25 YEARS SERVING THE NATION ANNUAL REPORT 2017 COVER RATIONALE Malaysia Airports is proud to have served hundreds of millions of people who pass through our airports. As the custodian of major gateways into the country for the last two and a half decades, we are delighted to be the face of joyful Malaysia to all our visitors. We are also proud to continue flying the Malaysian flag high through our presence overseas. Our success to date is owing to the worthy efforts of our loyal employees, many of whom work quietly and tirelessly in the background. This year’s annual report is dedicated to the unsung heroes who have accorded us their unstinting service. MALAYSIA AIRPORTS TODAY ONE OF THE WORLD’S MALAYSIA OPERATIONS OVERSEAS LARGEST 96.6 MILLION PASSENGERS OPERATIONS 31.3 MILLION PASSENGERS AIRPORT 5 INTERNATIONAL OPERATOR GROUP AIRPORTS ISTANBUL SABIHA GOKCEN 128.0 MILLION PASSENGERS INTERNATIONAL AIRPORT 1.0 MILLION TONNE OF CARGO 100%-OWNED > 120 CARRIERS 16 DOMESTIC AIRPORTS 18 STOLPORTS IN MALAYSIA 1ST AIRPORT DIVERSE AND HIGHLY OPERATOR GROUP SKILLED EMPLOYEES IN ASIA LISTED ON THE ˜ 11,000 EMPLOYEES WORLDWIDE STOCK EXCHANGE RM14.8 BILLION MARKET CAPITALISATION AS AT 22 MARCH 2018 KL INTERNATIONAL AIRPORT - MALAYSIA’S MAIN GATEWAY WORLD’S TOP 12 12TH* BUSIEST AIRPORT SERVICE FOR INTERNATIONAL QUALITY 2017 PASSENGERS IN THE WORLD * Based on 2017 preliminary results (> 40 MPPA CATEGORY) Scan this QR code to view the 2017 Annual Report Microsite. 25 YEARS SERVING THE NATION ANNUAL REPORT 2017 TABLE OF CONTENTS p.<4-29> p.<30-53> p.<54-91> p.<92-161> CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 WHO PERFORMANCE STRATEGIC STRENGTH OF WE ARE REVIEW REVIEW GOVERNANCE 4 Corporate Profile 30 Five-Year Financial Highlights 54 Chairman’s Statement 92 Board of Directors’ Profile 7 Corporate Information 31 Group Five-Year Summary 60 Management Discussion 105 Key Senior Management 8 Group Corporate Structure 33 Group Quarterly Performance and Analysis 106 Group Senior 12 Group Organisational 34 Key Financial Highlights 88 Embedding Sustainability Management Profile Structure 36 Group Segmental Analysis Into Our Strategy 120 Corporate Governance 14 Key Milestones 38 Statement of Distribution Overview Statement 15 2017 Awards 39 Statement of Financial Position 147 Additional Compliance 16 Past Awards & Accolades 40 Share Price, Volume Traded & Information 18 Letter from Chairman Market Capitalisation 148 Statement on Risk 20 2017 Media Highlights 41 Statement of Workforce Management and Internal 22 2017 Event Highlights 42 Group Financial Performance Control 46 Airport Performance Benchmark 156 Board Audit Committee 49 Dividend Policy Report 51 Financial Calendar 52 Investor Relations p.<162-309> p.<310-361> p.<362-382> CHAPTER 5 CHAPTER 6 CHAPTER 7 OUR VISION FINANCIAL STATEMENTS AIRPORTS STATISTICS ADDITIONAL INFORMATION 162 Financial Statements 310 Airports Statistics 362 Definitions TO BE THE GLOBAL LEADER IN CREATING AIRPORT CITIES 363 Statement of Shareholdings 367 Information for Shareholders and Investors 368 List of Properties 373 Group Corporate Directory 374 Airport Directory 375 Notice of the 19th OUR MISSION Annual General Meeting (AGM) 380 Statement Accompanying Notice of the 19th Annual General Meeting TOGETHER WE CREATE JOYFUL EXPERIENCES BY 381 AGM Administrative Details 382 Map to the AGM Venue CONNECTING PEOPLE AND BUSINESSES • Proxy Form From left to right SHAHARIDAH SHEIKH OSMAN MANAGER, FINANCE “I would like to thank Malaysia Airports for 25 wonderful years. I have been blessed to have had great career opportunities which had led to my personal growth. Through working for the company, I have also had the chance to meet many people from different cultures and background. Having had the honour to represent Malaysia Airports overseas was also an experience that I will cherish forever”. NORZALIZA SAID MANAGER, CORPORATE COMMUNICATIONS “I joined the Malaysia Airports family on the same date as its establishment and since then it has been a fantastic roller coaster ride. When I think about how I was here from Day One to witness how we have evolved from just an airport operator to a diversified airport operator group with international presence, I feel immensely proud”. MALAYSIA AIRPORTS HOLDINGS BERHAD CORPORATE PROFILE 4 MALAYSIA AIRPORTS TURNED 25 IN NOVEMBER 2017. IT HAS COME A LONG WAY SINCE ITS INCORPORATION IN 1992 AND IS NOW ONE OF THE LARGEST AIRPORT OPERATOR GROUPS IN THE WORLD IN TERMS OF NUMBER OF PASSENGERS HANDLED. TODAY, IT MANAGES 39 AIRPORTS ACROSS MALAYSIA WITH FIVE INTERNATIONAL AIRPORTS IN MALAYSIA AND ONE IN TURKEY, 16 DOMESTIC AIRPORTS AND 18 SHORT TAKE-OFF AND LANDING (STOLPORTS). Once a state-run airport operator, Malaysia Airports was corporatised as Malaysia Airports Berhad 25 years ago. Seven years later, Malaysia Airports Holdings Berhad was incorporated as a public limited company and listed on the Malaysian Stock Exchange (Bursa Malaysia) in 1999, becoming the first Asian airport operator to go public and only the sixth in the world to do so. It now employs nearly 11,000 people in Malaysia and around the world. Our core business is the management, operation, maintenance and development of airports. Malaysia Airports draws its revenue from aeronautical operations – aircraft landing and parking fees, passenger service charges and other airline charges – and commercial activities from airport-related services such as duty free shops and other retail outlets, hotel operations and commercial leasing. Annual Report 2017 CORPORATE 01 Who We Are Ô PROFILE also on optimising the commercial and growth opportunities presented by the travel and aviation industry. As we move RUNWAY TO SUCCESS 2020 forward, our vision is to be the global Malaysia Airports 5-year business plan leader in creating airport cities – ensuring comprising 4 strategic pillars sustainable growth by capitalising on the development opportunities presented through the availability of the vast land bank surrounding KL International Airport (KLIA). KUL HUB The diversification of Malaysia Airports’ Establishing KLIA as a preferred business activities has not only allowed us ASEAN Hub with increased connectivity to keep aviation charges at a competitive and seamless transfers level, but also to maintain robust returns 5 to our shareholders. Moreover, the model has allowed us to cross-subsidise the vital, but less lucrative operations of our smaller landing strips and airports where rural communities depend on air transport to connect with the closest townships or TOTAL AIRPORT EXPERIENCE cities, especially in Sabah and Sarawak. Creating an innovative airport Malaysia Airports sees the continuing experience and embedding a operation of these remote airbases as a customer-centric culture crucial part of its responsibility as a worthy corporate citizen. A slew of awards and accolades is testament to our continued success. Not only has our flagship airport KLIA, won numerous awards, Malaysia Airports as a AEROPOLIS whole, has also received recognition Stimulating economic activities and accolades in the areas of financial through logistics, aerospace and Each airport that is managed by Malaysia performance, governance, quality leisure segments through the airport Airports is unique with widely different assurance, service excellence and city development requirements – some of the Short Take stakeholder engagement, to name a few. Off and Landing Ports (STOLports) for example, are remote landing strips with In strategising for the future, Malaysia few services, but the company’s portfolio Airports’ five-year business plan is also includes full service international encapsulated in its Runway to Success airports providing multiple runways and a 2020 (RtS2020) document where priority fully-integrated travel experience. will be put on the establishment of KLIA INTERNATIONAL EXPANSION as a preferred ASEAN hub, improving Increasing international footprint and Over the past several decades, we have airport experience for all stakeholders, exporting core airport capabilities developed a business model that focuses development of Aeropolis and strategic not only on the airport business, but investments overseas. MALAYSIA AIRPORTS HOLDINGS BERHAD CORPORATE PROFILE KL INTERNATIONAL AIRPORT in the heart of ASEAN – a geographical KLIA AEROPOLIS area of some 600 million people all within KL International Airport, the premier a maximum flying time of just four to five The development of our airport city – KLIA gateway to Malaysia, opened in June 1998 hours. KLIA offers long and shorthaul Aeropolis – is one of the four strategic with one terminal and the design capacity capabilities with facilities that integrate pillars identified in RtS2020. Focused on to handle 25 million passengers per annum both full-service and low-cost carrier three key clusters – Air Cargo & Logistics; (mppa). Its capacity has been enhanced operations. With a land bank measuring Aerospace & Aviation; and MICE & Leisure, further through minor reconfiguration about 22,000 acres, there is also ample the development is closely aligned to including more efficient use of check-in room for expansion, as well as space for national development agenda and is counters and redesign of passenger flow a fourth runway. Malaysia Airports was expected to allow Malaysia Airports to and retail areas to allow it to handle up to proud to commence operations at klia2 emerge as a regional economic enabler. 30 mppa. With the opening of the second in 2014, the world’s largest terminal KLIA Aeropolis will