Greater Toronto Airports Authority Annual Information Form For the Year Ended December 31, 2012 March 27, 2013 Table of Contents 1. Caution Regarding Forward-Looking Information .................................................. 5 2. Corporate Structure ......................................................................................................... 6 3. General Development of the Business........................................................................ 7 3.1 Three-Year History ................................................................................................. 7 3.1.1 Air Passenger Traffic ..................................................................................... 8 3.1.2 Airline Industry Changes .............................................................................. 9 3.1.3 Aeronautical Rates and Charges .................................................................. 10 3.1.4 Other Developments .................................................................................... 11 4. Narrative Description of the Business ...................................................................... 13 4.1 Introduction ........................................................................................................... 13 4.2 Economic and Demographic Factors.................................................................. 13 4.3 Airport Activity Measures ................................................................................... 15 4.3.1 Air Passenger Traffic ................................................................................... 15 4.3.2 Aircraft Movements ..................................................................................... 18 4.3.3 Maximum Take-Off Weights ....................................................................... 19 4.3.4 Arrived Seats ................................................................................................ 19 4.3.5 Air Cargo ...................................................................................................... 20 4.4 Air Passenger Service ........................................................................................... 21 4.4.1 Share of Airline Activity .............................................................................. 21 4.5 Other Airports ....................................................................................................... 22 4.6 Airport Facilities .................................................................................................... 23 4.6.1 Airside Facilities ........................................................................................... 23 4.6.2 Terminal Facilities ....................................................................................... 24 4.6.3 Groundside and Support Facilities .............................................................. 24 4.6.4 Land Acquisitions ........................................................................................ 27 4.7 Airport Capital Programs .................................................................................... 27 4.7.1 Cancelled and Deferred Capital Programs .................................................. 28 4.7.2 Active Capital Programs .............................................................................. 29 4.8 Airport Revenues .................................................................................................. 31 4.8.1 Aeronautical Revenues ................................................................................. 31 4.8.2 Non-Aeronautical Revenues ........................................................................ 33 4.8.3 Airport Improvement Fees ........................................................................... 34 4.9 Airport Expenses ................................................................................................... 35 4.9.1 Ground Rent ................................................................................................. 35 Page 2 of 101 4.9.2 Goods and Services ....................................................................................... 35 4.9.3 Salaries, Wages and Benefits ........................................................................ 35 4.9.4 Payments-in-Lieu of Real Property Taxes ................................................... 36 4.9.5 Payments-in-Lieu of Development Charges ................................................ 36 4.9.6 Interest and Financing Costs ....................................................................... 36 4.9.7 Amortization ................................................................................................ 37 4.10 Ground Lease ......................................................................................................... 37 4.10.1 Ground Lease Rent ....................................................................................... 37 4.10.2 Other Provisions .......................................................................................... 38 4.11 Environmental Matters ........................................................................................ 38 4.11.1 Risk Oversight and Management ................................................................ 38 4.11.2 Environmental Risks .................................................................................... 39 4.11.3 Trends and Uncertainties-Climate Change .................................................. 40 4.11.4 Other Environmental Matters ..................................................................... 40 4.12 Human Resources ................................................................................................. 42 5. Risk Factors..................................................................................................................... 42 6. Description of Capital Structure ................................................................................ 48 6.1 Ratings .................................................................................................................... 49 6.2 Trustee .................................................................................................................... 50 7. Corporate Governance .................................................................................................. 50 7.1 Directors ................................................................................................................. 50 7.1.1 Board of Directors ........................................................................................ 52 7.2 Officers .................................................................................................................... 58 8. Compensation Discussion and Analysis .................................................................. 59 8.1 Human Resources and Compensation Committee .......................................... 59 8.2 Role of the Human Resources and Compensation Committee ...................... 60 8.3 Compensation Philosophy ................................................................................... 61 8.4 Benchmark Review ............................................................................................... 63 8.5 Compensation Risk ............................................................................................... 63 8.6 Compensation Consultants .................................................................................. 64 8.7 Key Elements of Compensation .......................................................................... 65 8.8 Base Salaries ........................................................................................................... 65 8.9 Management Incentive Plans .............................................................................. 66 8.10 Short Term Incentive Plan ................................................................................... 66 8.11 Long Term Incentive Plan .................................................................................... 70 8.12 Benefits.................................................................................................................... 72 8.13 Summary Compensation Table ........................................................................... 73 8.14 Pension Plan Benefits ........................................................................................... 74 8.15 Defined Benefit Plans ........................................................................................... 76 Page 3 of 101 8.16 Defined Contribution Plans ................................................................................. 77 8.17 Employment Agreements .................................................................................... 77 8.18 Compensation of Directors .................................................................................. 80 9. Auditor: Interest of Experts .......................................................................................... 82 10. Additional Information ................................................................................................. 83 Appendix “A” - Terms of Reference of the Board of Directors………………………..84 Appendix “B” - Audit Committee Charter……………………………………………...90 Page 4 of 101 1. Caution Regarding Forward-Looking Information This Annual Information Form (“AIF”) contains certain forward-looking information about the Greater Toronto Airports Authority (“GTAA”). This forward-looking information