAGR of 10.1% over the past 18 years. This growth has been achieved through a combination of an increase in the retail footprint in T2 and T3, the opening of the T4 terminal, improved marketing of the retail service offering, and an investment in car parking assets. Retail revenue from APAC s terminals is generally supported by minimum guaranteed rents, together with a percentage of retailers sales over and above the minimum guaranteed rents. Melbourne Airport currently has approximately 24,400 car parking bays under management. Car parking and ground transport revenue accounted for 58% of APAC s total retail revenue in the year ended 30 June 2016, and has been supported by the growth in the number of passengers at Melbourne Airport and the high utilisation of personal vehicles as a transportation mode to and from Melbourne Airport, particularly by domestic passengers. Property operations Property revenue provides a long-term, stable income stream that is not primarily driven by short-term changes in passenger numbers. Property and other revenue represented 16% of APAC s total revenue for the year ended 30 June 2016, which included rent from the T1 Lease as well as commercial rentals from properties developed elsewhere on the Melbourne Airport site. Rent paid by the top 3 lease holders contributed approximately 20% to APAC s property revenue. Other property revenue is derived from property leased at Melbourne Airport from hotels, freight facilities, maintenance bases, industrial warehouses and ground leases. Competitive strengths APAC believes that it has the following competitive strengths: Strong market position Melbourne Airport is Australia s second largest international and domestic airport, measured by passenger numbers for the year ended 30 June Approximately 26% of all international passengers flying to and from Australia and 22% of all Australian domestic passengers used Melbourne Airport in the year ended 30 June Melbourne Airport is the only major international airport in the State of Victoria and there is no other major international airport within at least a 460 kilometre (285 mile) radius. Melbourne Airport is the primary domestic airport in Victoria, located 22 kilometres (14 miles) from Melbourne s central business district and readily accessible by road 76

85 transportation, with direct access to Melbourne s major road and freeway network. APAM s airline customers offer Melbourne Airport passengers an extensive network of more than 60 domestic and international locations, with 748 international and 3,392 domestic flights weekly. Melbourne Airport forms a key component of the domestic Australian aviation market, including the Melbourne to Sydney route, the fourth busiest air route globally when measured by seat numbers for the year ended 30 June 2016, according to IATA. Australia s geographic isolation from other countries, its highly urbanised population and the significant distance between major population centres makes alternate modes of transport either not viable or uneconomical, further supporting APAC s strong passenger numbers. APAC s strong market position is underpinned by regulatory and operational factors that collectively support Melbourne Airport s attractiveness for passenger and freight airline customers. In particular, APAC believes that Melbourne Airport is the largest airport in Australia to provide 24 hour a day, 365 days per year curfew-free service. Unlike other Australian airports, Melbourne Airport is not subject to any regulations that cap the number of aircraft movements undertaken per hour or impose a curfew. Melbourne Airport s ability to operate without any externally imposed capacity constraints delivers significant benefit to APAM airline customers and travellers. Having the ability to operate 24 hours a day allows flights to and from Melbourne Airport to link into the Asian, Middle Eastern and European networks which provides more flexibility for airlines to meet connecting schedules to overseas hubs, provides opportunity for Melbourne s time critical exports to be timed to meet overseas markets, and enables Melbourne Airport to accommodate more international flights that may be subject to curfews at origin or hub airports. Melbourne Airport s curfew-free status and single-roof terminal precinct including the ability to develop additional runway capacity (subject to relevant approvals) on the existing site is a material factor which will support commercial negotiations to attract new services to Melbourne Airport. Strong and diverse passenger base APAC s airports primarily serve origin-destination traffic, which accounts for approximately 90% of passengers travelling through both Melbourne Airport and Launceston Airport. APAC believes that the high percentage of origin-destination traffic at its airports contributes to the relative resilience of its passenger numbers, as hub airports that serve more transit passengers carry a greater risk that their customers may shift to alternate airports if more convenient or direct services become available over time. APAC believes that origin-destination traffic also typically offers greater opportunities for retail and car parking operations to earn revenue, as its passengers are more likely to use its car parking and retail facilities. APAC serves a mix of domestic and international passengers, including those traveling for both business and leisure reasons. APAC s experience has been that in periods of downturn in a specific market segment such as business travel, its passenger airline customers have used pricing strategies to stimulate other market segments such as leisure travel, as airlines look to absorb available seat capacity. These strategies help mitigate any potential reduction in overall passenger numbers. For example, during the global financial crisis beginning in 2008, in response to declining demand for business travel, airlines lowered their prices, which led to an increase in passengers traveling for leisure. Melbourne Airport also serves a mixture of Australian and non-australian nationals traveling internationally, both inbound and outbound, which APAC believes leaves it less exposed to exchange rate fluctuations. Resilient and growing passenger base APAC s revenues are largely driven by its passenger numbers. In the ten-year period ended 30 June 2016, the CAGR in passengers at its airports was 4.2%, as compared to Australian GDP growth of 2.8% for the same period, with domestic and international passengers growing at a CAGR of 3.9% and 7.7%, respectively, over the period. Total passenger numbers across APAC s airports reached more than 35 million for the year ended 30 June 2016, an increase of 5.2% over the total of 33 million passengers for the prior year. Melbourne Airport has a growing passenger base, with Melbourne s population increasing by over 800,000 in the past ten years to over 4.5 million according to the Australian Bureau of Statistics as of 30 March APAC expects that demand for air travel will continue to exceed Australian GDP growth due to, among other things, rising incomes in Australia, historically low airfares, the continued liberalisation of bilateral air rights, more international travellers and a growing propensity to travel among an aging and relatively wealthy Australian population. The Australian population is also expected to continue to grow. The geography of Australia, particularly the vast distances between its population centres, often leaves passengers with no practical alternative to air travel. In addition, Melbourne is among Australia s most multicultural cities, with residents from more than 140 countries, 77

86 which APAC believes creates a disposition to travel and also contributes to inbound traffic at Melbourne Airport. APAC believes that all of these factors will continue to support growth in its passenger numbers. Strength in International passenger growth Since the privatisation of Melbourne Airport, international passenger numbers have increased from 2.4 million in the year ending 30 June 1997 to approximately 9.2 million in the year ended 30 June 2016, growing at a CAGR of 7.3%. Melbourne Airport s growth in international passenger numbers was higher than any other Australian east coast airport over the same period, compared to CAGRs of 4.2% and 4.6% for Sydney Airport and Brisbane Airport, respectively, over the same period. Melbourne Airport is supported in its international passenger growth efforts by a strong working relationship with the State Government of Victoria, the City of Melbourne and local tourism bodies. These bodies recognise that air links help drive economic growth in Victoria, and accordingly they work with Melbourne Airport to promote new routes and additional capacity to Melbourne. International Inbound Passengers CAGR FY10-16 Growth internationally from Australia s strong traditional relationships with countries such as the United Kingdom and the United States, and its close proximity to New Zealand, has supported international business and leisure passenger numbers at APAC s airports. The charts below (source DIAC country of residence) demonstrates, Melbourne Airport s passenger numbers have been growing across all regions (CAGR FY10-FY16) with a diversified mix of passengers from all regaions as at the year ending 30 June Australia North East Asia SouthEast Asia 54.6% 8.2% FY10-16 CAGR 12.5% 17.6% FY10-16 CAGR 12.2% 9.7% FY10-16 CAGR Europe NZ Pacific Americas / Middle East / Africa / Other 7.9% 5.2% FY10-16 CAGR 7.8% 3.5% FY10-16 CAGR 5.0% 6.4% FY10-16 CAGR More recently, Australia s close proximity, accessibility and growing ties to Asian countries, including China and India, has seen strong growth in inbound passengers from those countries, with direct routes to cities within those countries being within the range of long-haul flights. The below chart identifies the top 5 global origins of inbound international passengers to Melbourne Airport as at 30 June Top 5 Global origins Global international passengers by country (thousands) as at 30 June 2016 Source: DIAC Note: Represents inbound international visitors by country of residence to/from Melbourne Airport 78

87 Growing relationships in new markets Australia s strong traditional relationships with countries such as the United Kingdom and the United States, and its close proximity to New Zealand has supported international business and leisure passenger numbers at APAC s airports. More recently, Australia s close proximity, accessibility and growing ties to Asian countries, including China and India, has seen strong growth in inbound passengers from those countries, with direct routes to cities within those countries being within the range of long-haul commercial aircraft such as the B747, B777, B787, A330, A350 and A380. China (at 8.8% for the year ending 30 June 2016 (source DIAC)) is now the largest source of international passengers at Melbourne Airport, with New Zealand coming in second (at 7.4% for the year ending 30 June 2016 (source DIAC)). Melbourne Airport has also been seeking to attract airlines from the Asian region to Melbourne Airport, particularly those serving rapidly growing geographic areas. For the year ended 30 June 2016, the top 5 destinations for Asian countries were China, Malaysia, Singapore, India, and Indonesia. APAC has secured additional new weekly services and upgauging of existing services over the last three years. Below is a sample of new services secured in the past three years: 19 additional services across Asia (including Narita, Phuket and Taipei); six additional services across India. APAM continues to negotiate commercial agreements to secure services in both new and under serviced growing markets. High quality asset base with scope to develop additional capacity Melbourne Airport occupies one of the largest airport sites in Australia, which comprises 2,465 hectares (6,091 acres) of land, with two runways, 21 international aircraft parking positions (called stands) and 61 domestic aircraft stands. With some 400 hectares (988 acres) zoned commercial with over 300 hectares (741 acres) available for further development (or 12% of the total airport site), Melbourne Airport is not land capacity constrained and APAM has significant scope to further develop Melbourne Airport to grow commercial revenue. APAM is currently developing the Melbourne Airport 2018 Master Plan which is due for submission and approval by the Australian Government by December The key theme of the Master Plan is to ensure that the airport can continue to serve additional passengers, new aircraft and more flights over the next 20 years. Many of the key investment programmes outlined in the 2013 Master Plan-Refer to Master Plan section for additional detail) have been completed. A key component of the 2013 Master Plan is the development of a new east-west runway and the extension of the existing east-west runway. The proposed new runway which is subject to Commonwealth Government approval will increase the overall capacity at the airport within the existing site and is expected to facilitate at least 335, ,000 aircraft movements a year. Melbourne Airport is not land constrained which is a competitive strength. Transparent and stable regulatory and contractual environment Regulatory environment APAC s airports operate under a stable and light handed regulatory environment known as the dual-till system. Under this system, prices for aeronautical till (assets) are commercially negotiated with airlines, with the outcomes monitored by, but not subject to the approval of, the ACCC. The dual-till system and the removal of price caps have incentivised investment and growth in Melbourne Airport and continue to benefit APAM s airline customers and passengers. In addition, the Productivity Commission (which was established by the Australian Government in 1998 as an independent research and advisory body on a range of economic, social and environmental issues in Australia) periodically reviews the effectiveness of the regulatory regime for Australian airports and the need for future airport price regulations, including advising on any changes to the regulatory regime. The Productivity Commission most recently found in March 2012 that the light handed regulatory approach has increased aeronautical investment since the removal of price caps in APAC s non-aeronautical revenue streams (retail and property management) are unregulated and subject to market forces and commercial negotiation. The ACCC undertakes price, financial reporting and quality of service monitored for aeronautical services and airport car parking at Melbourne Airport. Car parking prices are monitored by, but are not subject to the approval of, the ACCC. Contractual environment APAC operates its airports pursuant to a set of contracts and contracting practices that offer it long-term stability. Each of APAC s airports is operated pursuant to a 99-year arrangement with the Australian Government, which includes a 50-year lease with a fully prepaid option to renew for a further 49 years. In addition to the long-term 79

88 lease arrangement, APAC also benefits from Tripartite Deeds with the Australian Government, pursuant to which the Australian Government consents to APAC granting security interests over its assets. The long-term lease agreements and Tripartite Deeds are enhanced by the regulatory requirement to publish master plans for both Melbourne Airport and Launceston Airport every five years. Each master plan sets out the strategic plan for each airport over the next 20 years. APAM s 2013 Master Plan covers the proposed development of Melbourne Airport through 2033 and documents APAM s plans for, among other things, the construction of a third runway. See Description of the Group Melbourne Airport 2013 Master Plan. In addition to the leases with the Australian Government, APAC also operates its businesses pursuant to stable long-term contracts with its airline customers and with its suppliers, vendors and tenants. Stable and diversified revenue base APAC s airports reported revenue and EBITDA for the year ended 30 June 2016 of A$861.3 million and A$607.4 million (excluding investment property revaluation), respectively. APAC s resilient, growing passenger numbers have underpinned the consistent growth in its earnings over time. APAC has invested and continues to invest in developing all of its revenue streams in order to ensure that it is not overly reliant on revenue from aeronautical charges. Revenue from retail operations, including parking and ground transport, accounted for 38% of APAC s total revenue in the year ended 30 June 2016, while revenue from property services, management and operations accounted for 16% of APAC s revenue in the year ended 30 June Strong capital structure APAC has been rated A- by Standard & Poor s (S&P) and A3 by Moody s since APAC currently enjoys the strongest ratings from S&P and Moody s of any airport in Australia. APAC s current debt facilities are diversified across markets, lenders and types of funding, and APAC is not dependent on any single debt market. APAC believes that maintaining diversified debt funding and strong capital structure is important to its overall funding strategies for the future growth and development of APAC s airports. APAC believes that it is able to manage its investment and funding strategies in a manner that enables APAC to increase or decrease capital expenditure as passenger numbers and other demand conditions change over time. APAC has the option to retain a portion of eligible dividends in order to prioritise cash flow and capital expenditure requirements. Experienced senior management team and Board APAC is led by a management team with significant experience working across the airport and aviation industries. The Chief Executive Officer of APAC, Lyell Strambi, has been employed at APAC since September 2015 and has over 30 years of experience in the aviation industry. APAC s Chief Executive Officer is supported by an experienced executive team across the aviation and commercial sphere. Each executive has accountability for profitability across associated business lines including aviation, retail, parking and ground transport and property. APAC s Board comprises representatives of APAC s shareholders, who are all highly experienced employees of some of the world s largest institutional infrastructure investment vehicles. They bring a wide range of skills and experience to APAC s Board and are committed to achieving a high standard of corporate governance and diligence within the business. APAC s shareholders are principally long-term investors in APAC. Business strategies Melbourne Airport is Victoria s gateway to the world, and a vitally important piece of strategic infrastructure. Its curfew-free operation and location are key competitive advantages that not only benefit the airport but also the state of Victoria, enabling tourism, freight and trade 24 hours a day. Growth in international passengers at Melbourne Airport has outstripped that of other Australian airport over the past decade. Strong growth in passenger numbers is expected to continue, driven in particular by economic growth in international markets, developments in aviation technology and the attractiveness of Melbourne as a destination for international carriers. The technological advancements driving greater fuel efficiency and aircraft range has transformed the economics of point-to-point air travel, enabling new direct services to Melbourne from ports throughout Asia, as well as opening up new potential routes across India, as well as North and South America. 80

89 As more of these new aircraft enter service, Melbourne Airport will be able to directly tap into a growing population of travellers with the means to afford international travel to Australia as a result of continued global economic growth, particularly in Asia. The Aviation business and its ability to capitalise on these positive demand drivers is at the core of APAC s strategy. While Aviation is the core of APAC s strategy, the Retail, Parking and Ground Transport (PGT) and Property business units play a critical role in the ability of APAC to deliver on aviation growth by developing: car parking, road and forecourt infrastructure to facilitate aviation growth; a retail offering aimed to improve traveller experience; and assets to add utility value for airline travellers e.g. hotels and other amenities. The Retail, PGT and Property business units not only help to facilitate aviation growth, they are significant contributors to APAC s financial performance. APAC s corporate strategy: Aviation Enhance engagement and partnerships: APAC is committed to working closely together with both airlines and tourism bodies to develop new routes in growth markets to fully capitalise on the current opportunities in Asia, India as well as North and South America. Improve the traveller experience: The traveller experience is at the heart of our planning and operations to ensure that those travelling through Melbourne and Launceston Airports have a hassle-free experience and will choose to travel through our airports time and time again. Improve access to the airport: Easy access to the airport is a critical part of the traveller journey and APAC is committed to developing its internal road infrastructure in line with traveller growth and also working with the government and authorities to develop improved solutions for the future. Government and community support for new infrastructure: With strong passenger growth forecasts, support from Government and the local community is vital to ensuring the timely provision of both on and off airport infrastructure. APAC is continuing to work with all stakeholders to ensure that the development of the airport has the maximum benefit for local communities and the State of Victoria as a whole. Infrastructure delivery at the right time at the right price Given the capacity intensity of the APAC business, management is focused on optimising the utilisation of existing infrastructure. New infrastructure will be commissioned in a timely manner to capture traveller growth while providing value to customers and through improved traveller experience. Optimise and grow retail, parking and ground transport and property business lines significant potential remains in each of APAC s business units Car parking and ground transport Further optimisation of car park utilisation and capturing value from new variations of ground transport. Retail to continue to expand the retail footprint in both the domestic and international terminals. Property to develop APAC s extensive land bank in the quickest and most efficient manner that adds value to APAC, its customers and the community. Drive efficiency throughout our business APAC is committed to continuous improvement and will continue to invest in key systems, process, technology and people to improve its service standards, reduce costs and improve customer and traveller experiences. Underpinning our business strategies, APAC manages our capital structure effectively. We utilise our strong business risk profile and strong and stable cash flows to maintain an efficient capital structure, providing financial flexibility. Our financing objectives include: Continue to leverage and diversify its sources of funding; Effectively manage the debt maturity profile; 81

90 Maintaining sufficient liquidity; Maintaining a strong investment-grade credit rating(s); and Minimising its cost of capital. Principal Operations and Revenue Streams Passenger overview While APAC s revenue is sourced from multiple businesses, all of its revenue, other than revenue from property operations, is primarily driven by passenger numbers. Increases in its passenger numbers have historically led to greater revenues from its aeronautical and retail (including ground transportation and car parking) businesses. For the year ended 30 June 2016, APAC accommodated 35 million passengers. As set forth in the graph below, the total passenger growth at Melbourne Airport from the year ended 30 June 1971 to the year ended 30 June 2016 at a CAGR of 5.6%. As the chart below demonstrates, Melbourne Airport s passenger numbers have stayed resilient in the face of strong adverse shocks to both the demand and supply for air travel, and it has typically seen a recovery of passenger numbers and a return to passenger number growth within 12 months of the adverse shocks. Melbourne Airport historical passenger numbers for the years ended 30 June (millions) Compass Collapse Australian Pilot Strike SARS September 11 Attacks Collapse of Ansett Airlines Tigerair Suspended Global financial crisis Source: APAC Domestic International Total The adverse events noted in the chart above are detailed below: Australian Pilot Strike: a strike, beginning in August 1989 and continuing through November 1989, of the Australian Federation of Air Pilots, comprising pilots for Australian Airlines (which was later merged into Qantas), Ansett Airlines, East-West Airlines (which was later merged into Skywest) and IPEC (now part of the Toll Group), which significantly disrupted passenger air travel for its duration. Compass Collapse: the bankruptcy in March 1993 of Compass Airlines, a low-cost carrier in Australia. September 11 Attacks: the attacks on the World Trade Center on 11 September Collapse of Ansett Airlines: the bankruptcy in March 2002 of Ansett Airlines, at the time, the second-largest Australian airline. SARS: concern over Severe Acute Respiratory Syndrome, a highly contagious virus, which caused many governments to recommend against travel to and from Asia during 2002 and Global Financial Crisis: the global economic recession that began in Tiger Suspended: the suspension of Tigerair by CASA for safety concerns in July

91 International For the year ended 30 June 2016, Melbourne Airport accommodated approximately 9.2 million international passengers. This represented 26% of all international passengers flying to and from Australia in that year, according to DIAC. Total international passenger number growth from the year ended 30 June 1997 to the year ended 30 June 2016 was 7.3% per annum. The composition of Melbourne Airport s international passengers is diverse in terms of nationalities represented. According to DIAC Visitors by Country of Origin, for the year ended 30 June 2016, approximately 54.6% of APAM passengers were from Australia, approximately 9% of its passengers were from China, approximately 7% of its passengers were from New Zealand, approximately 3.5% of its passengers were from the United Kingdom, and approximately 3% of its passengers were from Malaysia. No other country represents more than 3% of APAM passengers. Below is a chart showing the numbers of passengers over the past five years from China, New Zealand, the United Kingdom, Malaysia and Singapore, which, after Australia, are the five highest-represented nationalities of APAM passengers. For the periods displayed on the chart, Australian nationals represented between 55% and 58% of APAM international passengers. International arriving passengers by country of residence (not including Australian nationals) for the years ended 30 June , , , , , , , ,000 Source: DIAC Domestic and regional For the year ended 30 June 2016, Melbourne Airport accommodated approximately 24.7 million domestic passengers. This represented approximately 22% of all Australian domestic passenger numbers in that year. The total domestic passenger number growth CAGR from the year ended 30 June 1997 to the year ended 30 June 2016 was 4.3%. Airline customers Melbourne Airport is used by a variety of international and domestic commercial airlines, as well as cargo carriers and charter aircraft. Across the international and domestic spheres, a total of 31 commercial passenger airlines used Melbourne Airport as at 30 June For the year ended 30 June 2016, approximately half of APAM s passengers were handled by the Qantas Group, which operates Jetstar and approximately 30% of APAM s passengers were handled by the Virgin Group, which also operates Virgin Australia and Tigerair. No other airlines handled more than 10% of passengers for that period. International passenger airlines China New Zealand UK Malaysia Singapore As at 30 June 2016, 29 commercial passenger airlines provided international services to and from Melbourne Airport. During the year ended 30 June 2016, there were on average 3,578 weekly international aircraft movements 83

92 involving Melbourne Airport. Of the 29 carriers, the Qantas Group (comprising Qantas and Jetstar) had the most international passengers at Melbourne Airport for the year ended 30 June 2016, with approximately 25% of international passengers for that year. No other commercial passenger airline or airline alliance was responsible for more than 10% of international passenger numbers for the year ended 30 June Domestic passenger airlines As at 30 June 2016, six commercial passenger airlines provided services between Melbourne Airport and 32 domestic destinations. By passenger numbers, the Melbourne to Sydney route is the busiest domestic route in Australia and the fourth busiest route worldwide by seat numbers for the year ended 30 June During the year ended 30 June 2016, there were 186,070 domestic aircraft movements involving Melbourne Airport. The two largest airline groups, the Qantas Group (including Jetstar) and Virgin Group (including Virgin Australia and Tigerair), controlled the large majority of domestic passenger numbers during the year. Low-cost carriers Over the past ten years, LCCs, such as Jetstar and Tigerair, have significantly increased their market share in both the domestic and international markets. For the year ended 30 June 2016, LCCs accounted for 20% of international passengers and 35% of domestic passengers at Melbourne Airport. The operation of Terminal 4 will continue to support the growth within the LCCs with capacity up to ten million passengers per annum. Freight Melbourne Airport serves the largest volume of export air freight in Australia. In the year ended 30 June 2016, 275,000 tonnes of freight passed through Melbourne Airport, which represented 36% of the total Australian export air freight market. As at 30 June 2016, Melbourne Airport s three international freight stands served four dedicated freight carriers. There were 6,856 total freight aircraft movements (international and domestic) during the year ended 30 June Dedicated freight carriers represented approximately 2.9% of the total aircraft movements at Melbourne Airport for the year ended 30 June Dedicated freight carriers represent approximately 15% of the freight carried through Melbourne Airport. The remaining 85% of freight is carried on passenger airlines. APAC charges dedicated freight carriers based on the Maximum Take-off Weight (MTOW) of their aircraft. For the year ended 30 June 2016, APAC derived approximately A$3.3 million in revenues from dedicated freight carriers, which represents less than 1% of APAC s total aeronautical revenues for that year. General aviation General aviation traffic (including helicopters, business jets and air ambulances) accounts for a small share of movements approximately 0.5% of total aircraft movements at Melbourne Airport for the year ended 30 June General aviation flights are unscheduled and use excess airport capacity as available. APAC levies revenues on general aviation on a per-movement basis, based on their MTOW. For the year ended 30 June 2016, general aviation accounted for A$0.5 million in revenue, which represented approximately 0.1% of APAC s aeronautical revenues for that year. 84

93 Principal revenue overview Aeronautical services Aeronautical services represented A$396.9 million or 46% of revenue for the year ended 30 June 2016, including A$47.6 million of security revenue. A breakdown of the sources of aeronautical revenue (excluding security revenue) is illustrated in the following chart: Breakdown of sources of aeronautical revenue (excluding security revenue) for APAC for the year ended 30 June % 1% International Per-Passenger 54% Domestic Airfield Per-Passenger Domestic Terminal Charges for T3 and T4 31% Other Note: For the year ended 30 June 2016, revenues at Launceston Airport were A$22.2 million, with 54% earned from aeronautical fees, 38% from retail and 8% from property. Launceston revenues for this period accounted for 3% of APAC s total revenues. Aeronautical charges APAM s aeronautical charges for all of its passenger airline customers comprise two main components: airfield charges and terminal charges. Both components are charged on a per-passenger basis. All of the Melbourne Airport s passenger airline customers are signatories to ASAs, which govern the airfield charges for the use of its airfield, by all of its domestic and international airline customers, and the terminal charges for the use of T2, its international terminal. Terminal charges for the use of T3 and T4 at Melbourne Airport are recovered pursuant to TFAs with APAM s airline customers. APAM does not charge terminal charges for the use of T1; instead, the Qantas Group rents T1 from Melbourne Airport pursuant to the T1 Lease. Revenues from the T1 Lease are reflected in APAC s property revenues. For a discussion of the T1 Lease, see Description of the Group Property Operations Terminal 1. APAM also charges aeronautical fees to freight aircraft based on their MTOW. International aeronautical charges APAM s international aeronautical charges are calculated on a per-passenger basis and are commercially agreed, pursuant to an ASA, normally covering a five year period, between APAM and its international airline customers. The per-passenger charge paid by international airlines is based on an estimation of APAC s operational costs for its existing asset base, its cost of maintenance capital replacement expenditure, its forecast costs of new aeronautical growth capital expenditure. All of APAM s airside capital expenditure is funded through per-passenger aeronautical charges under the ASAs with its airline customers. Approximately 85% of capital expenditure on the roads to Melbourne Airport is currently funded through the ASAs. APAM s international aeronautical charges also include per-passenger charges for security screening, which are directly passed through to airlines. In addition to per-passenger charges, Melbourne Airport derives a small amount of ancillary revenue from fees charged for check-in counters and related equipment to its international airline customers. The current International ASA concludes in June APAM and the airline customers are in current negotiations for the forward ASA period. It is APAC s intention that the ASA will include an agreement to progress the Runway Development Program (RDP). Domestic aeronautical charges APAM s domestic aeronautical charges are calculated and negotiated in a manner analogous to its international aeronautical charges and are calculated on a per-passenger basis. In addition to the charges enumerated in the ASAs, APAM charges operators who use T1, T3 or T4 at Melbourne Airport an additional terminal charge. In the case of T1 at Melbourne Airport, this fee is charged through the T1 Lease, and in the cases of T3 and T4 at Melbourne Airport, this fee is charged on a per-passenger basis pursuant to the TFAs. As with its international aeronautical charges, APAM s domestic aeronautical charges for Terminals 3 and 4 are supplemented or modified by security charges, which are directly passed through to airlines. 85

94 Freight charges Freight aircraft are charged on the basis of their MTOW, which is a pre-determined weight assigned to the aircraft at the time of its registration. At Melbourne Airport, freight aircraft (unlike passenger aircraft) are also charged a parking fee for every 15 minute block they spend parked more than three hours after landing. General aviation charges General aviation includes fixed and rotary wing, powered and unpowered aircraft and other aircraft that are not regular public transport commercial airlines. Under the pricing scheme for general aviation, aircraft are charged an amount based on their MTOW. For the year ended 30 June 2016, general aviation accounted for less than 1% of APAC aeronautical revenues. General provisions of the Aeronautical Service Agreements Melbourne Airport s ASAs with its airline customers all use a schedule of per-passenger charges for RPT services and MTOW for no RPT and freighter services. In addition, they all share a number of other common terms. Current ASAs will expire on 30 June The Issuer is in current negotiations to establish the forward ASA. APAC concluded a TFA with Jetstar aligned to use T4, with the agreement expiry of November APAC is in negotiations regarding the Virgin Group s TFA with an expected contract expiry of June 2025, and Qantas Group T1 Lease due to expire in December Melbourne Airport s ASAs cover the T2 international terminal and the whole of the airfield and landside infrastructure (as used by both international and domestic airlines). Each agreement is an agreement for service and as such Melbourne Airport commits to provide infrastructure at agreed levels of service. For example, it commits to ensuring that 90% or more of all users of T2 will access an aerobridge (as opposed to a bus) when boarding or departing an aircraft. The ASAs allow for capital works not anticipated, and provide a process for negotiating recovery of capital expenditure for such works. The airlines have obligations such as to abide by Melbourne Airport s terminal and airfield conditions of use and payment terms. The airport s obligations include consultations regarding major works and annual reviews held with airlines. Airlines that are not signatories to an ASA must pay charges according to Melbourne Airport s standard terms and conditions, which generally include higher charges and no commitment to service levels than in the ASAs. Retail activities Retail revenue represented A$325.9 million or 38% of APAC revenue for the year ended 30 June Melbourne Airport s retail revenues comprise revenue from three main categories of activities: retail leases, car parking and other retail revenue (including revenue from car rental, ground transportation and advertising). Retail leases Revenue from retail leases represented A$133.8 million, or 41%, of retail revenue for the year ended 30 June As at 30 June 2016, Melbourne Airport housed 96 retail outlets, with approximately 15,209 square metres of retail space, which it leased to retailers. As at 30 June 2016, Melbourne Airport had 52 stores in the international terminal and 44 stores in the domestic terminals, (including the newly developed T4) that it operates (excluding T1, which is managed by the Qantas Group), with 38% of those stores being landside and 62% of those stores being airside. The duty free segment was the principal contributor to retail lease revenues for the year ended 30 June 2016 representing over half of retail lease revenues. APAC retail space was 100% leased as of 30 June 2016, with all leases having a three to five year term remaining. The lease with the Dufry Group (Dufry) will expire in Fee structures General APAC generally derives revenues from retail activities through leases. Each retail operator is generally required to pay the greater of (i) a percentage of the income earned from sales transacted by the business; or (ii) a contractually guaranteed minimum amount, which is either fixed, based on passenger numbers through Melbourne Airport, or a combination of both or based on the previous trading performance. Contract lengths vary, but typically APAC enters into ten-year contracts with duty-free retailers, five-seven year contracts with food or beverage retailers, and typically five-year contracts with other retailers. 86

95 Duty free Dufry were awarded the exclusive tax and duty free concession at T2 until On the basis of sales, Dufry is one of the largest airport duty free retailers in the world and is Melbourne Airport s largest retail customer. APAM derives revenues pursuant to its contract with Dufry through the greater of a percentage of sales or a contractually guaranteed amount per international passenger. Parking and Ground Transport Car parking represented A$187.4 million, or 58% of retail revenue of APAC for the year ended 30 June Car parking is priced per hour or per day and prices vary according to location, length of stay and whether selfparking or valet facilities are used. Melbourne Airport offers an online booking service to its car park customers via the Melbourne Airport website. The system is designed to offer customers a choice of parking alternatives at differing price points. Pricing is generally cheaper than the drive-up rates and customers can pre-pay for this service. Pricing models are constructed to drive revenue yield during peak and off-peak periods. Melbourne Airport determines car parking rates with a view to competition, both from competing off-site car parks as well as other modes of transport. Melbourne Airport car parking prices are not currently subject to government regulation but are monitored by the ACCC. APAM believes that its car parking prices are competitive on the basis of the availability of modal competition (through taxis and buses), the existence of off-airport operators and the proximity of its car parking facilities to Melbourne Airport. Car parking revenues are driven by car parking volumes and the average value of each car parking transaction (ATV). Car parking volumes will depend on the volume of passenger numbers at each terminal and the propensity of passengers to park (calculated as parking events in the respective car parking facility, divided by the total passengers). This can be influenced by a number of factors. Increases in ATV are driven by price increases (generally similar to CPI) and the mix of demand for each parking time band. Car parking bays by product offering as at 30 June 2016: Car Park Percentage of Total Short Term % Long Term % Staff % Car rental As at 30 June 2016, there are five car rental operators operating out of Melbourne Airport. Car rental operators pay APAC a fixed percentage of sales, plus a ready bay rental fee. Ground transportation Melbourne Airport levies an access charge on ground transportation such as private buses, courtesy buses for off-airport car parks, taxis, and private limousines. Melbourne Airport does not impose a charge on public buses entering the airport. Property operations Property operations and other revenue* represented A$138.6 million or 16% of revenue of APAC for the year ended 30 June Melbourne Airport holds 2,465 hectares (6,091 acres) of land in total, of which 400 hectares (988 acres) are zoned commercial with over 300 hectares (741 acres) available for further development. APAC s main sources of property revenue are rents from the airline community, rents from its business park tenants, and rents from other serviced sites (such as the AFP and Customs). APAC s property portfolio is currently valued at over A$1.4 billion as determined by Jones Lang LaSalle, independent property valuers, which includes vacant land valued at approximately A$185 million. APAC does not typically engage in speculative development and it develops property only where it is satisfied that the development has been pre-leased or can be readily leased to a tenant of sound credit standing, at a rental and for a term that represents an appropriate return for its investment. 87

96 APAC derives property revenue by leasing or licensing land and/or buildings to lessees including major logistics and freight companies as well as hotels. It leases sites (where it leases rights to the land to third parties and any related property or developments are owned by tenants) and property (where lessees occupy buildings owned by APAC). Unlike retail revenue, property revenues are based on rental or licence payments. As at 30 June 2016, APAC had over 300 separate leases or licences. Rental payments are negotiated with each individual tenant and rates vary depending upon the nature of the rental space. *Other revenue includes interest revenue and gains on sales of assets where applicable. Occupancy profile As at 30 June 2016, APAC s overall occupancy rate was 97% by net lettable area. Terminal 2 Sites in T2 are leased principally to international airlines for lounge, office, industrial/storage functions, with charges based on the relevant area leased. Terminal 1 T1 is operated under separate long-term lease arrangements with Qantas pursuant to the T1 Lease. The lease was signed in 1988 and extends to December The T1 Lease allows Qantas to undertake terminal improvements over the lease period to cater for the growth of its domestic passenger traffic. At the end of the lease period, T1, together with tenant improvements during the lease period, will revert to Melbourne Airport upon payment of a negotiated market value for the tenant improvements. Rents under the T1 Lease are adjusted for CPI and passenger numbers through T1. Terminal 3 and Terminal 4 Sites in T3 and T4 are leased primarily to the Virgin Group (including Virgin Australia and Tigerair) and Jetstar, respectively, for lounge, office, industrial/ storage functions, with charges based on the relevant area leased. Other site/property leases and licences In addition to leases and licences in respect of sites in the terminals, APAC has various arrangements in place relating to land and property developments outside of the terminals. See Description of the Group Description of Melbourne Airport site and facilities Other commercial properties. A number of these leases and licences relate to sites that are used for aviation-based activities, such as international freight facilities, aviation maintenance hangars and car rental backup facilities. A lesser proportion of these leases and licences are not directly related to aviation activities and include operations such as industrial warehousing, logistics warehousing, manufacturing facilities and offices. 88

97 Description of Melbourne Airport site and facilities Melbourne Airport is located in Tullamarine, approximately 22 kilometres (14 miles) north-west of Melbourne s central business district. Set forth below is a map displaying the layout of the Melbourne Airport site: The Melbourne Airport site comprises approximately 2,465 hectares (6,091 acres) of land and includes an international terminal (T2), three domestic terminals, two runways, extensive aprons and taxiways, facilities for aircraft maintenance, aircraft refuelling and fuel storage facilities, air cargo, flight catering and other aeronautical uses, as well as a range of commercial facilities, including car parking facilities, petrol stations, rental car facilities, office buildings, industrial warehousing and land that may be used for development purposes. Description of airfield Runways Melbourne Airport has two runways consisting of one north-south runway running 3,657 metres (approximately 12,000 feet) long that is 60 metres wide (approximately 200 feet), and one east-west runway running 2,286 metres (approximately 7,500 feet) that is 45 metres wide (approximately 150 feet). Both runways have high intensity approach lighting systems (at the south and west ends of the runways, respectively), runway lighting (high intensity on both ends of the north-south runway and on the west end of the east-west runway, with the east end of that runway having low intensity lighting), and instrument landing systems (on the south and west ends of the runways, respectively). Runway 16 is CATIIIb low visibility operations certified, allowing aircraft to land in conditions down to 125m visibility and zero feet cloud base, ensuring all weather operations. All four runway approaches have precision approach path indicators. All runways are supported by a taxiway system designed to facilitate the efficient movement of aircraft between the runways and terminal areas. Melbourne Airport accommodates the full range of aircraft codes with Code C (A320 and B737), Code D (B767), and Code E (A330, A340, B777 and B747) comprising the majority of operations. Code F services are operated from T2 by Airbus A380 aircraft. Additionally, the main north-south and east-west runways and their supporting taxiways have been upgraded to accommodate operations up to and including the Airbus A380. Aprons Aprons are areas that are provided to facilitate aircraft parking positions known as stands. The existing terminal aprons provide aircraft parking stands and access via taxiways, taxi lanes and lead-in lines for aircraft accessing its terminals. 89

98 Melbourne Airport s main terminal apron precinct has 83 aircraft parking stands for commercial passenger and freight operations, with 41 aerobridge positions. The apron areas are rapidly growing, and increasing parking positions in its main terminal apron precinct. The north apron area provides additional tow-off and layover capacity that is shared between domestic and international operations. A specific apron area at the southern end of the terminal precinct provides dedicated freight and aircraft parking adjacent to the cargo handling and logistics terminals. In addition to the contact stands, there are several remote and stand-off aircraft parking positions on taxiways outside the terminal precinct, where long-stay aircraft can be towed if required. The apron areas also support activities associated with the servicing of aircraft such as baggage, freight, refueling and flight catering and utilise a variety of ground support equipment operated by third parties. Taxiways The taxiways facilitate aircraft movement around the airfield. The taxiway infrastructure also provides dual apron perimeter taxiways, which ensure quick and efficient aircraft flow between runways and terminal aprons. This system is designed so that aircraft traffic can move in different directions simultaneously, facilitated by parallel runways. Melbourne Airport has three rapid exit taxiways, which allow arriving aircraft to quickly and consistently exit the runway, yielding consistent aircraft separations and optimising the number of aircraft that can utilise the runway. Description of passenger terminals Melbourne Airport currently has three domestic terminals and one international terminal. Melbourne Airport has a single-roof structure which links T2, its international terminal, with its largest domestic terminals, T1, and T3, which are domestic terminals. T4 is a domestic terminal adjacent to T3 and has pedestrian-access from its main terminal complex. Image of Melbourne Airport terminals: 90

99 Terminal 1 T1 is operated under separate long-term lease arrangements with the Qantas Group pursuant to the T1 Lease (concluding December 2018). T1 has two concourses with 21 gate positions, with six walk out positions and 15 aerobridges. Development options are available to increase the number of aero-bridged gate provisions at T1. Qantas has exclusive use of T1. When the T1 Lease expires in December 2018, APAC is required to pay the Qantas Group an amount equal to the fair market value of the improvements that the Qantas Group made to the terminal during the tenure of its lease. Terminal 2 All international flights depart from and arrive at T2. T2 has a single concourse. The terminal has 21 gate positions, of which 15 are equipped with aerobridges. Of these aerobridges, five can serve aircraft up to the size of an A380, nine can serve aircraft up to the size of a B777/B787, and one can serve aircraft up to the size of a B737. In addition to the gates, T2 operations has access to a range of remote parking stands across the airfield including freight stands than can be serviced by a bussing operation from a dedicated bussing lounge and a separate arrival facility, there are two stands serving up to B737, ten stands up to B777/B787 and two serving up to A380. Terminal 3 T3 has two concourses with 22 parking stands and 12 gates equipped with aerobridges. Of these aerobridges, three can serve aircraft up to the size of an A330, with all other aerobridges serving up to B737 type aircraft. The non aerobridge gates can be used by a variety of aircraft from small turboprops to A330s or B737s. T3 is occupied by Virgin Australia. T3 has long term plans for increased integration with T4 facilities to maximise the flexibility of the apron and terminal piers available for airlines operating out of T3 and T4. Terminal 4 T4 is a common-user terminal occupied by Jetstar, Tigerair, Rex, Air North operations and has 2 areas with up to 18 parking stands. These parking stands serve a range of aircraft from small turbo-prop aircraft up to the size of a B777/B787. T4 has plans for further expansion and integration with T3 which will increase the terminal capacity and available parking stands within the T3 and T4 precinct. T4 is a common-user terminal occupied by Jetstar, Tigerair, Rex and Air North operations and has two apron areas with up to 18 parking stands. These parking stands serve a range of aircraft from small turbo-prop aircraft up to the size of a B777/B787. T4 has plans for further expansion and integration to T3 which will increase the terminal capacity and available parking stands within the T3 and T4 precinct. 91

100 Car parking Melbourne Airport operates approximately 24,406 car parking bays, making it the largest car park operator in the southern hemisphere. APAC recently developed and opened the seven levels of the Car Park at Terminal T4 which provides 2,850-bays for passengers travelling to and from Terminal 4. The multi-level car park is a transport hub, providing parking, drop-off, pick-up taxis and buses all under one roof and conveniently located across a pedestrian only forecourt. Melbourne Airport s current parking bays are divided by product: short-term; long-term; and staff. Other commercial properties Hotels Melbourne Airport currently has four hotels with over 650 rooms in total: the Holiday Inn hotel, which is a 2/3 star hotel, the Park Royal (formerly Hilton), which is a 4/5 star hotel, the 73-room Ibis Budget hotel, and the 96-room Quest serviced apartment hotel. All hotels have leases secured for at least 18 years, the Park Royal and Ibis Budget being ground leases (with the buildings being owned by third parties). The Park Royal has direct undercover access to the terminals, while the Holiday Inn and Ibis Budget are both within easy walking distance of the terminals. The Quest serviced apartment hotel is located within the Melbourne Airport Business Park, having been built to service the airport s business community. Plans are underway for additional hotels within the airport s main precinct, with potential for some 500 new rooms across a range of hotel product offerings. Freight facilities Melbourne Airport has six freight facilities with airside/landside access. The occupiers are Qantas (domestic and international), Toll Dnata, Menzies, DHL and Australia Post, all of whom run large freight operations in Australia. Maintenance bases Four maintenance base facilities are occupied by Qantas, Melbourne Aviation Precinct, Virgin Tech and BAE. Business Park The business park has approximately 350 hectares (865 acres) of land zoned for industrial and business use. Approximately 109 hectares (269 acres) are developed or currently in development with 31 industrial and logistics warehouse facilities. The major tenants currently include Toll Ipec, TNT, DHL, DB Schenker, Border Express and Star Track Express. A large part of the Airport s commercial development activity occurs within the Business Park, with recent new additions including the 70,000 square meter Toll Ipec facility and the 40,000 square meter TNT logistics warehouse. Development land Melbourne Airport s undeveloped commercial land bank is over 300 hectares (741 acres) in size. Melbourne Airport s development strategy is to undertake development activity as demand requires. Current property revenues are earned from existing properties and from leasing new developments. Melbourne Airport typically does not take speculative development risk. However, it will take development risk where the property has been pre-leased, or where Melbourne Airport is satisfied that the property will be able to be readily leased to a suitable tenant. All of Melbourne Airport s development must comply with the current Master Plan. Melbourne Airport s business park has 168 hectares (415 acres) of vacant land available for development. Melbourne Airport intends to continue developing the park, focusing on large industrial warehouses (of 10,000 to 100,000 square metres (107,000 to 1.07 million square feet)), ultimately providing approximately 222 hectares (548 acres) of developed land with approximately one million square metres (10.7 million square feet) of facilities. Melbourne Airport has established a cargo estate along Melrose Drive at the south-east corner of the airfield. This estate totals approximately 46 hectares (114 acres), and when fully developed will provide freight, cargo, and industrial warehouse facilities totaling approximately 184,000 square metres (two million square feet) (including supporting developments and small-scale retail amenities). 92

101 Melbourne Airport has a 63-hectare (156 acre) site occupying a visible position along the Tullamarine Freeway and Melrose Drive. Due to the high exposure, which has been further enhance by the extension of Airport Drive (providing direct access to the M80 Western Ring Road), Melbourne Airport has planned the site for higher-value commercial developments, focused on customer experience activities. The site is referred to as the Gateway and is currently home to the Essendon Football Club (administration and training facility) and the soon to be developed Wave Park. The Wave Park facility will be Australia s first surf park, providing surfers with an opportunity to learn and train in an authentic water environment. Description of Launceston Airport site and facilities Launceston Airport is a major regional domestic airport with an annual passenger throughput of over 1.3 million passengers and has been recognised as the Australian Airports Association Major Airport of the Year for the last two consecutive years. The airport is located 15 kilometres from the City of Launceston, in northern Tasmania. The Airport provides facilities for the regular operation of an A320 and a B737 aircraft. The airport site has a land area of 180 hectares (480 acres). There is a single paved primary runway, 1,981 metres in length which was overlaid as part of an $11.5m project completed during The runway includes a Category 1 instrument landing system, high intensity runway lighting and approach lighting and a precision approach path indicator system. A full length parallel taxiway is associated with the primary runway. Apron facilities include five aircraft parking stands that can accommodate aircraft up to the size of a B737 or A321 adjacent to the main terminal building and three similarly-sized bays on the freight apron. Parking for general aviation aircraft is also available on the southern apron. A separate terminal houses the maintenance facility and operations of regional operator Sharp Airlines. The main terminal building provides 12 check-in desks and two self-check kiosks accommodating Qantas, Jetstar and Virgin Australia, a security screening facility housing two X-Rays, leading to two gate lounges, serving four arrival/departure gates. There is one regional frequent flyer lounge operated by QantasLink. A $3.5m terminal refurbishment completed in June 2016 delivered a 630 square metre extension to the terminal with an extensive glass façade, housing the world s first Boags Upper Deck Bar and Restaurant and a licenced Hudsons Café. The upgrade incorporated the provision of free public Wi-Fi and charging points for mobile devices, with the project winning the Australian Airports Association award for Innovation and Excellence (Commercial) in There are a total of five food/beverage and retail outlets operating in the terminal, including a refurbished 230sq metre site housing The Launceston Store. The arrivals area comprises two baggage carousels and a multi-tenant car rental facility, with a recently constructed Bike Port located adjacent to the terminal forecourt. Launceston Airport has a short-term car park comprising 400 bays, and a long-term car park capacity of approximately 1,073 bays, including 120 bays in an undercover car park which opened in late An additional 135 bays are dedicated to car rental operations and a 120 bay staff car park is provided proximate to the terminal building. 93

102 Picture of Launceston Airport and its facilities: 94

103 Melbourne Airport 2013 Master Plan Overview Pursuant to the Airports Act, which regulates federal airport sites such as Melbourne Airport, APAM produces a master plan for Melbourne Airport every five years. The master plan sets out the long-term developmental plan and strategy for Melbourne Airport including future land uses and types of permitted development, together with noise and environmental impacts. The master plan conveys APAM s strategic plan for the growth of airport activities and site development, and is a 20 year, forward-looking document that is required to provide specific detail in relation to the first five years of the plan, covering airside, ground transportation and proposed commercial developments and must also include an environmental strategy and a ground transport plan. Melbourne Airport s 2013 Master Plan was approved by the Australian Government in December With the ongoing growth and development of Melbourne and Victoria, the demand for air travel at Melbourne is expected to continue to grow and the 2013 Master Plan is a key element in ensuring Melbourne Airport is well placed to continue to serve additional passengers, new aircraft and more flights. In particular, key elements of the 2013 Master Plan included the preferred orientation for a third runway at Melbourne Airport, proposed terminal and commercial developments and improved ground transport access to the airport. Under the Airports Act, investments in further developing the infrastructure at Melbourne Airport pursuant to the master plan will be recovered pursuant to contractually negotiated ASAs with APAM s airline customers. APAM is currently developing the Melbourne Airport 2018 Master Plan which is due for submission and approval by the Australian Government by December The key theme of the Master Plan is to ensure that the airport can continue to serve additional passengers, new aircraft and more flights over the next 20 years. Below includes progress updates on the key developments highlighted within the 2013 Master Plan: Southern Precinct Programme: an integrated airside and land side development project to expand Melbourne Airport s domestic terminal capacity and associated infrastructure. The project incorporated a new terminal, multi-level car parks, associated access roads and enabling works as well as upgraded aircraft parking and apron works. Since the approval of the Master Plan, APAM has developed and opened Terminal 4, which focused on LCC airline customers and is currently occupied by Jetstar, Tigerair and Rex, and is situated approximately 200 metres from the main terminal building, as well as a 2,850-bay multi-level ground transport hub. Apron and Taxiway Expansion: an airside development project involving the creation of additional aprons and taxiways to facilitate aircraft movement and parking at Melbourne Airport. The Apron and Taxiway Expansion is an ongoing programme of works to meet airfield capacity. Airport Drive: The 3.3km extension of Airport Drive was completed in June This provides one continuous arterial from the M80 Ring Road to the terminal precinct. The new road is a second major entry to the airport, providing direct access from Melbourne s western suburbs. In its first year of operation, 11,000 traffic movements occurred each day on Airport Drive. Elevated road: The first stage of Melbourne Airport s elevated loop road was completed as part of the construction of the transport hub in This road is part of Melbourne Airport s long-term road access solution to reduce congestion and allow vehicles to move through the terminal precinct more efficiently. Plans for further development are ongoing to address traffic congestion in line with Master Planning. Runway Development Programme: A key component of the 2013 Master Plan was the Runway Development Program which nominated the next runway in an east-west runway orientation and an extension of the existing east-west runway. The proposed new runway system will increase the overall capacity of the airport and provide the most efficient solution for passengers and airlines. The need for the construction of an additional runway reflects APAM s current expectation that the existing two-runway system will reach capacity between 2020 and The proposed third runway is subject to Commonwealth Government approval through the development of a Major Development Plan (MDP). Detailed planning and technical studies (environmental, traffic, noise, economic, health and social impacts) as well as a comprehensive community engagement programme, are underway to guide the development of the MDP. The planned new runway is expected to lie approximately two kilometres south of the existing east-west runway, enabling both runways to operate independently. APAM expects the three-runway system to facilitate at least 335, ,000 aircraft movements a year, compared to the 210,000 annual aircraft movements the existing two runways can support. The maximum hourly movement rate that can be achieved in the most favourable weather conditions will increase from 65 to 88 movements an hour. Based on current forecasts, it is anticipated the third runway will be able to accommodate aircraft movements at Melbourne Airport until approximately 2035 to Plans for a fourth runway are also outlined in the 2013 Master Plan. 95

104 Further expansion of T2: The 2013 Master Plan contemplates a set of strategic developments to further increase T2 s capacity, convenience and efficiency, including extending the building, installation of selfservice check-in, automated bag-drop facilities and automated equipment including immigration smart gates and dynamic wayfinding systems in the arrivals hall, creating opportunities to consolidate domestic and international departures areas, expanding security screening areas, supporting the operation of fullbody scanners, upgrading the capacity and look and feel of secondary examination areas, adding additional baggage claims, adding more aircraft parking positions including additional remote stands, and improving the aesthetics of the terminal. Since the 2013 Master Plan, APAM has constructed a bussing and passenger transit lounge accompanied by additional premium airline lounges, inbound and outbound smart gates and is currently refurbishing the luxury retail, duty free and food offering. T2 expansion remains a critical enabler to support the growing international market at Melbourne Airport. Community and Stakeholder Engagement APAC has a strong commitment to community consultation and communication about its plans for the future. The airport will continue to actively communicate with local, State and Commonwealth Governments, local businesses, industry partners and the broader community. APAC believes that the current and ongoing performance of its business benefits from a strong relationship between Melbourne Airport and the broader community in which it operates. APAC believes that engagement with its external stakeholders will contribute to the ongoing public and community support for the current regulatory arrangements in place at Melbourne Airport and a community environment that will allow Melbourne Airport to continue to grow and develop. Overview of material agreements and authorisations Melbourne Airport Lease APAM operates Melbourne Airport pursuant to a fully prepaid lease provided by the Australian Government, dated 2 July 1997 (the Airport Lease). Pursuant to the terms of the Airport Lease, APAM leases the Melbourne Airport site, including the structures and developments thereon, under a 99-year arrangement, comprising a lease for a term of 50 years, together with an option to renew for a further term of 49 years, which may be exercised at no additional cost during the 40th year of the initial term. The Airport Lease provides that APAM must use the leased site as an airport and must provide access to Melbourne Airport by intrastate, interstate and international air transport. APAM is also required to maintain certain insurances, licences and approvals and must maintain and repair the airport site throughout the term of the Airport Lease. APAM must develop the airport site at its own cost and expense and is required to make payments equivalent to all rates, land tax and other taxes on the airport site when they are due. APAM has agreed to maintain the environment of the Melbourne Airport site in accordance with obligations imposed by relevant legislation and have released the Australian Government from liability in the event that APAM is required to remediate the Melbourne Airport site in order to comply with legislation. The Australian Government only has the right to terminate the Airport Lease if the aerodrome certificate is suspended or cancelled (other than due to an administrative oversight), if APAM ceases to use the Melbourne Airport site for purposes of airport operations or if APAM ceases to provide for access to Melbourne Airport by interstate and international air transport. The Australian Government may exercise step-in rights under which it may enter into possession of the Melbourne Airport site and (in some circumstances) operate Melbourne Airport on termination of the aeronautical certificate, or if it believes that the aerodrome certificate may be suspended or cancelled (other than due to an administrative oversight), if it believes that APAM may cease to use the Melbourne Airport site for predominantly purposes of airport operations or if it believes APAM may cease to provide for access to Melbourne Airport by interstate and international air transport. APAM is excused from performance of its obligations to use the Melbourne Airport site for purposes of airport operations or provide for access to Melbourne Airport by interstate and international air transport where failure to comply is the result of a force majeure event. The Airports Act provides that the Airport Lease may only be transferred with the Minister s approval and prohibits disposal of the Airport Lease by way of declaration of trust. APAM must not permit a sub-lease or licence which is inconsistent with the Airports Act or regulations without approval from the Australian Government. Melbourne Airport Tripartite Deed The Tripartite Deed is an agreement between the Australian Government, APAM, and Westpac Administration Pty Ltd and Westpac Banking Corporation as joint and several security trustees. The Tripartite Deed was entered into on 1 July 2013, and replaces an earlier tripartite deed. 96

105 Pursuant to the terms of the Tripartite Deed, the Australian Government consents to the creation of security interests over APAM s assets (including the mortgage over the Airport Lease and the various other securities described under Description of the Security Security below. In the event that the Airport Licence is cancelled or suspended, the Australian Government must enter into possession (unless directed otherwise by a Security Trustee) for up to 45 days to maintain the operations of Melbourne Airport to the extent it is practical to carry out those functions having regards to the reason why the Airport Licence was cancelled or suspended. Unless it directs the Australian Government not to enter into possession of Melbourne Airport, the Security Trustees are obliged to put forward a remedial programme (and a timetable for the implementation of that programme) for the Australian Government s approval as soon as is reasonably practicable after the suspension or cancellation but, in any event, within 30 days after the suspension or cancellation. If approved, and CASA believes the remedial programme will remedy or overcome the events which result in the Airport Licence being suspended or cancelled (and result in a current airport Licence being in place no later than 90 days after the suspension or cancellation), the Australian Government s period of possession of the Melbourne Airport site will terminate as soon as the remedial programme is first implemented. Each Security Trustee is obliged jointly and severally to indemnify the Australian Government as lessor against all claims, costs, injury and damages arising out of the Australian Government exercising its step-in rights under the Airport Lease and the Tripartite Deed, to the extent not recovered from the receipts of APAM. The indemnity does not apply where a Security Trustee directs the Australian Government not to step in. Provided the Security Trustees comply with the Australian Airports Act and other relevant legislation, they may enforce their loan security and enter into possession of Melbourne Airport. However, if the Australian Government exercises its right under the Airport Lease and enters into possession of the Airport site, that will take priority over the Security Trustee s possession. While they are in possession, the Security Trustees must comply with the Airport Lease and the Australian Airports Act. The Tripartite Deed provides for an agreement by the Australian Government that the financiers under the secured finance facilities should have access to the residual value of Melbourne Airport (i.e., the value of the unexpired term of the Airport Lease and of associated plant and equipment) if the Australian Government terminates the Airport Lease. On termination of the Airport Lease, the Security Trustees must enforce their security over the other assets and advise the Australian Government of the amounts owing to the financiers under the secured finance facilities. The Australian Government may re-grant the Airport Lease (on substantially no less advantageous terms applied under the Airport Lease) for its unexpired term and resell associated plant and equipment. Alternatively, it may decide to retain Melbourne Airport in Australian Government hands and to have the unexpired lease term and those assets valued by an independent valuer. In either case, the re-grant or resale or revaluation is to be not less than market value or, if there is no market value, it is to be the best premium, rent and asset purchase price that is reasonably obtainable having regard to the circumstances then existing. The Australian Government will pay out the financiers under the secured finance facilities to the extent of the amount specified above after paying out certain priority amounts. The Tripartite Deed terminates on the date that the loan security is fully discharged or the expiry of the term of the Airport Lease (excluding any option to renew), whichever is earlier. Aerodrome certificate APAM operates Melbourne Airport under the terms of the aerodrome certificate, which was granted to it by CASA under the Australian Civil Aviation Safety Regulations APAM s current certificate was issued to it on 13 August 2004, and remains in force unless it is suspended or cancelled. CASA may suspend or cancel the certificate if there are reasonable grounds to believe that the airport facilities, operations or maintenance are not of the standard necessary in the interests of safe air navigation or if APAM does not allow CASA the required access to the airport facilities, equipment or records. Sale Agreement APAM is party to a Share Sale Agreement dated as of 7 May 1997 with the Australian Government (the Share Sale Agreement), pursuant to which the Australian Government agreed to grant the Airport Lease and make associated transfers of certain airport property, contractual rights, liabilities and employees to APAM. Competition Melbourne Airport is currently the only major international airport in the State of Victoria and there is no other major international airport within at least a 640 kilometre (397 miles) radius of Melbourne Airport. Melbourne Airport is the primary domestic airport in Victoria, located 22 kilometres (14 miles) from Melbourne s central 97

106 business district, and has sufficient land available for development to match expected passenger demand for at least the next 20 years. Melbourne Airport competes with other Australian capital cities for international passengers. It also faces limited competition from Avalon Airport. Employees As at 30 June 2016, APAC employed 288 direct employees. Head count will increase in line with the timing of the delivery of the capital plan and due to growth. There are approximately 14,000 people working at APAC airports that are not employed or contracted by it. Approximately 38% of APAC s direct employees are union members, with the unions being: United Voice, the Electrical Trades Union/CEPU, the Community and Public Sector Union Victoria and the Metals and Engineering Workers Union. Agreements with these unions are due to expire on 30 June 2017 with ongoing discussions aimed for finalisation by that date. APAC has good relationships with its staff and unions, and does not anticipate any difficulties in renegotiating agreements. Legal and other proceedings From time to time, APAC is involved in claims and litigation arising in the ordinary course of business, such as contractual disputes, property damage and health and safety, personal injury and environmental claims. Individually and in the aggregate, these claims are not expected to have a material adverse effect on APAC s financial position. Environmental As a long-term occupier and operator of industrial real estate, APAC incurs liabilities relating to environmental damage from time to time in the ordinary course of its business. However, APAC does not believe that any of its environmental liabilities are material to its results of operations or financial condition. Insurance APAC s operations are covered by a comprehensive insurance programme that is generally consistent with Australian airport practice and with the requirements of the Airport Lease. APAC s major insurance policies include: Combined Material Damage and Business Interruption: A$2 billion of coverage relating to damage to tangible property, plant and machinery, runways, taxiways and aprons and resultant business interruption; Airport Owners and Operators Liability: A$2 billion of coverage relating to legal liability to pay compensation to third parties arising in connection with the ownership and/or operation of Melbourne and Launceston Airport. This policy includes a U.S.$250 million sublimit in relation to war and terrorism; and Excess AVN52 (War, Hijacking and Other Perils): provides coverage up to a limit of A$1.5 billion for liabilities in excess of the U.S.$250 million sublimit under the Airport Owners and Operators Liability Policy relating to legal liability for damages arising from bodily injury and property damage arising out of limited acts of war/terrorism (i.e., an occurrence insured under Extended Coverage Endorsement (Aviation Liabilities) AVN 52G). APAC has various additional insurance policies in place, including policies in relation to legionella, construction liability, public and products liability, motor vehicles, crime, employment practices liability, workers compensation, corporate travel, Directors and Officers liability and personal accidents. As at 30 June 2016, there were no material insurance claims in dispute. Seasonality APAC s aeronautical and retail businesses are subject to minor seasonal fluctuations. International passenger numbers peak during Australian school holidays, and travelling to northern hemisphere destinations increases during the northern hemisphere summer. Domestic travel tends to be less seasonal. 98

107 Overview INDUSTRY OVERVIEW There are 12 core-regulated major airports in Australia, which accounted for approximately 91% of all scheduled passenger numbers in Australia for the year ended 30 June 2016, according to the Australian Bureau of Infrastructure, Transport and Regional Economics. Core-regulated airports are airports which are leased from the Australian Government and are subject to the regulatory regime discussed in Regulation Competition regulation and role of the ACCC. The locations of the top ten Australian airports, based on passenger numbers for the year ended 30 June 2016, are set forth in the map below. Source: Australian Bureau of Infrastructure, Transport and Regional Economics There are two major categories of RPT air transportation services that operate in Australia. These are (i) international services; and (ii) domestic services, which include interstate and intrastate flights. According to the Australian Bureau of Infrastructure, Transport and Regional Economics, there were approximately 154 million RPT passengers for all Australian airports for the year ended 31 December 2016, more than six times the total Australian resident population of approximately 24 million, according to the Australian Bureau of Statistics. Domestic and regional passengers accounted for approximately 76% of total RPT passenger numbers and international passengers accounted for 24%, respectively, of total RPT passenger numbers. The chart below sets forth the relative size (by passenger numbers) of the top ten major airports in Australia for the year ended 30 June Passenger Numbers for the year ended 30 June 2016 (millions) Passenger share 26% % % % 5% % 1.0 2% 1% 1% 1% Sydney Melbourne Brisbane Perth Adelaide Gold Coast Cairns Canberra Hobart Darwin Domestic and regional passengers International passengers Source: BITRE, Airport Traffic Data, June 2016; APAC Passenger numbers By way of comparison, according to ACI Airport Traffic Statistics as at 30 June 2016, Melbourne Airport was the 54th busiest global airport and 20th busiest airport in Asia Pacific by total number of passengers. 99

108 International passengers According to the Australian Bureau of Infrastructure, Transport and Regional Economics, for the year ended 30 June 2016, there were approximately 37.6 million international passengers flying to and from Australia. The international passengers flying to and from Melbourne Airport were comprised of approximately 45.5% non- Australian nationals, and 54.6% Australian nationals, according to Department of Immigration and Citizenship. There is a broad mix of reasons for visitors travelling to and from Australia, including tourism, visiting friends and relatives, business, employment, and education. Domestic passengers According to the Australian Bureau of Infrastructure, Transport and Regional Economics, there were approximately million passengers using Australia s domestic and regional airline network for the year ended 30 June 2016 with the major domestic airlines (Qantas, Jetstar, Virgin Australia and Tigerair) carrying the substantial majority of these passengers. At Melbourne Airport, the major domestic airlines accounted for approximately 24.4 million passengers, or 99% of total domestic passenger numbers for the year ended 30 June Air traffic in Australia is largely dominated by movements between the capital cities, although this is becoming less concentrated over time. The busiest domestic route in Australia is the Melbourne to Sydney route, which was the fourth busiest route in the world by seat capacity in 2016 according to OAG Traffic Analyzer. According to the Australian Bureau of Infrastructure, Transport and Regional Economics, Melbourne Airport features in six of Australia s ten busiest routes. Set forth in the table below are the ten busiest domestic routes in Australia by annual passenger numbers for the year ended 30 June 2016 and each of the routes involving Melbourne Airport are bolded. In the table below, each route flown by a domestic or regional passenger generates one passenger number. Top domestic Australian routes Passengers for the year ended 30 June 2016 (millions) 1 Melbourne Sydney Brisbane Sydney Brisbane Melbourne Gold Coast Sydney Adelaide Melbourne Melbourne Perth Gold Coast Melbourne Adelaide Sydney Perth Sydney Hobart Melbourne Source: BITRE, Domestic aviation activity, published September 2016 Regulatory framework According to BITRE, Australia s top ten major airports accounted for approximately 89% of passenger traffic through Australian airports as at 30 June Aeronautical revenues in Australia are not subject to price-setting by regulatory authorities, unlike the typical regulatory regime in the United States and Europe. Under the United Kingdom residual or single-till system, revenues derived through ancillary commercial activities undertaken in connection with the operation of the airport, such as retail operations, are usually taken into account when aeronautical revenues are set, often resulting in lower aeronautical revenues being derived by airports under such a regime. Australia s dual-till regime is closer to the compensatory system in the United States, with charges set by contractual negotiation. However, the Australian system is generally less prescriptive than compensatory systems in the United States, with generally fewer rules in relation to the use of revenues. The dual-till system which operates in Australia ensures that when returns on aeronautical activities are monitored, only the revenues and costs directly associated with aeronautical activities are taken into account. In Australia, the car parking prices are monitored by, but not subject to the approval of, the ACCC. See Regulation. Ownership Historically, most of Australia s major airports used to be owned and operated by the Australian Government. In 1997, the Australian Government began privatising airport holdings held under the Federal Airports Corporation 100

109 through the sale of long-term leases (50-year leases with a free option to renew for a further 49 years). Australia has privatised major airports more rapidly than most other Organisation for Economic Cooperation and Development nations; while many major airports around the world have remained in public ownership, Australia s major airports are all privately operated under leasehold from the Australian Government under the Airports Act. These airports are generally held by airport operators, investment and funds management companies, though in some cases local or state government authorities also own minority stakes. The Phase 1 of the airport privatisation in Australia was completed in 1997, with the leasehold sale of Melbourne, Perth and Brisbane Airports, while Phase 2 followed in 1998 with an additional 14 airports including Adelaide, Canberra, Darwin and Hobart. Sydney Airport was the last major Australian airport to be privatised, in Operating model The operating model for Australian airports typically involves a high degree of outsourcing, with the airport operator providing relatively few services directly to airport users. Services such as retailing, security, cleaning and ground handling are often outsourced to concession holders or contractors, while government agencies handle services such as air traffic control, customs and quarantine services. For example, Airservices Australia, a government-owned commercial authority, is responsible for air traffic control and airspace management across the Australian flight information region, covering Australia s sovereign airspace as well as some surrounding international airspace. Other services provided by Air services Australia include aeronautical information, communications and rescue and firefighting services. Other Australian Government agencies that provide services at airports include the CASA (which conducts safety regulation of civil air operations), the Australian Customs Service, the Australian Quarantine and Inspection Service, the Department of Immigration and Citizenship, and the Australian Federal Police. The Australian Federal Police is the primary law-enforcement agency at Australia s major airports, with responsibilities which include providing a uniformed policing presence, providing first response to acts of terrorism and emergency incidents, collecting and analysing aviation intelligence, and conducting investigations. Security screening is another government-mandated security service, with most airport operators engaging specialist companies to provide these services. Other airside activities, such as refueling and freight storage are also outsourced, with airport operators typically limited to the provision of basic infrastructure or to the provision of land to allow others to provide the infrastructure and services. Oil companies often provide both refueling facilities and services at larger airports, although the airport operator provides the land on which oil companies can build storage and reticulation equipment. Aviation landscape The major international and domestic airlines operating in Australian airports as at 30 June 2016, are set forth below, with the airlines serviced by Melbourne Airport set forth in bold: International Airlines Domestic Airlines Air Calédonie International Japan Airlines Qantas Air Canada Jetstar Asia Virgin Australia Air China Korean Air Jetstar Air India LAN Airlines Tigerair Australia Air Mauritius Malaysia Airlines Regional Express Air New Zealand Malindo Air Air North Air Niugini Nauru Airlines Air Vanuatu Pacific Air Express AirAsia X Philippine Airlines All Nippon Airways Polar Air Cargo American Airlines Qantas Airways Asiana Airlines Qatar Airways British Airways Royal Brunei Airlines Cathay Pacific Airways Scoot Cebu Pacific Air Sichuan Airlines China Airlines Silk Air China Eastern Airlines Singapore Airlines China Southern Airlines Solomon Airlines Delta Air Lines South African Airways Emirates Tasman Cargo Airlines 101

110 International Airlines Etihad Airways Eva Air Federal Express Corporation Fiji Airways Garuda Indonesia Hainan Airlines Hawaiian Airlines Hong Kong Airlines Indonesia AirAsia Indonesia AirAsia X Thai Airways International Tigerair Australia United Airlines Virgin Australia United Parcel Service Vietnam Airlines Virgin Samoa Xiamen Airlines Domestic Airlines Source: BITRE, APAM With Virgin Australia making increasing inroads into Qantas dominant position during 2003, Qantas embarked on its own low cost carrier strategy and launched Jetstar in May The resulting seat growth and fare competition led to traffic growth higher than the domestic long-term trend. Since then, a further domestic low cost carrier, Tigerair, has also entered the market. Tigerair was temporarily grounded by CASA in July 2011 but resumed domestic services a month later. A few years later the domestic duopoly was re-established with Virgin Australia acquiring Tigerair in July Low cost international carriers, including Jetstar International, AirAsia X, Indonesia AirAsia X, Cebu Pacific Air and Singapore Airline s low cost carrier Scoot have also had the effect of expanding the international market. Low cost carriers generally provide 30% to 50% more seats on the same model aircraft used by full service airlines and have faster turnaround times between flights. 102

111 REGULATION Set out below is a broad outline of some of the key regulatory regimes which apply to APAC and its operations, particularly with respect to its aviation operations, safety and security matters, competition matters and the environment. The discussion below is neither a comprehensive summary of these regimes nor is it a complete list of the legislation and regulations that apply to APAC. Competition regulation and role of the ACCC Regulatory regime The Airports Act establishes the applicable system for regulating Australian airports. Australian Government owned airports may only be leased to a corporation whose sole business is to run the airport. These corporations are known as airport operator companies. Airport operator companies are subject to the following ownership restrictions: a 49% limit on foreign ownership; a 5% limit on airline ownership for certain airports; and a 15% limit on cross-ownership for Melbourne/Sydney, Sydney/Brisbane and Sydney/Perth airports. The Airports Act also sets out requirements for building and development, environmental issues, monitoring of airport services and facilities, demand management and other operational issues. In May 2002, the Australian Government abolished price notification and price caps for Australian airports and endorsed a regulatory approach which generally allows aeronautical charges to be set by commercial agreement between APAC and the airlines that service APAC. The ACCC is Australia s competition and consumer law regulator and it continues to monitor APAC s aeronautical charges and the quality of its service. Monitoring is conducted on a dual-till approach, which ensures that the reasonableness of aeronautical charges are considered solely in light of the costs of APAC s aeronautical business, rather than an approach by which returns on ancillary commercial activities undertaken in connection with the operation of the airport, such as retail operations, are taken into account in setting aeronautical charges. This approach allows for the greater realisation of commercial revenues and ancillary commercial activities. The Productivity Commission is the Australian Government s independent research and advisory body on a range of economic, social and environmental issues. The Productivity Commission also periodically reviews the effectiveness of the regulatory regime for Australian airports, and the need for future airport price regulation, including advising on any changes to the regulatory regime. The Productivity Commission most recently reported its findings in 2011 and on 30 March 2012 the Australian Government announced that it broadly accepted the Productivity Commission s findings, and specifically that: the ACCC should consider publishing a draft monitoring report each year, and then, following consultation with the monitored airports, publish a final report; monitoring should continue to June 2020, with a review in The monitoring should apply to Melbourne, Sydney, Perth and Brisbane airports; assessments of airport behaviour should continue to be governed by the existing Pricing Principles, which, in general, means that prices should promote the efficient use of the airport while allowing a return on assets that is commensurate with the regulatory and commercial risks involved; neither an airport-specific arbitration regime nor mandatory access undertakings should be introduced; and improvements should be made to the ACCC quality of service monitoring. In March 2017, the ACCC included evidence in their review that confirmed all four of Australia s largest airports, including Melbourne Airport, had maintained service levels between satisfactory and good. The ACCC also monitors our financial condition and quality of service and reviews our annual financial accounts, collects relevant qualitative and quantitative data from us and conducts surveys of the airlines served by Melbourne Airport for the purposes of its annual monitoring report Pricing and access Part IIIA of the Australian Competition and Consumer Act sets out the general framework for access regulation in Australia. Access regulation aims to ensure businesses have access, on commercial terms, to the services provided 103

112 by certain essential infrastructure facilities, such as airports, and vests the role of deciding whether a service should be covered by access regulation in the Minister for Competition Policy and Consumer Affairs. Operational aviation regulation Master plan The Airports Act requires airport operators to prepare and lodge a master plan at least every five years. The master plan is a key part of the Australian Government s regulatory framework for airport operators, such as APAC. Operators are required to set out their plan for the development of the airport to accommodate the efficient facilitation of future aviation growth, while ensuring all relevant stakeholders have had an opportunity to understand, comment and provide input. In summary, the master plan must: cover a period of 20 years (known as the planning period ); be reviewed at least every five years; specify the airport operator s development objectives; assess the future needs of civil aviation users and other users of the airport; specify the airport operator s proposals for land use and related development; include forecasts relating to noise exposure levels and the airport operator s plans for managing aircraft noise intrusion; assess environmental issues and the airport operator s plans for managing these issues; be displayed for a period of 60 business days for public comment before the master plan is approved by the Minister; include a five-year plan for the ground transport system on the landside of the airport; for the first five years, include detailed information on proposed developments for commercial, community, office, retail or any other purpose not related to airport services; identify the likely effect on employment and the local and regional economy during the first five years; and include a five-year environment strategy (previously approved separately). The master plan is a planning document only, and whether the proposed developments are implemented will depend on relevant aviation and business requirements during the relevant five-year review period. The airport can be required to undertake certain initiatives identified in the five-year environment strategy. APAC s 2013 Master Plan for Melbourne Airport was approved by the Commonwealth Minister for Infrastructure and Regional Development on 18 December Aircraft noise management The Airports Act requires the master plan to include an Australian Noise Exposure Forecast, which forms the basis for Melbourne Airport s current published noise contours and associated planning controls. Airservices Australia (the entity responsible for air traffic management at all Australian airports) has set up permanent noise monitoring equipment in a number of suburbs around Melbourne Airport to measure aircraft noise. Melbourne Airport s noise abatement procedures are designed and implemented by Airservices Australia to reduce the impact of aircraft noise on the community. They include procedures for runway use and flight paths to reduce flights over residential areas. Air traffic control implements these procedures but they are not mandatory, and their use depends on weather conditions and aircraft requirements. The Noise Abatement Committee has been established to review the impact of aircraft noise exposure on the surrounding community and make recommendations to minimise it. The Noise Abatement Committee is chaired by a Melbourne Airport representative and comprises representatives from Airservices Australia, major airlines, various Commonwealth and State government departments and agencies and local councils. Melbourne Airport is not subject to any regulated curfew or cap on aircraft movements. 104

113 Safety and security regulation Civil aviation safety CASA was established pursuant to the Australian Civil Aviation Act CASA s primary function is to regulate the safety of civil air operations in Australia and the operation of Australian aircraft overseas. CASA is responsible for issuing aerodrome certificates which airports require to operate. The Australian Civil Aviation Safety Regulations 1998 set out operational safety standards that apply to airfields in Australia, including detailed safety requirements that are set forth in the Manual of Standards. The Manual of Standards is an extensive document setting out standards in relation to, for example, the physical characteristics of airfields, obstacle restrictions and limitations, requirements for visual aids, markings and signs, lighting, operating and facilities standards and radio communication standards. The Australian Civil Aviation Regulations 1988 together with Civil Aviation Orders published by CASA set out additional requirements for airfields such as standards relating to the marshaling and parking of aircraft, and precautions required in respect of refueling, engine and ground radar operations. The Australian Airports (Protection of Airspace) Regulations 1996 established a system for the protection of airspace at and around airports (including Melbourne Airport and Launceston Airport) in the interests of the safety, efficiency or regularity of existing or future air transport operations into or out of airports. The regulations create restrictions in relation to certain activities conducted in airspace that is defined to be a prescribed airspace for an airport. These regulations apply to both on-airport and off-airport developments. Specific government approval is required in relation to certain activities conducted in prescribed airspace, including constructing or altering a building, or any other activity that causes a thing attached to or in physical contact with the ground to intrude into the prescribed airspace. This includes cranes and other temporary structures. Security-based regulation Australia s aviation security regime has been progressively enhanced following the 11 September terrorist attacks in the United States in Aviation security is administered through the Office of Transport Security, which is an office of the Department of Infrastructure and Transport. Under the Australian Aviation Transport Security Act 2004 and the Australian Aviation Transport Security Regulations 2005, Melbourne and Launceston Airports are required to prepare and implement a Transport Security Programme (TSP). All airlines operating in Australia are also required to have their own approved TSP. APAC is the screening authority for Melbourne Airport, excluding the T1 Domestic Terminal, where Qantas is responsible for screening. APAC is also responsible for screening at Launceston Airport. In accordance with the Australian Aviation Transport Security Act 2004 and the Australian Aviation Transport Security Regulations 2005, security screening of all passengers, visitors and carry-on baggage, as well as random explosive trace detection, is undertaken in APAC s passenger terminals for all departing international and domestic flights. APAC also issues and administers Aviation Security Identity Cards (ASICs) in accordance with the Australian Aviation Transport Security Act 2004 and the Australian Aviation Transport Security Regulations An ASIC is required in order to obtain unescorted access to the secure areas of security controlled airports that have regular public transport services. The ASIC scheme is a layer of security designed to ensure that only people who have been background-checked to a certain level are permitted to be in the secure areas of airports. Bilateral constraints Airlines operate international services under agreements between the government of their country of origin and the government of their destination country. These treaties are known as bilateral air services agreements. Bilateral air services agreements/arrangements contain provisions on: Traffic rights the routes airlines can fly, including cities that can be served within, between and beyond the bilateral partners. Capacity the number of flights that can be operated or passengers that can be carried between the bilateral partners. Designation, Ownership and Control the number of airlines the bilateral partners can nominate to operate services and the ownership criteria airlines must meet to be designated under the bilateral agreement. This clause sometimes includes foreign ownership restrictions. Ticket Prices some agreements require airlines to submit ticket prices to aeronautical authorities for approval. It is not current practice for Australian aeronautical authorities to require this. 105

114 Other other clauses addressing competition policy, safety and security. International aviation is regulated by over 3,000 interlocking bilateral air services agreements. Although the majority of international air services are still traded bilaterally, in recent years groups of countries have come together to negotiate air services agreements known as plurilateral agreements. The modern history of the bilateral system commenced in 1944 when the Convention on International Civil Aviation, commonly known as the Chicago Convention, established the rules under which international aviation operates. Rights developed from the Chicago Convention (including the freedoms of the air described below) continue to form the basis of rights exchanged in air services negotiations today. The first five freedoms of the air, the subject of treaties, involve the rights or privileges, in respect of scheduled international air services, granted by one State to another State to: fly across its territory without landing; land in its territory for non-traffic purposes; put down, in the territory of the first State, traffic coming from the home State of the carrier; take on, in the territory of the first State, traffic destined for the home State of the carrier; and put down and to take on, in the territory of the first State, traffic coming from or destined to a third State. Governments must negotiate new treaties to allow international aviation to grow and to expand their carriers access to new and emerging markets. The Australian Government has negotiated over 68 bilateral air services agreements and associated arrangements and is engaged in a programme of bilateral air services negotiations to continue to expand airline access between Australia and the rest of the world. The Australian Government is working to move beyond the bilateral system through multilateral organisations including the International Civil Air Organization, the World Trade Organization and the Asia Pacific Economic Cooperation and is also working within the bilateral system to liberalise air services arrangements and progressively remove restrictions on routes, capacity and airline ownership. Recent examples of where the Australian Government has worked to liberalise air rights include: the Open Skies agreement between Australia and the United States reached in February 2008, which allows an unlimited number of services between cities in the two countries; Open Skies negotiations between Australia and the European Union to remove existing limits on Australian and European carriers operating between the two continents. Existing limits include, for example, that Australian carriers are only allowed to offer three weekly flights to Paris; ensuring capacity limits between Australia and the United Arab Emirates have been lifted before demand has been constrained; and working with China to ensure capacity caps are increased before demand is constrained. Bilateral constraints occur in the event that bilateral agreements are restrictive in terms of the number of flights that may be conducted. At any one time there may be constraints on direct flights to certain countries due to bilateral constraints and frequently these are the result of timing factors with growth occurring in advance of intergovernmental discussions about raising capacity. For example, APAC is working with the Australian Government to develop its bilateral arrangements in order to increase the passenger numbers that are permitted to fly between Australia and Malaysia, China, Hong Kong, Vietnam, Philippines, Qatar and the United Arab Emirates. There are a number of additional bilateral arrangements in place that impact Melbourne Airport, which APAC does not believe are likely to have an immediate impact on its potential to increase passenger numbers through Melbourne Airport and Launceston Airport. Environmental regulation Master plan Under the Airports Act, APAC is required to prepare, lodge and obtain Australian Government approval for its master plans. See Regulation Operational aviation regulation Master Plan. Among other things, the Airports Act requires a master plan to include plans with respect to a range of environmental matters, including: the airport s assessment of environmental issues that might reasonably be expected to be associated with the implementation of a master plan; and the airport s plans for dealing with these environmental issues, including plans for ameliorating or preventing environmental impacts. 106

115 APAC s 2013 Master Plan for Melbourne Airport was approved by the Commonwealth Minister for Infrastructure and Regional Development on 18 December See Regulation Operational aviation regulation Master Plan above for a description of the requirements for the master plan. Airport Environment Strategy Under the Airports Act, APAC is also required to prepare, lodge and obtain Australian Government approval for an Airport Environment Strategy every five years as part of its master plans. The purpose of an Airport Environment Strategy is to ensure airport operations are undertaken in accordance with environmental legislation and standards and to establish a framework for assessing such compliance, and to promote the continual improvement of environmental management at the airport. In summary, an Airport Environment Strategy must: cover a period of five years; specify the airport operator s objectives for the environmental management of the airport; identify those areas of the airport which are environmentally significant; identify the sources of environmental impact associated with airport operations; identify how the airport operator proposes to monitor and ensure the minimisation of the impact on the environment by airport operations, including timeframes for any measures to achieve this; and be displayed for a period of 60 business days for public comment before the Environment Strategy is approved. The Airports Act requires an airport operator to take all reasonable steps to ensure the Environment Strategy is complied with. A contravention of the Environment Strategy is not an offence and does not affect the validity of any transaction. The current Melbourne Airport Environment Strategy is included in the 2013 Master Plan. The Launceston Airport Environment Strategy was approved by the Australian Government in 2015 and will remain in effect until either 2020 or a new Airport Environment Strategy is approved by the Minister. Environmental standards There are various offenses under the Airports Act relating to the causation of pollution which harms the environment. These offenses cover situations where pollution impacts an area identified in the Airport s Environment Strategy as environmentally significant, where the pollution is high impact and irreversible, where the pollution results or potentially results in substantial harm to public health or safety or substantial damage to property. Each of these offences carries a penalty. There are also offences with lower penalties for pollution causing low impacts and interfering with enjoyment of the relevant area. The Airports Act together with the Australian Airports (Environment Protection) Regulations 1997 imposes standards and requirements in relation to the prevention and minimisation of pollution and excessive noise but excluding pollution and excessive noise created by aircraft. The regulations enable the Airport Environment Officer, an independent officer employed by the Department of Infrastructure and Transport, to issue penalty notices for breaches of environmental standards. Emissions regulation In 1992, the Australian Federal, State and Territory governments of Australia signed an Inter-Governmental Agreement that resulted in the establishment of the National Environmental Protection Council and the introduction of National Environmental Protection Measures (NEPMs). An NEPM has been implemented regarding ambient air quality. This measure establishes specific ambient standards, monitoring and reporting protocols for carbon monoxide, nitrogen dioxide, photochemical oxidants, sulphur dioxide, lead and particles. In 2007, the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) was introduced to establish a legislative framework for reporting greenhouse gas emissions, energy consumption and energy production by corporations in Australia. The NGER Act requires controlling corporations (relevantly defined to mean the ultimate Australian holding company) to apply to be registered and report emissions and energy data if their corporate group or a member of it triggers one or more reporting thresholds. APAC is currently registered and reports under the NGER Act. A carbon price mechanism was introduced in Australia on 1 July 2012 under the Clean Energy Act 2011 (Cth) and associated legislation. The carbon price was directly payable by liable entities, who must acquire and surrender a permit for every tonne of greenhouse gas they emit (or for which they are responsible). APAC was not a liable entity under the carbon pricing mechanism as it does not trigger the relevant threshold for scope one emissions, namely direct emission of 25,000 tonnes or more of carbon dioxide or equivalent (CO2-e) in a financial year. 107

116 Legislation was passed on 17 July 2014 to repeal the Clean Energy Act 2011 (Cth) and associated legislation and end the carbon price mechanism on 30 June Liability still applies for the 2013/14 financial year. The reporting requirements of the NGER Act continue. To deliver significant emissions reductions the government is implementing a suite of Direct Action policies, including the Emissions Reduction Fund and Safeguard Mechanism. The Australian Government has indicated that the 2030 target policy framework will be further considered in detail in In the interim, the Australian Government will implement initiatives that can deliver low cost emissions reductions such as developing a National Energy Productivity Plan and developing a strategy to improve utilisation of solar power. Uncertainty therefore remains regarding future climate change regulation in Australia and the effect it may have on APAC and the aviation industry. It is broadly expected that international and domestic regulation of climate change issues will increase over time and will likely involve increasing costs applying to greenhouse gas emissions. Even though APAC has limited direct greenhouse gas emissions, its cost base (operating costs and capital project costs) is exposed to greenhouse gas emissions and hence potentially related costs. APAC s main exposure is to increased energy costs due to its high volumes of electricity usage. Other areas of APAC s supply chain which may be impacted by pass-through costs include gas, water supply, waste disposal and development and construction projects. APAC has been actively implementing measures to reduce its carbon footprint, and therefore its exposure to the impacts of the carbon regulation. Building activities The Airports Act together with the Australian Airports (Building Control) Regulations 1996 establishes a system for the approval of building activities on airport sites. Prior to the commencement of any building activity on an airport site, an application for approval of building activity must be lodged with the airport lessee company, which in the case of Melbourne Airport is APAM, and in the case of Launceston Airport is APAL, and the Airport Building Controller (ABC). The ABC is an independent officer employed by the Department of Infrastructure and Regional Development. The ABC s role is to ensure that the proposed works comply with all relevant building standards and codes. If the ABC believes it is necessary, a statutory assessment of the environmental impacts created by new development is also undertaken by the Airport Environment Officer. A building application is required to include a statement describing how the proposed building activity is consistent with both the airport s master plan and its environmental strategy. Where proposed works meet certain criteria under the Airports Act so as to fall within the definition of major development, for example, if the value of the works is A$20 million or more, a Major Development Plan must be prepared and lodged for approval with the Minister. An environmental assessment and community consultation are undertaken prior to seeking approval from the Minister for Infrastructure and Regional Development. 108

117 Directors MANAGEMENT The following table sets forth certain information regarding the Issuer s directors as of 31 December Name David Crawford AO Lyell Strambi John Harvey Barry Brakey Michael Cummings Danny Elia David Kenny James Fraser-Smith Lianne Buck Title Chairman Managing Director and Chief Executive Officer Director Director Director Director Director Director Director David Crawford, AO. Chairman. Mr. Crawford was appointed Chairman in April He is also the Chairman of LendLease Corporation Limited and South32 Limited. Mr. Crawford has extensive experience in risk management and business reorganisation. He has acted as a consultant, scheme manager, receiver and manager and liquidator to very large and complex groups of companies. Previously, he was the Australian National Chairman of KPMG. He was the former Chairman and Director of Fosters Group Limited, former Director of Westpac Banking Corporation Ltd and former Chairman of National Foods Limited. John Harvey. Director. Mr. Harvey was appointed in March 2013, after previously holding the position from May 2011 to February Mr. Harvey was previously Chief Executive Officer of the Mt Eliza Business School and the inaugural CEO of PricewaterhouseCoopers in Australia. Mr. Harvey had a 25-year career with PricewaterhouseCoopers during which he provided professional advisory services to multinational and Australian national companies and was a registered company auditor for 20 years Barry Brakey. Director. Mr. Brakey was appointed in February 2015 and is the Head of Property at the Future Fund. Michael Cummings. Director. Mr. Cummings was appointed in March 2015 and is the Head of Funds Infrastructure at AMP Capital Investors for Australia and New Zealand. Danny Elia. Director. Mr. Elia was appointed in October 2015 and is the Executive Director of Global Asset Management at IFM Investors. David Kenny. Director. Mr. Kenny was appointed in December 2015 and is an Investment Director, Infrastructure at AMP Capital Investors. James Fraser-Smith. Director. Mr Fraser-Smith was appointed in September 2016 and is a Director in the Infrastructure and Timberlands team at Future Fund. Lianne Buck. Director. Ms Buck was appointed in October 2016 and is the Head of Direct Investments and Infrastructure for NSW Treasury Corporation. 109

118 Senior management The following table sets forth certain information regarding the Issuer s senior management as of 31 December Name Lyell Strambi David Hall Simon Gandy Andrew Gardiner Lorie Argus Linc Horton Lisa Evans Carly Dixon Michael Jarvis Elias Zraicat Eileen Kershaw Paul Hodgen Title Chief Executive Officer Chief Financial Officer Chief of Aviation Chief of Retail and Launceston Airport Chief of Parking and Ground Transport Chief of Property Executive General Manager Corporate Services Executive Corporate and Public Affairs Executive Planning Executive General Manager Infrastructure, Procurement and Delivery Executive Human Resources General Manager, Launceston Airport Lyell Strambi, Mr. Strambi joined APAC in September He has extensive experience spanning more than 30 years in the aviation sector both in Australia and overseas. Before joining APAC, Mr. Strambi spent six years at Qantas, the last two as CEO of Qantas Domestic. Prior to this he worked for eight years at Virgin Atlantic Airways based in London. David Hall, Mr. Hall joined APAC in November 2016 and has extensive experience spanning more than 30 years in aviation, finance, banking and mining industry sectors across a number of geographies. Prior to joining APAC, Mr. Hall served as CEO of Jetstar Australia and New Zealand and has held senior executive positions in Qantas and Jetstar groups, Rio Tinto (Melbourne and London), National Australia Bank, ANZ Banking Group and WMC Resources Limited. Simon Gandy, Mr. Gandy joined APAC in 2007 and has more than 27 years experience in airport management, development and leadership. Mr. Gandy leads the Aviation business unit at Melbourne Airport and is accountable for all operational, financial and investment decisions supporting the growth and development of the aviation business. Prior to joining APAC, Mr. Gandy held a number of roles with BAA, the UK s largest airport operator at that time. Andrew Gardiner, Mr. Gardiner joined APAC in 2014 and has more than 35 years retail industry experience in Australia and abroad. Mr. Gardiner has spent 8 years in the travel retail business, as Managing Director at DFS Galleria Australia, General Manager of Retail at Sydney Airport and now as Chief of Retail at Melbourne and Chief of Launceston Airport. Andrew is a prior Chairman of the Australian Duty Free Association and serves on the boards of Asia Pacific Travel Retail Associate and Launceston Airport. Mr. Gardiner is a member of the Australian Institute of Company Directors. Most recently Mr. Gardiner was appointed to the Victorian State Advisory Board of the Starlight Children s Foundation. Lorie Argus, Ms. Argus joined APAC in 2015 as the company s Executive Operations, before assuming her current role with responsibility for managing a portfolio of assets including car parks, ground transportation, landside operations and roads. With more than 25 years experience, Ms. Argus s career before APAC included roles as General Manager of Network Operations for Queensland Urban Utilities, and as General Manager of Ground Operations for Virgin Australia. Linc Horton, Mr. Horton joined APAC in 2008 and has over 17 years experience in property and investment including senior roles with BAA Lynton and Threadneedle Property Investment. Mr. Horton is responsible for actively managing the airport s existing property portfolio and developing the airport s commercial land bank. Lisa Evans, Ms. Evans joined APAC in 2009, with more than 20 years legal experience. Ms. Evans is the Company Secretary and is responsible for the shared corporate services functions of the business, including human resources, safety and environment, legal services, corporate and public affairs, and business systems and ICT. Prior to joining APAC, Ms. Evans held other corporate legal roles in Melbourne for approximately five years, following ten years in private practice in both Australia and New Zealand. Ms. Evans was admitted as a Barrister and Solicitor of the High Court of New Zealand in 1993 and was admitted to legal practice in Victoria in Ms. Evans is also a Member of the Australian Institute of Company Directors. Carly Dixon, Ms. Dixon joined APAC in 2008 and has 13 years experience in public affairs, communications and policy roles within the public and private sectors. Ms. Dixon is responsible for Government and Stakeholder 110

119 Relations, Corporate Communications and Community Engagement. Ms Dixon has served in senior advisory roles for Commonwealth Cabinet Ministers and Victorian parliamentarians. Michael Jarvis, Mr. Jarvis joined APAC in 2011 and has 14 years of experience as an economist in the aviation industry. Mr. Jarvis is responsible for Melbourne Airport s five-year Master Plan. Prior to joining APAC, Mr. Jarvis held roles with aviation consultants and airlines, including experience in airline network planning. Elias Zraicat, Mr. Zraicat joined APAC in 2016 and has over 30 years of construction experience where Mr. Zraicat delivered major aviation construction projects in Hong Kong, Abu Dhabi and Sydney airports. Mr. Zraicat oversees facilities management, infrastructure and the major projects delivery programme for Melbourne Airport. Eileen Kershaw, Ms. Kershaw joined APAC in 2016 with more than 20 years experience in Human Resources. Ms. Kershaw is responsible for leading the HR function to develop and implement initiatives that build organisational capability through talent. Ms. Kershaw is a commercially oriented HR executive with extensive experience in complex operating environments in industries including property, asset management, financial and professional services. Paul Hodgen, Mr. Hodgen joined APAC in 2011 and has more than 37 years aviation experience including roles with Jetstar, British Midland Airways and British Airways and serving in senior advisory roles for Commonwealth Cabinet Ministers and Victorian parliamentarians. Board practices Role and responsibilities The primary responsibilities of the Board include: the appointment of the Managing Director and Chief Executive Officer; the establishment of the long-term goals of APAC and strategic plans to achieve those goals; the review and adoption of annual budgets for the financial performance of the consolidated entity and monitoring the results on a monthly basis; ensuring that the consolidated entity has implemented adequate systems of internal controls together with appropriate monitoring of compliance activities; and the approval of the annual financial statements and half-year financial statements. Appointment of Directors Subject to the Shareholders Deed, each shareholder may from time to time appoint one person to be a Director for each part of its shareholding which at that time constitutes 10% of the total issued shares. For further information, see Principal shareholders. Director s removal Each shareholder has the sole right to remove a Director appointed by it. If at any time any part of a shareholder s shareholding in APAC is reduced below any one of 10%, 20%, 30% or 40% of the total issued shares, that shareholder is taken to have given a notice of removal in respect of the Director(s) appointed by it so that at any time, the number of Directors appointed by each shareholder is one person for each part of its shareholding which constitutes 10% of the total issued shares. If the relevant shareholders appoint more than one Director, that shareholder is entitled to nominate the person who is to be removed as a Director. If a nomination is not received within five business days, the Director last appointed by that shareholder is the director in respect of which the notice of removal is taken to have been given. Board committees, membership and charters The Board has formed three Committees to support the Board in the following areas: Audit and Risk Management Committee The Audit and Risk Management Committee is comprised of at least two non-executive Directors and meets at least three times each year. The Audit and Risk Management Committee meetings provide a separate forum for the review of: the annual financial statements and other external financial reporting requirements prior to their approval by the Board; 111

120 the effectiveness of management information systems including risk management systems and systems of internal control; the efficiency and effectiveness of the internal and external audit functions, including reviewing the respective audit plans; and the independence of auditors and the appropriateness of their appointment for any other services. The Committee meets at least once a year with the External Auditor without executives being present. The Committee is responsible for monitoring the Company s system of internal control and endorsing the Risk Management Framework. The Committee regularly monitors the operational and financial aspects of the Company s activities and considers the recommendations and advice of auditors and other external advisors on the operational and financial risks that face the Company. The Committee ensures that recommendations made by the auditors and other external advisers are investigated and where considered necessary, appropriate action is taken to ensure that the Company has an appropriate internal control environment in place to manage the key risks identified. A system of risk management has been in place for a number of years which allows the Committee directly to monitor management performance in assessing and controlling risk. The system includes external advisers whose reports are communicated to the Committee both directly and indirectly. The Board is satisfied that this process assists the Board to effectively monitor management performance in risk management and control. Finance and Projects Committee The Finance and Projects Committee is currently comprised of four non-executive Directors. Meetings are held as required, but at least twice per year. Its focus is on the financial arrangements of the Company, including: awareness of the Company s financial risk profile and monitoring the Company s financial strategy; and assisting the Board in reviewing the Company s corporate financial model, including the basis for any assumptions contained in the model and the process by which the model is prepared. The Finance and Projects Committee is also charged with reviewing and reporting to the Board on any large scale projects which the Company intends to embark on including capital projects which are complex in nature. Except in the case of projects delegated by the Board to the Committee for review and approval, the Committee has no delegated authority of its own. Remuneration Committee The Remuneration Committee is comprised of three non-executive Directors and meets at least four times each year. The Remuneration Committee reports to the Board in relation to: the contractual terms, remuneration and performance metrics of the Chief Executive Officer and the Executive reporting to him; remuneration of the Chairman and members of the Board; succession planning for senior executives; and human resource strategy and its implementation. The Remuneration Committee has no delegated authority to make decisions on behalf of the Board. 112

121 Overview PRINCIPAL SHAREHOLDERS The shareholders of APAC are predominantly long-term superannuation/pension funds whose shareholding in APAC is ultimately managed or represented by one of five entities. The following table sets forth the respective management or representation of holders of ordinary shares in APAC as at 31 December Manager/Representative Number of ordinary shares Percentage of ordinary shares on issue (%) AMP Investments ,268, IFM Investors (Nominees) ,727, Hastings Funds Management ,275, NSW Treasury Corporation ,813, Future Fund ,015, AMP Investments AMP Investments holds 27.32% shareholding in APAC and acts as the AMP Bloc for AMP Capital Investors, AMP Investment Services, AMP Life and AMP Capital Funds Management. IFM Investors IFM Investors (IFM) is represented on APAC s Board by IFM Investors (Nominees) Limited (IFMNL) as a trustee for DAF Private Capital Sub-Trust APAC, which is managed by IFM, and along with IFMNL are ultimately owned by a number of Australian pension funds. IFM directly holds 25.17% of APAC. Hastings Funds Management Hastings Funds Management is a subsidiary of Westpac Banking Corporation. It is the manager of Utilities of Australia Pty Limited as trustee for the Utilities Trust of Australia, which manages 8.70% of APAC. NSW Treasury Corporation J.P. Morgan Nominees Australia Ltd, acting as nominee for JPMorgan Chase Bank, N.A. (Sydney Branch) in its capacity as custodian for SAS Trustee Corporation is represented by NSW Treasury Corporation on the APAC Board and holds 18.47% of APAC. 113