Annual Report 2015 Gute Reise! We make it happen Fraport – from Frankfurt to the world. We are Europe’s best airport operator and set standards worldwide. Since the end of the last fiscal year, Fraport has had a new mission statement. The new mission statement highlights a clear paradigm shift: Instead of taking the Airport Manager’s perspective, Fraport turns to the customer. The new slogan puts this into words as “Gute Reise! We make it happen”, words that also enrich the title of this year’s Annual Report. The company processes and infrastructure shall ensure that the customer has a good trip. The company’s mission has also been clearly defined: We operate airports for our customers with worldwide success, and offer associated services. We create the conditions needed for international interconnectedness, economic development and prosperity. In doing so, we want to serve the demand for mobility in the economy and in society, offer our partners a platform for their business model, and drive economic strength and job generation in the respective regions, as well as being an attractive employer and responsible partner. With the new mission statement, the corporate strategy, the 2015 Agenda, is being transferred to a new strategy. The new strategy will be implemented in the 2016 fiscal year and broken down into individual segments and Group companies. Financial performance indicators € million Revenue Revenue adjusted by IFRIC 12 EBITDA EBIT EBT Group result Profit attributable to shareholders of Fraport AG Earnings per share (basic) (€) Year-end closing price of the Fraport share (€) Dividend per share 1) (€) Operating cash flow Free cash flow Total assets Shareholders’ equity Group liquidity Net financial debt Return on revenue (%) Return on shareholders’ equity (%) EBITDA margin (%) EBIT margin (%) ROCE (%) ROFRA (%) Gearing ratio (%) Non-financial performance indicators Global satisfaction (Frankfurt) (%) Punctuality rate (Frankfurt) (%) Baggage connectivity (Frankfurt) (%) Equipment availability rate (Frankfurt) (%) Employee satisfaction Total number of work accidents Rate per 1,000 employees Employees Average number of employees Total employees as at the balance sheet date 1) Proposed dividend (2015). 2015 2,598.9 2,583.8 848.8 520.5 433.8 297.0 276.5 3.00 58.94 1.35 652.2 393.6 8,847.3 3,511.7 1,043.1 2,774.3 16.7 8.3 32.7 20.0 8.6 9.4 83.8 2015 80 80.3 98.8 98.9 2.85 1,475 27.0 2015 20,720 23,038 2014 Change in % 2,394.6 2,383.8 790.1 482.8 374.7 251.8 234.7 2.54 48.04 1.35 506.2 246.8 9,013.2 3,286.0 1,179.6 3,012.8 15.6 7.6 33.0 20.2 7.9 9.2 97.3 8.5 8.4 7.4 7.8 15.8 18.0 17.8 18.1 22.7 0.0 28.8 59.5 – 1.8 6.9 – 11.6 – 7.9 – – – – – – – Table 1 2014 Change in % 80 81.1 98.6 97.8 2.89 1,473 28.8 – – – – – 0.1 – Table 2 2014 Change in % 20,395 23,116 1.6 – 0.3 Table 3 Fraport Annual Report 2015 Contents 1 Consolidated Financial Statements 3 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Non-Current Assets Segment Reporting Group Notes Notes to the Consolidation and Accounting Policies Notes to the Consolidated Income Statement Notes to the Consolidated Financial Position Notes to the Segment Reporting Notes to the Consolidated Statement of Cash Flows Other Disclosures 4 Further Information Responsibility Statement Auditor’s Report Seven-Year Overview List of Graphics and Tables Glossary Financial Calendar 2016 Traffic Calendar 2016 Imprint 100 101 102 103 104 106 108 110 110 131 139 170 172 173 198 199 200 202 204 205 205 205 Contents To Our Shareholders 1 Letter of the CEO The Fraport Executive Board Report of the Supervisory Board Statement on Corporate Management and Corporate Governance Report Group Management Report 2 Information about reporting Overview of Business Development Situation of the Group Operating Activities Structure Strategy Control Legal Disclosures Remuneration Report Economic Report General Statement of the Executive Board Economic and Industry-Specific Conditions Significant Events Business Development Group Results of Operations Segment Results of Operations Asset and Financial Position Value Management Non-financial Performance Indicators Employees Research and Development Environment and Society Share and Investor Relations Significant Events after the Balance Sheet Date Outlook Report General Statement of the Executive Board Risk and Opportunities Report Business Outlook 2 6 8 14 23 24 25 25 25 29 33 37 38 46 46 46 48 49 51 54 58 64 65 66 68 68 69 73 74 74 75 94 2 To Our Shareholders / Letter of the CEO Letter of the CEO Your company has developed very successfully in recent years. The challenge facing us all now is carrying this success forward for the long-term future. This also means that we need to regularly question the way in which we have conducted our business so far, and what we have achieved, to this point, and conse- quently align with future market developments in aviation. It is for this reason, that last year, we incorporated our strategic direction, “Agenda 2015”, into a new mission statement. We looked at our targets and our business from the focused perspective of our cus- tomers. Our mission statement “Gute Reise! Wir sorgen dafür” replaces our previous slogan “The Airport Managers”, creating the foundation for further success. Our processes and our infrastructure should help our customers “have a good trip”. In doing so, we want to serve the demand for mobility in the economy and in society, offer our partners a platform for their business model, and drive economic strength and job generation in the respective regions, as well as being an attractive employer and responsible partners. In the past fiscal year, we have taken an essential step on the route to a “good trip”, and securing the future viability of your company in the long term, by commencing the construction of Terminal 3. The new construction secures the long-term capacity and quality we need to remain successful in the competitive worldwide aviation market. In line with our growth forecast, we plan to put the first construction phase of the new terminal, designed for up to 14 million passengers, into operation in the fiscal year 2022. For us, ensuring long-term success equally means bearing responsibility, not only for our shareholders and employees, but also for those who live near the airport. The topics of active sound insulation and noise reduction continue to be a high priority, despite the decision to expand. In both aspects, we have been praised for our important global leadership position. To continue to fulfill this position in the future, we carried out a trial operation of the ‘noise absence model’ at Frankfurt Airport in the past fiscal year. Through the targeted use of runways, we are able to afford the residents more quiet during day and evening hours, depending on the weather and operating conditions. The reduced noise level at various measurement points around the airport prove the success of the ‘noise absence model’. We are very aware of our role in society, and use it to shape future developments. Looking back over 2015, we are proud that the Frankfurt site has, for the first time in its history, surpassed the 60 million passenger mark, with over 61 million passengers and 2.5 percent growth. On a total of 63 days, more than 200,000 passengers used the airport, and led in particular to a very high capacity Fraport Annual Report 2015 To Our Shareholders / Letter of the CEO 3 Dr. Stefan Schulte Chairman of the Executive Board Fraport AG utilisation during the summer months. Despite a slight drop in the cargo tonnage of 2.6 %, to just under 2.1 million metric tons, Frankfurt Airport continues to be one of the most important air freight handling facility in Europe. The site thus once again supported a systematically relevant role within the value chain in Germany, which, as an exporting nation, is dependent upon a competitive transit and freight hub. Transport growth was inconsistent across the Group airports. Whilst the investments with a high propor- tion of Russian air traffic recorded static to diminishing passenger numbers, the airports in Ljubljana, Lima, Hanover and Xi’an showed very positive growth. Dear Shareholders, we wish to continue to profitably utilise our expertise in the successful operation of airports. For this reason, we signed concession agreements for the operation of 14 predominantly tourism-oriented regional airports in Greece alongside our Greek partner Copelouzos Group in the past fiscal year. We are currently expecting to commence airport operations in late 2016, thus expanding our international portfolio. Fraport Annual Report 2015 4 To Our Shareholders / Letter of the CEO The past fiscal year was challenging as regards further development of airport charges. We withdrew the proposal submitted for a very moderate increase in charges, particularly as we could not resolve differences with the responsible approving authorities with regard to the appropriate return on interest of the capital employed within the legally binding timeframe. This issue will also be taken into account in 2016, as we will examine the matter thoroughly before submitting a new application. In terms of finances, the 2015 fiscal year was a good one for your company. We were able to increase all relevant key financial figures in comparison to the previous year, and continue the positive development of previous years. With EBITDA of almost 849 million Euros and EBIT amounting to around 521 million Euros, both performance indicators were again significantly up on the previous year’s values. We also improved the Group result by 18 percent to 297 million Euros. The significant improvement in performance of the key financial figures is also reflected in your company’s increased value added. At almost 47 million Euros, this figure was approximately 10 million Euros above the previous year’s level. Dear Shareholders, we would like to let you benefit from our success. For this year’s AGM, following the increase in dividends for the fiscal year 2014, the Supervisory Board and the Executive Board propose that another dividend be distributed, at the same level as the previous year, of 1.35 Euros per share. Aerodrom Ljubljana and AMU Holdings Inc., Group companies that were newly acquired in 2014, also contributed to the positive performance, making their first full contribution to the Group result in the past fiscal year. The airport in the Slovenian capital, Ljubljana, achieved passenger growth of 10 percent, leading to EBITDA of around 13 million Euros and EBIT of approximately 3 million Euros. The key financial figures of AMU Holdings Inc. were at a similarly high level. The success of this acquisition was illustrated in EBITDA of almost 12 million Euros and EBIT of over 4 million Euros. The positive development of your company is due to the over 20,700 employees on our sites across the globe. The consistently positive financial development is supported by their knowledge and performance. I would like to sincerely thank them, on behalf of my colleagues on the Executive Board, and the senior managers of the Fraport Group, for their commitment throughout the 2015 fiscal year. We would also like to thank our business partners and you, our esteemed Shareholders, for the trust and loyalty you have placed in us. Fraport Annual Report 2015 To Our Shareholders / Letter of the CEO 5 For the 2016 fiscal year, we expect another challenging environment – also due to geopolitical tensions, – with passenger growth of 1 to 3 percent at the Frankfurt site. We expect mixed development across our international airports. The investments in Lima and Xi’an in particular should show consistently high momentum, whereas Antalya and St. Petersburg airports are noticeably suffering from the political crisis between Turkey and Russia, Antalya in particular following the recent attacks in Turkey. With regard to the development of our key financial performance indicators, we expect Group EBITDA between around 850 million Euros and approximately 880 million Euros, and Group EBIT between approximately 520 million Euros and approximately 550 million Euros. We forecast that the Group result will be roughly the same level as or slightly higher than in the 2015 fiscal year. Further deterioration in the geopolitical situation, as well as further air traffic strikes, particularly at the Frankfurt site, could have a dampening effect on passenger demand, and the development of key financial figures. As you can see, esteemed Shareholders, the future business development habors natural risks that we limit as far as possible, but also affords opportunities that we take up in a targeted manner. New trends require new business activity. One example, which we adopted last year, is digitization. Through new service offers and increased personalization, we make our passengers’ flight experiences more customized than ever before. We deliberately react to changing customer needs in terms of information, directions, service, and shopping, – particularly with regard to using mobile devices. Amongst the most important innovations are the intro- duction of our online-shopping platform, and the launch of a reward program for passengers at Frankfurt Air- port. The entire product range of participating shops can be looked at within our online services, and their products reserved – from the comfort of home and before the start of the trip. Initially, guests can collect orders and make their payments in the respective shop. We will soon have an online payment system, and we will be able to deliver purchases to either the departure gate or even to their home, making the shopping experience as pleasant as possible for our guests. Take a look by visiting shop.frankfurt-airport.com. We now hope you will enjoy reading our 2015 Annual Report, and I look forward to welcoming many of you to this year’s AGM on May 20, 2016 in the Jahrhunderthalle in Frankfurt am Main. Sincerely yours, Stefan Schulte Fraport Annual Report 2015 6 To Our Shareholders / The Fraport Executive Board The Fraport Executive Board (from left to right) Michael Müller Executive Director Labor Relations Born in 1957 Appointed until September 30, 2017 Dr. Stefan Schulte Anke Giesen Dr. Matthias Zieschang Chairman of the Executive Board Born in 1960 Appointed until August 31, 2019 Executive Director Executive Director Controlling Operations Born in 1963 Appointed until December 31, 2017 and Finance Born in 1961 Appointed until March 31, 2017 Fraport Annual Report 2015 To Our Shareholders / The Fraport Executive Board 7 Fraport Annual Report 2015 8 To Our Shareholders / Report of the Supervisory Board Report of the Supervisory Board The Supervisory Board performed all the tasks incumbent on it under law, the company statutes, and rules of internal pro- cedure, and continuously monitored the management of the company in fiscal year 2015. The Supervisory Board obtained regular, timely, and comprehensive information from the Executive Board, in writing and orally, on the proposed business policies, fundamental questions concerning future management and corporate planning, the situation and development of the company and the Group as well as significant business transactions, and consulted with the Executive Board on these matters. Deviations in the development of business from the planning were explained in detail to the Supervisory Board. Based on the reports of the Executive Board, the Supervisory Board extensively discussed the business transactions of significance to the company. The Supervisory Board harmonized the strategic alignment of the company with the Executive Board. In addition, the Chairman of the Executive Board maintained regular contact with the Chairman of the Supervisory Board and informed him about the current developments concerning the business situation as well as significant business transactions. The Supervisory Board was directly involved in all the decisions that were of fundamental importance to the company. Where required by law, the company statutes or rules of internal procedure, the Supervisory Board voted on the relevant proposals made by the Executive Board after having thoroughly examined and consulted on those matters. During the reporting period, the Supervisory Board convened four ordinary meetings, one strategy session, and two special meetings. All the members of the Supervisory Board took part in more than half of the meetings of the Board. With regard to participation in meetings of Supervisory Board committees, Lord Mayor Feldmann only participated in two of five meetings of the investment and capital expenditure committee and one of three meetings of the executive committee. All the other members of the Supervisory Board took part in more than half of the meetings of the committees to which they belong. Focal points of discussions of the Supervisory Board The business development of the Fraport Group and its Group companies, with a particular emphasis on the traffic and earnings development at Frankfurt Airport, were the subject of regular discussions by the Supervisory Board. With respect to the Group airports Antalya, Varna, Burgas and St. Petersburg, the impact of the political crisis in relation to Russia also played a prominent role. Besides this regular reporting, the following matters were extensively discussed in particular: > In 2015, the Supervisory Board also regularly obtained information on the various measures and initiatives to improve active and passive noise abatement at Frankfurt Airport. A particular focal point was the testing that has been taking place since April of “noise breaks” that at times allow residents an extension to the night-time break of up to seven hours. > In addition, in-depth information on further future-oriented projects for the purpose of increasing results at the Frankfurt site was provided. Here, the focal point was on projects to use new communications media for passenger loyalty and the promotion of retail activities. In December, these resulted in the introduction of an online shopping platform and the launch of a loyalty program for passengers and visitors to Frankfurt Airport. In this context, the Supervisory Board agreed on September 18, 2015 to the establishment of a joint venture in the retail section. > Another topic in the reporting was the efforts to further increase the service quality in all areas. In this context, a new company mission statement was developed under the slogan “Gute Reise! We make it happen.” Fraport Annual Report 2015 To Our Shareholders / Report of the Supervisory Board 9 Karlheinz Weimar Chairman of the Supervisory Board Fraport AG > In continuation of the Group’s internationalization strategy, the Supervisory Board first approved the restructuring of the existing loan agreement between Fraport AG and the project company in St. Petersburg on March 16, 2015. In addition, it intensively monitored the further progress of the tender for the airport concessions for Greek regional airports already won by a Fraport Consortium in 2014 and finally agreed to the signature of the final concession agreements in a special meeting on October 5, 2015. These were then signed on December 14, 2015. With respect to the offer made in December 2014 to acquire shares in Quito Airport, the Supervisory Board was informed that ultimately another bidder’s offer was accepted. > With respect to the investment in Manila, the Supervisory Board continued to support the efforts in and out of court in reaching an appropriate compensation agreement with the Philippine government for the capital expenditure made in connection with the construction of Terminal 3 at Manila Airport. In this context, the Supervisory Board initially discussed in depth the reasons for the decision in which the ICSID Court of Arbitration in Washington again declined jurisdiction in mid-December 2014 and was pleased to be informed that on September 8, 2015 the Supreme Court of the Philippines fundamentally confirmed that the local Fraport project company PIATCO was entitled to compensation. > In addition, the Supervisory Board dealt with the financial statements and management reports of the company and the Group as at December 31, 2014, the agenda for the Annual General Meeting (AGM) on May 29, 2015 and the resolution proposals included in it, and the 2014 Annual Report. Furthermore, the Supervisory Board again decided to propose to the AGM that PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, be appointed as the auditor for fiscal year 2015. Fraport Annual Report 2015 10 To Our Shareholders / Report of the Supervisory Board Furthermore, the Supervisory Board made specific decisions on the following subjects, among others: > On March 16, 2015, the Supervisory Board approved the conclusion of a hereditary building rights contract in the cargo section, although this has not yet been implemented. > At a special meeting on April 14, 2015, the Supervisory Board – in continuation of its previous resolution and in recognition of the Hesse state government’s quality assurance report – approved the continuation of the expansion of Frankfurt Airport South and the realization of Terminal 3. The ground-breaking ceremony took place on October 5, 2015 with 400 Fraport employees from all sections in attendance. > On September 18, 2015, the Supervisory Board approved the appointment of the auditor Korthäuer & Partner GmbH to audit the economic development plan of the ramp/passage field of business and also authorized the Executive Board to purchase the Frankfurt Airport Center in Terminal 2 (FAC 2). > On December 14, 2015 it also approved the 2016 Business Plan. As part of its strategy session in mid-September 2015, under the motto “Frankfurt Airport”, the Supervisory Board also focused on addressing the challenges in the individual areas at Frankfurt Airport. Work of the committees The Supervisory Board continued its successful work with the committees it had formed to increase the efficiency of its work and to prepare for the Supervisory Board meetings. In individual appropriate cases and in accordance with law, decision-making powers of the Supervisory Board are granted to the committees. The chairpersons of the committees provided regular reports at the next Supervisory Board meeting to the plenum of the Supervisory Board on the work of the committees. The compo- sition and responsibilities of the individual committees can be found in the chapter “Statement on Corporate Management and Corporate Governance Report” as well as on the Group’s website www.fraport.com under the section The Fraport Group. The finance and audit committee met six times during the reporting period and discussed significant business transactions, the annual and consolidated financial statements, the management reports and the recommendation for the appropriation of profit to the AGM, respectively, the amount of the dividend. Representatives of the auditor often participated in the meetings on individual agenda items. The finance and audit committee prepared the determination of the focal points of the 2015 fiscal year audit of accounts for the Supervisory Board. The half-year interim report and the other interim reports were discussed in detail prior to their publication. Comments were also made on the 2016 Business Plan of Fraport AG (prepared in accordance with the German Commercial Code, HGB) and the 2016 Group Plan (prepared in accordance with IFRS). Furthermore, the finance and audit committee dealt with the issuance of awarding the audit mandate to the auditor and made a proposal to the plenum for the election of the auditor for fiscal year 2015. In this context, the auditor’s confirmation of independence pursuant to Section 7.2.1 of the German Corporate Governance Code (GCGC) was obtained, the qualification of the auditor monitored, and the remuneration of same discussed. Furthermore, the issue of mandates for non-audit-related services to the auditor was discussed. After the cyclical change of the auditor for the fiscal year 2013, it was proposed to the plenum again to recommend PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, to the AGM as auditor for fiscal year 2015. Further focal points of the discussions were asset and liability management as well as the regular supplementary report in accordance with Section 90 of the German Stock Corporation Act (AktG) to the consolidated financial statements and/or the consolidated interim financial reports. In addition, the committee discussed the risk management, the internal control system, the internal audit system as well as the compliance management system in detail and ensured that the Supervisory Board was appropriately informed. Fraport Annual Report 2015 To Our Shareholders / Report of the Supervisory Board 11 The focal points of the discussion of the investment and capital expenditure committee in fiscal year 2015 were again the further business development of the investment business and the area of capital expenditure. In its four meetings as well as a special meeting, the committee intensely discussed, among other things, the preparation of Supervisory Board resolutions on the “St. Petersburg” and “Greek regional airports” projects, a joint venture in the retail section, and the purchase of FAC 2. With respect to the current development in Russia, members of the Supervisory Board and the committee also held in-depth discussions on location in St. Petersburg. Existing investments, both globally and at the Frankfurt site, were also regularly the focus of attention. On March 12, 2015, the committee also approved the sale of the American subsidiary Air-Transport IT Services, Inc. to the Amadeus Group. Finally, the committee assisted with the capital expenditure at the Frankfurt site and commented on the investment plan in the context of the 2016 Business Plan. The human resources committee met three times in fiscal year 2015 and regularly discussed the human resources situation in the Group. Focal points of the discussion also included current wage issues, the strategic succession planning for man- agement levels 1 and 2 and the development of postings and returns. In addition, Fraport College’s training offerings, the development measures for top management and measures and initiatives to meet the need for skilled staff were the subject of discussion. Moreover, the impact on the Fraport Group of the law on the advancement of women into management positions was explained and both the development of the 2015 sickness figures along with activities in health management and the results of the first online barometer survey of employees were presented. The executive committee met three times during the reporting period. It dealt with Executive Board matters and remu- neration issues arising in the 2015 fiscal year. In this context, it also prepared a remuneration adjustment for Mr. Müller and discussed both the vertical comparison of Executive Board remuneration at Group level and the results of an expert opinion by the consultancy firm, Kienbaum, on the appropriateness of Executive Board remuneration. In light of the fact that there was no change in the composition of the Supervisory Board, the nomination committee formed for preparing the new election of shareholder representatives did not meet in the 2015 fiscal year. Nor was it not necessary to convene the mediation committee in accordance with the German Co-Determination Act in fiscal year 2015. Corporate Governance and statements of compliance The Executive Board and the Supervisory Board addressed the implementation of the German Corporate Governance Code (GCGC) also in the past fiscal year. The Government Commission further developed the GCGC on May 5, 2015 and essentially decided upon three changes to the code, which particularly emphasize the further increasing significance of the Supervisory Board’s role. In addition, the new legislation that came into force on May 1, 2015 for the advancement of women into management positions was also copied in the GCGC. Of the three changes to the code, two were adopted in the Fraport Code. This concerns firstly the recommendations that, in future, for its recommendations to the AGM for the election of new Supervisory Board members, the Supervisory Board should check with the respective candidate that he or she can contribute the time expected, and secondly the recommen- dation that it should in future be noted in the Report of the Supervisory Board if a member of the Supervisory Board has only participated in half or fewer of the meetings of the Supervisory Board and the committees he or she belongs to in a fiscal year. With regard to the third new recommendation on setting a company-specific regular limit of length of membership in the Supervisory Board, it was decided not to incorporate this in the Fraport Code because on September 18, 2015 the Supervisory Board decided to refrain from implementing this. As a consequence, this had to be explained and justified in the 2015 statement of compliance. Fraport Annual Report 2015 12 To Our Shareholders / Report of the Supervisory Board The Supervisory Board implemented the annual efficiency review in the form of a self-evaluation using a catalog of topics in 2015. As a result, the Supervisory Board requested some organizational changes in connection with the preparation for and follow-up of meetings. Further details on Corporate Governance as well as the text of the current statement of compliance pursuant to Section 161 of the AktG made by the Executive Board and Supervisory Board on December 14, 2015 can be found in the chapter “Statement on Corporate Management and Corporate Governance Report” starting on page 14. The Fraport Code and the current and past statements of compliance can also be found on the Group’s website www.fraport.com under the section The Fraport Group. Conflicts of interest and their treatment To prevent the appearance of potential conflicts of interest, Mr. Gerber did not participate in the resolution to conclude a hereditary building rights contract in the cargo section or a discussion in connection with the future adjustment of charges. In addition, the discussion in the regard of and the resolution to appoint the auditor Korthäuer & Partner took place in the absence of the partner of that company, Mr. Prangenberg. Annual and consolidated financial statements PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft audited the annual financial statements of Fraport AG and the consolidated financial statements as at December 31, 2015 as well as the management report and Group management report and issued unqualified auditor’s reports. The Supervisory Board issued the audit mandate on December 14, 2015 in accordance with the resolution passed by the AGM on May 29, 2015. The separate financial statements and the management report were prepared in accordance with the regulations of the HGB applicable to large capital companies; the consolidated financial statements and the Group management report were prepared in accordance with IFRS as applicable in the EU, and both audited by the auditor. The consolidated financial state- ments and the Group management report meet the conditions for exemption from the preparation of consolidated financial statements in accordance with German law. The auditor established that an early risk warning system, that meets the legal requirements and which makes it possible to identify at an early stage developments that could jeopardize the company as a going concern, was in place. The documents mentioned as well as the proposal by the Executive Board for the utilization of the profit earmarked for dis- tribution have been sent to the Supervisory Board by the Executive Board without delay. The finance and audit committee of the Supervisory Board examined these documents extensively and the Supervisory Board reviewed them also personally. The audit reports of PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft and the financial statements were available to all the members of the Supervisory Board, and were comprehensively dealt with in the accounting meeting of the Supervisory Board in the presence of the auditor who reported on significant results of its audit, and were available to respond to additional questions and provide further information. In the meeting, the chairwoman of the finance and audit committee provided a comprehensive report on the treatment of the annual financial statements and the consolidated financial statements in the committee. The Supervisory Board approved the results of the annual audit. After the completion of the audit by the finance and audit committee and its own review, the Supervisory Board did not raise any objections. The Supervisory Board approved the annual financial statements prepared by the Executive Board; the annual financial statements were thus adopted. Fraport Annual Report 2015 To Our Shareholders / Report of the Supervisory Board 13 The Supervisory Board approved the proposal by the Executive Board to use the profit earmarked for distribution to pay a dividend of €1.35 per no-par value share. The report prepared by the Executive Board on the relationships of Fraport AG with affiliated companies pursuant to Section 312 of the AktG was submitted to the Supervisory Board. The report concludes with the following statement by the Executive Board, which is also included in the management report: “The Executive Board declares that under the circumstances known to us at the time, Fraport AG received fair and adequate compensation for each and every legal transaction conducted. During the reporting year, measures were neither taken nor omitted at the request of or in the interests of the State of Hesse and the City of Frankfurt am Main and their affiliated companies.” The auditor reviewed the report on the relationships with affiliated companies and issued the following auditor’s report: “Based on mandatory our audit and the conclusions reached, we confirm that 1. the effective disclosures made in the report are correct, 2. the consideration paid by the company for the legal transactions referred to in the report was not unreasonably high.” The auditor participated in the discussions with the Supervisory Board on March 14, 2016 on the report regarding the relationships with affiliated companies and was available to the Supervisory Board to provide additional information. After conducting its own review, the Supervisory Board agrees with the assessment by the auditor and raises no objections to the statement by the Executive Board regarding the relationships with affiliated companies provided at the end of the report and included in the management report. Personnel particulars The composition of the Executive Board and Supervisory Board remained unchanged compared to the previous year in 2015. The Supervisory Board would like to thank the Executive Board and the company’s employees for the successful work in 2015. Frankfurt am Main, March 14, 2016 Karlheinz Weimar (Chairman of the Supervisory Board) Fraport Annual Report 2015 14 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report Statement on Corporate Management and Corporate Governance Report In the following statement on corporate management, pursuant to Section 289a of the German Commercial Code (HGB) and Corporate Governance Report pursuant to Section 3.10 of the German Corporate Governance Code (GCGC), the Executive Board reports on the corporate management and the corporate governance of Fraport – simultaneously for the Supervisory Board and in summary (see also Section 3.10 of the GCGC). The term “corporate governance” at Fraport means responsible corporate management and control. The objectives of corporate governance at Fraport are sustainable value creation and creating as well as strengthening confidence among investors, cus- tomers, employees and the public. Good corporate governance therefore has the highest priority at Fraport. In this context, efficient collaboration between the Executive Board and the Supervisory Board is as important as protecting shareholders’ interests and maintaining open and transparent corporate communications. Fraport monitors the national and international developments in this area and regularly reviews its own corporate code, the Fraport Corporate Governance Code, in connec- tion with new legal regulations and revised national and international standards, and modifies it to meet these as required. In accordance with Section 317 (2) sentence 4 of the HGB, the following disclosures under Section 289a of the HGB were not included in the annual audit by the auditor. Statement of compliance pursuant to Section 161 of the German Stock Corporation Act (AktG) As a listed company headquartered in Germany, corporate governance at Fraport primarily orients itself on German stock corporation law, capital market law and the suggestions and recommendations of the GCGC. There is no obligation to im- plement the suggestions and recommendations of the GCGC. However, under Section 161 of the AktG the Executive Board and the Supervisory Board are obliged to issue a statement of compliance and to report and justify any deviations from the recommendations of the GCGC. The Executive Board and the Supervisory Board last issued the following statement of compliance under Section 161 of the AktG on December 14, 2015: “The last annual statement of compliance was issued on December 12, 2014. Since then, Fraport AG has complied with and will continue to comply with the recommendations made by the Government Commission on the German Corporate Governance Code (the “GCGC”) in the Code version dated June 24, 2014, and the amended version of May 5, 2015, in each case with the exception of the recommendations set forth in Section 5.4.1 (2) sentence 1 of the GCGC with regard to the specification of a regular limit of length of membership in the Supervisory Board. Grounds: Section 5.4.1 (2) sentence 1 of the GCGC contains, inter alia, a recommendation that a regular limit of length of membership in the Supervisory Board be specified. The Supervisory Board of Fraport AG views such a limit on the duration of membership as inappropriate. Rather, in determining the composition of a functional and effective Supervisory Board, care should be taken to ensure a mix of experienced members and those newly elected to serve in this body. A rigid maximum duration runs contrary to this, as it would be necessary to replace all or most members of the Supervisory Board at regular intervals. How- ever, the long-standing Supervisory Board members who would be affected by such a provision in particular have profound knowledge of the company, which they can use to the company’s benefit in supervising and advising the Executive Board. In light of the time limit on their activities as such, long-standing Supervisory Board members also do not lose either their independence or their openness towards new ideas. It would therefore not be in the interests of Fraport AG if persons with particular supervisory and advisory skills and abilities were to be required to leave the Supervisory Board based on a fixed time limit on their membership therein. In addition, a fixed maximum length of membership may run counter to the diversity the GCGC requires in the composition of the Supervisory Board, which is reflected in part in the different lengths of time for which members have served and, associated with these lengths, the members’ experience levels.” Fraport Annual Report 2015 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report 15 The statement of compliance was promptly made permanently available to the shareholders on the company’s website at www.fraport.com in the section “The Fraport Group”. GCGC recommendations Fraport AG also voluntarily complies with the recommendations of the GCGC, solely with the following exceptions: Transmission of the Annual General Meeting (AGM) via modern communication media (Section 2.3.3 of the GCGC). Primarily for security reasons and personal privacy, Fraport only published the speeches of the Chairman of the Supervisory Board and the Chairman of the Executive Board at the beginning of the 2015 AGM on the Internet. First-time appointment of members of the Executive Board (Section 5.1.2 (2) of the GCGC). All Executive Board members were initially appointed for a term of five years indicating the company’s willingness to enter into a long-term arrangement. Furthermore, an initial term of five years still represents the common practice among experienced professionals and is therefore in line with the expectations of many potential Executive Board members. Gender ratio and setting targets for the proportion of women in the Executive Board and in management positions Gender ratio On May 1, 2015, the “Act on Equal Participation of Women and Men in Management Positions in the Private and Public Sector” came into force. According to this, with the new elections and postings in Fraport’s Supervisory Board that become necessary from January 1, 2016, the statutory gender ratio with a minimum of at least 30 % women and at least 30 % men in the Supervisory Board must be complied with (Section 96 (2) of the AktG, Section 5.4.1 (2) of the GCGC). In this respect, the Supervisory Board decided at its meeting of September 18, 2015 that these ratios are to be met separately for shareholders and for employees. The Supervisory Board currently comprises three female and seven male shareholder representatives and one female and nine male employee representatives. Targets for the Executive Board The “Act on Equal Participation of Women and Men in Management Positions in the Private and Public Sector” additionally requires targets to be set for the proportion of women in the Executive Board (Section 111 (5) of the AktG, Section 5.1.2 (1) of the GCGC). The Supervisory Board also set a target of 25% for the proportion of women in the Executive Board at its meeting of September 18, 2015. This target is to be reached by June 30, 2017. As the Executive Board currently consists of one female and three male members, this target has already been reached. Targets for the first and second management levels below the Executive Board The “Act on Equal Participation of Women and Men in Management Positions in the Private and Public Sector” furthermore requires targets to be set for the proportion of women in both management levels below the Executive Board (Section 76 (4) of the AktG, Section 4.1.5 of the GCGC). At its meeting of September 16, 2015, the Executive Board set a target for the proportion of women in the first reporting level of 17.9 % and a target for the proportion of women in the second reporting level of 27.5 % as at December 31, 2016. At the end of 2015, the proportion of women in the first reporting level was 19.2 % and the proportion in the second reporting level was 27.6 %, meaning the targets have already been met here. Fraport Annual Report 2015 16 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report Disclosures on other significant corporate management practices Beyond the statutory provisions, Fraport utilizes the following relevant corporate management practices: Own corporate governance code The Fraport Supervisory Board has adopted its own corporate governance principles for the company. The Fraport Corporate Governance Code describes the fundamental principles for the management and control of the company as well as the responsible corporate governance that the company has undertaken to uphold. Furthermore, it clarifies the material rights of shareholders. The Fraport Corporate Governance Code is closely modeled on the GCGC and is regularly monitored and adapted where necessary in light of new legal regulations as well as revised national and international standards (last amended on December 14, 2015). The Fraport Corporate Governance Code can be downloaded from the company website www.fraport.com in the section "The Fraport Group". Compliance Fraport understands the term “compliance” to mean compliance with laws and internal regulations. At Fraport, the issues of compliance and values management are brought together in a “values-based compliance management system”. Thus, the preventive nature of values management introduced in 2003 enhances the compliance management system. A key element of the compliance management system is formed by the compliance guidelines, which have formed part of the employment contracts since 2005. In addition to an internal confidant, Fraport introduced an electronic whistle-blower system (BKMS® System) in 2009. Additionally, an external ombudsperson was appointed in 2011 who in particular confidentially receives and legally examines tips on serious legal violations. Suspected cases of compliance breaches have been processed by central case management since 2012. To prevent compliance breaches, e-learning courses on the subject of compliance have been run since 2013 – in addition to a range of communication measures and a number of classroom training courses. In the last few years, Fraport has introduced key elements of the compliance management system into the national and international subsidiaries. In 2014, Fraport further advanced this development by a mandatory Group guideline. In addition, an insider guideline supplements the legal requirements on the insider trading ban. Employees who have access to insider information as part of their work are included on a so-called insider list. The company differentiates here between regular and project-related or process-dependent insiders. In order to avoid insider-trading, the guideline particularly regu- lates handling insider information in accordance with the code of conduct. In accordance with the new requirements from the Market Abuse Regulation, the list and the insider guideline will be revised and brought into force in fiscal year 2016. In fiscal year 2013, Fraport additionally anchored its commitment to comply with internationally accredited regulations, such as the principles of the UN Global Compact, OECD Guidelines, and ILO Core Labor Standards, across the company through a code of conduct. The Fraport Policy forms the core of this commitment and is published on www.fraport.com. As an international airport operator, Fraport is also aware of its responsibility to the environment. Air safety, environmental protection, and corporate social responsibility are of fundamental importance to the company. Information on dealing with these matters and further corporate management practices, for example initiatives for promoting occupational health and safety, and diversity among employees, are available on the company website at www.fraport.com. Fraport Annual Report 2015 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report 17 Structure and functioning of the management and control bodies For Fraport, a responsible and transparent corporate management and control structure is the cornerstone for creating value and trust. In accordance with the provisions of law, Fraport is subject to a “dual governance system”, which is achieved by the strict separation of personnel in the management and control bodies (two-tier board). While the Executive Board manages the company, the Supervisory Board supervises the Executive Board. The members of the Executive Board and the Supervisory Board work closely together in the interest of the company. The structure of the management and control bodies at Fraport AG is as follows: Executive Board The Executive Board of Fraport AG has comprised four members since September 1, 2014: Dr. Stefan Schulte (Chairman), Anke Giesen, Michael Müller, and Dr. Matthias Zieschang. As the management body, it conducts the business of the company. The Executive Board is bound by the company’s interests and corporate sociopolitical principles within the framework of the stock corporation law. Beyond this, the rules of procedure, which the Executive Board established for itself and presented to the Supervisory Board for approval, form the basis of its work. The schedule of responsibilities for the Executive Board, which governs the allocation of responsibilities, is also attached to the rules of procedure as an annex. On this basis, the Executive Board reports to the Supervisory Board on all relevant matters of business development, corpo- rate strategy, and possible risks in a regular, timely and comprehensive manner. In addition, the Executive Board must have the prior approval of the Supervisory Board for several matters, particularly for capital expenditure measures above a value of €10 million, to the extent that this is not provided for in a business plan approved by the Supervisory Board. The length of the appointment of the Executive Board members is geared toward the long term and is – as already stated – five years as standard. Remuneration of the Executive Board comprises fixed and performance-related components. A detailed breakdown of the remuneration is provided in the Remuneration Report in the Group management report in the 2015 Annual Report. The Executive Board usually meets weekly and constitutes a quorum if at least half of its members participate in the meeting. Resolutions are adopted by a simple majority of all the participating members of the Executive Board. In the case of a tie, the chairman holds the casting vote. Supervisory Board The Supervisory Board of Fraport AG supervises the activities of the Executive Board. It is composed of an equal number of representatives of shareholders and employees and comprises 20 members. The ten shareholder representatives are elected by the AGM and the ten employee representatives are elected by the employees in accordance with the provisions of the German Co-Determination Act (MitbestG) for five years. The Supervisory Board has created rules of procedure, under which it has a quorum if – on the basis of a proper notice of meeting – at least half of its members participate in the voting in person or through submission of written votes. Resolutions are adopted with a simple majority unless otherwise mandated by law. In the event of a tie vote, the chairman of the Supervisory Board, who must be a shareholder representative, is entitled to a second vote. Beyond this, the rules of procedure regulate, in particular, the appointment and powers of committees of the Supervisory Board. Fraport Annual Report 2015 18 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report As a rule, the Supervisory Board meets four times a year (2015: seven times) and monitors the efficiency of its activities on a regular basis with respect to both their effectiveness and their appropriateness in view of new challenges. The Supervisory Board reviews its activities in the past fiscal year on an annual basis in the Supervisory Board Report. A detailed breakdown of its remuneration is provided in the Remuneration Report in the Group management report in the 2015 Annual Report. At the time of publishing this statement, the Supervisory Board was comprised as follows: Composition of the Supervisory Board Representatives of the shareholders Representatives of the employees Karlheinz Weimar (Chair) Gerold Schaub (Vice-Chair) Uwe Becker Kathrin Dahnke Peter Feldmann Peter Gerber Dr. Margarete Haase Frank-Peter Kaufmann Lothar Klemm Michael Odenwald Prof. Dr. Eng. Katja Windt Claudia Amier Devrim Arslan Hakan Cicek Dr. Roland Krieg Mehmet Özdemir Arno Prangenberg Hans-Jürgen Schmidt Werner Schmidt Edgar Stejskal Table 4 Objectives for the composition of the Supervisory Board The Supervisory Board named specific objectives for its composition pursuant to Section 5.4.1 of the GCGC. With regard to the proportion of women in the Supervisory Board, the Supervisory Board updated the objective set for its composition in fiscal year 2015 as follows: “The Supervisory Board shall be composed of at least 30 % women and 30 % men, and this ratio is to be met separately for shareholders and for employees.” As already stated, the Supervisory Board comprises three female and seven male shareholder representatives and one female and nine male employee representatives. In addition, there is an adequate number of members on the Supervisory Board who have international experience. When proposing candidates, the nomination committee and the Supervisory Board will continue to take the international experience of Supervisory Board candidates appropriately into account. In addition, in accordance with the new recommendation in Section 5.4.1 (4) of the GCGC, they will in future check with the respective candidate that he or she can contribute the time expected. Furthermore, based on the then new provision in Section 5.4.1 (2) of the GCGC, in its meeting on December 14, 2012, the Supervisory Board decided that at least three independent shareholder representatives within the meaning of Section 5.4.2 of the GCGC should be members of the board. As the Supervisory Board has at least three independent shareholder representatives with Kathrin Dahnke, Dr. Margarete Haase, and Prof. Dr. Eng. Katja Windt, this target has already been reached. Fraport Annual Report 2015 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report 19 Committees of the Supervisory Board The Supervisory Board has formed the following committees based on the statutory provisions and the provisions of its rules of procedure. The following table provides an overview of the tasks, regulated number of meetings, the actual number of meetings in the past fiscal year, the planned number of members and the actual number of members as at the date of publication of this statement. Committees of the Supervisory Board Committee Functions Regulated number of meetings Meetings 2015 Regulated number of members Members 4 6 8 Dr. Margarete Haase (Chair) Finance and audit committee Investment and capital expendi- ture committee Human resources committee Executive committee > Preparation of Supervisory Board resolutions in the area of finance and audit-related resolutions > Addressing the supervision of the accounting process, the effectiveness of the internal control system, the risk management system, the internal audit system, the audit of the accounts, particularly the independence of the external auditor and the auxiliary services rendered by the external auditor as well as compliance > Statement of opinion on the business and development plan (with the exception of the capital expenditure plan), the annual and consolidated financial statements, the proposal of the Executive Board for the appropriation of profits, the management report and the Group man- agement report, the audit report of the external auditor and other auditors, the proposal of the audit report for the Supervisory Board, the approval of the actions of the Executive Board, and the awarding of the audit mandate to the auditor, the fees agreement and the determination of the focus of the audit > Preparation of resolutions relating to capital expenditure, 4 5 resolutions or decisions concerning the founding, acquisition and sale of Group companies and ongoing monitoring of the economic development of existing Group companies > Final decision if the obligation or entitlement of Fraport AG arises from a capital expenditure measure (outside of the approved business plan) or an investment-related action between €10,000,000.01 and €30,000,000 > Final decision on the acquisition or disposal of, or charge on, property or land rights between €5,000,000.01 and €10,000,000 > Statement of opinion on the capital expenditure plan and on capital expenditure reporting > Preparation of resolutions in the area of human 4 resources > Statement of opinion, in particular on changes in head- count, fundamental issues relating to collective bargaining law, the payment system, the employee investment plan, matters concerning the company retirement plan > Preparations for the appointment of members of the Executive Board and the conditions of employment contracts, including remuneration > Final decision concerning outside activities of members of the Executive Board that require the approval of the Supervisory Board As needed 3 3 Arno Prangenberg (Vice-Chair) Uwe Becker Kathrin Dahnke Lothar Klemm Dr. Roland Krieg Hans-Jürgen Schmidt Edgar Stejskal 8 Lothar Klemm (Chair) Gerold Schaub (Vice-Chair) Claudia Amier Peter Feldmann Frank-Peter Kaufmann Werner Schmidt Edgar Stejskal Prof. Dr. Eng. Katja Windt 8 Claudia Amier (Chair) Frank-Peter Kaufmann (Vice-Chair) Devrim Arslan Uwe Becker Hakan Cicek Mehmet Özdemir Michael Odenwald Prof. Dr. Eng. Katja Windt 8 Chairman of the Supervisory Board Karlheinz Weimar (ex officio) Vice Chairman of the Supervisory Board Gerold Schaub (ex officio) Claudia Amier Peter Feldmann Dr. Margarete Haase Frank-Peter Kaufmann Werner Schmidt Edgar Stejskal Committee in accordance with Section 27 of the MitbestG > Preparation of a recommendation on the appointment or dismissal of members of the Executive Board if the entire Supervisory Board does not reach such decision As needed 0 4 Chairman of the Supervisory Board Karlheinz Weimar (ex officio) Vice Chairman of the Supervisory Board Gerold Schaub (ex officio) Devrim Arslan Lothar Klemm Nomination committee > Recommendation of suitable candidates to the Supervisory As needed 0 3 Karlheinz Weimar Board for its recommendations to the AGM Uwe Becker Dr. Margarete Haase Table 5 Fraport Annual Report 2015 20 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report Shareholders and AGM The shareholders of Fraport AG exercise their rights in the company at the AGM where they exercise their right to a voice and a vote. The shareholders are informed of business developments in the past year and the company’s forecasts through the management report with sufficient time prior to the meeting. During the year, the shareholders are provided with com- prehensive and timely information about current business developments through interim reports and other company publi- cations on the company website. The AGM is held in the first six months of every fiscal year and makes decisions concerning the tasks assigned to it by law, such as the appropriation of profits, election and approval of the actions of the members of the Supervisory Board and approval of the actions of the Executive Board, the selection of the external auditor, amendments to the company statutes, and other tasks. The shareholders can either exercise their right to vote in person or can authorize third parties to exercise their right to vote. Each share entitles its holder to one vote in the voting. Remuneration of the Executive Board and the Supervisory Board The essential features of the remuneration system as well as the disclosures on the remuneration of the Executive Board and the Supervisory Board can be found in a separate remuneration report. This is part of the Group management report in compliance with Section 315 (2) number 4 of the HGB, and Section 4.2.5 and Section 5.4.6 (2) of the GCGC. Acquisition or disposal of company shares (directors’ dealings) Pursuant to Section 15a of the WpHG, management (directors) and persons closely related thereto are legally obliged to dis- close the acquisition or disposal of shares of Fraport or any financial instruments related thereto, if the value of the transactions undertaken exceeds the sum of €5,000 within one calendar year. The notifications in this respect are disclosed by Fraport without delay. Fraport also monitors the new requirements in the area of directors’ dealings that will enter into force during fiscal year 2016 as a result of the Market Abuse Regulation and will update its internal guidelines accordingly. Shareholdings of the bodies The total shareholdings of all members of the Executive Board and Supervisory Board are less than 1 % of the total number of shares issued by Fraport. Risk and opportunities management For Fraport, corporate governance also means handling corporate risks and opportunities responsibly. For this reason, Fraport has introduced a comprehensive Group-wide risk and opportunities management system. The structure of the risk and opportunities management system and a report on key risks and corporate opportunities are presented in detail by the Executive Board in the management report for the fiscal year. Depending on their importance for the company, changes to key risks or significant opportunities opening up during the year are published either in an ad hoc disclosure or as part of the financial reporting during the year or the quarterly releases. The early risk recognition system is also part of the annual audit by the auditor. The effectiveness of the internal control and risk management system is monitored by the Supervisory Board in accordance with Section 107 (3) of the AktG. At Fraport, the finance and audit committee of the Supervisory Board performs this task. Fraport Annual Report 2015 To Our Shareholders / Statement on Corporate Management and Corporate Governance Report 21 Accounting and audit of accounts Fraport prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as applicable in the European Union, and the additional applicable requirements of German commercial law pursuant to Section 315a (1) of the HGB. A Group management report is prepared in accordance with Section 315 of the HGB. The an- nual financial statements and management report of Fraport AG are prepared in accordance with the provisions of the HGB. Further information on the accounting principles is available in the notes to the respective financial statements. The annual and consolidated financial statements are published within 90 days of the end of the fiscal year. The annual and consolidated financial statements and the management report and Group management report of Fraport are audited by an external auditor in accordance with Section 316 of the HGB. On the basis of the AGM’s resolution, in fiscal year 2015 this was PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (“PwC”), which is thus auditing Fraport for the third year in a row. The confirmation of independence required in accordance with Section 7.2.1 of the GCGC for the preparation of the vote was submitted by PwC. The audit of accounts is carried out in accordance with German auditing standards. It was agreed with the external auditor that it will immediately inform the Supervisory Board of possible grounds for disqualification or partiality immediately if these are not remedied at once. The external auditor shall also immediately report on all findings and incidents arising during the performance of the audit of accounts that are significant for the tasks of the Supervisory Board. In addition, the external auditor has to inform the Supervisory Board, respectively, record in the audit report if it finds facts that reveal an inaccuracy in the statement of compliance submitted by the Executive Board and Supervisory Board in accordance with Section 161 of the AktG while performing the audit of accounts. During the year, the external auditor also participated in discussions with the finance and audit committee regarding the Group interim financial statements and meetings with the Supervisory Board regarding the annual and consolidated financial statements. Disclosure of the statement on corporate management and corporate governance report The Executive Board disclosed the statement on corporate management and corporate governance report on February 29, 2016 on www.fraport.com in the section “The Fraport Group”. Fraport Annual Report 2015 22 Group Management Report Fraport Annual Report 2015 Group Management Report for the 2015 Fiscal Year Information about Reporting Overview of Business Development Situation of the Group Operating Activities Structure Strategy Control Legal Disclosures Remuneration Report Economic Report General Statement of the Executive Board Economic and Industry-Specific Conditions Significant Events Business Development Group Results of Operations Segment Results of Operations Asset and Financial Position Value Management Non-financial Performance Indicators Employees Research and Development Environment and Society Share and Investor Relations Significant Events after the Balance Sheet Date Outlook Report General Statement of the Executive Board Risk and Opportunities Report Business Outlook 23 24 25 25 25 29 33 37 38 46 46 46 48 49 51 54 58 64 65 66 68 68 69 73 74 74 75 94 Group Management Report / Information about Reporting 23 Information about reporting Group accounting takes account of the International Financial Reporting Standards (IFRS) in force on the reporting date (December 31, 2015) and the interpretations issued by the IFRS Interpretations Committee (IFRS IC) as adopted in the Euro- pean Union (EU). In addition, Fraport reports the information pursuant to Section 315a (1) of the German Commercial Code (HGB). Compared to the previous year, there were no significant changes to accounting and reporting standards for Fraport, meaning that the previous year’s figures were not restated and no significant adjustments to the report structure were needed. With regard to the development of the results of operations, changes compared to the previous year primarily arose as a result of the first-time full-year inclusion of the Group company AMU Holdings Inc., which was acquired in August 2014, and the Group company Ljubljana, which was acquired in October 2014. Both companies are allocated to the External Activities & Services segment. The Executive Board already took the effects of the full-year consolidation of the Group companies into account in the Outlook Report of the 2014 consolidated financial statements. Fraport also sold its shares in the Group com- pany Air-Transport IT Services, Inc., USA with effect as at April 22, 2015. In the past fiscal year until its deconsolidation, the Group company, which was also allocated to the External Activities & Services segment, made revenue of €4.9 million (2014: €12.5 million), and a net result of €0.1 million (2014: €0.6 million). A gain on disposal of €8.0 million also resulted from the sale. In addition, Fraport sold its shares in FSG Flughafen-Service GmbH (FSG) on September 21, 2015. In the past fiscal year until its deconsolidation, the company, which was also allocated to the External Activities & Services segment, made revenue of €1.9 million (2014: €4.0 million), and a net result of €0.1 million (2014: €0.1 million). The deconsolidation of FSG has had no material effect on the consolidated financial statements. Fraport also sold 51 % of the shares in the capital of Group company Fraport Cargo Services (FCS) to Worldwide Flight Services (WFS) on November 2, 2015. The Group company, which still is part of the Ground Handling segment, has since been included in the Group using the equity method under the new name of Frankfurt Cargo Services. Since the sale of the shares, the company had generated revenue of €54.0 million and a net result of –€3.2 million. Since the sale of the shares, the company’s result contribution for Fraport has been €0.2 million. The effects of the sale of the shares are described in the notes in note 2. There were no further significant changes in the companies included in consolidation nor any significant increases or reductions in shareholdings. The companies included in consolidation and the disclosures of shareholding pursuant to Section 313 (2) of the HGB are to be found in the Group notes of this report. An overview of the calculation of financial key figures and a description of specialist terms are presented in the glossary to the Annual Report. The Executive Board approved these consolidated financial statements and this Group management report for publication on February 29, 2016. The Supervisory Board gave its approval on March 14, 2016. Fraport Annual Report 2015 24 Group Management Report / Overview of Business Development Fraport Annual Report 2015 Overview of Business Development Situation of the Group > Group companies, AMU Holdings Inc. and Ljubljana, which were acquired in 2014, integrated > Concession agreements to operate 14 Greek regional airports signed at the end of 2015 (Closing of the transaction and takeover of operations planned for the end of 2016) > New mission statement as of the end of 2015 Economic Report > Positive passenger forecasts in Frankfurt, Ljubljana, Lima, Hanover and Xi’an exceeded in some cases > Contrary to the forecast: Decreases in passengers in Antalya, Varna, Burgas and St. Petersburg due to lower numbers of passengers from Russia > Start of construction of Terminal 3 in Frankfurt > Results of operations in 2015 were slightly above the forecast > Significant improvement in earnings per share by 18.1 % to €3.00 > The free cash flow of €393.6 million significantly exceeded the €124.6 million distributed as dividends and decreased net financial debt to €2,774.3 million (gearing ratio of 83.8 % at the end of 2015) > Shareholders’ equity ratio increased from 34.4 % to 37.4 % > €9.8 million improvement in value added in the Group to €46.9 million > Forecasts of non-financial performance indicators largely met > The annual average number of employees was 20,720 (2014: 20,395) > Continuing focus on innovations and ideas and on the environment and society > Fraport share up from the previous year’s year-end closing price of €48.04 to €58.94 > €1.35 dividend per share distributed for the 2014 fiscal year (previous year: €1.25 per share) Outlook Report > Positive passenger forecasts in Frankfurt, Ljubljana, Lima, Hanover and Xi’an > Passenger numbers expected to decrease in Antalya and St. Petersburg, and increase slightly in Varna and Burgas > Slight revenue growth forecasted for 2016 > Group EBITDA of between €850 million and €880 million expected > Depending on the development in Antalya, Group result in 2016 forecasted to be at the previous year’s level or slightly above it, but may also decrease temporarily in case the Greece transaction will be closed at the end of 2016 > Free cash flow in 2016 forecasted to be approximately at 2015 level, depending on Antalya it may also be lower > Significant increase in net financial debt and gearing ratio expected in case the Greece transaction will be closed, decreases expected in both without Greece > No risks jeopardizing the Group as a going concern discernible > Stable dividend recommendation of €1.35 per share for the 2015 fiscal year Group Management Report / Situation of the Group 25 Situation of the Group Operating Activities In addition to the Frankfurt site, Fraport was also active at 13 further airports through Group companies at the time of preparing the con- solidated financial statements. The most significant Group companies in terms of their results include the Group companies Lima (concession agreement to operate Lima Airport until 2031 with extension options), The following section provides an overview of the Fraport Group’s Antalya (concession agreement to operate the terminals there until fundamental business model and most important company sites. 2024), Twin Star (concession agreement to operate the airports in Varna and Burgas until 2041), AMU Holdings Inc. (agreements on A leading international airport group the time-limited marketing of retail areas at the Baltimore, Boston, Fraport Group (hereinafter also referred to as: Fraport) is among the Cleveland and Pittsburgh airports), Ljubljana (right to use the airport leading global airport groups with its international portfolio. There- in Ljubljana until 2054) and Xi’an (share in the capital in the operating by, Fraport provides all airport and terminal operation services and company of the airport in Xi’an). Whereas the Group companies Lima, associated services. Fraport also provides planning and consultancy Twin Star, AMU Holdings Inc. and Ljubljana are fully consolidated in the services and has operational and administrative activities. The further Group accounting as majority shareholdings, the Group companies development of airports into integrated mobility, event, and real estate Antalya (joint venture) and Xi’an (associated company) are included locations represents a broad revenue and earnings basis for the Group. using the equity method. Passenger traffic, which impacts on a majority of the services the Group provides, is key to the Group’s revenue and earnings performance. The Group’s business activities can fundamentally be distinguished by Structure Group site and by the services provided there. Here, the main site is The corporate structure, the key features of the Group management Frankfurt Airport, one of the biggest passenger and cargo airports in and control structure, the Group’s organization and the most financially the world. In contrast to time-limited airport operating models, the significant company sites and their competitive position are presented Fraport Group parent company, Fraport AG Frankfurt Airport Services in the following. Worldwide (Fraport AG) wholly owns and operates Frankfurt Airport with no time limits. With more than 10,500 employees, Fraport AG, Changes compared with the previous year which has been stock exchange-listed since 2001, is also the biggest Compared with the previous year, no fundamental changes were made single company of the Group, which has more than 20,700 employees. to the legal and organizational Group structure in the 2015 fiscal year. It directly or indirectly holds the shares in the other Group companies As the Outlook Report in the 2014 Group management report already (companies pursuant to Section 313 (2) of the German Commercial indicated was possible, in the previous fiscal year the Executive Board Code (HGB)) and its head office is in Frankfurt am Main. Fraport founded three Group companies for the planned operation of the con- provides the entire range of airport and airport-related services at cessions of 14 Greek regional airports together with a Greek partner, the Frankfurt site. the Copelouzos Group. These Group companies are allocated to the External Activities & Services segment. Fraport signed the concession agreements for the operation of the airports on December 14, 2015. At the time of preparing the consolidated financial statements, the Executive Board expects the transaction to be closed and to takeover the concession probably at the end of 2016. Fraport Annual Report 2015 26 Fraport AG sold its shares in the Group company Air-Transport IT A detailed description of the structure and operation of the manage- Services, Inc., USA with effect as at April 22, 2015. The Group company ment and control bodies is presented in the “Statement on Corporate was allocated to the External Activities & Services segment. Fraport Management”. The annually updated Statement on Corporate Man- also sold its 33.33 % share in the capital of FSG Flughafen Service agement does not form part of the annual audit of the consolidated GmbH on September 21, 2015. The company was also allocated to accounts by the auditor and can be found in the chapter “Statement the External Activities & Services segment. Fraport also sold 51 % of on Corporate Management and Corporate Governance Report”. the shares in the capital of Group company FCS on November 2 of the past fiscal year. The Group company, which is part of the Ground Organization Handling segment, has since been included in the Group using the For the purpose of managing the Group, the Executive Board has di- equity method. There were no further significant changes in the vided the business activities into four segments: “Aviation”, “Retail & companies included in consolidation nor any significant increases or Real Estate”, “Ground Handling”, and “External Activities & Services”. reductions in shareholdings. As at December 31, 2015, there were The segments encompass the strategic business units and service units 49 companies consolidated excluding companies accounted for using of Fraport AG and also include the Group companies involved in each the equity method, and 67 companies including companies accounted of these business processes. for using the equity method (in the previous year 47 and 65 companies respectively). For a detailed overview of the shareholdings within the The Aviation segment incorporates the strategic business units Group, please see the Group notes (see Group note 57). “Airside and Terminal Management, Corporate Safety and Security” and Based on Fraport AG’s organizational structure, the Executive Board es- Aviation segment is also active at other airports – including outside the tablished a new service unit as at June 1, 2015. The “Airport Expansion Fraport Group – through its Group company FraSec Fraport Security South” service unit, in particular, brings together the activities related Services. This was the fact at Stuttgart Airport in the past fiscal year. The to the construction of Terminal 3 and the associated infrastructure in core of the segment remained the Frankfurt site in the past fiscal year. “Airport Security Management”. In addition to the Frankfurt site, the Frankfurt. In addition, the Executive Board renamed the “Facility Man- agement” service unit “Integrated Facility Management” as at August 1, The Retail & Real Estate segment consists primarily of the “Retail 2015. The unit was renamed due to a change in responsibilities. and Properties” strategic business unit active at the Frankfurt site. The Key features of the management and control structure lot management and the renting and marketing of areas around the As a stock corporation in accordance with German law, the parent com- Frankfurt site. The Retail & Real Estate segment generated income pany of the Fraport Group, Fraport AG, is subject to strict segregation exclusively in and around the Frankfurt site in the past fiscal year. strategic business unit mainly conducts the retail activities, parking of the decision-making powers exercised by the Executive Board, the Supervisory Board, and the AGM as management and control bodies. The Ground Handling segment particularly comprises the “Ground Services” strategic business unit active at the Frankfurt site and the As a management body, the Executive Board bears the strategic Group companies FCS and APS Airport Personal Service. In 2015, the and operational responsibility for the Group. The Executive Board is segment predominantly generated its income from providing ground responsible for the company’s result and consisted at the time of pre- services and the central infrastructure at the Frankfurt site. paring the consolidated financial statements of the four members Dr. Stefan Schulte (Chair), Anke Giesen (Executive Director Operations), The External Activities & Services segment consists essentially of Michael Müller (Executive Director Labor Relations), and Dr. Matthias the central unit “Global Investments and Management”. The central Zieschang (Executive Director Controlling and Finance). unit is responsible for Fraport AG’s investments in Group companies whose business processes are not integrated at the Frankfurt site, e.g. As a control body, the Supervisory Board supervises and advises the Lima, Varna and Burgas, Antalya or Ljubljana and Xi’an. In addition to Executive Board in its decisions, and is therefore directly involved in all the business outside the Frankfurt site, which is referred to as “external company decisions that are of fundamental importance. As an addi- activities” for reasons of company history, the segment includes the tional control and co-determination body, Fraport AG’s shareholders “Integrated Facility Management”, “Information and Telecommunica- exercise their voting rights in the company at the AGM. Each of the tion”, “Airport Expansion South” and “Corporate Infrastructure Man- approximately 92 million shares that have been issued entitles the agement” service units, which are exclusively active at the Frankfurt site. owner to one vote. There are no differing classes of shares. Group Management Report / Situation of the GroupFraport Annual Report 2015 27 In addition to the aforementioned strategic business units and service units, Fraport AG’s twelve central units provide, among other things, Group-wide services such as “Corporate Compliance, Risk and Values Management”, “HR Top Executives”, or “Finance and Investor Rela- tions”. The costs of the central units are allocated to the four segments appropriately. Segment structure Fraport Group Segments 1) Aviation Retail & Real Estate Ground Handling External Activities & Services Global Investments and Management Integrated Facility Management Information and Telecommunication Airport Expansion South Corporate Infrastructure Management Graphic 1 Directly allocated business units of Fraport AG Airside and Terminal Management, Corporate Safety and Security Airport Security Management Retail and Properties Ground Services 1) Including assigned Group companies. Key sites and competitive positions With a share of 63.4 % in the 2015 Group result, the German site – and here almost exclusively Frankfurt Airport – was also the most import- ant site of the Fraport Group in the past fiscal year (2014: 62.8 %). Compared with the previous year, the share of the Peru site rose from 12.8 % to 15.5 % and the share of the China site rose from 1.5 % to 3.1 %. Due to the first time full-year recognition of the Group compa- nies Ljubljana and AMU Holdings Inc., which were acquired in 2014, the USA and Slovenia sites also had a larger share in the Group result. The Turkey site reported lower shares, particularly due to a decrease in passenger numbers from Russia, and the Saudi Arabia site also – due to the planned expiration of the management contract. Share in the Group result by site in % 63.4 Germany 15.5 Peru 9.9 Turkey 4.8 Bulgaria 3.1 China 1.6 USA 0.8 Slovenia 0.9 Other sites Graphic 2 Group Management Report / Situation of the GroupFraport Annual Report 2015 28 Competitive position at Frankfurt site Competitive position outside the Frankfurt site With 61.0 million passengers, Frankfurt Airport was the fourth largest The competitive situation at the very tourist-oriented sites of Antalya, passenger airport in Europe in the past fiscal year after London Heath- Turkey, as well as in Varna and Burgas, both in Bulgaria, differs from that row (75.0 million), Paris Charles de Gaulle (65.8 million) and Istanbul of the Frankfurt site. The key drivers of the sites’ traffic and business Atatürk (61.8 million), and ahead of Amsterdam Schiphol (58.3 million). development are tourist providers’ charter traffic without a significant In Germany, Frankfurt Airport was by far the largest passenger airport, focus on individual companies. The performance of each site depends ahead of Munich with 41.0 million passengers in the 2015 fiscal year. particularly on the appeal of the respective regions with regard to qual- Based on its cargo throughput (air freight and airmail) of 2.1 million ity, safety, price level and entry requirements. With some 27.5 million metric tons, Frankfurt has remained Europe’s largest airport ahead of passengers, the airport in Antalya was the third-largest passenger air- Paris Charles de Gaulle and Amsterdam Schiphol. In Germany, Leipzig/ port in Turkey in the past fiscal year behind the two airports in Istanbul, Halle Airport was the next largest competitor with 1.0 million metric and the dominant tourist airport in the Mediterranean region, ahead tons of cargo. Compared across continents, Frankfurt Airport is among of Palma de Mallorca. The largest passenger groups were travelers the largest passenger and cargo airports in the world. from Germany, accounting for a share of around 24 %, and Russia, accounting for a share of over 20 %. The Black Sea airports in Burgas In respect to its competitive position, Frankfurt Airport competes, on and Varna, with just under 2.4 million and approximately 1.4 million the one hand, with airports in its catchment area for boarding pas- passengers, respectively, were the second and third-largest passenger sengers and, on the other hand, for national and international transfer airports in Bulgaria after Sofia. The sites’ key passenger groups were passengers on the basis of its function as an international transfer passengers from Russia (approximately 20 %) and Germany (more than airport. Here, the Frankfurt site particularly serves the transfer passen- 17 %). With the inauguration of the terminal in Varna in August 2013 gers of Deutsche Lufthansa, which, as in previous years, was the site’s and in Burgas in December 2013, all three tourist sites have installed main customer and had a share of more than 60 % of the passengers sufficient capacity since the end of the 2013 fiscal year to be able to in Frankfurt in 2015. The largest international competitors for transfer serve the growth that is expected in these regions in the medium term. passengers are primarily the aforementioned hub airports, London Heathrow, Paris Charles de Gaulle, Istanbul Atatürk and Amsterdam The sites of Lima, Peru, and Xi’an, China, continue to benefit from the Schiphol, which are also dominated to varying degrees by their res- relatively high economic growth rates of the relevant countries and ident main customers British Airways, Air France, Turkish Airlines and from increasing demand from tourists. The growth of the Lima site is KLM. Due to the dynamic development of many airlines and airports also boosted by the good geographical location of the airport, which from the Persian Gulf region, the Frankfurt site is increasingly also in is attractive for the transfer traffic between South and North America intercontinental competition with these sites, currently particularly in particular. The site’s main customer is LAN Perú, which belongs to with Dubai. the LATAM Group and carries more than half the airport’s passengers. Several airlines with growth rates in double digits are developing very The expansion and modernization programs at the Frankfurt site dynamically at the Xi’an site. These include China Eastern Airlines, continue to contribute to maintaining and improving its international which, with a market share of almost 30 %, is the largest passenger competitive position. The programs, which mainly include the now airline. The transfer market, which has to date only been relatively completed projects Runway Northwest, Pier A-Plus, the A380 mod- small, offers the airport further potential. Due to the passenger growth ernization measures, the CD-Pier, and the planned Terminal 3, secure forecasted, the Lima site’s capacity will reach its limit in the foreseeable airport capacities and qualities in the long term in order to give the future. Capital expenditure on the airport’s infrastructure in the medium site a successful, lasting competitive edge. The increased customer term (construction of a new terminal and a new runway) is therefore focus also has a positive impact (see also the chapter titled “Strategy” required to maintain and strengthen the competitive position. The beginning on page 29). The ongoing enhancement of CargoCity Xi’an site has sufficient capacity in the short to medium term thanks North and CargoCity South also supports the competitive position to the inauguration of a new terminal and a new runway in the 2012 in the cargo segment. fiscal year. Due to the strong growth outlook of the site, however, additional capacity will also be unavoidable here, too, in the long term. Group Management Report / Situation of the GroupFraport Annual Report 2015 29 The Ljubljana site is the airport for Slovenia’s capital city and at the same Short-term development of air traffic remains volatile time the country’s largest airport. Its further development is therefore Despite the long-term growth forecasts, the short-term development essentially connected to the country’s economic and tourist prosperity of aviation markets continues to contain uncertainties. These result, and the development of neighboring regions and their airports, for above all, from political crises, such as in Ukraine and the Middle example Zagreb in Croatia or Trieste in Italy. The key customer in Lju- East, the possible spread of epidemics, such as Ebola, and possible bljana is the now privatized Adria Airways, which serves around 60 % terrorist attacks, such as in Tunisia, Paris or Istanbul, but also from the of the passenger traffic. The Executive Board considers the airport’s economically uncertain situations of various economies and airlines. currently available capacity to be sufficient to serve the growth in traffic The latter continue to be negatively influenced by intense competition, expected in the short to medium term. the rolling out of national taxes, such as the German aviation tax, and Additional information about business development in the past fiscal conservative and short-term volatile supply behavior of airlines. Positive year can be found in the “Economic Report” beginning on page 46. and negative effects also arise from the appreciation and depreciation labor disputes. As a result, these negative effects are resulting in a Strategy of currencies and from price fluctuations on commodity markets. Due to its competitive situation, at Fraport the aforementioned uncertainties particularly affect Frankfurt Airport. Due to the high share The following sections describe the long and short-term market of Russian-dominated traffic, the St. Petersburg, Antalya, Varna, and determinants and the strategic direction of the Group derived from Burgas sites are also heavily influenced by uncertainties. these by the Executive Board. The strategy sets the framework for corporate decisions. Forecasts for the long-term development of global air traffic Source Airbus Boeing Embraer DKMA Period Reference until 2034 Revenue passenger kilometers until 2034 Revenue passenger kilometers until 2034 Revenue passenger kilometers until 2034 Number of passengers CAGR 4.6 % 4.9 % 4.9 % 4.0 % Table 6 Group strategy remains oriented toward long-term market development Compared with the previous year, no fundamental changes were made to the Group strategy in the 2015 fiscal year. Fraport continues to guide its strategy by the long-term forecasted development of the global aviation market and its market trends. Here, renowned aviation associations and aircraft manufacturers continue to expect long-term stable growth of the aviation market. This is derived, in particular, from projected global economic growth and the continuing global expan- sion of the middle class. Supporting effects continue to result from the continuing internationalization of labor and education. Increasing traffic is also forecasted from migration and tourism. The intense com- petition between airlines leading to relatively cheap ticket prices also has the effect of promoting growth. Disproportionate growth is still expected from and in the economic emerging markets in Asia-Pacific, Latin America, Africa, and the Middle East. Group Management Report / Situation of the GroupFraport Annual Report 2015 30 Agenda 2015 In line with the traffic forecasts, Fraport is also expanding the airport Due to the long-term growth forecasts with simultaneously difficult infrastructure at the Group sites outside Frankfurt. After inauguration competitive circumstances, strategic challenges arise for Fraport. In of the new terminals in Varna and Burgas, as well as in St. Petersburg in fiscal year 2009, the Executive Board categorized these in the five 2013, and the inauguration of a new runway as well as a new terminal elements “manage capital expenditure”, “strengthen profitability”, at the Xi’an site in 2012, Fraport sees the need for investment predomi- “increase customer satisfaction”, “secure sustainability”, and “utilize nantly at the Lima site in the medium term. Here, by constructing a new growth potentials” within the scope of so-called “Agenda 2015”. The terminal and a new runway, the dynamic traffic growth of the past few elements continued to be important in the past fiscal year and are years and the forecasted development of the site are taken into account. described below, together with the progress. Fraport also continuously analyzes the traffic levels at the other Group Agenda 2015 Utilize growth potentials Strengthen profitability Increase customer satisfaction Secure sustainability Manage capital expen- diture sites and optimizes the capacity needs in accordance with demand. The key risks and opportunities associated with the expansion of airport infrastructures in and outside of Frankfurt can be found in the “Risk and Opportunities Report” beginning on page 75. Information on the amount of capital expenditure or additions to non-current assets in the past fiscal year is included in the “Asset and Financial Position” chapter beginning on page 58. The forecasted development for the 2016 fiscal year can be found in the “Business Outlook” beginning on page 94. The Business Outlook also includes the development of the Graphic 3 Fraport Group expected over the medium term. Strengthen profitability Manage capital expenditure The competitive circumstances in aviation and the comprehensive To maintain its international competitive positions and participate in capital expenditure measures taken and those planned for the future the growth of air traffic over the long term, the provision of airport result in financial burdens for Fraport, which consist predominantly infrastructure in a demand-, safety-, and cost-oriented manner remains of operating costs, depreciation and amortization, and interest. The a high priority for Fraport. The Executive Board took important steps Executive Board therefore faces the challenge of increasing the profit- toward the sustainability of the Frankfurt site with the start of imple- ability of the company, the operating result, as well as the Group result. mentation of the expansion program in the 2009 fiscal year and the In this context, Fraport in past years has, e.g., driven the following FRA North modernization program, which was progressed almost areas forward: in parallel. With the inauguration of Runway Northwest in the 2011 fiscal year, the opening of Pier A-Plus in 2012 and the completion of > Inauguration of new infrastructure to create long-term opportunities the remodeling of Pier B (also in 2012), and of the CD-Pier in 2008, to serve traffic growth at the Group sites four key parts of the capital expenditure program have already been > Gradually raising airport charges in the Aviation segment and inter- completed as they were needed. national sites to refinance capital expenditure > Focusing on retail revenue by creating new areas (including in Pier Based on the traffic volume forecasted for the long term and investiga- A-Plus in Frankfurt) and developing digital retail offerings tions of the capacity limits of the existing facilities, the inauguration of new landside capacities in Frankfurt will be required from 2021 onwards > Securing the ground handling agreement at the Frankfurt site with Deutsche Lufthansa until 2018 and extending the agreements with in order to maintain the same level of quality and be able to serve various other airlines the traffic volume. For this reason, Fraport began the construction of > Optimizing the Group portfolio through company acquisitions and Terminal 3 in the southern part of the airport site in the previous fiscal sales of shares year. The new terminal, which will cost between €2.5 billion and €3 billion including the landside and airside development, is accord- > Optimizing internal processes and structures, including the re- structuring of Corporate Infrastructure Management and merging ingly to be inaugurated in approximately 2022. The development of comparable functions in Integrated Facility Management CargoCity North and South, which has also been initiated, will also strengthen the site in the cargo transport area in the long term. > Implementing the Pact for the Future for employees of Fraport AG with collective bargaining agreement changes and operating changes to limit the increase in personnel expenses. Group Management Report / Situation of the GroupFraport Annual Report 2015 31 Key performance indicators relating to the “strengthen profitability” Outside of Frankfurt, the Lima site in particular demonstrates its cus- element can be found in the chapter titled “Control” beginning on tomer focus impressively with numerous awards (including “Skytrax page 33. A description of the development of performance indicators Best Airport in South America” 2009 – 2015). At Antalya Airport, the during the past fiscal year can be found in the chapters titled “Results quality of the ground service processes and customer satisfaction are of Operations”, “Asset and Financial Position”, and “Value Manage- also of key significance: In the past few fiscal years, retail areas were ment” beginning on page 51. The associated forecasted figures for expanded and several passenger facilities upgraded, which further the 2016 fiscal year and a medium-term outlook can be found in the enhanced the comfort for passengers. At the Varna and Burgas sites, chapter titled “Business Outlook” beginning on page 94. In addition, the “We Care” program improves passenger satisfaction in the check- the Executive Board is examining further measures to improve prof- in and security areas. Moreover, the two terminal inaugurations also itability, which are not part of the short and medium-term business had a positive impact on customer satisfaction. The focus is also on outlook, and are shown by way of example in the chapter titled “Risk passenger satisfaction with the airport at the Ljubljana site. and Opportunities Report” beginning on page 75. Increase customer satisfaction Key performance indicators relating to the “increase customer satisfac- tion” element can be found in the chapter titled “Control” beginning Fraport sees the ongoing improvement of customer satisfaction as a on page 33. A description of their development during the past fiscal Group-wide challenge. Fraport benefits from passengers, airlines and year can be found in the chapter titled “Non-financial Performance other business partners seeing the Group airports as their airports of Indicators” beginning on page 65; the associated forecasted figures choice. This applies to departing and arriving passengers as well as for the 2016 fiscal year and a medium-term outlook can be found in transfer passengers or customers who use the Group sites for business the chapter titled “Business Outlook” beginning on page 94. purposes. It is essential to have satisfied customers in order to fully realize the potential of the airport business. Secure sustainability Sustainability and acting responsibly are a central future subject for Among other things, the results of passenger surveys underscore that Fraport and have key significance for company development. As well the quality improvements made at the Frankfurt site in past years have as the economic aspect, this understanding also covers the areas of been positively received. To continue this trend, Fraport is continuing the environment and society. The strategically important topics of to intensively pursue the “Great to have you here!” service program responsible corporate management were identified for the first time begun in 2010. The objective is to maintain the general satisfaction of in the 2010 fiscal year through a materiality analysis and turned into a passenger customers at Frankfurt Airport (global satisfaction) above program with specific targets and measures. The program is structured 80 % in the long term and to strengthen passengers’ loyalty to the site. similarly to the materiality matrix’s areas of action and is reviewed and In the course of the program, Fraport also set itself the medium-term updated annually. target of offering its guests a 5-star service. In order to achieve this, Fraport is working on implementing projects in the five areas of The survey of Fraport management and representatives of stakeholder “Welcome & Wayfinding”, “Art, Culture & Ambience”, “Amenities & groups conducted in the past fiscal year resulted in the materiality Comfort”, “Relax & Enjoy”, and “Work & Explore”. Employees are matrix being updated. Since then, the following topics have been also involved in this program. Measures for this are developed and included in the key areas of action for the sustainability of the company: implemented in the subprogram “Friendly and Attentive”. In the past “product quality and customer satisfaction”, “economic efficency”, few years, for example, the following projects have been and continue “growth and development in the group”, “ideas and innovation”, to be advanced: > Further enhancement of the terminal signage > Possibilities for passengers to work in the gate areas > Establishing additional quiet zones > Continuous upgrading of the sanitary facilities > Expanding TV, video, and gaming offerings “attractive and responsible employer”, “occupational health and safety”, “value added and engagement in the region”, “noise abate- ment", “climate protection” and “conservation of nature and resources”. The fundamental prerequisites for operating the business – also including the previous areas of action of compliance/governance and air safety – were defined as standard processes at Fraport and no longer represent key areas of action in the matrix. Updating the materiality matrix also required the program to be revised. In this context, the targets for each area of action were also streamlined to a maximum of two to three measurable targets. Group Management Report / Situation of the GroupFraport Annual Report 2015 32 Key performance indicators relating to the “secure sustainability” individualization in addressing customers. In order to offer the passen- element can be found in the chapter titled “Control” beginning on gers a shopping and service range tailored to their needs along the page 33. A description of the development during the past fiscal year entire travel chain, Fraport is also developing innovative offers. They can be found in the chapter titled “Non-financial Performance Indi- include the introduction of an online shopping platform and the launch cators” beginning on page 65; the associated forecasted figures for of a loyalty program for passengers and visitors to Frankfurt Airport at the 2016 fiscal year and a medium-term outlook can be found in the the end of the past fiscal year. This further expands Fraport’s presence chapter titled “Business Outlook” beginning on page 94. in the retail business and lays the foundation for additional revenue. An additional description of measures taken in the area of society and Outside Frankfurt, retail revenue developed very positively again at the the environment is included in the chapter of the management report Lima site for reasons relating to currency and volume. Due to a decrease with the same name. Detailed information is published on the Group in the number of passengers from Russia, who have to date been very website www.fraport.com. The reporting on the updated materiality heavy consumers, the airports in Varna, Burgas and Antalya reported matrix and the program’s status report are expected to be made at lower retail revenue. By continuously modernizing existing areas and the same time as the financial figures for the first quarter of 2016. implementing the expertise gained in Frankfurt, the Executive Board The online reporting and the reporting on the materiality matrix and aims to further exploit retail potential at the Group airports. the status report do not form part of the audit of the consolidated accounts by the auditor. Growth driver 2: External business Utilize growth potentials In the past fiscal year, the External Activities & Services segment generated more than one third of the Group result. The aim is to Fraport’s objective is to achieve Group-wide participation in the growth further increase the result of the segment. In 2014, this was achieved of the aviation market. By implementing capital expenditure, Fraport by acquiring AMU Holdings Inc., USA, which operates and develops has significantly increased its capacities at the Frankfurt site and be- commercial terminal areas at currently four US airports under conces- yond in recent years. These growth potentials shall be developed with sion agreements, as well as by acquiring Aerodrom Ljubljana, d.d., modern and low-noise aircraft. In this context, the Frankfurt site has which operates the Slovenian capital’s airport in Ljubljana. In addition, an incentive program for airlines, which aims to generate passenger Fraport signed concession agreements with a consortium partner growth for new or existing airlines on new international routes with to operate the 40-year concessions of 14 Greek regional airports on low-noise aircraft. A special focus is also on the freight business. In December 14, 2015. At the time of preparing the consolidated financial the long term, the conditions for participation in further growth in air statements, the Executive Board expects the transaction to be closed traffic will be created through Terminal 3 in Frankfurt. and Fraport to take over the operations under concession probably In the Group airports outside of Frankfurt, the focus is also on active site marketing. Thanks to more favorable conditions, in some cases it Growth driver 3: Airport city at the end of 2016. was possible to achieve significantly higher growth rates at the Group The international trend is still to develop hub airports to become airport airports in the past few fiscal years. cities. Fraport recognized this trend at an early stage and identified In addition, the Group-wide focus is on three further growth drivers: for real estate development. Depending on the particular project, Growth driver 1: Retail business Fraport decides if and to what extent the Group will participate in the development. The current project focal points include the high-quality The expansion and modernization of the shopping and food and office site Gateway Gardens, the logistics area of the Mönchhof site, beverage areas in the terminals are essential elements of growth the commercial area of Taubengrund, and CargoCity South. sites around the Frankfurt Airport site that are worth consideration plans for retail business. Through the inauguration of in total about 12,000 m² of retail space in Pier A-Plus, in the 2012 fiscal year Fraport As a result of the short and medium-term realizable opportunities for created the foundation for further retail growth at the Frankfurt site. growth and taking account of the future development of industry- After the net retail revenue per passenger in Frankfurt increased in the specific conditions, the Executive Board has drawn up the earnings past fiscal year from an average of €3.43 in 2014 to €3.62 (see also forecast for the 2016 fiscal year as well as a medium-term outlook. The “Results of Operations” chapter beginning on page 51), the un- forecast and medium-term outlook can be found in the chapter titled changed medium-term target continues to be to increase net retail “Business Outlook” beginning on page 94. In addition, the Executive revenue per passenger to €4. To achieve this objective, the imple- Board is examining the implementation of further opportunities, which mentation of innovative purchase concepts on potential existing are not part of the short and medium-term business outlook, and are areas will be the focus in coming years. The development will also be shown as an example in the chapter titled “Risk and Opportunities supported by culture-specific, sales-boosting measures and a stronger Report” beginning on page 75. Group Management Report / Situation of the GroupFraport Annual Report 2015 33 New mission statement and development of Agenda 2015 Fraport mainly uses key figures relating to the results of operations and With the involvement of employees from administrative and operating to the asset and financial position, as well as key figures that link the sections of Fraport AG and from Group companies, the Executive Board results of operations with the asset and financial position, as key financial developed a new mission statement for the Fraport Group in the past performance indicators (value management). In accordance with the fiscal year and published it at the end of 2015. Under the motto “Gute long-term oriented Group strategy, the Executive Board manages and Reise! We make it happen”, the new mission statement includes the evaluates the development of financial performance indicators while corporate goals: “growth and development of the sites”, “service- also taking account of long-term forecasted market developments. In oriented provider”, “competitive position thanks to optimal cooper- this context, strategic measures taken – such as the implementation ation”, “learning organization” and “fairness and acknowledgment”. of larger capital expenditure projects or the expansion of external Considered abstractly, these goals are represented by the overarching business – can also lead to a short to medium-term burden on the aim of “growth through progress”. The new mission statement, which financial performance indicators, as long as it is assumed that the asset, has since also become the guiding principle for the business activities, financial and earnings positions will develop in a positive manner over also includes the following corporate values defined under the umbrella the long term, and the measures do not pose disproportionately high term of “trust”: “competence”, “reliability”, “openness”, “courage”, risks to the company. and “commitment”, and the corporate vision “Fraport: from Frankfurt to the World. We are Europe’s best airport operator and set standards The key financial performance indicators and their significance for worldwide.” Fraport are described in the following. The description of their devel- opment during the past fiscal year can be found in the chapters titled The new mission statement converts Agenda 2015 into a new strategy, “Group Results of Operations”, “Asset and Financial Position”, as well as which will be introduced in the Group starting from 2016 and rolled “Value Management” beginning on page 51. The associated forecasted out in the individual segments and Group companies. figures for the 2016 fiscal year and a medium-term outlook can be Control found in the chapter titled “Business Outlook” beginning on page 94. Results of operations key figures As a fundamental component of the interim and consolidated annual The Control chapter explains the key figures primarily used by the financial statement reporting, the results of operations include the Executive Board to make the corporate measures taken as part of the presentation and explanation of significant earnings components and Group strategy measurable and to evaluate them. Here, the Executive key figures. While the results of operations in the context of regular Board differentiates between financial and non-financial performance reporting provide information about the past business development indicators here. and are forecasted in the short to medium term in the business outlook, earnings forecasts are also regularly drawn up over long-term periods Changes compared with the previous year for internal planning purposes. The information resulting from this is Compared with the previous year, no fundamental changes were made essential for the Executive Board with regard to the company’s long- to Group control in the 2015 fiscal year. The Executive Board continues term management. to control the Group in accordance with key financial and non-financial performance indicators, which are derived from the Group strategy. As Key financial performance indicators for Fraport are revenue (as a already described in the 2014 Group management report (see 2014 key component of total revenue), EBITDA, EBIT, EBT and the Group Annual Report, in the chapters titled “Control” beginning on page 37 result. Revenue reflects the Group’s operating activities. EBITDA is and “Business Outlook” beginning on page 91), in the area of value calculated from the total revenue less operating expenses (personnel, management, the Executive Board adjusted the parameters for calcu- material, and other operating expenses). EBITDA therefore shows lating the value added. No material changes to the outcome of the the success of the operating activities and is a superior performance value management arose from the adjustment in the past fiscal year. indicator both in terms of absolute development and in relation to In addition, the Executive Board will use the rate per 1,000 employees the development of revenue and indirectly to traffic development. in the area of occupational health and safety management instead of the total number of work accidents from January 1, 2016 onwards. Group EBIT, which plays a decisive role in Group value management, More detailed information on this topic can be found in the relevant presents EBITDA in the context of depreciation and amortization. Less/ section of the next chapter. plus the financial result, which is essentially comprised of the interest result, the EBT arises from the EBIT. Financial performance indicators For Fraport, the growth-oriented development of financial performance indicators is critical for the long-term success of the company. The overriding importance of these indicators is reflected in the Group strategy as a set of criteria for the “manage capital expenditure”, “utilize growth potentials”, and “strengthen profitability” areas of action. Group Management Report / Situation of the GroupFraport Annual Report 2015 34 The Group result is the outcome of the business activities and is cal- flow), Fraport has also taken into account any incoming dividend culated on the basis of the EBT less taxes on income. The Group result payments from at equity-valued companies in the determination of alters the Group shareholders’ equity and is directly connected to the the free cash flow since the 2014 consolidated financial statements. development of earnings per share, which is a component of Executive The free cash flow thus provides information about the financial funds Board remuneration (see also the chapter titled “Remuneration Report” available to the Group from the operating activities of a period after beginning on page 38). deducting operating capital expenditure activities. These free funds can, in turn, be retained in order to increase the company’s liquidity Asset and financial position key figures and to be available as a financial reserve for future capital expenditure As well as in the results of operations, the result of the strategically or to reduce the leverage (the gearing ratio) or can be distributed adopted measures and operating activities of Fraport is also reflected among shareholders as dividends. in the Group’s asset and financial position. For Fraport, in particular the development of the shareholders’ equity, the shareholders’ equity ratio, the liquidity or net financial debt, the gearing ratio, Links between the results of operations and the asset and financial position (value management) the operating cash flow, and the free cash flow are significant. In order to sustainably increase the Group’s value, the Executive Board, in addition to the key figures of the results of operations, and asset and The level of shareholders’ equity or the shareholders’ equity ratio financial position, specifically draws parallels between the development represents the basis for the current and future operating activities for of the results of operations, and the asset and financial position. In this Fraport. A solid base of shareholders’ equity is, for example, essential context, the Executive Board plans and manages the Group’s develop- for the financing of large strategic projects. Also connected with ment according to the principles of value management. this was the company’s stock market launch in the 2001 fiscal year, which led to a significant increase in shareholders’ equity of around At Fraport, the central figure used to steer and measure this approach €900 million, and formed the essential basis for financing the expansion is the “Fraport value added” figure. As of the past fiscal year, this is of the Frankfurt site as well as the external business. calculated as the difference between EBIT plus the result before tax of Group companies accounted for using the equity method and the Besides shareholders’ equity, the liquidity or net financial debt and capital costs (= Fraport assets x cost of capital). The new definition also the gearing ratio in particular serve as key financial indicators to the takes account of the financial development of the Group companies Executive Board to assess the financial situation. To calculate the gearing accounted for using the equity method and the capital expenditure on ratio, the company calculates the net financial debt, which is defined as these by incorporating the corresponding carrying amounts. the difference between the Group’s liquidity and the non-current and current financial liabilities, into the ratio to the shareholders’ equity. To The value added is consolidated and recorded at Group and at segment achieve a more accurate result, the shareholders’ equity is adjusted by level. While EBIT and the pre-tax results of Group companies accounted the planned dividend distribution as well as non-controlling interests. for using the equity method are key figures of the results of operations, The gearing ratio thereby indicates the Group’s leverage and varies as a Fraport assets are derived from the consolidated statement of financial rule depending on the phase of Fraport’s investment cycle. The gearing position, and are defined as the average of the Group’s or segments’ ratio therefore usually increases in times of high capital expenditure and fixed interest-bearing capital required for operations including the falls when the company’s capital expenditure is lower. In the context carrying amounts of the Group companies accounted for using the of the capital expenditure program at the Frankfurt site, the Executive equity method. Fraport assets consist of the following components Board has defined that the gearing ratio should not exceed a value of as of the past fiscal year: about 140 %. Depending on the financing of the investments in the external business, the gearing ratio of the Fraport Group may also Goodwill + Other intangible assets at cost/2 + Investments in airport temporarily reach a higher figure. operating projects at cost/2 + Property, plant, and equipment at cost/2 + Carrying amounts of Group companies accounted for using the In addition to the gearing ratio, the Executive Board uses the operating equity method + Inventories + Trade accounts receivable – Current cash flow and the free cash flow as key performance indicators for the trade accounts payable evaluation of the financial strength of the Group. While the operating cash flow represents the cash flow from or used in operating activities, To avoid value creation coming solely from depreciation and amorti- the free cash flow is the result of the operating cash flow less the cash zation, the Fraport Executive Board recognizes regularly depreciable flow used in capital expenditure for property, plant and equipment, or amortizable assets within Fraport assets at half of their historical investment property, other intangible assets, and airport operating acquisition/manufacturing costs (at cost/2), and not at residual carrying projects (without taking account of payments for the acquisition of amounts. Goodwill and investments in Group companies accounted for Group companies and for the acquisition of concessions). To illustrate using the equity method are recognized at carrying amount because a more precise development of the free financial funds (the free cash they are not subject to regular depreciation and amortization. Group Management Report / Situation of the GroupFraport Annual Report 2015 35 Fraport calculates the weighted average cost of capital (WACC) using airports is also on passenger satisfaction. Due to the control of the the capital asset pricing model. Given the continuously changing relevant Group companies, the satisfaction figures of the airports where economic environment, interest rate levels, and/or Fraport’s risk and Fraport holds minimum a stake of 50 % in the shareholders’ capital are financing structure, Fraport regularly reviews, and, if needed, adjusts stated within the framework of the annual reporting. its WACC. This was reduced from 9.5 % (before tax) to 8.6 % for the 2015 fiscal year, which was equivalent to an after-tax rate of around Global satisfaction describes the overall passenger satisfaction with 5.9 % (previous year: 6.6 %). the travel process chain and the service at the Frankfurt site. Fraport continues to aim for a target of at least 80 % for global satisfaction. To allow comparisons between segments of varying size, in addition Compared with the 2010 fiscal year, this increase is equivalent to a to its value added Fraport uses the measurement and steering figure rise of ten percentage points. In Frankfurt and at the other Group sites, “return on Fraport assets” (ROFRA). ROFRA is calculated from the global satisfaction and passenger satisfaction with the Group airports ratio of EBIT plus the pre-tax results of the Group companies accounted is primarily measured in surveys. for using the equity method to Fraport assets and shows whether the business areas created value (ROFRA > WACC) or not (ROFRA < WACC). The punctuality rate indicates how many flights took off and landed on time in Frankfurt, whereby a flight is only regarded as being late after Non-financial Performance Indicators 15 minutes in accordance with the International Air Transport Associa- In addition to its financial development, Fraport also measures the tion (IATA). A high level of punctuality is an evidence of the reliability development of “non-financial performance indicators”, which are also of the respective airport and improves the ability of airlines and airport essential for the long-term success of the company and result primarily service providers to plan. The assessment of the punctuality rate may from the “increase customer satisfaction” and “secure sustainability” particularly be distorted by bad weather conditions in Frankfurt or elements of the Group strategy. These performance indicators include, by already existing delays to incoming flights. With a comparable for example, service quality as perceived by passengers and employee weather situation, Fraport aims for a continued high punctuality rate satisfaction. To improve the company control, Fraport has assigned the of around 80 %. key non-financial performance indicators to the “customer satisfaction and product quality” and “appeal as an employer” categories. Baggage connectivity provides information about the percentage of departure baggage at the Frankfurt site that is loaded on time and The key non-financial performance indicators pursuant to GAS 20 and sent to the correct destination in relation to the total departing bag- their significance for Fraport are shown in the following. The descrip- gage. A high level of connectivity proves a good quality of baggage tion of their development during the past fiscal year can be found in processes here. This is particularly important because Frankfurt has a the chapter titled “Non-financial Performance Indicators” beginning high proportion of transfer baggage with a transfer share of more than on page 65. The associated forecasted figures for the 2016 fiscal year 55 %. The objective is to achieve a sustainable baggage connectivity and a medium-term objective can be found in the chapter titled of more than 98.5 %. “Business Outlook” beginning on page 94. An additional description of non-financial performance indicators, that are not essential for the The availability of mobility equipment in terminals is particularly understanding of the business development pursuant to GAS 20 important for passengers with limited mobility. Fraport uses the can be found on the Group website www.fraport.com. The online equipment availability rate to track the availability of this equipment at reporting does not form part of the audit of the consolidated accounts the Frankfurt site; the rate measures the proper technical operation of by the auditor. elevators, escalators, and aerobridges. Fraport aims for an availability Customer satisfaction and product quality For Fraport, the quality of services performed and the associated Appeal as an employer rate of far above 90 %. customer satisfaction are decisive competitive factors and of key signif- For Fraport, appeal as an employer is, like customer satisfaction and icance for the long-term success of the business. The clear objective is product quality, a key factor to ensure the long-term success of the to raise its own quality and a high level of customer satisfaction. Fraport business. Fraport understands appeal to mean the creation of good uses a number of performance indicators to measure and control working conditions in order to gain and retain committed and qualified quality and customer satisfaction. The most important indicators at employees. So as to measure and manage its appeal as an employer, the Frankfurt site include the global satisfaction of passengers, the Fraport uses various performance indicators, such as employee punctuality rate, the baggage connectivity, and the equipment satisfaction, as well as key figures relating to employee safety, and availability rate. Beyond the Frankfurt site, the focus at the Group health management. Group Management Report / Situation of the GroupFraport Annual Report 2015 36 Employee satisfaction, which is surveyed annually by means of a In order to spread risk and due to cash outflows at different times, the questionnaire to employees of Fraport AG and 13 other Group com- liquidity within Fraport AG is invested in a broadly diversified manner. panies – including Lima and Twin Star – is a central instrument for the In order to improve profitability, investments are also made in corpo- measurement of employee morale. Fraport is convinced that satisfied rate bonds with and without ratings. The medium- and long-term employees achieve better customer loyalty and improved performance. investment horizon corresponds to the greatest possible extent to The employee satisfaction key figure is calculated from nine aspects of the expected long-term cash outflows. To cover payments expected satisfaction and shows potential areas of improvement. Despite contin- in the short term, Fraport AG holds time deposits and liquid securi- ued uncertain economic framework conditions, the Executive Board ties with a short remaining term. In connection with the objective of seeks to stabilize and continuously improve the employee satisfaction limiting financial risks, Fraport AG’s asset management suffered neither over the long term. After achieving the target value of being better defaults nor losses from negative interest rates in the past fiscal year. 3.0 (index value in line with the German school grading system) this The majority of the investments concerned listed corporate bonds and development shall now be stabilized. commercial paper, time deposits at banks and promissory note loans. All the investments are fungible or can be liquidated. Furthermore, health and safety management is key to increasing appeal. Fraport needs efficient and high-performing employees to The majority of the fully consolidated Group companies in Germany withstand international competition. One measurement of employee are integrated into the Fraport AG cash pool. This means that their occupational health and safety that Fraport uses is the number of work liquidity is transferred to Fraport AG and is therefore part of Fraport AG accidents. The objective is to continuously reduce the total number asset management. These Group companies therefore do not require of work accidents per year and the resulting days missed due to an independent asset management strategy. The liquidity of the con- accidents. Because the number of work accidents should also always trolled foreign Group companies is, in some cases, subject to a drawing be seen in relation to the number of personnel, since January 1, 2016 restriction due to arrangements in project financing agreements. Their the Executive Board has related the statistics for work accidents to the liquidity is therefore not part of the asset management of Fraport AG number of employees in the financial reporting. It now reports the and is managed on a decentralized basis taking account of the Group number of reportable work accidents in relation to 1,000 employees finance policy. The liquidity of the Group companies accounted for (the rate per 1,000 employees). Compared to the total number of work using the equity method that are not included in the Fraport AG cash accidents, only the reportable accidents are taken into account here. pool is also managed on a decentralized basis. This means that, among others, the previously reported accidents while commuting and sports accidents are no longer taken into account. For With regard to debt, the finance management of Fraport AG aims to better comparability of future developments, this report includes both achieve balanced financing composed of bilateral loans, bonds (capital the total number of accidents and the rate per 1,000 employees for market), loan financing from public loan institutions, and promissory the past fiscal year. The aim is a rate per 1,000 employees that is the note loans. In line with the Group finance policy, money can be same as or lower than the 2015 fiscal year’s level of approximately 30. borrowed both at a fixed and at a floating interest rate. To reduce Finance management interest rate risks from borrowing with floating interest rates, interest rate hedging transactions can be concluded as a rule. The majority The key aspects of finance management are described in the Group of the fully consolidated Group companies in Germany, as described finance policy. The policy applies to all Group companies that are above, are integrated into the Fraport AG cash pool, so that acquiring controlled by Fraport AG and are fully consolidated in these consoli- separate external funds is not necessary. For the controlled foreign dated financial statements. The core objectives of finance management Group companies, the fund-raising takes place depending on the are securing liquidity, limiting financial risks, profitability, and relevant framework conditions, either by concluding project financing, flexibility. The highest priority is to secure liquidity. Building on the bilateral loans, or by internal provision of funding via a Group loan or Group’s solid shareholders’ equity base, it is secured through both shareholders’ equity. The Group companies accounted for using the internal financing – via operating cash flow – and external financing – equity method in Germany and abroad that are not included in the in the form of debt. The securing of the strategic objectives is, to a Fraport AG cash pool are largely financed by external debt in addition certain extent, performed differently within the Group companies and to shareholders’ equity. This always takes place with the involvement is described in the following. of Fraport AG’s Finance department. Group Management Report / Situation of the GroupFraport Annual Report 2015 37 Due to the effects on the consolidated statement of financial position by a simple majority of the votes cast and the capital stock represented as at December 31, 2015, the financing and liquidity analysis in the at the time of the resolution. If, by way of exception, the law requires chapter titled “Asset and Financial Position” beginning on page 58 a higher capital majority (e.g., when changing the purpose of the relates only to Fraport AG and the fully consolidated Group companies company as stated in the company statutes, Section 179 (2) sentence 2 in Germany and abroad. Additional key financial risks and opportuni- of the AktG; or when creating contingent capital, Section 193 (1) ties, i.e., also referring to the Group companies accounted for using sentence 1 of the AktG), the resolution of the AGM has to be passed the equity method, are stated in the “Risk and Opportunities Report” by a three-quarter majority of the represented capital stock. beginning on page 75. Legal Disclosures At the AGM of May 31, 2013, by canceling the existing authorized capital, new authorized capital of €3.5 million was approved, which can be used for issuing shares to employees of Fraport AG (see also Group note 32). The Executive Board is now entitled, with the approv- As a listed corporation headquartered in Germany, Fraport AG is subject al of the Supervisory Board, to increase the capital stock on one or to a number of statutory disclosure requirements. Important reporting more occasions by up to a total of €3.5 million until May 30, 2018, by obligations that apply to this management report as a result of these issuing new shares in return for cash. The statutory subscription rights requirements are shown in the following. of the shareholders may be excluded. In 2015, a total of €493,440 of authorized capital was used for issuing shares within the scope of the Takeover-related disclosures employee investment plan. The capital stock of Fraport AG is €923,850,760. It is divided into 92,385,076 no-par-value bearer shares. The company holds treasury A contingent capital increase of €13.9 million was approved pursuant shares (77,365 shares), which are offset from capital stock on the to Sections 192 et seqq. of the AktG at the AGM held on March 14, balance sheet. The issued capital stated in the commercial balance 2001. The purpose of the contingent capital was expanded at the AGM sheet as at December 31, 2015 and reduced by treasury shares is on June 1, 2005. The contingent capital increase also served to fulfill €923,077,110 (92,307,711 no-par-value bearer shares). There are no subscription rights under the approved Fraport Management Stock differing classes of shares. Options Plan 2005 (MSOP 2005). The Executive Board and Supervi- sory Board were authorized to issue up to a total of 1,515,000 stock On the basis of the consortium agreement concluded between the options to beneficiaries entitled to subscribe until August 31, 2009, State of Hesse and Stadtwerke Frankfurt am Main Holding GmbH dated in accordance with more detailed provisions in this regard. Some of April 18/23, 2001 with a supplement as at December 2, 2014, the total the shares which were issued as part of performance-related remuner- voting rights in Fraport AG held by both shareholders, calculated in ation to members of the Executive Board until 2010 were subject to accordance with Section 22 (2) of the German Securities Trading Act a vesting period of 12 or 24 months. The exercise period of the final (WpHG), amounted to 51.35 % as at December 31, 2015. At that time, tranche of the 2005 Fraport Management Stock Options Plan ended on they were attributed as follows: State of Hesse 31.34 % and Stadtwerke April 10, 2014. A new plan was not issued. Frankfurt am Main Holding GmbH 20.01 %. The voting rights in Fraport AG owned by the City of Frankfurt am Main are held indirectly As at December 31, 2014, the contingent capital totaled €3.4 million. via the Stadtwerke Frankfurt am Main Holding GmbH subsidiary. In 2014, subscription rights in the amount of €37,500 (3,750 options) According to the last official reports in accordance with the WpHG or were exercised under MSOP 2005. The Supervisory Board voided disclosures by individual shareholders, other voting rights in Fraport the contingent capital in its meeting of March 16, 2015 and passed a AG were attributable as follows (as at December 31, 2015): Deutsche resolution for the deletion without replacement of the passage in this Lufthansa AG 8.45 %, BlackRock, Inc. 3.003 % and Legg Mason, Inc. regard in Section 4 (4) of the company statutes. 3.001 %. The relative ownership interests were adjusted to the current total number of shares as at the balance sheet date, and therefore Under a resolution of the 2010 AGM, the Executive Board is also au- may differ from the figures given at the time of reporting or from the thorized to purchase treasury shares of up to 3 % of the capital stock respective shareholders’ own disclosures. available at the time of the 2010 AGM. The Executive Board may only use these treasury shares to serve subscription rights under MSOP The appointment and dismissal of Executive Board members is carried 2005, while the Supervisory Board may use them as a share-based out in compliance with the relevant provisions of the German Stock Cor- portion of the Executive Board’s remuneration. No treasury shares were poration Act (AktG) (Sections 84 and 85). Pursuant to Section 179 (1) purchased in 2015 based on these authorizations. sentence 2 of the AktG in conjunction with Section 11 (3) of the com- pany statutes, the Supervisory Board is entitled to amend the company The aforementioned provisions set under Section 315 (4) of the HGB statutes only with respect to the wording. Other amendments to the are rules customarily applied by similar listed companies and are not company statutes require a resolution of the AGM, which, according intended to hinder any takeover attempts. to Section 18 (1) of the company statutes, must be passed in general Group Management Report / Situation of the GroupFraport Annual Report 2015 38 Report on the relationships with affiliated companies Remuneration Report Due to the shareholdings of 31.34 % (previous year: 31.35 %) held by the State of Hesse and 20.01 % held by Stadtwerke Frankfurt am Main The following remuneration report describes the main features of the Holding GmbH (previous year: 20.02 %) as well as the consortium remuneration system for the Executive Board and Supervisory Board agreement concluded between these shareholders on April 18/23, of Fraport AG in accordance with the statutory regulations, and the 2001 with a supplement as at December 2, 2014, Fraport AG is a recommendations of the GCGC as amended on May 5, 2015. It sum- publicly controlled enterprise. There are no control or profit transfer marizes which principles apply in determining the total remuneration agreements. of the members of the Executive Board, and explains the structure and amount of the remuneration of the Executive Board and Supervisory The Executive Board of Fraport AG therefore compiles a report on the Board members. relationships with affiliated companies in accordance with Section 312 of the AktG. At the end of the report, the Executive Board made the following statement: “The Executive Board declares that under the circumstances known to us at the time, Fraport AG received fair and Remuneration of the Executive Board members in the 2015 fiscal year Remuneration system adequate compensation for each and every legal transaction conduct- Executive Board remuneration is set by the Supervisory Board upon ed. During the year under review, measures were neither taken nor the recommendation of its executive committee and is reviewed on omitted at the request of or in the interests of the State of Hesse and a regular basis. The remuneration of the Executive Board members of the City of Frankfurt am Main and their affiliated companies.” Fraport AG is intended be in proportion to the tasks of the position and Statement on Corporate Governance and Corporate Governance Report the company’s situation and in line with a transparent and sustainable corporate management approach which focuses on the long term. Acting also for the Supervisory Board, the Executive Board prepares a Remuneration is comprised as follows: Statement on Corporate Management in accordance with Section 289a of the HGB, and Section 3.10 of the German Corporate Governance > Non-performance-related components (fixed salary and compen- Code (GCGC) for the Group. The Statement on Corporate Manage- sation in kind) ment including the Corporate Governance Report is published in the > Performance-related components with a short and medium-term chapter of the Annual Report “To Our Shareholders” and on the corpo- incentive effect (bonus) rate website www.fraport.com under the section The Fraport Group. > Performance-related components with a long-term incentive effect (Long-Term Strategy Award and Long-Term Incentive Program) Key features of the internal control and risk management system In order to comply with the remuneration-related amendments of the The description of the key features of the internal control and risk man- GCGC in the version dated May 5, 2015, with effect starting in fiscal agement system with respect to the accounting process in accordance year 2014, a maximum limit was defined with each Executive Board with Section 315 (2) no. 5 HGB can be found in the chapter titled member for the sum of the aforementioned respective remuneration “Risk and Opportunities Report” beginning on page 75 of this report. components. For the Chairman of the Executive Board this amounts to €2.3 million and €1.65 million for every other member of the Executive Board. This maximum limit also applies in relation to the remuneration components that were granted for the previous fiscal years 2010 to 2013 and have not yet been fully paid out. In addition to the remuneration components specified above, the members of the Executive Board received allocations to pension commitments. In principle, the pension commitments, including performance-related contributions, are in a fixed proportion to the respective fixed annual gross salary, and are therefore subject to im- plicit maximum limits. Further information on pension commitments for Executive Board members can be found in note 38. Group Management Report / Situation of the GroupFraport Annual Report 2015 39 Non-performance-related components The actual bonus for an Executive Board member is calculated by During the term of their employment contract (generally five years), multiplying EBITDA and ROFRA, each minus a basic allowance, by a Executive Board members, as a rule, receive an unchanging fixed annual multiplier contractually stipulated for each Executive Board member salary across the entire period. and adding together the aforementioned results. The bonus amount for one fiscal year is capped at 175 % of the bonus paid for 2009 – or The amount of the fixed annual salary is reviewed on a regular basis, if the member was appointed during the year or the employment generally annually, to ensure that it is appropriate. contract was amended in 2009, an amount extrapolated –for the entire year. For Executive Board members appointed as of 2012, the maxi- The fixed annual compensation also covers any activity performed by mum bonus amount for a fiscal year is limited to 140 % of the bonus an Executive Board member for companies in which Fraport AG holds calculated pro forma for fiscal year 2011. 50 % of anticipated bonus an indirect or a direct interest of more than 25 % (so-called “other payments are paid out monthly during the fiscal year. The remaining board mandates related to Group companies”). bonus payments are payable within one month after the Supervisory Board has approved the respective consolidated financial statements In addition, the remuneration for Executive Board members includes for the relevant fiscal year. compensation in kind and other payments (ancillary benefits). In particular, compensation in kind is the pecuniary benefit subject to 50 % of the calculated bonus payments have a conditional payback income tax from the private use of a company car with driver. This provision. If EBITDA and ROFRA in the following year do not reach at compensation in kind is generally available to all Executive Board least an average of 70 % of the corresponding key figure for the fiscal members in the same way; the amount of compensation depends on year in question, the Executive Board member has to pay back 30 % the personal situation. of the bonus to Fraport AG. Should the same apply to the second year after the relevant fiscal year, 20 % of the bonus has to be repaid. A Executive Board members also receive half of the total contributions to- possible repayment obligation exists for each following year separately ward their pension insurance in the case of voluntary insurance, and in and must be individually reviewed each year for compliance. the case of statutory insurance, half of the total statutory contributions. If the Supervisory Board is of the opinion that the relevant business fig- For contributions to voluntary statutory or private medical and health ures have decreased due to influences outside of the Executive Board’s care insurance, each member of the Executive Board receives a tax-free control, it can grant a bonus at its discretion or waive the repayment in employer contribution in line with legal provisions. full or in part, based on the Executive Board member’s performance. If an Executive Board member holds an active position for less than one fiscal year, a pro rata bonus payment is made. Performance-related components Without a long-term incentive effect (bonus) The bonus is dependent on the EBITDA and ROFRA of the Fraport Group for the respective fiscal year. EBITDA is the Group operating result, ROFRA the interest on Group assets; i.e., the total return on cap- ital (“return on Fraport assets”). Both key figures (EBITDA and ROFRA) are recognized business management parameters for measuring the success of a company. Group Management Report / Situation of the GroupFraport Annual Report 2015 40 With a long-term incentive effect (Long-Term Strategy Award, LSA) For the share performance target, the Fraport share price development over the corresponding three-year period is compared with the The LSA creates an additional long-term incentive effect that appropri- average development of the MDAX and a share basket, which includes ately and on an ongoing basis takes into consideration the interests of the shares of the operators of the Paris, Zurich, and Vienna airports. the main stakeholders of Fraport AG, specifically employees, customers, The payment for this share performance target is again determined and shareholders. by comparing the reference value calculated at the beginning of the three-year period with the actual development. Positive or negative As part of the LSA, each Executive Board member is promised a pro- deviations increase or decrease the prospective bonus accordingly. spective financial reward for one fiscal year – the first being in 2010 for the fiscal year 2013. After three fiscal years have expired (the fiscal Entitlement to LSA payments is established by approval by the Super- year in question and the two following years), the extent to which visory Board of the consolidated financial statements for the last fiscal the targets have been met is determined and the actual payment is year of the performance period. calculated based on these results. The paid amount can exceed or fall below the prospective amount but is capped at 125 % of the amount If an Executive Board member leaves Fraport AG before the end of a originally stated. Performance targets are customer satisfaction, three-year period already commenced, the extent to which the target sustained employee development, and share performance. All three has been met is also not calculated until after this three-year period targets are equally important under the LSA. As in the previous year, a has expired for this Executive Board member. The award for the entire prospective sum of €120 thousand has been promised to the Chairman period is then paid on a pro rata basis for the amount of time the of the Executive Board for the performance period of 2015 to 2017, Executive Board member actually worked for the company. There is with a payout in 2018, while a prospective sum of €90 thousand each no right to payment for a three-year period which has not yet expired has been promised to the other members of the Executive Board. at the time the employment contract has been legally terminated due to extraordinary circumstances that are within the control of the Customer satisfaction is evaluated on an annual basis using an estab- Executive Board member (termination by request of the Executive lished assessment system for airlines, real estate management, retail Board member without cause pursuant to Section 626 of the German properties, and passengers. Whether or not a target has been met is Civil Code (BGB), termination for cause within the control of the determined by comparing the corresponding data (in percentage Executive Board member in accordance with Section 626 of the BGB), points) at the beginning of the three-year period with the average or if the Executive Board member has been removed from his or her achieved over the same period. If the actual result exceeds or falls below office for cause pursuant to Section 84 (3) of the AktG while his or her the target by two full percentage points, the bonus paid for customer employment contract continues. If an Executive Board member joins satisfaction is increased or decreased correspondingly. the company during the course of a fiscal year, the Supervisory Board decides if and to what extent the Executive Board member is entitled Sustained employee development relates to employee satisfaction and to participate in the LSA program for this fiscal year. the changes in headcount. The Supervisory Board decides to which extent the target has been met. Its decision is based on the results Long-Term Incentive Program (LTIP) of the employee satisfaction barometer (an annual survey among The LTIP is a virtual stock options program. – Beginning in fiscal year Fraport AG employees) and the responsible development of headcount 2010 –, the Executive Board members of Fraport AG are promised a in view of the Group’s economic situation. contractually stipulated amount of virtual shares within their employ- ment contracts, so-called performance shares, for each fiscal year on the condition that and depending on whether they meet predefined performance targets (the so-called target tranche). After four fiscal years, the –so-called performance period–, it will be determined to what extent these performance targets have been met and the number of performance shares actually due to the Executive Board member, the so-called actual tranche. The actual tranche can exceed or fall below the target tranche but is capped at 150 % of the target tranche. Group Management Report / Situation of the GroupFraport Annual Report 2015 41 The two performance targets “earnings per share” (EPS) and “rank total The relevant share price used for calculating the LTIP payment corre- shareholder return MDAX” are relevant for deriving the actual tranche sponds to the weighted average of the company’s closing share prices from the target tranche, with the earnings per share (EPS) performance in XETRA, or a similar trading system replacing XETRA at the Frankfurt target being weighted at 70 % and the rank total shareholder return Stock Exchange, during the first 30 trading days immediately subse- MDAX performance target at 30 %. For the fiscal year 2015, 9,000 quent to the last day of the performance period. For the performance performance shares were allocated to Dr. Stefan Schulte as a target shares issued in 2013 and in previous fiscal years, the relevant share tranche, while the other Executive Board members were allocated price for calculating the LTIP payment is limited to €60 per performance 6,850 performance shares. share. Entitlement to the LTIP payment is established by approval by the Supervisory Board of the consolidated financial statements for the In order to determine to what extent the EPS performance target has last fiscal year of the performance period. been met, the weighted average target EPS during the performance period, based on the strategic development planning applicable at the For all performance shares allocated from the 2014 fiscal year onwards, time of the award, is compared with the average EPS actually achieved the LTIP payment is limited to 150 % of the product of the performance during the performance period. For assessing to what extent the target shares of the actual tranche multiplied by the “relevant share price at has been met, the target EPS for the first fiscal year accounts for 40 %, the time of issuance”. The “relevant share price at the time of issuance” the second for 30 %, the third for 20 %, and the fourth for 10 %. If tar- corresponds to the weighted average of the company’s closing share gets have been met 100 % across the performance period, the actual prices in XETRA or a similar trading system replacing XETRA at the tranche corresponds to the target tranche. If the actual EPS differs from Frankfurt Stock Exchange during the month of January of the fiscal the target EPS, the number of allocated performance shares is adjusted year, in which the relevant performance period begins. accordingly. If the actual EPS falls below the target EPS by more than 25 percentage points, no performance shares are issued for the EPS Furthermore, for all LTIP performance share tranches that have already performance target. If the actual EPS falls below the target EPS by been allocated and will be in future, maximum payment amounts have 25 percentage points, the actual tranche amounts to 50 % of the target been defined, which amounts to a maximum of €810.0 thousand for tranche. If the actual EPS exceeds the target EPS by 25 percentage Dr. Schulte and for the other Executive Board members a maximum points, the actual tranche amounts to 150 % of the target tranche. of €616.5 thousand per performance share tranche. Intermediate values can be calculated using a straight-line method. Any performance exceeding the targets by more than 25 percentage The rules for LTIP entitlements of former Executive Board members points is not taken into account. are largely the same as for the LSA. In addition, a former Executive Board member is not entitled to any performance shares for a target The extent to which the rank total shareholder return MDAX perfor- tranche whose performance period has lasted less than twelve months mance target has been met is calculated by determining the weighted at the time the employment contract was legally terminated. The average rank of Fraport AG among all companies listed in the MDAX LTIP fair value accrual allocation resulted in the following expenses in relation to the total shareholder return (share price development for the fiscal year: Dr. Stefan Schulte €579.4 thousand (previous year: and dividends) over the performance period. Just as with the EPS €304.2 thousand), Anke Giesen €384.0 thousand (previous year: performance target, the four relevant fiscal years will be weighted €183.8 thousand), Michael Müller €227.0 thousand (previous year: in decreasing order. The actual tranche equals the target tranche if €96.5 thousand), Peter Schmitz €133.9 thousand (previous year: Fraport AG, during the performance period, ranks number 25 among €113.2 thousand), Dr. Matthias Zieschang €380.4 thousand (previous total shareholder return MDAX with its weighted average. For each year: €217.6 thousand). rank exceeding or falling below 25, the actual tranche is increased or reduced by 2.5 percentage points. If Fraport AG ranks worse than Further information regarding share-based remuneration via LTIP is 45th place, no performance shares will be issued for the rank total provided in the Group notes under note 47. shareholder return MDAX performance target; if Fraport AG ranks better than 5th place, there will not be a further increase in the number of performance shares issued over 5th place. Group Management Report / Situation of the GroupFraport Annual Report 2015 42 Remuneration of the Executive Board 2015 In the tables below, the contributions, inflows, and pension-related expenses to each member of the Executive Board are displayed individ- ually based on the recommendations of Section 4.2.5 (3) of the GCGC: Remuneration of the Executive Board (contributions granted) in €’000 Fixed salary Ancillary benefits 1) Total 1) One-year variable remuneration (bonus) 2) Multiyear variable remuneration Long-Term Strategy Award (3 years) Tranche 2014 (January 1, 2014 to December 31, 2016) Tranche 2015 (January 1, 2015 to December 31, 2017) Long-Term Incentive Program (4 years) Tranche 2014 (January 1, 2014 to December 31, 2017) 3) Tranche 2015 (January 1, 2015 to December 31, 2018) 3) Total 4) Pension-related expenses 5) Total remuneration Dr. Stefan Schulte (Chairman of the Executive Board; Executive Director since April 15, 2003) 2014 2015 2015 (Min) 2015 (Max) 415.0 415.0 415.0 415.0 30.8 445.8 711.7 25.2 440.2 766.7 25.2 25.2 440.2 440.2 – 870.1 120.0 – – – – 120.0 0.0 150.0 440.0 – – – – 370.2 0.0 810.0 1,717.5 1,697.1 440.2 2,270.3 390.9 502.5 502.5 502.5 2,108.4 2,199.6 942.7 2,772.8 (Executive Director Ground Handling; (Executive Director Labor Relations; (Executive Director Controlling (Executive Director Operations; Executive Director since January 1, 2013) Executive Director since October 1, 2012) and Finance; Executive Director from Anke Giesen Michael Müller Dr. Matthias Zieschang Executive Director since April 1, 2007) September 1, 2009 to August 31, 2014) 2014 2015 2014 2015 2014 2015 2014 2015 2015 (Min) 2015 (Max) 2015 (Min) 2015 (Max) 2015 (Min) 2015 (Max) 2015 (Min) 2015 (Max) 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 320.0 320.0 320.0 320.0 200.0 29.3 329.3 502.4 33.3 333.3 541.2 33.3 33.3 333.3 333.3 – 674.8 51.8 351.8 312.6 30.3 330.3 490.1 30.3 30.3 330.3 330.3 – 674.8 44.4 364.4 541.4 41.0 361.0 541.4 41.0 41.0 361.0 361.0 – 541.4 48.6 248.6 328.1 90.0 334.9 – – – – – 90.0 0.0 112.5 90.0 0.0 112.5 – 90.0 0.0 112.5 – – 90.0 – 90.0 – 20.0 – – – – – – – – – 173.6 – 334.9 – – 281.7 0.0 616.5 – 281.7 0.0 616.5 – 281.7 0.0 616.5 1,256.6 1,246.2 333.3 1,737.1 928.0 1,192.1 330.3 1,734.1 1,330.7 1,274.1 361.0 1,631.4 133.7 146.8 146.8 146.8 124.1 127.8 127.8 127.8 268.9 345.5 345.5 345.5 1,390.3 1,393.0 480.1 1,883.9 1,052.1 1,319.9 458.1 1,861.9 1,599.6 1,619.6 706.5 1,976.9 0.0 – 596.7 136.8 733.5 1) Ancillary benefits vary depending on personal circumstances; there is no set minimum or maximum. 2) The bonus includes the payments on account for the fiscal year 2015 and the addition to the bonus provision in 2015. 3) The LTIP was measured at fair value as at the time of awarding. 4) For the Chairman of the Executive Board the total cap amounts to €2.3 million and €1.65 million for every other member of the Executive Board. If the total cap is exceeded, the last payment component will be reduced accordingly. 5) Pension-related expenses were reported pursuant to IAS 19. Remuneration of the Executive Board (inflows) in €’000 Fixed salary Ancillary benefits Total One-year variable remuneration (bonus) 2) Multiyear variable remuneration Long-Term Strategy Award (3 years) Tranche 2011 (January 1, 2011 to December 31, 2013) Tranche 2012 (January 1, 2012 to December 31, 2014) Long-Term Incentive Program (4 years) Tranche 2010 (January 1, 2010 to December 31, 2013) Tranche 2011 (January 1, 2011 to December 31, 2014) Total 3) Pension-related expenses 4) Total remuneration Dr. Stefan Schulte (Chairman of the Executive Board; Executive Director since April 15, 2003) (Executive Director Ground Handling; (Executive Director Labor Relations; (Executive Director Controlling (Executive Director Operations; Executive Director since January 1, 2013) Executive Director since October 1, 2012) and Finance; Executive Director from Anke Giesen Michael Müller Dr. Matthias Zieschang 2014 415.0 30.8 445.8 666.1 60.0 – 664.2 – 1,836.1 390.9 2,227.0 2015 415.0 25.2 440.2 724.1 – 40.0 – 489.0 1,693.3 502.5 2,195.8 Executive Director since April 1, 2007) September 1, 2009 to August 31, 2014) 2014 1) 2015 1) 2014 300.0 29.3 329.3 470.2 15.0 – – – 814.5 133.7 948.2 2015 300.0 33.3 333.3 511.1 20.0 – – 186.1 1,050.5 146.8 1,197.3 2014 300.0 51.8 351.8 292.6 18.8 – – – 663.2 124.1 787.3 2015 300.0 30.3 330.3 387.0 22.5 – – 140.5 880.3 127.8 1,008.1 320.0 44.4 364.4 517.2 45.0 – – 505.6 1,432.2 268.9 1,701.1 320.0 41.0 361.0 551.0 30.0 – – 372.2 1,314.2 345.5 1,659.7 1) An offsetting of the remuneration in 2015 for the Supervisory Board activities at Hanover-Langenhangen Airport was made against the bonus payment of Dr. Zieschang of €4,760.00 for the 2014 fiscal year and €2,975.00 for the 2015 fiscal year. 2) The bonus includes the payments on account for the 2015 fiscal year and the ex-post adjustment to the bonus for the 2014 fiscal year. 3) For the Chairman of the Executive Board the total cap amounts to €2.3 million and €1.65 million for every other member of the Executive Board. If the total cap is exceeded, the last payment component will be reduced accordingly. 4) Pension-related expenses were reported pursuant to IAS 19. Contributions granted Peter Schmitz – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Inflows Peter Schmitz 2015 – – – – – – 171.8 26.7 341.2 539.7 539.7 2014 200.0 48.6 248.6 392.0 45.0 – – 505.6 1,191.2 136.8 1,328.0 Group Management Report / Situation of the GroupFraport Annual Report 2015 43 Anke Giesen (Executive Director Ground Handling; Executive Director since January 1, 2013) Michael Müller (Executive Director Labor Relations; Executive Director since October 1, 2012) Dr. Matthias Zieschang (Executive Director Controlling and Finance; Executive Director since April 1, 2007) Peter Schmitz (Executive Director Operations; Executive Director from September 1, 2009 to August 31, 2014) 2014 2015 2015 (Min) 2015 (Max) 2014 2015 2015 (Min) 2015 (Max) 2014 2015 2015 (Min) 2015 (Max) 2014 2015 2015 (Min) 2015 (Max) Contributions granted 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 320.0 320.0 320.0 320.0 200.0 29.3 329.3 502.4 33.3 333.3 541.2 33.3 33.3 333.3 333.3 – 674.8 51.8 351.8 312.6 30.3 330.3 490.1 30.3 30.3 330.3 330.3 – 674.8 44.4 364.4 541.4 41.0 361.0 541.4 41.0 41.0 361.0 361.0 – 541.4 48.6 248.6 328.1 90.0 – – – 90.0 – – – 90.0 – – – 20.0 – 90.0 0.0 112.5 90.0 0.0 112.5 – 90.0 0.0 112.5 – 334.9 – – – 173.6 – – – 334.9 – – – – 281.7 0.0 616.5 – 281.7 0.0 616.5 – 281.7 0.0 616.5 1,256.6 1,246.2 333.3 1,737.1 928.0 1,192.1 330.3 1,734.1 1,330.7 1,274.1 361.0 1,631.4 133.7 146.8 146.8 146.8 124.1 127.8 127.8 127.8 268.9 345.5 345.5 345.5 1,390.3 1,393.0 480.1 1,883.9 1,052.1 1,319.9 458.1 1,861.9 1,599.6 1,619.6 706.5 1,976.9 0.0 – 596.7 136.8 733.5 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Table 7 Inflows Dr. Stefan Schulte (Chairman of the Executive Board; Executive Director since April 15, 2003) Anke Giesen (Executive Director Ground Handling; Executive Director since January 1, 2013) Michael Müller (Executive Director Labor Relations; Executive Director since October 1, 2012) Dr. Matthias Zieschang (Executive Director Controlling and Finance; Executive Director since April 1, 2007) Peter Schmitz (Executive Director Operations; Executive Director from September 1, 2009 to August 31, 2014) 2014 300.0 29.3 329.3 470.2 15.0 – – – 814.5 133.7 948.2 2015 300.0 33.3 333.3 511.1 – 20.0 – 186.1 1,050.5 146.8 1,197.3 2014 300.0 51.8 351.8 292.6 18.8 – – – 663.2 124.1 787.3 2015 300.0 30.3 330.3 387.0 – 22.5 – 140.5 880.3 127.8 1,008.1 2014 1) 2015 1) 320.0 44.4 364.4 517.2 45.0 – 505.6 – 1,432.2 268.9 1,701.1 320.0 41.0 361.0 551.0 – 30.0 – 372.2 1,314.2 345.5 1,659.7 2014 200.0 48.6 248.6 392.0 45.0 – 505.6 – 1,191.2 136.8 1,328.0 2015 – – – 171.8 – 26.7 – 341.2 539.7 – 539.7 Table 8 1) An offsetting of the remuneration in 2015 for the Supervisory Board activities at Hanover-Langenhangen Airport was made against the bonus payment of Dr. Zieschang of €4,760.00 for the 2014 fiscal year and €2,975.00 for the 2015 fiscal year. 2) The bonus includes the payments on account for the 2015 fiscal year and the ex-post adjustment to the bonus for the 2014 fiscal year. 3) For the Chairman of the Executive Board the total cap amounts to €2.3 million and €1.65 million for every other member of the Executive Board. If the total cap is exceeded, the last payment component will be reduced accordingly. 4) Pension-related expenses were reported pursuant to IAS 19. 1) Ancillary benefits vary depending on personal circumstances; there is no set minimum or maximum. 2) The bonus includes the payments on account for the fiscal year 2015 and the addition to the bonus provision in 2015. 3) The LTIP was measured at fair value as at the time of awarding. 4) For the Chairman of the Executive Board the total cap amounts to €2.3 million and €1.65 million for every other member of the Executive Board. If the total cap is exceeded, the last payment component will be reduced accordingly. 5) Pension-related expenses were reported pursuant to IAS 19. in €’000 Fixed salary Ancillary benefits 1) Total 1) One-year variable remuneration (bonus) 2) Multiyear variable remuneration Long-Term Strategy Award (3 years) Tranche 2014 (January 1, 2014 to December 31, 2016) Tranche 2015 (January 1, 2015 to December 31, 2017) Long-Term Incentive Program (4 years) Tranche 2014 (January 1, 2014 to December 31, 2017) 3) Tranche 2015 (January 1, 2015 to December 31, 2018) 3) Total 4) Pension-related expenses 5) Total remuneration in €’000 Fixed salary Ancillary benefits Total One-year variable remuneration (bonus) 2) Multiyear variable remuneration Long-Term Strategy Award (3 years) Tranche 2011 (January 1, 2011 to December 31, 2013) Tranche 2012 (January 1, 2012 to December 31, 2014) Long-Term Incentive Program (4 years) Tranche 2010 (January 1, 2010 to December 31, 2013) Tranche 2011 (January 1, 2011 to December 31, 2014) Total 3) Pension-related expenses 4) Total remuneration Dr. Stefan Schulte (Chairman of the Executive Board; Executive Director since April 15, 2003) 2014 2015 2015 (Min) 2015 (Max) 415.0 415.0 415.0 415.0 30.8 445.8 711.7 25.2 440.2 766.7 25.2 25.2 440.2 440.2 – 870.1 120.0 440.0 – 120.0 0.0 150.0 – – – – – – – 370.2 0.0 810.0 1,717.5 1,697.1 440.2 2,270.3 390.9 502.5 502.5 502.5 2,108.4 2,199.6 942.7 2,772.8 2014 415.0 30.8 445.8 666.1 60.0 – – 664.2 1,836.1 390.9 2,227.0 2015 415.0 25.2 440.2 724.1 40.0 – – 489.0 1,693.3 502.5 2,195.8 Group Management Report / Situation of the GroupFraport Annual Report 2015 44 Provisions for pensions and similar obligations Pension obligations to currently active Executive Board members were as follows: Provisions for pensions and similar obligations in €’000 Dr. Stefan Schulte Michael Müller Dr. Matthias Zieschang Anke Giesen Total Obligation December 31, 2014 Change 2015 Obligation December 31, 2015 5,899 310 2,685 310 9,204 366 108 299 111 884 6,265 418 2,984 421 10,088 Table 9 Other agreements The former Executive Board member Mr. Mai received payments Each member of the Executive Board has entered into an obligation of €162.8 thousand for the LTIP 2011 tranche and a payment of to purchase shares in Fraport AG amounting to at least half a year’s €7.5 thousand for the LSA 2012 tranche in fiscal year 2015. fixed gross salary (cumulative cost at the time of purchase) and hold them for the duration of the respective contract of employment. The employment contract of the former Executive Board member Already existing holdings of Fraport AG shares are taken into account. Peter Schmitz provides for a two-year noncompetition clause follow- The obligation to purchase and hold shares is reduced pro rata if the ing the end of his employment as at August 31, 2014. Pursuant to a employment contract has a term of less than five years. If the Executive resolution of the Supervisory Board, the noncompetition clause was Board member is reappointed, the equivalent value of the shares an waived. Furthermore, in fiscal year 2015, Mr. Schmitz received pay- Executive Board member is obliged to hold is increased to at least a ments of €341.2 thousand for the LTIP 2011 tranche, and a payment of full annual gross salary. €26.7 thousand for the LSA 2012 tranche. Each member of the Executive Board has agreed to a two-year non- Other benefits competition clause. During this term, reasonable compensation in As other benefits, Executive Board members have the option of pri- the form of an annual fixed gross salary pursuant to Section 90a of the vate use of a company vehicle with a driver, private use of a company HGB shall be paid. Part payments shall be made monthly. The com- mobile device, a D&O liability insurance with a deductible pursuant pensation shall be generally credited against any retirement pensions to Section 93 (2) sentence 3 of the AktG, an accident insurance and owed by Fraport AG, inasmuch as the compensation together with a lifetime entitlement to use the VIP service of Fraport AG, as well as the retirement pensions and other generated income exceeds 100 % access to a parking spot at Frankfurt Airport. Fraport AG reimburses of the last fixed salary received. travel costs for company trips and other business expenses in line with the regulations in general use at Fraport AG. Group Management Report / Situation of the GroupFraport Annual Report 2015 45 Remuneration of the Supervisory Board in fiscal year 2015 full fiscal year. This additional compensation is paid for a maximum of The remuneration of the Supervisory Board is regulated in Section 12 two committee memberships. Supervisory Board members that be- of the company statutes of Fraport AG. It is provided solely as fixed come members of or leave the Supervisory Board during a fiscal year remuneration. According to this, every member of the Supervisory receive pro rata remuneration. The same holds true in the case of any Board shall receive a fixed remuneration of €22.5 thousand for each change in the membership of committees. Each Supervisory Board full fiscal year payable at the end of the fiscal year, the Chairman and member receives €800 for every Supervisory Board meeting he or she the Chairman of the finance and audit committee shall receive twice attends and every committee meeting attended of which he or she is a that amount, the Vice-Chairman and the Chairmen of the other com- member. Accrued expenses will also be reimbursed (see also note 56). mittees shall each receive one and a half times this amount. For their membership on a committee, Supervisory Board members receive an The following remuneration was paid to the individual members of additional, fixed remuneration of €5 thousand per committee for each the Supervisory Board for fiscal year 2015: Remuneration of the Supervisory Board 2015 in € Supervisory Board Member Amier Arslan Becker Cicek Dahnke Feldmann Gerber Haase Claudia Devrim Uwe Hakan Kathrin Peter Peter Dr. Margarete Kaufmann Frank-Peter Klemm Krieg Lothar Dr. Roland Odenwald Michael Özdemir Mehmet Prangenberg Arno Schaub Schmidt Schmidt Stejskal Weimar Windt Gerold Hans-Jürgen Werner Edgar Karlheinz Prof. Dr. Katja Fixed salary Committee remuneration Attendance fees Total 33,750.00 22,500.00 22,500.00 22,500.00 22,500.00 22,500.00 22,500.00 45,000.00 22,500.00 33,750.00 22,500.00 22,500.00 22,500.00 22,500.00 33,750.00 22,500.00 22,500.00 22,500.00 45,000.00 22,500.00 10,000.00 10,000.00 10,000.00 5,000.00 5,000.00 10,000.00 0.00 10,000.00 10,000.00 10,000.00 5,000.00 5,000.00 5,000.00 5,000.00 10,000.00 5,000.00 10,000.00 10,000.00 10,000.00 10,000.00 14,400.00 8,000.00 8,800.00 8,000.00 8,800.00 7,200.00 4,800.00 12,000.00 14,400.00 14,400.00 10,400.00 6,400.00 8,000.00 10,400.00 10,400.00 10,400.00 12,000.00 16,800.00 8,000.00 11,200.00 528,750.00 155,000.00 204,800.00 58,150.00 40,500.00 41,300.00 35,500.00 36,300.00 39,700.00 27,300.00 67,000.00 46,900.00 58,150.00 37,900.00 33,900.00 35,500.00 37,900.00 54,150.00 37,900.00 44,500.00 49,300.00 63,000.00 43,700.00 888,550.00 Table 10 Remuneration of the Economic Advisory Board in fiscal year 2015 For membership on the Economic Advisory Board, a remuneration of €2,500.00 is paid for every year of membership and €2,000.00 per meeting attended, with the Chairman receiving twice that amount. Travel expenses are reimbursed independently. Group Management Report / Situation of the GroupFraport Annual Report 2015 46 Economic Report General Statement of the Executive Board Gross domestic product (GDP)/world trade 1) Real changes compared to the previous year in % 2015 2014 Despite strike and weather-related flight cancellations, the number of passengers at the Frankfurt site again developed positively over the past fiscal year. Over 61 million passengers represented an increase of 2.5 % and a new record at the same time. On the other hand, the weaker growth of world trade and the economic problems of various emerging and developing economies were reflected in the cargo section. In total, cargo throughput declined by 2.6 % to nearly 2.1 million metric tons. The airports in the Fraport Group recorded mixed performances over the past fiscal year. While the sites with significant share of Russian traffic recorded a declining to static number of passengers, the airports in Ljubljana, Lima, Hanover and Xi’an showed a positive trend. World Eurozone Germany USA China Japan World trade 3.1 1.5 1.7 2.5 6.9 0.6 2.6 3.4 0.9 1.6 2.4 7.3 0.0 3.4 1) Data for 2015: Estimates based on Table 11 International Monetary Fund (IMF, January 2016), Deutsche Bank (January 2016), DekaBank (December 2015), German Federal Statistical Office (January 2015). The upturn in the global economy forecasted at the start of the fiscal Financially, the Group had an overall positive performance in 2015. In year did not fully occur in the reporting period. The different devel- addition to growth of passengers at the Frankfurt site, higher revenue opments in individual regions already seen in 2014 continued in the resulted from the increase in airport and infrastructure charges at the previous year. Whereas the economic development of most industrial site and from the retail business. Outside Frankfurt, –in addition to the countries was relatively robust, economic growth decreased in a num- increase in traffic at the Lima site, – higher revenue primarily resulted ber of emerging and industrial countries. In China in particular, signs of from the first-time full-year inclusion of the Group companies AMU weakening development accumulated. Due to a weak Chinese import Holidays Inc. and Ljubljana. Further positive effects resulted from the demand, global trade was also below expectations for the full year. A conversion of US$ revenue from the Group company Lima to the further reason for this was liquidity being withdrawn from countries that Group’s € currency. Adjusted for the recognition of earnings-neutral are particularly important sales markets for China or whose economy capacitive capital expenditure, Group revenue increased by €200.0 depends particularly heavily on commodity exports. As a result, various million to €2,583.8 million (+8.4 %) in the past fiscal year. Group EBITDA international currencies including the Russian Ruble and the Brazilian also improved noticeably by 7.4 % to €848.8 million and the Group Real depreciated significantly against the US$. China also significantly result increased by 18.0 % to €297.0 million. Free cash flow was at devalued the Renminbi against the US$ for the first time in many years. €393.6 million, which was again significantly positive and surpassed the previous year’s value by €146.8 million (+59.5 %). Economic recovery continued in the Eurozone. Consumption was an The Executive Board declares the Group development in 2015 as overall energy costs, low interest rates and a weak €, the gross domestic prod- positive also due to the consistently sound liquidity supply. uct within the monetary union increased by an estimated 1.5 % in the important pillar for economic growth. In an environment of decreased Economic and Industry-Specific Conditions achieved the lowest level since January 2012 in October at 10.7 %. year 2015. The economic recovery also ensured a visible improvement in the labor market. The unemployment rate in the Eurozone thus Development of the economic conditions Driven by private consumption, the German economy has again grown The global economy grew again in 2015, but developed somewhat dynamically in 2015. Gross domestic product increased by 1.7 %. more sluggishly than expected. The growth rate of world trade was Consumption was supported by low interest rates on savings, lower 2.6 %. energy costs and a relatively good situation in the labor market. Other factors supporting economic recovery included devaluation of the €, which had a positive effect on exports. Group Management Report / Economic ReportFraport Annual Report 2015 Crude oil price and significant exchange rates 2015 Values at index base 100 140 100 60 January 1, 2015 US$ in € CNY in € Yen in € Ruble in € CHF in € Barrel Brent crude oil in US$ Despite the globally higher economic output, the oil price decreased Passenger and cargo development by region 47 December 31, 2015 Graphic 4 Changes compared to the previous year in % Passengers 2015 Air freight 2015 Germany Europe North America Latin America Middle East Asia-Pacific Africa World 3.8 5.0 5.6 5.5 11.3 8.0 – 0.1 6.1 0.1 0.7 2.4 1.2 10.7 1.5 3.2 2.3 Source: Press release ACI Pax Flash and Freight Flash (ACI, February 17, 2016), ADV for Germany; cargo instead of air freight (ADV, February 8, 2016). Table 12 by around 30 % to below 40 US $ per barrel. The decrease was mainly due to an excess suppy from the United States, which resulted pri- marily from fracking, as well as ongoing high output from individual OPEC nations. Short and long-term interest rates have fallen further in the Eurozone over the past year. Thus, the average 6-month EURIBOR was 0.05 % (in the previous year: 0.31 %). In the long-term, the average 10-year Euro swap rate dropped from 1.46 % to 0.88 %. Development of the legal environment During the past fiscal year, there were no changes to the legal envi- ronment that had a significant influence on the business development of the Fraport Group. Development of the global aviation market According to the preliminary figures from Airports Council International (ACI), global passenger numbers grew by 6.1 % in fiscal year 2015. Air freight volume rose by 2.3 %. European airports achieved slightly lower growth in passenger numbers at 5.0 %. In air freight, European airports also developed below the total market at 0.7 % . The passen- ger numbers at German airports grew by 3.8 %. Cargo tonnage also remained below the global and European level at +0.1 %. Group Management Report / Economic ReportFraport Annual Report 2015 48 Significant Events Strategic partnership for freight handling at Frankfurt Airport Start of construction of Terminal 3 in Frankfurt Fraport established a strategic partnership with WFS in the area of In March 2015, the Hesse state government presented the results of freight handling at the Frankfurt site on July 7, 2015. The sale of 51 % the quality audit of the expert reports published by Fraport AG on of the capital shares of the Group company FCS to WFS took place future capacity requirements at Frankfurt Airport. The traffic reports on November 2, 2015. The Group company FCS, which generated presented by Fraport AG in September 2014 assume that passenger revenue of €54.0 million and a net result of –€3.2 million until the sale numbers at Frankfurt Airport will rise to between 68 and 73 million of the shares, is now consolidated into the Group as a joint venture passengers by 2021, so that the airport’s current terminal capacity of accounted for using the equity method. However, due to the compa- 64 million passengers will be exceeded. On April 14, 2015, after ny’s low margin, the sale had only an insignificant overall effect on the detailed analysis of the audit reports, the Fraport Supervisory Board operating results for fiscal year 2015. The aforementioned revenue will confirmed its decision to implement the planned Terminal 3 in the fail to be consolidated in fiscal year 2016. Since then, the company’s southern part of the airport. The ground-breaking ceremony for Ter- net result is recognized on a pro rata basis in the result from companies minal 3 was organized on October 5, 2015. The construction time for accounted for using the equity method. the terminal, including test phases, is scheduled to be a good seven years, so the new terminal is expected to be inaugurated in 2022. The Concession agreements signed for Greek regional airports new terminal including the land and airside infrastructure development Fraport and its Greek partner, the Copelouzos Group, signed the is expected to cost between approximately €2.5 billion and €3 billion. concession agreements for operating 14 regional airports in Greece on December 14, 2015. After finalizing the financing agreements Sale of the Group company Air-Transport IT Services and the fulfillment of suspensive conditions, such as approval under Fraport sold its shares in the Group company Air-Transport IT Services, competition law by the EU and the ratification of the concession Inc., USA for a price of US$13.0 million with effect from April 22, 2015. agreements by the Greek parliament, the Executive Board assumes The company was assigned to the segment External Activities & the closing of the transaction at the end of 2016 when preparing Services and generated revenue of €4.9 million in the period up to the consolidated annual financial statements. At this point of time, the deconsolidation (full year 2014: €12.5 million) and a net profit the Fraport/Copelouzos consortium, in which Fraport has a majority of €0.1 million (full year 2014: €0.6 million). A gain on disposal of shareholding, will also takeover the operation of 14 regional airports €8.0 million resulted from the sale of Air-Transport IT Services. and will make a one-time payment of €1,234 million. Application for charge development at the Frankfurt site retracted The 40-year concession agreements comprise the mainland airports of Thessaloniki, Aktio, and Kavala, and the island airports of Chania Due to differences of opinion between Fraport and the Hessian on Crete, Kefalonia, Kerkyra on Corfu, Kos, Mykonos, Lesbos, Rhodes, Ministry of Economics, Energy, Transport and Regional Development Samos, Santorini, Skiathos and Zakynthos. In total, the airports recorded (HMWEVL) with regard to the calculation of significant cost items in passenger numbers of about 23.4 million in 2015 and thus showed calculating the airport charges for the 2016 fiscal year, on October 29, an increase of 6.4 % compared to the previous year. In addition to 2015, Fraport withdrew the application made on July 1, 2015 for an the one-time payment of €1,234 million, the consortium will make an increase in airport charges by an average of 1.9 % for the fiscal year annual minimum concession payment of €22.9 million. This is adjusted 2016. Fraport will re-check the facts and make a new application in the depending on the inflation rate. The consortium is also required to fiscal year 2016. Until a new charge table comes into force, the charge make capital expenditure in the upgrading and expansion of the airport table approved from 2015 will remain in force. Due to the withdrawal infrastructures within the first four years of operation. After completion of the proposal, the Executive Board does not expect any further in- of the expenditure, the concession agreements include an increase in crease in airport charges for the fiscal year 2016 (increase in 2015: on the airport charges and rise in a variable concession fee, which is to be average 2.9 %). The airport charges serve to refinance the chargeable paid in addition to the minimum concession payment. The expected costs and are essential to the Aviation segment’s revenue performance. effects from the closing of the transaction on the short to medium-term asset, financial, and earnings position of the Fraport Group are included in the Outlook Report of this report from page 74 onwards. No other events that have had or will have a significant effect on the business development of the Fraport Group have occurred over the past fiscal year. Group Management Report / Economic ReportFraport Annual Report 2015 49 Business Development Development at Frankfurt site European traffic (excluding Germany) achieved growth of 2.3 % in the reporting period. Domestic traffic saw the most dynamic growth at 3.0 %. Thus, German domestic traffic profited from base effects from The stable growth of private consumption led to pleasing growth in the previous year. passenger demand in 2015. With over 61.0 million passengers, this was the highest number of passengers recorded in the history of the Cargo volume declined by 2.6 % in 2015 to a total of around airport. The number for the previous year was exceeded by around 2.1 million metric tons. The development was characterized by the 1.5 million passengers (+2.5 %), despite the fact that this year was weakness in world trade and economic problems in certain emerging characterized by a large number of cancellations due to strikes. With- and industrial countries. In particular, China’s imports and exports via air out strike and weather-related cancellations, the growth would have freight were in stronger negative territory over the course of the year. been 3.8 %. With a growth rate of 2.5 %, intercontinental traffic found a way back of using larger aircraft, aircraft movements stagnated during 2015. to its previous growth momentum. The main driver was Asian traffic; all Movements in Frankfurt decreased by 0.2 % compared with the pre- high volume markets in the Far East clearly increased, in some cases by vious year with approximately 468 thousand take-offs and landings. In double-digits. In the Middle East, growth was quantitatively led by the contrast, the maximum take-off weights increased and achieved a Emirates and its hub airports. However, African traffic saw an increasing new record value of some 29.5 million metric tons (+2.0 %). As a result of the cancellations due to strikes and the ongoing trend reduction. After the attacks in this region, traffic with Tunisia initially fell and demand for Egyptian destinations also subsequently reduced. 2015 passenger and cargo development at Frankfurt Airport percentage change compared to 2014 1.3 – 0.9 4.6 1.2 2.5 – 6.4 7.5 0.6 5.4 – 3.3 2.8 – 2.6 6.6 – 2.2 3.2 – 4.6 – 1.2 – 4.8 4.3 – 1.9 – 11.3 – 3.9 2.1 – 1.0 0 January February March April May June July August September October November December Passengers Cargo Graphic 5 Group Management Report / Economic ReportFraport Annual Report 2015 50 Development outside the Frankfurt site international passengers fell by 5.5 % to some 21.2 million. The drop Ljubljana Airport, the capital airport of Slovenia, recorded a 10.0 % in the number of international passengers was, in particular, due to increase in passenger numbers, some 1.4 million in the 2015 fiscal year. fewer travelers coming from Russia. While more passengers traveled on flights to and from Belgrade and Zurich Airports, there was a drop in passenger numbers on connections With around 13.5 million passengers, St. Petersburg Airport showed, to and from Moscow. in the reporting year, a decline of 5.4 % compared with the previous year. While international traffic significantly decreased by 21.8 %, The passenger numbers at Lima Airport developed over the past domestic traffic rose by 10.4 %. fiscal year just as strongly as in previous years. With around 17.1 million passengers, an increase of 9.2 % was achieved, which was also a new Approximately 5.5 million passengers meant that there was an increase record. Domestic traffic grew by 11.8 %. This was more than interna- of 3.0 % at Hanover Airport in the 2015 fiscal year. Tourist air traffic tional traffic, which increased by 6.2 %. Cargo throughput was around in particular has developed positively. 301 thousand metric tons. This figure was slightly below the previous year’s level (– 0.6 %). There was a sustained dynamic development at Xi’an Airport. The passenger numbers there in 2015 grew by 13.0 % to nearly 33.0 million The Bulgarian airports in Varna and Burgas carried approximately passengers. High-volume domestic air traffic increased by 12.5 % to 3.8 million passengers in fiscal year 2015, a decrease of 4.1 %. While approximately 31.3 million passengers. International traffic grew by the number of passengers at the Burgas site decreased, mainly due to 23.9 % to almost 1.7 million passengers. fewer travelers from Russia and Germany, by 6.7 % to approximately 2.4 million, passenger numbers in Varna stagnated at just under Delhi Airport, in which Fraport AG holds a 10 % share, was used by 1.4 million (+0.8 %). approximately 46.0 million travelers in the reporting period, compared to last year this represented a significant growth of 15.7 %. Indian do- Around 27.5 million passengers were recorded traveling through mestic traffic continued to show strong growth at 21.6 %. International Antalya Airport in the 2015 fiscal year, signaling a decrease of 1.6 %. passenger numbers increased by 3.9 %. Freight volume again showed While the number of passengers traveling within Turkey increased a sharp rise (+11.8 %). once again significantly by 14.2 % to over 6.3 million, the number of Traffic development at the Group sites Airport 1) Fraport share in % Passengers 2) Cargo (air freight and air mail in m. t.) 2015 Change in % 2015 Change in % Frankfurt Ljubljana Lima Burgas Varna Antalya St. Petersburg Hanover Xi’an Delhi 100 100 70.01 60.00 60.00 51.00/50.00 3) 35.50 30.00 24.50 10.00 61,032,022 1,438,304 17,112,536 2,360,320 1,398,694 27,522,514 13,499,755 5,452,669 32,970,150 45,981,773 2.5 10.0 9.2 – 6.7 0.8 – 1.6 – 5.4 3.0 13.0 15.7 2,076,734 10,140 300,686 13,272 116 n.a. n.a. 17,492 211,591 773,896 – 2.6 3.1 – 0.6 >100 57.2 n.a. n.a. 15.2 13.8 11.8 1) Fraport also holds 100 % of the shares of the operating company at the new airport in Dakar, which is currently in the construction phase. 2) Commercial traffic only, in + out + transit. 3) Share of voting rights: 51 %, dividend share: 50 %. 2015 468,153 32,893 166,388 18,271 11,959 171,285 138,327 75,695 266,807 347,434 Movements Change in % – 0.2 4.7 7.3 – 4.3 – 0.9 – 2.8 – 6.2 – 0.4 9.2 7.3 Table 13 Group Management Report / Economic ReportFraport Annual Report 2015 Comparison with the forecasted development Compared with the forecast for the 2015 fiscal year (see the 2014 Group management report, “Business Outlook” chapter starting on page 91), with respect to business development over the past fiscal year the following deviations arose: The weakness in global trade and economic problems in various emerg- ing and developed countries meant that cargo throughput in Frankfurt was below the forecast (forecast: market growth rate of up to 3 %). As the 2014 management report had already foreseen as possible, the Varna and Burgas airport holdings, as well as those in Antalya and St. Petersburg, did show stagnation or a decline in passenger numbers, owing to the ongoing difficult economic and political situation in Russia. The airport holdings in Lima, Xi’an and Ljubljana, in contrast, performed clearly positive and grew higher than expected at growth rates of around 10 % or more. Other forecasts for business development were accurate. Group Results of Operations Summary of the income statement € million Revenue Revenue adjusted by IFRIC 12 EBITDA Depreciation and amortization EBIT Financial result EBT Group result Earnings per share in € (basic) 51 2015 2014 Change 2,598.9 2,583.8 848.8 328.3 520.5 – 86.7 433.8 297.0 3.00 2,394.6 2,383.8 790.1 307.3 482.8 – 108.1 374.7 251.8 2.54 204.3 200.0 58.7 21.0 37.7 21.4 59.1 45.2 0.46 Change in % 8.5 8.4 7.4 6.8 7.8 – 15.8 18.0 18.1 Table 14 Over the past fiscal year, the Fraport Group generated revenue in the Star for the 2015 fiscal year, the revenue for the 2015 fiscal year was amount of €2,598.9 million and therefore €204.3 million more than in €2,583.8 million. In relation to the also adjusted previous year’s figure fiscal year 2014 (+8.5 %). All segments of the Group contributed to this of €2,383.8 million, this was an increase of €200.0 million or 8.4 %. As positive development. Adjusted for earnings-neutral capacitive capital in previous years, Fraport earned a major portion of its consolidated expenditure in Group companies outside Frankfurt in the context of revenue (more than one third) in the fiscal year through its principal applying IFRIC 12 and relating to the Group companies Lima and Twin customer at the Frankfurt site, Deutsche Lufthansa. Group Management Report / Economic ReportFraport Annual Report 2015 52 At the Frankfurt site, this revenue growth was primarily due to positive There was an increase in cost of material, personnel expenses, and other passenger development, as well as higher airport and infrastructure operating expenses in the fiscal year under review. The cost of mate- charges. Additional revenue came from the retail and parking busi- rials totaled €610.4 million, some €77.1 million above the previous ness. At €3.62, the net retail revenue per passenger at the Frankfurt year’s figure (+14.5 %). The main reasons for the increase were higher site exceeded the previous year’s figure by €0.19 or 5.5 %. On the currency and traffic-related expenses in the Group company Lima, one hand, the increase in the number of passengers traveling on resulting in additional expense of €36.6 million. AMU Holdings Inc. intercontinental flights had a positive impact on the retail revenue, as and Ljubljana Airport, acquired by the Group in 2014, increased cost these travelers generally have an above-average retail spend. On the of materials by a further €24.5 million and €4.7 million, respectively. At other hand, the weakness of the € currency was another purchase the Frankfurt site, in particular, non-capitalizable expenses from capital incentive for customers. Outside of Frankfurt Airport there was – in expenditure resulted in additional material costs. After adjusting for addition to positive traffic development at Lima Airport, – higher rev- the recognition of capacitive capital expenditure, the cost of materials enue mainly coming from the new Group companies AMU Holdings across the Group amounted to €595.3 million, up by €72.8 million Inc. (first consolidated in August 2014 with additional revenue of on the adjusted previous year’s figure of €522.5 million (+13.9 %). €39.1 million in the reporting period) and Ljubljana (consolidat- ed for the first time in October 2014, with additional revenue of Over the past fiscal year, personnel expenses increased by €27.6 million in the reporting period). There were further positive €56.3 million to €1,026.7 million (+5.8 %). Whereas the new effects from the translation of revenue from the Group company Lima, Group companies Ljubljana (+€8.2 million) and AMU Holdings Inc. which was recognized in US$, into the Group currency of the €. The (+€1.6 million) led to additional personnel expenses of €9.8 million, the Group company Twin Star saw a decline in its performance, gener- majority of the increase came from collective bargaining agreements ating lower revenue due to a decrease in traffic. Declining revenue for the public sector and security business that, in particular, affected also resulted from the absence of revenue from the Group company employees at the Frankfurt site. At the Frankfurt site, the creation of a Air-Transport IT Services that was sold off and the management contract provision for fire brigade employees’ transitional pensions additionally in Saudi Arabia that ended as planned in the previous year. increased the expenses. Mainly due to the exchange rate, personnel expenses increased in the Group company Lima by €2.1 million. Other operating income in the repor ting period totaled €49.8 million, €7.3 million higher than the previous year (+17.2 %). Other operating expenses increased, partly as a result of high- The increase was mainly driven by the gain on disposal from the sale er allowances as well as the new Group companies Ljubljana of the Group company Air-Transport IT Services, which resulted in ad- (+€4.6 million) and AMU Holdings Inc. (+€4.5 million), from ditional other operating income of €8.0 million. Excluding the gain on €172.2 million to €193.2 million (+12.2 %). Due to foreign currency disposal, the other operating income would have been approximately conversion and volumes the other operating expenses also increased at the same level as the previous year. Slightly higher internal work in the Group company Lima (+€1.1 million). capitalized in the segments of Ground Handling, External Activities & Services, and Aviation led to an increase in internal work capitalized Despite the increase in operating expenses, the significant improve- from €28.3 million to €29.9 million. ment in total revenue over the past fiscal year resulted in an increase in Group EBITDA. Totaling some €848.8 million, Group EBITDA ex- The positive development in revenue, other operating income and ceeded the previous year’s figure by €58.7 million (+7.4 %). Relative internal work capitalized, led to a significant increase in total revenue to Group revenue, this meant that there was an EBITDA margin of in the past fiscal year. At €2,679.1 million, this showed a growth of 32.7 % and an almost constant margin compared with the value of €213.1 million on the figure for the 2014 fiscal year (+8.6 %). When the 2014 fiscal year of 33.0 %. Adjusting the revenue and expenses adjusted for the application of IFRIC 12, at €2,664.0 million, total from recording earnings-neutral capacitive capital expenditure in the revenue was €208.8 million above the corresponding figure for the Group companies outside of Frankfurt, the EBITDA margin was at 32.9 % previous year (+8.5 %). (in the previous year: 33.1 %). Group Management Report / Economic ReportFraport Annual Report 2015 53 Depreciation and amortization of €328.3 million (+6.8 % com- Comparison with the forecasted development pared to the previous year) led to a Group EBIT of €520.5 million. Compared with the forecast for the 2015 fiscal year (see the 2014 Compared with the previous year, there was a rise in depreciation and Group management report, "Business Outlook" chapter starting on amortization mainly due to the first-time full-year recognition of the page 91) the following variations occurred concerning the Group’s Group companies Ljubljana (+€7.5 million) and AMU Holdings Inc. results of operations over the past fiscal year: (+€5.4 million), depreciation and amortization in connection with the sale of shares FCS, and by the translation of depreciation and With a total of €848.8 million, the Group EBITDA slightly exceeded the amortization in the Group company Lima. Thanks to the positive forecast range of around €820 million to approximately €840 million. development of the Group EBITDA, Group EBIT showed an increase The reason for the higher than expected Group EBITDA was, in par- of €37.7 million compared with the previous year (+7.8 %), despite ticular, due to gains on disposal from the sale of the Group company higher depreciation and amortization. Air-Transport IT Services in the amount of €8.0 million. Slightly higher than forecasted depreciation and amortization due partly to the sale The financial result improved significantly over the last fiscal year of shares in FCS and converting the depreciation and amortization from –€108.1 million to –€86.7 million (+€21.4 million). The reasons of Group companies Lima and AMU Holdings Inc., however, meant for the positive performance were a better interest result and other that the Group EBIT was in line with the forecasted range, despite the financial result. While the interest result improved mainly due to lower improved Group EBITDA. A better than expected financial result led to interest rates for long-term loans, the other financial result saw, despite slightly higher than projected Group EBT of €433.8 million (forecast unrealized exchange rate losses because of the fair value of a CHF loan, of between approximately €405 million and €425 million). The Group mainly a positive development due to the market valuation of deriv- result was therefore also better. atives. The negative traffic development in Antalya led to a decline in the result from companies accounted for using the equity method. This The modified forecasts presented in the 2015 nine-month report were was partly offset by a higher contribution from the Group company in confirmed by the values of the consolidated financial statements for Xi’an. The capitalization of interest expenses relating to construction 2015. Also the forecast for Group revenue stated in the 2014 Group work affected the fiscal year with a reduction of €15.8 million in the management report and not modified during the year was confirmed interest expenses (previous year: €15.2 million). in the past fiscal year. The better Group EBIT and financial result led to a significant increase in Group EBT. An amount of €433.8 million surpassed the previous year’s EBT by €59.1 million (+15.8 %). At a tax rate of 31.5 % (previous year: 32.8 %), the Group result also increased noticeably by €45.2 million compared with 2014 to €297.0 million (+18.0 %). Basic earnings per share amounted to €3.00, €0.46 up on the previous year (+18.1 %). Group Management Report / Economic ReportFraport Annual Report 2015 54 Segment Results of Operations Aviation € million Revenue Personnel expenses EBITDA EBITDA margin EBIT Average number of employees Retail & Real Estate 2015 2014 Change Change in % € million 2015 2014 Change Change in % 927.3 320.9 237.5 25.6 % 116.3 884.2 296.1 236.9 26.8 % 115.5 6,043 6,082 43.1 24.8 0.6 4.9 8.4 0.3 Revenue Personnel expenses EBITDA – 1.2 PP – EBITDA margin 0.8 – 39 0.7 EBIT Average number of employees – 0.6 Table 15 488.2 48.6 378.8 77.6 % 295.1 455.7 46.2 356.5 78.2 % 275.0 32.5 2.4 22.3 – 0.6 PP 20.1 624 613 11 7.1 5.2 6.3 – 7.3 1.8 Table 16 The Aviation segment’s revenue in the 2015 fiscal year rose from The revenue of the Retail & Real Estate segment rose significantly in €884.2 million to €927.3 million (+4.9 %). The reasons for this positive the year under review from €455.7 million in the previous year to development were mainly higher passenger numbers at the Frankfurt €488.2 million (+7.1 %). The higher revenue of €32.5 million was site, as well as the increase in airport charges on January 1, 2015 by mainly due to additional revenue in the retail business (+€16.1 million an average of 2.9 %. Security services also increased significantly year- compared with the previous year). Here, growth in passenger numbers on-year by €8.1 million (+7.4 %). Despite the increase in revenue and in Frankfurt and, in particular, an increase in the number of passengers higher income from the release of provisions, the segment EBITDA was traveling on intercontinental services, which show above spending almost unchanged compared with the previous year at €237.5 million behavior in retail stores, increased revenue. The depreciation of the (+0.3 %). The main reason for the constant EBITDA development was € currency against a number of international currencies also had a a significant increase in expenses. In addition to the higher personnel positive impact. The "net retail revenue per passenger” key figure in expenses arising from collective agreements in the security business the 2015 fiscal year reached an amount of €3.62, an increase of 5.5 % and the public sector, the creation of a provision for the transitional when compared with the previous year. Additional revenue was gen- pensions of fire brigade employees had an impact, increasing expens- erated in the past fiscal year in the areas of real estate – due to higher es. Within the non-staff cost, among other things, it was the higher rental income – and parking – due to volume and price effects. The expenses from capital expenditure that could not be capitalized and sale of land on the Mönchhof site in the past fiscal year led to one-off higher provisions created which led to an increase. Further expenses revenue in the mid single-digit million € range. related to temporary measures to increase customer satisfaction at the Frankfurt site. Despite the increase in operating expenses arising, among other things, from material expenses in connection with the sale of land and from Depreciation and amortization, which stayed at the same level as non-capitalizable capital expenditure as well as tariffs and volume the previous year, resulted in a segment EBIT of €116.3 million. effects in human resources, the segment EBITDA clearly rose in 2015 When compared with fiscal year 2014, this was a slight increase of by €22.3 million to €378.8 million (+6.3 %). There was an additional €0.8 million or 0.7 %. positive effect from other income which was mainly the result of the release of provisions. Slightly higher depreciation and amortization resulted in a segment EBIT of €295.1 million. Compared with the previous year, this was a significant growth of €20.1 million or 7.3 %. Group Management Report / Economic ReportFraport Annual Report 2015 55 Ground Handling External Activities & Services € million Revenue Personnel expenses EBITDA EBITDA margin EBIT Average number of employees 2015 2014 Change Change in % € million 2015 2014 Change Change in % 673.1 429.4 46.4 6.9 % 6.0 656.2 412.0 44.3 6.8 % 7.5 16.9 17.4 2.1 0.1 PP – 1.5 2.6 4.2 4.7 Revenue Personnel expenses EBITDA – EBITDA margin – 20.0 EBIT 510.3 227.8 186.1 36.5 % 103.1 9,262 9,038 224 2.5 Average number of employees 4,791 4,662 Table 17 398.5 216.1 152.4 111.8 11.7 33.7 38.2 % – 1.7 PP 84.8 18.3 129 28.1 5.4 22.1 – 21.6 2.8 Table 18 The higher passenger numbers, increased maximum take-off weights, In the reporting period, the External Activities & Services segment as well as the increase of infrastructure charges in the fiscal year 2015 reported a significant increase in revenue by €111.8 million to led to a 2.6 % increase in revenue to €673.1 million (+€16.9 million) €510.3 million (+28.1 %). Adjusted for the recognition of earnings-neu- in the Ground Handling segment. In terms of expenses, it was mainly tral capacitive capital expenditure related to the application of IFRIC personnel expenses that rose due to the traffic volume and prices from 12, revenue increased in the 2015 fiscal year from €387.7 million to €412.0 million to €429.4 million (+4.2 %). €495.2 million (+27.7 %). In addition to the positive traffic development in Lima, higher revenue of €66.7 million resulted from the new Group Despite the increase in personnel expenses as well as lower other op- companies AMU Holdings Inc. (consolidated for the first time in August erating income, which mainly resulted from the release of provisions 2014, with additional revenue of €39.1 million in the reporting period) in the previous year, the segment EBITDA improved from €44.3 million and Ljubljana (consolidated for the first time in October 2014, with to €46.4 million (+4.7 %). This positive development was largely the additional revenue of €27.6 million in the reporting period). There result of the increase in revenue. Higher depreciation and amortization, were further positive effects from the translation of revenue from the which derived, among other things, from the sale of shares in FCS, Group company Lima, which was recognized in US$, into the Group resulted in a segment EBIT of €6.0 million. Compared to the previous currency of the €. The Group company Twin Star, however, saw a de- year, this was a decrease of €1.5 million or 20.0 %. cline in its performance, generating lower revenue due to a decrease in traffic. Declining revenue also resulted from the absence of revenue from the Group company Air-Transport IT Services that was sold off and the management contract in Saudi Arabia that ended as planned in the previous year. With below-average expense development, the segment EBITDA improved significantly also because of the gain from the disposal of the Group company Air-Transport IT Services of €8.0 million, from €152.4 million to €186.1 million (+22.1 %). Higher depreciation and amortization, particularly from the new Group companies Ljubljana (+€7.5 million) and AMU Holdings Inc. (+€5.4 million), resulted in a segment EBIT of €103.1 million. Compared with the previous year, this was equivalent to an increase of €18.3 million or 21.6 %. Group Management Report / Economic ReportFraport Annual Report 2015 56 Development of the key Group companies outside of Frankfurt The following table shows the business numbers of the key Group companies outside of Frankfurt at 100 %: Development of the key Group companies outside of Frankfurt Fully consolidated Group companies Share in % Revenue in € million 1) EBITDA in € million EBIT in € million Result in € million 2015 2014 Δ % 2015 2014 Δ % 2015 2014 Δ % 2015 2014 Δ % AMU Holdings Inc. 2) Ljubljana 2) Lima Twin Star 100 100 59.7 34.8 20.6 7.2 70.01 277.9 214.3 >100 >100 29.7 60 53.9 60.7 – 11.2 11.8 12.6 100.1 32.4 3.8 1.7 76.7 35.7 >100 >100 30.5 – 9.2 3.6 2.6 82.5 20.9 0.9 – 0.8 61.8 24.4 >100 – 33.5 – 14.3 3.7 3.3 46.3 13.2 1.1 – 0.6 32.1 15.8 >100 – 44.2 – 16.5 Group companies accoun- ted for using the equity method Share in % Revenue in €million 1) EBITDA in € million EBIT in € million Result in € million 2015 2014 Δ % 2015 2014 Δ % 2015 2014 Δ % 2015 2014 Δ % Antalya 3) Pulkovo/Thalita Hanover Xi’an 4) 51/50 35.5 30 24.5 301.0 233.1 146.1 200.7 326.8 369.9 142.0 143.9 – 7.9 – 37.0 2.9 39.5 258.3 125.4 28.3 84.7 282.6 108.7 27.1 56.6 – 8.6 15.4 4.4 49.6 160.6 184.0 – 12.7 87.1 8.1 36.1 67.0 7.2 29.0 30.0 12.5 24.5 67.8 – 8.8 3.8 20.5 1) Revenue adjusted by IFRIC 12: Lima 2015: €263.0 million (2014: €204.7 million); Twin Star 2015: €53.7 million (2014: €59.5 million); Pulkovo/Thalita 2015: €208.1 million (2014: €241.3 million). 2) Values since Fraport share acquisition: AMU Holdings Inc. since August 2014 and Ljubljana since October 2014. 3) Share of voting rights: 51 %, Dividend share: 50 %. 4) Previous year’s figures have been adjusted. 85.2 – 20.4 – 291.7 1.1 12.6 – >100 62.7 Table 19 In the 2015 fiscal year, the AMU Holdings Inc. Group company ac- headcount due to the traffic volume. Almost flat depreciation and quired in August 2014 reported revenue of €59.7 million, an EBITDA amortization and an improvement in the financial result led to a of €11.8 million, an EBIT of €3.6 million and a result of €3.7 million. €2.6 million fall in result to €13.2 million. Whereas the appreciation of the US$ had a negative effect on the purchasing power of international passengers in the USA, the strength Especially due to lower passenger numbers in international traffic, the of the currency also led to an increase in the consolidated earnings Group company in Antalya, which is accounted for using the equity of the Company in €. method, saw a decline in revenue, EBITDA and EBIT in 2015. In addition to a decrease in airport charges, the revenue from the retail business With higher passenger numbers, the Group company Ljubljana, was also below the previous year. The main reason for this was a fall in acquired in October 2014, reported over the past fiscal year revenue the number of passengers from Russia, who had previously been strong of €34.8 million, an EBITDA of €12.6 million, an EBIT of €2.6 million consumers in Antalya. The Group company’s result of €67.8 million and a result of €3.3 million. Due to the late inclusion of the Group was €17.4 million lower than the previous year’s figure (– 20.4 %). company in 2014, as for AMU Holdings Inc. there are no comparable figures for the previous year. Adjusted for the impact of earnings-neutral capacitive capital expendi- ture in connection with the application of IFRIC 12, the Group company Boosted by the good traffic development and positive exchange rates Pulkovo/Thalita, which is accounted for using the equity method, from the conversion of US$, the Group company Lima recorded good in the reporting year saw revenue decrease from €241.3 million revenue, EBITDA, EBIT and result growth in 2015. The exchange rate to €208.1 million (– 13.8 %) due to the exchange rate. The Group com- effect increased revenue by approximately €45.8 million, EBITDA by pany’s EBITDA of €125.4 million (+€16.7 million), EBIT of €87.1 million around €16.5 million, EBIT by approximately €13.7 million and earnings (+€20.1 million), and result of –€8.8 million (+€282.9 million) signifi- by around €7.6 million. cantly exceeded the earnings figures for the previous year. While the previous year’s financial result was noticeably negatively affected in Due to the decrease in passenger numbers, the Group company Twin the amount of –€320.2 million through the currency translation of Star reported a decrease in revenue, EBITDA, EBIT and the result in financial liabilities, the currency translation in the 2015 fiscal year had the year under review. With a €6.8 million revenue decline (without a positive effect of €11.8 million. The result contribution for Fraport the effect of IFRIC 12: €5.8 million), the company’s EBITDA fell by of –€3.1 million increased the pro rata loss of the Group company, €3.3 million. Lower expenses were linked, among other things, which is – based on accounting using the equity method – recognized with decreases in revenue-related concession payments and a lower in a separate account, to €107.2 million as at December 31, 2015. Group Management Report / Economic ReportFraport Annual Report 2015 57 The positive development of traffic at the Group company Hanover, which is accounted for using the equity method, resulted in good Segment share in Group revenue and EBITDA in 2015 revenue, EBITDA, EBIT and result development for the Group com- Despite increases in revenue in the Aviation, Retail & Real Estate and pany. With an amount of €3.8 million, the result of the company in Ground Handling segments, their shares in Group revenue did not which Fraport holds a 30 % stake exceeded the previous year’s figure increase. The reason for this was the strong revenue growth in the by €2.7 million. External Activities & Services segment, mainly due to the first-time full-year consolidation of the companies acquired in 2014, AMU Group The financial development of the Group company Xi’an accounted for Holdings Inc. and Ljubljana and the positive development of the Lima using the equity method, reflected the positive traffic development Group company. However the Aviation segment retained the largest in 2015. The revenue, EBITDA, and EBIT of the company significantly share in Group revenue at 35.7 % (previous year: 36.9 %). improved compared to the figures for the previous year. At the amount of €20.5 million, the result showed an increase of €7.9 million The Retail & Real Estate segment with a share of 44.6 % again contrib- (+62.7 %). In addition to the increase in traffic, the translation of the uted most to the Group’s EBITDA (previous year: 45.1 %). In the same Chinese currency into the Group currency, the €, also had the effect way as for Group revenue, the External Activities & Services segment of increasing the result. increased its share in the Group’s EBITDA (from 19.3 % to 21.9 %) due to the significantly positive development, while the remaining Comparison with the forecasted development segments had a lower share in Group EBITDA (Aviation 2015: 28.0 %, in Compared with the forecast for the 2015 fiscal year (see the 2014 the previous year: 30.0 %, Retail & Real Estate 2015: 44.6 %, compared Group management report, “Business Outlook” chapter, starting on with 45.1 % in the previous year and Ground Handling 2015: 5.5 %, page 91), in respect of the segment’s results of operations the following in the previous year: 5.6 %). variations occurred during the past fiscal year: Due to higher expenses, which were in part in connection with the Segment contribution to Group revenue 2015 creation of a provision for the transitional pensions of fire brigade em- ployees, the development of the Aviation segment’s EBITDA and EBIT was lower than forecast at the beginning of the fiscal year (forecast at the beginning of the fiscal year: growth between around €5 million in % 19.6 External Activities & Services and €15 million). The revenue, EBITDA and EBIT in the Retail & Real Estate segment, how- ever, proved to be better than forecasted at the beginning of the fiscal year (forecasts at the beginning of the fiscal year: Increase in revenue of up to approximately 5 %, segment EBITDA and EBIT roughly at the same level as the previous year). This was due to higher than expected revenue and other income as well as lower expenses. 25.9 Ground Handling 35.7 Aviation 18.8 Retail & Real Estate Graphic 6 Partly as a result of the sale of shares held in Group company FCS, the increase in revenue in the Ground Handling segment was lower than Segment contribution to Group EBITDA 2015 forecasted at the beginning of the fiscal year (forecast at the beginning of the fiscal year: revenue increase of up to €30 million). The low impact of the Group company FCS on the segment EBITDA, just as with the segment EBIT, meant that the forecasts made at the beginning of the fiscal year for both earnings figures were essentially met (forecasts: values which are approximately the same level as in the previous year). in % 21.9 External Activities & Services 5.5 Ground Handling Earnings for the External Activities & Services segment developed as expected at the beginning of the fiscal year. The forecasts adapted in the 2015 nine-month report were for the most part confirmed by the values of the consolidated financial state- ments for 2015. 28.0 Aviation 44.6 Retail & Real Estate Graphic 7 Group Management Report / Economic ReportFraport Annual Report 2015 58 Asset and Financial Position the shareholders’ equity ratio reached 37.4 % at December 31, 2015, exceeding the level of December 31, 2014 of 34.4 % by Asset and capital structure 3.0 percentage points. In comparison with the balance sheet date 2014 the total assets of the Fraport Group for the year ended December 31, 2015 went down The non-current liabilities in the amount of €4,230.6 million were from €9,013.2 million to €8,847.3 million (– 1.8 %). This slight decline €677.5 million lower than the value on the 2014 balance sheet date was due to lower non-current assets and non-current liabilities. (– 13.8 %). The main reason for the lower figure was a decrease of €600.5 million in non-current financial liabilities, which were reclas- The non-current assets decreased compared with December 31, sified to current financial liabilities due to their remaining term. A 2014 from €8,081.3 million by 1.9 % to €7,926.3 million. The reason positive development in the market values of derivatives led to lower for the decline was mainly term-related reclassifications of securities “other liabilities”. An increase from €819.1 million to €1,105.0 million from the item “Other financial assets” to the current item “Other was recognized in current liabilities (+34.9 %). The reason for the receivables and financial assets”. The decline in “property, plant, and increase was particularly a rise in current financial liabilities. Whereas the equipment”, was mainly due to a capital expenditure volume that term-related reclassifications increased the current financial liabilities, was lower than regular depreciation and amortization. Despite the loan repayments reduced the item. term-related reclassifications, the current assets of €921.0 million were 1.2 % below the value of the 2014 balance sheet date. This decrease Despite a new promissory note loan in the amount of €125.0 million, was attributable to a decline in “trade accounts receivable” on the gross debt as at December 31, 2015 amounted to €3,817.4 million, balance sheet date. The item “non-current assets held for sale” in the €375.0 million below the level of December 31, 2014 (– 8.9 %). previous year’s balance sheet was in connection with the Air-Transport Deducting the Group liquidity of €1,043.1 million (December 31, IT Services Inc., FSG and Adria Airways Tehnika, d.d. Group companies, 2014: €1,179.6 million) resulted in 7.9 % lower net financial debt of which have been sold in the meantime. €2,774.3 million (December 31, 2014: €3,012.8 million). The gearing ratio reached a value of 83.8 % (December 31, 2014: 97.3 %). Despite the distribution of profits for the past fiscal year, sharehold- ers’ equity rose in 2015 from €3,286.0 million to €3,511.7 million In the past fiscal year, disposals and acquisitions of companies as well as (+6.9 %). The rise was primarily due to the positive Group result. share increases/reductions have not had a material effects on the develop- After deducting the “non-controlling interests” item in the amount of ment of the asset and capital structure. Changes in inflation rates as well €74.4 million and the profit earmarked for distribution of €124.7 million, as the fair value of financial instruments also had no significant impact. Structure of the consolidated financial position as at December 31 € million 2015 Assets Liabilities and equity 2014 Assets Liabilities and equity Non-current assets Current assets Shareholders’ equity Non-current liabilities Current liabilities 3,511.7 3,286.0 7,926.3 8,081.3 4,230.6 921.0 1,105.0 931.9 4,908.1 819.1 8,847.3 9,013.2 Graphic 8 Group Management Report / Economic ReportFraport Annual Report 2015 59 Additions to non-current assets In the 2015 fiscal year, the additions to the non-current assets of the Fraport Group totaled €409.8 million, €78.2 million lower than the comparable figure of the previous year (2014: €488.0 million). Of this amount, €235.3 million was attributed to “property, plant, and equipment” (2014: €270.3 million), €134.3 million to “financial assets” (2014: €161.9 million), €8.4 million to “investment property” (2014: €16.4 million) and €31.8 million to “other intangible assets” and “airport operating projects” (2014: €39.4 million). The capitaliza- tion of interest expenses relating to construction work amounted to €15.8 million (2014: €15.2 million). At €245.0 million, the greater part of additions related to Fraport AG (2014: €276.2 million). The focus areas were capital expenditure in the existing infrastructure as well as various construction activities for Terminal 3. Additions to financial non-current assets resulted in par- ticular from securities and the positive contribution to earnings of the Group company Antalya, which is accounted for using the equity method. The additions in property, plant, and equipment, intangible assets and investment property were attributable to the following segments: Additions by segment € million 83.8 External Activities & Services 39.5 Ground Handling 88.5 Aviation 63.7 Retail & Real Estate Graphic 9 Group Management Report / Economic ReportFraport Annual Report 2015 60 Statement of cash flows than three months, in the past fiscal year there was a cash flow used In the 2015 fiscal year, the Fraport Group realized cash flow from in investing activities of €57.7 million. In the previous year, this was operating activities of €652.2 million. Compared with the previous €235.0 million higher at €292.7 million. year, this was equivalent to an increase of €146.0 million or 28.8 %. In addition to a significant increase from operating activities, which Within financing activities, there were non-current financial liabilities primarily resulted from improving operating earnings, the amount of of €561.1 million redeemed (previous year: €460.0 million), so that the interest paid and taxes on income paid improved when compared to cash flow used in financing activities in the reporting period amounted the previous year. to €541.8 million. The significantly lower value in the previous year of €184.5 million (lower cash outflow of €357.3 million) was in particular The cash flow used in investing activities excluding investments due to higher inflows of cash and cash equivalents in the 2014 fiscal in time deposits and securities was, particularly due to the disap- year, which resulted from taking on long-term financial liabilities (delta pearing of payments for the acquisition of consolidated subsidiaries, of €275.0 million). The acquisition of “non-controlling interests” result- €279.5 million lower than the previous year’s figure at €244.3 million ed from the takeover of the remaining shares in the Group company (– 53.3 %). At virtually constant cash outflows for capital expenditure Ljubljana following the squeeze-out resolution by the general meeting in property, plant, and equipment, the significant improvement in of Aerodrom Ljubljana, d.d. on January 19, 2015. In connection with operating cash flow mainly led to a significant increase in free cash the financing for the Antalya concession, bank deposits of €23.3 million flow from €246.8 million to €393.6 million (+€146.8 million). The sale remained subject to drawing restrictions as at the balance sheet date. of consolidated subsidiaries related to the sale of shares in Air-Transport The level of cash and cash equivalents as presented in the statement IT Services (+€10.0 million) and FSG (–€0.3 million). Including capital of cash flows as at December 31, 2015, therefore was at €230.7 million, expenditure and proceeds from securities and promissory note loans €62.9 million more than in the previous year. as well as returns from time deposits with a term to maturity of more Reconciliation to the cash and cash equivalents as at the consolidated statement of financial position € million Bank and cash balances Time deposits with a remaining term of less than three months Cash and cash equivalents as at the consolidated statement of cash flows Time deposits with a remaining term of more than three months Restricted cash Cash and cash equivalents as at the consolidated statement of financial position December 31, 2015 December 31, 2014 39.8 190.9 230.7 152.0 23.3 406.0 17.4 150.4 167.7 210.0 23.3 401.0 Table 20 Summary of the statement of cash flows and reconciliation to the Group’s liquidity € million 167.8 652.2 – 244.3 186.6 –541.8 10.2 230.7 1) 812.4 1,043.1 0 Cash and cash equivalents as at January 1, 2015 Cash flow from operating activities Cash flow used in investing activities, excluding time deposits and securities Cash inflow from investing activities in time deposits and securities Cash flow used in financing activities Foreign currency translation effects on cash and cash equivalents Cash and cash equivalents as at December 31, 2015 Short-term realizable assets Group’s liquidity as at December 31, 2015 1) The difference in the cash and cash equivalents of the statement of financial position is the result of the time deposits with a remaining term Graphic 10 of more than three months, and restricted cash. Group Management Report / Economic ReportFraport Annual Report 2015 61 Financing analysis the gross debt of Fraport AG was almost 30 %, and the fixed portion In 2015, the finance management of Fraport AG continued to pursue approximately 70 % (floating rate portion in previous year: almost 30 %, balanced funding via the operating cash flow and a diversified debt fixed share: approximately 70 %). The cost of debt after interest rate financing base with a balanced maturity profile. As at the balance sheet hedging measures was 3.3 % (previous year: 3.5 %). date, there was a balanced mix of financing consisting of bilateral loans (26.6 %), bonds (25.9 %), loans issued by public loan institutions Fully-consolidated Group companies in Germany are usually inte- (21.1 %) and promissory note loans (26.4 %). To reduce interest rate grated into the Fraport AG cash pool, so that acquiring separate risks from borrowing with floating interest rates, interest rate hedging external funding is not necessary. In fully-consolidated foreign Group transactions were concluded in some cases. The nominal volume companies, funding is primarily carried out through common project relating to this was €970 million at the end of the year. financing schemes. Overall, the financial liabilities had an average remaining term of The key features of the Group financing instruments with regard 4.6 years with an average hedging maturity of 3.6 years. Taking into to type, maturity, and interest rate structures are presented in the account interest rate hedging transactions, the floating rate portion of following table: Financial debt structure Financing type Promissory note loans Public loan EIB/WIBank Bond issue Private placement Bilateral loans Project financing (fully-consolidated foreign Group companies) Year of issue Nominal volume in € million Maturity Repayment structure Interest Interest rate 2008 2009 2010 2012 2012 2013 2014 2014 2015 2009 2009 2009 50 14 35 235 60 50 350 50 125 2017 2017 2020 2020 2022 2030 2020 2022 2028 2021 2021 2017 end of term end of term end of term end of term end of term end of term end of term end of term end of term 770 2016 – 2019 ongoing repayment during the term of the loans 800 150 2019 2029 end of term end of term floating 6-month-EURIBOR + margin mainly floating 6-month-EURIBOR + margin floating 6-month-EURIBOR + margin fixed fixed fixed fixed fixed 2.42 % p.a. 2.90 % p.a. 4.00 % p.a. 2.74 % p.a. 3.06 % p.a. 4.0 % p.a. 1.436 % p.a. 1.436 % p.a. floating 6-month-EURIBOR + margin floating 6-month-EURIBOR + margin fixed fixed 5.25 % p.a. 5.875 % p.a. 1993 – 2012 999 (primarily denominated in €) 2016 – 2028 mainly end of term mainly floating 1/3/6/12-month-EURIBOR/ CHF LIBOR + margin 2007 110 (originally in US$) 2022 ongoing repayment during the term fixed 6.88 % p.a. Table 21 The contractual agreements for the financial liabilities of Fraport AG Independent project-financing arrangements of fully consolidated include two customary non-financial covenants consisting of a negative foreign Group companies contain a series of credit clauses typical for pledge and a pari passu clause. Only the public loans include, among this type of financing. These clauses include regulations under which other things, commonly accepted credit clauses regarding changes certain debt service coverage ratios and control indicators for debt in shareholder structure and in the control of the company (so-called ratio and credit periods must be complied with. Failure to comply with change-of-control clause). If these have a proven negative effect on the agreed credit clauses may lead to restrictions on the distribution of the credit rating of Fraport AG, the creditors have above a certain dividends and/or to the early redemption of loans or to the additional threshold, the right to call the loans due ahead of time. payment of shareholders’ equity. Compliance with these criteria is examined on an ongoing basis. Regarding the financial indicators, all of the clauses had been complied with as at the balance sheet date 2015. Group Management Report / Economic ReportFraport Annual Report 2015 62 In connection with the project finance in Lima, there is also a credit dividends after the prior agreement of the creditor. There are also clause under which the transfer of construction land for expanding investment restrictions. The Group company in Lima is currently in the airport, laid down in the concession contract, was planned to take negotiations with the Peruvian government in order to remedy this place by the Peruvian government to the Group company Lima by situation. December 31, 2015. As the transfer by the state was not fully com- pleted by December 31, 2015, the Group company did not comply The maturity profile of the Fraport Group’s financial debt showed a with this credit clause after December 31, 2015. Until this situation is balanced repayment structure as at the balance sheet date (Financial resolved, the Group company is currently only permitted to distribute debt in foreign currencies converted as at the balance sheet date rate). Maturity profile as at December 31, 2015 € million 1,043.1 3,817.4 516.0 295.6 517.7 1,133.3 186.5 423.3 401.2 2.6 2.6 318.6 0 Liquidity Gross debt Book values Nominal values 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 ++ Liquidity analysis The strategy of broad diversification of investments in corporate bonds was continued in the 2015 fiscal year. The key characteristics of Fraport AG’s investment instruments in terms of type, remaining term, and interest structure are presented in the following table: Asset structure of Fraport AG Investment type Promissory note loans Overnight funds Time deposits Bonds thereof governmental thereof financials thereof insurances thereof industrials Commercial paper 1) As a result of roundings, there can be discrepancies when summing up. Market value 1) in € million Remaining term in years 22.5 11.0 0.0 65.0 104.0 441.7 10.3 82.0 96.0 6.7 22.0 328.7 57.9 1.7 2.6 0.0 0.6 2.2 2.7 1.4 1.8 2.3 2.2 2.9 2.8 0.7 Graphic 11 Interest floating fixed fixed fixed floating fixed fixed floating fixed fixed floating fixed fixed Table 22 Group Management Report / Economic ReportFraport Annual Report 2015 As at December 31, 2015, industrial promissory note loans, industrial bonds, and industrial commercial paper were distributed across the following industry sectors (market value: €422.1 million): Allocation of industrial assets in % 21.7 Sectors <5 % 5.2 Utilities 6.9 Infrastructure 6.9 Pharma and health care 9.3 Oil & Gas 63 15.6 Automotives 12.3 Food and beverages 11.2 Industrials 10.9 Transport and logistics Graphic 12 The ratings of all investments used in asset management are presented The cost of carry, which is calculated using a (tiered statement) in the graphic. Commercial paper is assigned to the long-term rating maturity-matching principle, was – 0.6 % (–€4.1 million) as at Decem- equivalent of the issuers. ber 31, 2015. Rating structure of assets 0 20 40 60 in % AAA AA A BBB Not rated Liquidity in the fully consolidated foreign Group companies was €329.7 million (previous year: €174.6 million). As it is partly subject to drawing restrictions – arising from conditions stipulated in the project financing agreements – it is not part of the asset management at Fraport AG. 2.2 22.1 47.6 27.4 0.7 Significance of off-balance-sheet financial instruments for the financial position Fraport focuses on the products presented in the “Financing analysis” section for financing its activities. Off-balance-sheet financial instru- ments are of no material significance in Fraport’s financing mix. Rating In light of Fraport’s unrestricted access to the capital market at attractive prices, very healthy liquidity supply combined with its comfortable Graphic 13 portfolio of free, approved credit lines, there has not been a need for an external rating so far. On the balance sheet date rated (99.3 %) and non-rated assets (0.7 %) were in the industrial portfolio. Group Management Report / Economic ReportFraport Annual Report 2015 64 Comparison with the forecasted development flow, net financial debt slightly below the level on the balance sheet Compared with the forecast for the 2015 fiscal year (see the 2014 date of 2014). Among other things, due to the good development of management report, "Business Outlook” chapter, starting on page 91), the Group result, the Group shareholders’ equity and shareholders’ in respect of the asset and financial position the following variations equity ratio achieved higher growth than assumed at the beginning occurred during the past fiscal year: of the fiscal year (forecast: in each case slight increases compared with the 2014 balance sheet date). As a consequence, also the gearing ratio As a result of a later than planned start of construction of Terminal 3 in fell at a faster rate than expected (forecast: decrease of up to approx- Frankfurt, the investment volume for property, plant, and equipment imately five percentage points). The low level of capital expenditure was slightly below the forecast for the 2015 fiscal year (forecast: slight at regular depreciation and amortization also resulted in a reduction increase in investment volume compared to 2014). As a result, the free in total assets (forecast: slight increase compared to 2014). cash flow was also more positive than anticipated and net financial debt was down stronger (forecast: ongoing significantly positive free cash The operating cash flow and Group liquidity developed as expected. Value Management Development of the value added 2015 € million Fraport Group Aviation Retail & Real Estate Ground Handling External Activities & Services 1) 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Adjusted EBIT 1) Fraport assets 569.1 538.5 116.3 115.5 294.6 274.6 6,071.0 5,830.5 2,481.0 2,456.1 1,887.5 1,870.0 Costs of capital before taxes Value added before taxes ROFRA 522.1 46.9 9.4 % 501.4 37.1 9.2 % 213.4 – 97.1 4.7 % 211.2 – 95.7 4.7 % 162.3 132.3 160.8 113.8 15.6 % 14.7 % 7.0 608.8 52.4 – 45.3 1.2 % 8.8 605.2 52.0 – 43.3 1.4 % 1) Adjusted EBIT = EBIT plus earnings before taxes of the Group companies accounted for using the equity method 2014 values adapted to reflect the new calculation method to enable comparisons to be made. 151.0 1,093.8 94.1 56.9 139.6 899.2 77.3 62.3 13.8 % 15.5 % Table 23 In fiscal year 2015, the value added of the Fraport Group was Comparison with the forecasted development €9.8 million higher than the value of the previous year at €46.9 million Compared with the forecast for the 2015 fiscal year (see the 2014 (previous year: €37.1 million). The value added of the Aviation seg- management report, “Business Outlook” chapter, starting on page 91), ment decreased slightly from –€95.7 million to –€97.1 million and in respect of the Group and segment added value contributions the remained negative. The value added of the Retail & Real Estate segment following variations occurred during the past fiscal year: increased from €113.8 million to €132.3 million. The reason for this was the disproportionately large EBIT development of the segment As a result of a lower than assumed development of the adjusted seg- in relation to the cost of capital before taxes. The value added of the ment EBIT, the value added for the Aviation and External Activities & Ground Handling segment declined slightly due to the decline in EBIT Services segments were below those of the forecasts (forecast for from –€43.3 million to –€45.3 million. The decline in the value added Aviation: slight increase, forecast for External Activities & Services: of the External Activities & Services segment was mainly due to the noticeable increase). The better development of the results of opera- falling result at the Group company, Antalya, which is accounted for tions in the Retail & Real Estate segment led in contrast to a segment using the equity method, so that the value added was down from value added that exceeded the forecast (forecast: roughly unchanged €62.3 million to €56.9 million. to the previous year). The ROFRA of the Fraport Group rose as a result of the positive per- The value added figures of the Group and of the Ground Handling formance of the Retail & Real Estate segment from 9.2 % to 9.4 %. segment were largely in line with the forecasts. Group Management Report / Economic ReportFraport Annual Report 2015 Non-financial Performance Indicators Non-financial performance indicators Indicators Global satisfaction (Frankfurt) Punctuality rate (Frankfurt) Baggage connectivity (Frankfurt) Equipment availability rate (Frankfurt) Employee satisfaction 1) Total number of work accidents 2) Rate per 1,000 employees 2) 2015 80 % 80.3 % 98.8 % 98.9 % 2.85 1,475 27.0 2014 80 % 81.1 % 98.6 % 97.7 % 2.89 1,473 28.8 Change 0 PP – 0.8 PP 0.2 PP 1.2 PP 0.04 2 – 1.8 1) Values without Lima and Twin Star Group companies, whose values were not available until the editors deadline. 2) Values at the reporting date of December 31, 2015 and December 31, 2014. As a result of late submissions, there may be changes to the figures. 65 Change in % – – – – – 0.1 – Table 24 Customer satisfaction and product quality Global satisfaction of passengers Equipment availability rate The equipment availability rate reached an average of 98.9 % in fiscal As a result of the measures of the service program “Great to have you year 2015 and was thus 1.1 percentage points above the level of the here!”, over the past fiscal year it was possible at higher passenger previous year. Compared with the previous year, in particular the numbers to maintain global passenger satisfaction at the Frankfurt site availability of escalators (an average of 98.4 % to 96.8 %) and lifts (an at the level of the 2014 fiscal year of 80 %. In addition, the willingness average of 98.9 % to 97.7 %) improved. With an average availability of passengers to recommend the site to others rose above 70 % for the of 99.8 %, the gate bridges were available at almost all times during first time. Among other things, the introduction of an unlimited free the year under review (previous year: 99.8 %). WiFi offering, additional resting and waiting areas in the terminals and improved orientation for passengers contributed to this. Appeal as an employer Employee satisfaction At the Antalya site, customer satisfaction was 1.4 percentage points The average grade for satisfaction by the employees of the Fraport lower than the previous year’s figure at 78.4 % (previous year: 79.8 %). Group was in the past fiscal year at 2.85 and therefore slightly up on the The airport in Lima recorded in the most recent study an unchanged previous year’s figure of 2.89. In particular the satisfaction of employees level of satisfied passengers of 95.0 % (in the previous study: 95.0 %). in Fraport AG increased. The response rate was almost unchanged to At the airports in Varna and Burgas, the satisfaction level, in line with the previous year at 48 % (previous year 49 %). the previous year was over 97.0 %. With strong passenger growth, the number of complaints in Ljubljana in 2015 was 137 (as a result Employee safety and health management of the late takeover in 2014 there are no comparable previous year The total number of work-related accidents, including commuting and figures for Fraport). Punctuality rate sports accidents over the past 2015 fiscal year totaled 1,475 (adjusted for FCS) and therefore increased by 2 over the previous year’s figure of 1,473 (+0.1 %). After deducting non-reportable accidents, the number For the punctuality of aircraft movements at Frankfurt Airport, in 2015 of accidents in the year under review was 585 reportable accidents, there was a similar picture to the previous year. The results were which, when taking account of the total number of employees, rep- adversely affected by strikes and weather. The record numbers in the resented a rate per 1,000 employees of 27.0 (previous year: 28.8). For summer months meant that there was a lower punctuality rate for the the fully-consolidated companies at the Frankfurt site this was 27.8 and summer six months than for the winter quarters. With a punctuality therefore a rate of 2.3 below the previous year. rate of 80.3 % the previous year’s figure was not fully achieved, but was still at a high level (2014: 81.1 %). Comparison with the forecasted development Baggage connectivity Compared with the forecast for the 2015 fiscal year (see the 2014 management report, “Business Outlook” chapter, starting on page 91), In the past fiscal year, baggage connectivity at the Frankfurt site in respect of the non-financial performance indicators the following amounted to 98.8 % and was therefore 0.2 percentage points above variation occurred during the past fiscal year: the previous year’s figure. Particularly in the summer months of 2015 and at the end of 2015, connectivity was increased above the com- Contrary to the forecast, the number of work-related accidents could parable figures for the previous year. not be reduced but rather was maintained at approximately the value of 2014. The other forecasts were met. Group Management Report / Economic ReportFraport Annual Report 2015 66 Employees Development of employees in the Group Average number of employees Fraport Group thereof Fraport AG thereof Group companies thereof in Germany thereof abroad 2015 20,720 10,561 10,159 18,865 1,855 2014 20,395 10,725 9,670 18,657 1,738 Change Change in % 325 – 164 489 208 117 1.6 – 1.5 5.1 1.1 6.7 Table 25 Compared with the previous year, the average number of employees employment in the Group companies, had the opposite effect on the (employees excluding apprentices and employees on leave) of the Group-wide headcount. Outside of Germany, headcount increased, Fraport Group in fiscal year 2015 increased from 20,395 to 20,720 largely as a result of the first-time full-year inclusion of the new Group (+1.6 %). In Germany, there was an increase in demand for manpow- companies Ljubljana (+301 employees) and AMU Holdings Inc. er, particularly in the Group company APS Airport Personal Services (+16 employees). (+293 employees), as a result of increased traffic volume at the Frankfurt site. The reduction in headcount at Fraport AG (– 164 employees), With a share of 10.1 %, the rate of employee turnover for permanent which was primarily due to the use of fluctuation combined with higher employees was slightly below the level of the previous year of 10.5 %. Development of employees in the segments Average number of employees per segment Aviation Retail & Real Estate Ground Handling External Activities & Services 2015 6,043 624 9,262 4,791 2014 6,082 613 9,038 4,662 Change Change in % – 39 11 224 129 – 0.6 1.8 2.5 2.8 Table 26 While the Aviation segment last fiscal year had a lower number of em- particular as a result of additional employees in the Group company APS ployees, primarily due to a decline in the number of persons employed Airport Personal Service. In the External Activities & Services segment, at Fraport AG, the slight increase in the Retail & Real Estate segment the number of employees increased due to the first-time full-year in- however resulted from higher employment numbers in Fraport AG. In clusion of the new Group companies Ljubljana and AMU Holdings Inc. the Ground Handling segment, the number of employees increased in Group Management Report / Economic ReportFraport Annual Report 2015 67 Development of total employees in the Group Total employees as at the reporting date December 31, 2015 December 31, 2014 Change Change in % Fraport Group thereof Fraport AG thereof Group companies thereof in Germany thereof abroad 23,038 11,401 11,637 21,043 1,995 23,116 11,694 11,422 20,956 2,160 – 78 – 293 215 87 – 165 – 0.3 – 2.5 1.9 0.4 – 7.6 Table 27 Compared with the previous year balance sheet date, the number of The percentage of women, one of the key diversity indicators, in- total employees (employees including joint ventures, temporary em- creased by 0.5 percentage points to 24.2 % in fiscal year 2015 (previous ployees, apprentices, and employees on leave) of the Fraport Group year: 23.7 %). At 29.3 % (previous year: 30.0 %), the percentage of as at December 31, 2015 fell to 23,038 from 23,116 (– 78 employees). women in the top five management levels exceeded the aforemen- The decline at Fraport AG in the amount of 293 was mainly due to tioned Group-wide percentage of women again in 2015. the fluctuation of employees associated with increased employment at Group companies (+215 employees). Abroad, among other things, Further diversity indicators developed as follows in fiscal year 2015: due to the sale of Air-Transport IT Services as well as due to lower The average age of the Group’s workforce rose slightly from 42.4 years traffic-related employment in the Group companies Antalya and Twin to 42.8 years. 20.2 % of employees had foreign citizenship (excluding Star, there was a reduction in the total number of employees (– 165). German citizens with an immigration background) (previous year: Development in personnel structure (previous year: 7.7 %). The number of training days increased from Fraport values the diversity of its employees. This diversity helps the 3.0 days on average to 3.8 days in fiscal year 2015. 20.2 %). The Group-wide disability ratio reached a level of 7.9 % Group to better understand the concerns of its customers, develop innovative solutions, and remain competitive in a globalized economy. Diversity management is therefore a central component of its human resources strategy. It is based on a Group agreement that includes the establishment of principles of anti-discrimination, advancement of women into management positions, and diversity. These principles form part of recruitment decisions and training measures. Group Management Report / Economic ReportFraport Annual Report 2015 68 Research and Development Environment and Society As a service company, Fraport does not undertake research and de- At its airport sites, Fraport serves the mobility requirements of the velopment in the strict sense. For the Group, however, improvement relevant regions and countries. At the same time, flight operations proposals and innovations from employees serve as factors for improv- are invariably associated with direct and indirect burdens for local ing the quality of the Group’s own products, and thus for increasing residents and the environment. In this area of conflict, Fraport faces customer satisfaction and retaining competitiveness (see also chapter up to its corporate responsibility. To the extent that this is feasible, “Risk and Opportunities Report” beginning on page 75). Fraport ensures that the burden from airport operations is reduced. Fraport therefore consistently uses its own employees’ potential within The measures that Fraport starts and implements are wide-ranging. the framework of its ideas management. During the past fiscal year In this respect, the company bundles important issues and monitors there was again an “Ideas Day” set up by ideas management to honor the measures taken using targets and achievement levels. These issues the most committed submitters and assessors by the Executive Board. include, among other things, active and passive noise abatement at the Overall, 807 ideas were submitted in 2015 and 67 ideas implemented Frankfurt site, climate, nature, and resource protection. Whereas the (previous year: 854 ideas, 49 implementations). The economic benefits measures in the area of active noise abatement are monitored by such were thus improved in comparison with the previous year. means as flight noise measurements and the regular determination of those affected by flight noise in particular noise level ranges, the mea- Fraport specifically carries out networking among other things within sures relating to passive noise abatement are measured for example by innovation management – pursuant to an “open innovation” – with the value of the noise abatement measures constructed. The measures companies in its own value chain as well as “best practice” companies in the area of climate change are measured in particular with reference in other sectors. Initial projects were also successfully initiated with to the carbon emissions of the company. With regard to nature and start-ups explicitly from the Rhine-Main area. In 2015, the collaboration resource protection, Fraport has set a goal inter alia to provide all with HOLM – House of Logistics and Mobility – was further intensified. environmentally relevant Group companies in which Fraport holds a The added value here lies in coordinated collaboration with other stake of more than 50 % with a certified environmental management organizations, in particular regional academic establishments, in order system. In addition, in terms of social responsibility, the so-called value to support forward-looking logistics projects and new technological creation statement defines the company’s positive contribution to the developments, and thus further increase the appeal of the Frankfurt site. economic development of the various regions. Noise abatement For further noise abatement, over the past fiscal year Fraport has tested at the Frankfurt site in particular the potential of the “ground based augmentation system” (GBAS) navigation system introduced in 2014. GBAS supports satellite-guided precision approaches with a view to conduct curved approaching procedures without losing capacity in the longer term. In addition, the company also plans to use GBAS to introduce a steeper 3.2 degree approaching angle on all runways and thus to achieve further noise reduction. In the past fiscal year, Fraport has implemented various further measures for passive noise abatement. Using construction changes, for example, it is possible to reduce noise levels in buildings. At the Frankfurt site, in this context Fraport has extensive statutory obligations for around 86,000 households whose claims are defined by such matters as noise protection areas. In order to support local residents in the determi- nation of their rights and to assist their application, Fraport provides an extensive range of information and services on the Group website www.fraport.com. Group Management Report / Economic ReportFraport Annual Report 2015 69 Climate, nature, and resource protection To reduce its own CO2 emissions, Fraport drove forward the replace- ment of ventilation systems in Terminal 1 at the Frankfurt site in 2015. Share and Investor Relations Development of the share 2015 Additional energy-saving measures included terminal lighting control The German equity markets were clearly volatile in 2015. While depending on usage, the use of LED bulbs in the freight transfer Germany’s benchmark DAX index ended the reporting period 9.6 % hall at Group company FCS, and the optimization of the 80 km long up compared to the 2014 fiscal year’s closing value at 10,743 points, luggage transfer system. The measures relating to the “E-PORT AN” the MDAX achieved a relatively strong increase of 22.7 % to 20,775 e-mobility project were also expanded in 2015. Based on preliminary points. After strong gains in the first quarter (DAX +22.0 % and figures, the Group parent company emitted over the past fiscal year around 218,000 metric tons of CO2 and therefore 8.3 % less than in the previous year. With regard to nature and resource protection, at MDAX +22.1 %), development cooled in the second quarter of 2015, primarily due to the uncertain economic development of Greece and the consequences for the European economy that may result (DAX in the end of the past fiscal year 96 % of the fully consolidated environ- the second quarter: – 10.4 % and the MDAX: – 6.2 %). The low interest mentally relevant Group companies were certified by an Environmental rates and overall favorable economic conditions continued to have a Management System (EMAS) or ISO 14001. positive impact. The European Central Bank’s decision to purchase Value creation statement €60 billion in government bonds and other securities from Eurozone countries each month until the end of September 2016 also stimulated Airports are important business locations and contribute directly and equity markets. In the third quarter, in particular the devaluation of the indirectly to economic and social value creation. Frankfurt Airport, Chinese Renminbi at the end of August as a result of the concerns about for example, with more than 80,000 direct employees, is the largest China’s economic development and it becoming known in September regional place of work in Germany. Additional employment effects that Volkswagen had manipulated emissions tests led to negative are also created in enterprises that are appointed by Fraport for the market reactions (DAX in the third quarter: – 13.1 % and the MDAX: construction and maintenance of airport infrastructures. With a catch- – 2.1 %). In the fourth quarter of the fiscal year, the mood on the stock ment area of around 38 million people in a radius of approximately markets turned again. Among other things, the ECB’s decision to extend 200 kilometers and in its role as one of the largest cargo airports in the bond buying program, as well as positive labor market indicators Europe, the Frankfurt site is one of the most important business loca- from the USA, caused prices to rise. As a result, the benchmark DAX tions of the country. index rose strongly by 11.1 % and the MDAX by 7.8 %. In this context, Fraport contributes comprehensively to social value Within this market environment, the Fraport share developed also creation. The company’s direct value creation includes expenses for very positive with a rise from €48.04 to €58.94 (+22.7 %). Following personnel, capital expenditure, taxes, interest, and dividends to its share price growth of 15.9 % in the first quarter of the fiscal year, the shareholders. Over the past fiscal year the direct value added amount- Fraport share gained again in the second quarter, increasing 1.2 % to ed to more than €2.7 billion. Indirectly the company contributes by €56.34. Primarily due to concerns about China’s economic develop- such means as the consumption by airport employees and companies ment, however, the value of the share fell 2.0 % to €55.19 in the third located at the airport, which also have their own value creation and in quarter. Similar to the positive development of the leading German turn also employment effects. indices, the Fraport share – despite the uncertainties in the Far East and the decision to withdraw the application to increase Frankfurt Further information on the social and environmental commitment of airport charges – increased in the fourth quarter by 6.8 % to the price Fraport AG is provided on the company’s website www.fraport.com. of €58.94 at the end of the year. Cumulatively the increase in the share price in the course of the 2015 fiscal year therefore amounted to €10.90 (+22.7 %) and taking into account the dividend payment on June 1, 2015 of €1.35 per share amounted to €12.25 (+25.5 %). The Fraport share therefore had a market capitalization of €5.4 billion at the year-end (previous year: €4.4 billion). The share was thus based on market capitalization the 18th largest stock among the 50 MDAX shares (previous year: 22nd place). Measured by traded stock market turnover in XETRA, the Fraport share ranked as in the previous year 40th place among the MDAX stocks. With an average of 151,188 shares traded daily, the share’s trading volume increased by 51.0 % in 2015 (previous year: 100,101). Group Management Report / Economic ReportFraport Annual Report 2015 70 Fraport share Opening price in € Closing price in € Change in absolute terms in € 1) Change in % 2) Highest price in € (daily closing price) Lowest price in € (daily closing price) Average price in € (daily closing prices) 2015 48.04 58.94 10.90 22.7 62.30 48.04 56.34 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 54.39 48.04 – 6.35 – 11.7 57.77 47.19 52.13 48.04 55.67 7.63 15.9 57.93 48.04 53.48 55.67 56.34 0.67 1.2 62.30 55.72 58.11 56.34 55.19 – 1.15 – 2.0 60.67 51.63 55.87 55.19 58.94 3.75 6.8 60.59 54.51 57.87 Average trading volume per day (number) 151,188 100,101 126,772 148,938 176,356 150,714 Market capitalization in € million (quarterly closing price) 5,443 4,436 5,141 5,203 5,096 1) Change including dividends: 2015: €12.25, 2014: –€5.10, Q2 2015: +€2.02. 2) Change including dividends: 2015: 25.5 %, 2014: – 9.4 %, Q2 2015: 3.6 %. 5,443 Table 28 The shares of other stock-exchange listed European airports performed as follows: Aéroports de Paris +8.5 %, Vienna Airport +14.0 % and Zurich Airport +13.1 %. Compared with its issue price of €58 per share on February 11, 2015, the Spanish airport operator AENA gained 82.4 % by the end of the year. Development of the Fraport share compared to the market and European competitors in % (index base 100) 190 150 100 90 January 1, 2015 Fraport AG DAX MDAX Aéroports de Paris Vienna Airport Zurich Airport AENA Source: Bloomberg December 31, 2015 Graphic 14 Group Management Report / Economic ReportFraport Annual Report 2015 71 Development in shareholder structure Fraport was notified of the following changes in shareholder structure in the past fiscal year: Notification of voting right pursuant to Section 21 of the German Securities Trading Act (WpHG) Holders of voting rights Date of change Type of change New share of voting rights RARE Infrastructure Limited 1) RARE Infrastructure Limited 2) RARE Infrastructure Limited 3) RARE Infrastructure Limited 4) Legg Mason, Inc. 5) BlackRock, Inc. 6) March 10, 2015 August 25, 2015 September 10, 2015 September 11, 2015 December 2, 2015 December 18, 2015 Falling below the 5 % threshold Falling below the 3 % threshold Exceeding the 3 % threshold Falling below the 3 % threshold Exceeding the 3 % threshold Exceeding the 3 % threshold 4.87 % 2.99 % 3.002 % 2.99 % 3.001 % 3.003 % 1) Of which 4.87 % of the voting rights were assigned in accordance with Section 22 (1) sentence 1, No. 6 WpHG in conjunction with Section 22 (1) sentence 2 WpHG. 2) Of which 2.99 % of the voting rights were assigned in accordance with section 22 (1) sentence 1, No. 6 WpHG in conjunction with Section 22 (1) sentence 2 WpHG. 3) Of which 3.002 % of the voting rights were assigned in accordance with Section 22 (1) sentence 1, No. 6 WpHG in conjunction with Section 22 (1) sentence 2 WpHG. 4) Of which 2.99 % of the voting rights were assigned in accordance with Section 22 (1) sentence 1, No. 6 WpHG in conjunction with Section 22 (1) sentence 2 WpHG. 5) Of which 3.001 % of the voting rights were assigned in accordance with Section 22 WpHG. 6) Of which 3.003 % of the voting rights were assigned in accordance with Section 22 WpHG, Black Rock, Inc. were assigned instruments pursuant to Section 25 (1) No. 2 WpHG, that provided other voting rights of 0.03 % and 0.11 %. Table 29 Shareholder structure as at December 31, 2015 1) in % 34.20 Free Float 3.00 Legg Mason Inc. 3.00 BlackRock Inc. 8.45 Deutsche Lufthansa AG 31.34 State of Hesse 20.01 Stadtwerke Frankfurt am Main Holding GmbH 1) The relative ownership interests were adjusted to the current total number of shares as at December 31, 2015 and therefore may differ from the figures given at the time of reporting or from the respective shareholders’ own disclosure. Shares below 3 % are classified under “free float”. Graphic 15 Group Management Report / Economic ReportFraport Annual Report 2015 72 To the extent it was known, the proportion of Fraport shares in free float was split across the following countries: Allocation of free float 1) in % 22.3 Not known/other 1.4 Finland 1.5 Japan 1.6 Norway 1.7 Switzerland 2.2 China 3.4 Canada 6.5 France 7.6 Germany 19.2 USA 17.7 United Kingdom 14.9 Australia 1) Free float excluding shares of the State of Hesse, Stadtwerke Frankfurt am Main Holding GmbH, and Deutsche Lufthansa AG, Source: Ipreo. Graphic 16 Dividend for the 2015 fiscal year (proposal for the appropriation of profit) Investor Relations (IR) Consistent, comprehensive and proactive communication with inves- Fraport pursues a consistent dividend policy. The aim is that sharehold- tors and analysts is of utmost importance to the Fraport IR department. ers participate appropriately and long-term oriented in the business The IR team maintains personal contact with existing and potential development. In this context, the Executive Board aims to pay out investors in the context of road shows, capital market conferences, approximately 40 to 60 % of the profit attributable to shareholders of and meetings at the company’s headquarters at Frankfurt Airport. Fraport AG as dividends. Here, the dividend per share should reach Over the past fiscal year there were also targeted individual and Group at least the level of the previous year. meetings as well as presentations with the company’s chief executive officer and chief financial officer. The central topics for discussion in For the 2015 fiscal year, the Executive Board intends to propose to the 2015 remained the current and expected traffic developments at the 2016 AGM an unchanged dividend compared to the previous year company’s sites, planning for the construction of Terminal 3, as well of €1.35 per share. Compared to the share closing price in 2015 of as the development of the free cash flow and dividends. Other issues €58.94, this would correspond to a dividend yield of 2.3 % (previous related to the cost situation in particular in the Aviation and Ground year: 2.8 %). The profit earmarked for distribution of €124.7 million Handling segments, the development of airport charges in Frankfurt, (previous year: €124.7 million) would then equate a pay out of the strategy of Deutsche Lufthansa in its role as the main customer at 45.1 % based on the profit attributable to shareholders of Fraport AG the Frankfurt site as well as portfolio development, and strategy in the in the Group result of €276.5 million (previous year: 53.1 %). External Activities & Services segment. Furthermore, the IR team was available by phone or by e-mail for a direct dialog. The analysts’ conference on the publication of the 2014 results in March 2015, the AGM in May 2015, three conference calls on the quarterly reports, and the provision of up-to-date information on the IR website www.meet-ir.com rounded off the range of IR services in the past fiscal year. Group Management Report / Economic ReportFraport Annual Report 2015 Group Management Report / Economic Report / Significant Events after the Balance Sheet Date 73 Annual General Meeting (AGM) At the last AGM on May 29, 2015, Fraport received a clear majority for all agenda items from its shareholders. The capital entitled to vote was represented with 81,614,693 ordinary shares and the same number of voting rights (88.38 % of capital). The detailed voting results as well as further information about the AGM are available on the company website www.fraport.com in the Investor Relations section. The AGM for the 2015 fiscal year will be held on May 20, 2016 at the Jahrhun- derthalle in Frankfurt. Data relevant to the capital market Share capital Fraport AG 1) Total number of shares as at December 31 Number of floating shares 2) as at December 31 Number of floating shares (weighted average of reporting period) Absolute share of capital stock Annual performance (including dividend) Beta relative to the MDAX Earnings per share (basic) Earnings per share (diluted) Price-earnings ratio Dividend per share 3) Profit earmarked for distribution Dividend yield as at December 31 3) ISIN Security identification number (WKN) Reuters ticker code Bloomberg ticker code Selected indexes 1) Including treasury shares. 2) Total number of shares at the balance sheet date, less treasury shares. 3) Proposed dividend (2015). Significant Events after the Balance Sheet Date There were no significant events after the balance sheet date for the Fraport Group. € million Number Number Number per share, in € in % in € in € in € € million in % 2015 923.9 92,385,076 92,307,711 92,289,839 10.00 25.5 0.80 3.00 2.99 19.6 1.35 124.7 2.3 2014 923.4 92,342,748 92,265,383 92,240,662 10.00 – 9.4 0.80 2.54 2.54 18.9 1.35 124.7 2.8 DE 000 577 330 3 577330 FRAG.DE FRA GR MDAX, FTSE4Good Index, STOXX Global ESG Leaders Index, Euronext Vigeo (Europe 120/Eurozone 120), Germany Ethical 30 Share Index, Climate Disclosure Leadership Index (CDLI). Table 30 Fraport Annual Report 2015 74 Outlook Report General Statement of the Executive Board For the Frankfurt site, the Executive Board expects continuing stable growth in passenger numbers, estimating growth at around 1 % to approximately 3 % in the 2016 fiscal year – partly due to geopolitical tensions – . In addition to the expected traffic growth, the Executive Following signature of the concession agreements for the opera- Board expects additional revenue from the further development of the tion of the 14 Greek regional airports, at the time of preparing the retail business. Exchange rate fluctuations that impact the purchasing consolidated financial statements the Executive Board expects the power of passengers may additionally have positive or negative effects. transaction to be closed at the end of 2016 and to take over operation In connection with the continuing shortfall in covering the capital of the airports. As there were still conditions precedent at the time costs in Frankfurt and the further investing activities at the airport sites, of preparing the consolidated financial statements (see chapter titled particularly in Frankfurt, in the forecasted period the Executive Board “Significant Events” beginning on page 48), there is, however, the expects increases in airport charges, which he expects to materialize possibility that the closing of the transaction will be delayed. The in Frankfurt from fiscal year 2017 onwards. The sale of shares in the Executive Board therefore forecastes the financial development for Group company FCS will lead to a decrease in revenue in the Ground the 2016 fiscal year first without effects from the closing of the Greece Handling segment in fiscal year 2016. Due to the Group company’s transaction, followed by a forecast of the impact of the transaction. low operating margin, this will, however, have no significant impact on The order selected does not reflect the probability of occurrence the segment’s EBITDA. The Executive Board expects negative effects expected by the Executive Board, but rather is aimed at giving the at the Frankfurt site to come in particular from additional personnel reader the best possible transparency and comprehensibility of the expenses in connection with pay increases under collective bargaining future development, as the comparable company development of agreements and from a higher cost of materials for reasons relating the previous fiscal year is presented first. to traffic volumes. In the medium-term forecasted period of the next five years, the Exec- Outside of Frankfurt, the financial development of the Lima site – in utive Board expects the global economy to expand, which will have a addition to the assumed positive operating development – is partic- positive impact on the development of air traffic in general as well as ularly characterized by exchange rate effects in connection with the on the Group airports. Correspondingly, the Executive Board forecasts translation of the revenue denominated in US$ into the Group currency. positive operating development for the Group in total. Uncertainties As previously described, the development of the Varna and Burgas, continue to result from political crises, particularly between Russia and Antalya and St. Petersburg sites is largely determined by the political Ukraine and between Russia and Turkey. These may particularly impact developments around Russia. Travel restrictions between Russia and the business development of the Varna and Burgas, Antalya and St. Turkey may have a negative impact on the Antalya and St. Petersburg Petersburg sites. In addition, terrorist attacks or the threat of terrorist sites. Russian passengers switching to alternative vacation destinations attacks in touristic areas may have an impact on passenger demand at may, in contrast, have a positive impact on the Varna and Burgas the Group airports. At the Frankfurt site, the situation in the Ground sites. In connection with the terrorist attacks that have taken place Handling segment in particular remains challenging and difficult in in Istanbul and Ankara since the start of 2016, there is additionally a view of the intense competitive environment. negative development of tourist traffic in Antalya in fiscal year 2016 to be expected. The Executive Board assesses the further development of the Ljubljana, Hanover and Xi’an sites as positive overall, whereas the Xi’an site should exhibit continuing high momentum. Although it remains difficult to forecast the financial result, which is due to future changes in interest rates and exchange rates and from the uncertain operating and financial development of the Group company Antalya, the Executive Board anticipates a positive overall development in the Group result in the forecasted period. In the event that the Greece transaction is closed as early as the end of 2016, the 2016 Group result may also decrease temporarily (see also the “Business Outlook” chapter beginning on page 94). In the medium- term forecasted period, the operation of the Greek regional airports will have the impact of increasing the result. Here the Executive Board expects significant growth in revenue in the lower triple digit million € range for the 2017 fiscal year and an associated significant increase in EBITDA. Group Management Report / Outlook ReportFraport Annual Report 2015 75 With regard to the asset and financial position, despite ongoing Risk strategy and objectives capital expenditure on maintenance measures and in Terminal 3, Within the further development of Fraport it is always, within the the Executive Board expects positive free cash flows in the short to context of the integrated strategy and planning process, ensured medium term (without taking payments for the acquisition of Group that the risks associated with the opportunities are in an appropriate companies and concessions into account), which, after the deduction relationship to each other. This is ensured through a comprehensive of dividend payments, will lead to a reduction of net financial debt risk and opportunities management, which guarantees that risks and and the gearing ratio. In connection with the closing of the transaction opportunities are identified at an early stage, are evaluated, controlled, to operate the 14 Greek regional airports, however, depending on and monitored in a standardized manner and are transparently com- the date of closing and of the financing of the one-off payment of municated using a systematic reporting. €1,234 million, there will be a significant increase in net financial debt of up to approximately €1.1 billion, if circumstances remain the same. The following principles are derived from this objective: The gearing ratio will also increase significantly as a result. In connection 1. Already as part of the strategic planning processes and when pre- with the medium-term capital expenditure requirements at the paring the long-term business plan, a comparison is made with the Frankfurt, Lima, and Greece sites, overall the Executive Board expects opportunities and risk strategy, which results from the anticipated a temporary increase in net financial debt and the gearing ratio in the business development. This way, Fraport avoids risks that are not medium-term forecasted period. directly related to the original business purpose. 2. The centralized Risk Management unit is responsible for the im- Despite the higher debt, the Executive Board continues to assess the plementation and further development of the risk management Group’s financial situation in the forecasted period as stable. As at the system and links this with the opportunities management process. date of preparing the consolidated financial statements, the Executive 3. Risk and opportunities management is a key function of the respec- Board does not see any significant risks that might jeopardize the tive business, service, and central units that are responsible for their Fraport Group as a going concern (see also the “Risk and Opportu- business processes; this involves material risks being managed using nities Report” beginning on page 75). Apart from the closing of the appropriate measures and being reduced to an acceptable level, Greece transaction, there are no further significant acquisitions or as well as actively utilizing opportunities. disposals of companies or increases or reductions in shareholdings in 4. Through standardized and comprehensive processes, early identi- the forecasted period foreseen. Risk and Opportunities Report fication, standardized analysis, centralized control and monitoring, as well as systematic and transparent reporting take place regarding all material risks and opportunities. 5. All employees are encouraged to actively become involved in risk and opportunities management in their area of activity. The Fraport Group has a comprehensive, Group-wide risk and op- portunities management system, which makes it possible for Fraport to identify and analyze risks at an early stage, and to control and limit those risks using appropriate measures, as well as to take advantage of opportunities. This results in the early identification of potential risks that could jeopardize the Fraport Group. Fraport regards risks as future developments or events that can have a negative impact on the achievement of operational planning and strategic targets. Opportu- nities are regarded as future developments or events that can lead to a positive planning deviation or strategic target deviation. Group Management Report / Outlook ReportFraport Annual Report 2015 76 The risk management system Risk policy, principles and strategies Organization of risk management Risk controlling and monitoring Risk reporting Risk analysis Risk monitoring > Description of tasks and responsibilities > Monitoring by RMC and RMC office Risk control > Preventative and reactive measures > Cost/benefit analysis > Controlling of measures > Internal risk reporting > Risk reporting to Supervisory Board/ Finance and audit committee > Management report to capital market Risk aggregation > Definition of total risk position (risk map) > Reporting of relevant risks to the Executive Board Documentation, risk management software Risk identification > Definition of risk areas > Risk inventory: bottom-up and top-down process Risk evaluation > Evaluation by impact level and probability of occurrence (risk portfolio) > Evaluation of scenarios > Prioritization of risks Graphic 17 The Fraport Executive Board bears the overall responsibility for an The RMC is the highest executive body in the risk management system effective risk management system, through which comprehensive below the Executive Board and is made up of senior managers from and standardized management of all material risks is ensured. In this the company’s operating and supporting units. The management of context, by preparing the development plan, it has also approved the the RMC is performed by the Risk Management and Internal Control risk strategy and risk objectives for the Group. The Executive Board System department. The management of the RMC is responsible for appoints the members of the Risk Management Committee (RMC), the organization, maintenance, and further development of the Group- approves the rules of procedure for the RMC, and is the addressee for wide risk management and internal control system (ICS), as well as the the quarterly reporting of relevance to the Group and ad hoc reports regular updating and implementation of the risk management and ICS in the risk management system. policy in the Fraport Group. The RMC reports to the Executive Board on a quarterly basis immediately after its meetings. The risk management system is documented in writing in a policy for Fraport AG and one for the Group companies to be included, and is closely linked to the central ICS and the compliance management system, and is interlinked with them in an integrated system. It follows the “COSO II” (Committee of the Sponsoring Organizations of the Treadway Commission) framework and covers risks in the areas of strategy, operational business, financial reporting, and compliance. Group Management Report / Outlook ReportFraport Annual Report 2015 77 Using a risk-oriented scope procedure, which is to be performed 1) Identification and reporting of risks annually, the Risk Management and Internal Control System depart- Risks are identified using various instruments primarily by the oper- ment determines which Group companies should be included in the ational business, service, and central units of Fraport AG, as well as standardized ICS procedure. Based on an annually updated analysis, the Group companies. The risk identification methods used range this process records internal risks along the very significant business from market and competition analysis, to the evaluation of customer processes, mitigates them through suitable control activities and/or surveys, information about suppliers and institutions, right through to reduces them to an appropriate level. Based on an annual self-assess- monitoring risk indicators from the regulatory, economic, and political ment by the responsible departments and Group companies (so-called environment. Division Managers are responsible for the accuracy of control self-assessment), the effectiveness of the key process controls the information received from their units that is processed in the risk is assessed and the results of this effectiveness assessment is then management system. They are obligated to constantly monitor and reported to the Executive Board and the Supervisory Board. Through manage risk areas, and report on all risks in their divisions and their linking the risk management system to the ICS, a more comprehensive integrated investments to the Risk Management and Internal Control transparency is created regarding the material risks existing in the System department on a quarterly basis. Outside of regular quarterly Group and a closed “risk workflow” is established. reporting, newly identified material risks must be immediately reported Process-integrated and process-independent monitoring measures form the elements of the internal monitoring systems. The central 2) Evaluation of risks on an ad hoc basis. Group Internal Audit unit is integrated into the internal monitoring The systematic evaluation of risks determines the extent and prob- system of the Fraport Group with process-independent audit activities. ability of occurrence of the identified risks, and makes it possible to estimate the extent to which the individual risks can jeopardize the PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungs- objectives and strategy of the Fraport Group, or which risks will most gesellschaft (PwC) has examined the risk early-warning system of likely, due to their nature, are able to jeopardize the company as a Fraport AG within the context of the annual financial statement audit going concern. For this purpose, the financial impact (quantitative with regard to stock corporation law requirements. It fulfills all of the assessment or – if this is not possible – grouping into the relevant legal requirements that apply to such a system. impact levels) and its probability of occurrence is ascertained by the responsible business, service, and central units (= risk carriers). The The Supervisory Board of Fraport AG has the function of supervising reference basis is always the rolling 24-month period. However, this the effectiveness of the internal control and risk management system does not mean that risk carriers risks only analyze and evaluate from a in accordance with Section 107 (3) of the AktG. This responsibility is short-term perspective; possible infrastructural risks are in particular executed by the finance and audit committee of the Supervisory Board. monitored in accordance with their long-term impact. During the evaluation process, the potential impact (= impact level) is divided Risk transfer through the purchase of insurance policies is controlled by into four categories: “low”, “medium”, “high” and “very high”. The the Group company Airport Assekuranz Vermittlungs-GmbH. impact level is evaluated according to how the risks impact the relevant detection variable (EBIT, financial result, or liquidity). Furthermore, The Fraport risk management system only covers risks, not opportu- qualitative factors, which could be important for Fraport’s reputation nities. However, an opportunities consultation takes place quarterly and which also determine the risks, are also included in the analysis. within the context of the RMC meeting. The probability of occurrence for individual risks is also divided into Risk management process four categories: “unlikely”, “possible”, “likely” and “very likely”. The risk level (“low”, “moderate”, “significant” and “very significant”) arises The risk management process comprises the following steps. In order from the combination of impact level and probability of occurrence. to support the entire process, Fraport uses an integrated risk manage- ment software solution. Group Management Report / Outlook ReportFraport Annual Report 2015 78 The risk evaluation is conservative, i.e., the greatest possible impact for 4) Risk aggregation and reporting Fraport is assessed. A distinction is made between a gross evaluation Integrated risk management aims to ensure a transparent presentation and a net evaluation. The gross risk is the greatest possible negative of the Fraport Group’s risk situation. For this, the Risk Management (financial) impact prior to risk-minimizing measures. The net risk and Internal Control System department consolidates and aggregates represents the expected residual (financial) impact after initiation or the quarterly risk reports from the divisions and Group companies as implementation of risk-minimizing measures. The risk assessment in required and provides these to the RMC for assessing the risk situation this report only reflects the net risk. using a “risk map”. Risks are reported to the Executive Board when 3) Risk control they are classified as “significant” or “very significant” on the basis of their net assessment according to systematic evaluation standards Risk carriers are tasked with developing and implementing suitable used Group-wide. measures to minimize and control risk. In addition, general strategies must be developed to deal with the identified risks. These strategies In the event of very significant changes to previously reported risks include risk avoidance, risk reduction with a view to minimize the or newly identified “very significant” risks, reporting also takes place (financial) impact or the probability of occurrence, transfer of risk to a outside of the regular quarterly reporting as ad hoc reporting. third party (for example, through the purchase of insurance policies), or risk acceptance. The decision regarding the implementation of the Twice a year, the Executive Board reports the “significant” (“amber”) relevant strategy and/or measures also considers the costs in relation to and “very significant” (“red”) risks, including their changes, to the the effectiveness of potential risk-minimizing measures. Here, the Risk Supervisory Board with a focus on the finance and audit committee Management and Internal Control System department works closely of the Supervisory Board. The following graphic shows the addressees with the risk carriers in order to monitor the progress of risk-minimizing of the risk reporting, depending on the net evaluation of the risks: measures and to evaluate their effectiveness from a Group perspective. Reporting matrix very likely > 80 % likely > 50 % – 80 % possible > 20 % – 50 % unlikely ≤ 20 % e c n e r r u c c o f o y t i l i b a b o r P Strategic business units, service and central units/ Group companies Finance and audit committee/ Executive Board, RMC Management report, finance and audit committee/Executive Board, RMC Management report, finance and audit committee/Executive Board, RMC Strategic business units, service and central units/ Group companies Strategic business units, service and central units/ Group companies RMC RMC Management report, finance and audit committee/Executive Board, RMC Management report, finance and audit committee/Executive Board, RMC Finance and audit committee/ Executive Board, RMC Management report, finance and audit committee/Executive Board, RMC Strategic business units, service and central units/ Group companies Strategic business units, service and central units/ Group companies RMC Finance and audit committee/ Executive Board, RMC low ≤ €3 million medium > €3 – 10 million high > €10 – 20 million very high > €20 million Level of financial impact Graphic 18 Group Management Report / Outlook ReportFraport Annual Report 2015 79 This process ensures the early detection of risks that could jeopardize the Fraport Group as a going concern. Accounting-related internal control system in accordance with Section 315 (2) no. 5 of the HGB In terms of the Group accounting process, Fraport regards the internal An integral component of Fraport’s risk management system is also control and risk management system as a process that is embedded monitoring financial risks, whereby the presentation of financial instru- in the Group-wide internal control and risk management system. ments overall and, in particular, hedging transactions in accounting is Fraport’s Group accounting system covers the processing of business monitored and controlled. This process is described in the financial risks transactions; records for the documentation of assets and liabilities; and section (“risk report”). At Fraport, this process represents a subsection processes for the consolidation of the separate financial statements of of the accounting-related internal control system. parent/subsidiary companies, for the inclusion of joint ventures, and Further development of the risk management system in 2015 associated companies, and for recording the required information for the disclosures in the Group notes and Group management report. The company applies principles, processes, and measures aimed at safe- The new risk management policy for Fraport AG and the new Group guarding the effectiveness and compliance of the Group’s accounting policy for the Group companies to be included came into force as at system, which Fraport designed to conform to “COSO” standards, in January 1, 2015. The principles, procedures, instruments, risk areas, an effort to ensure that the recognition, measurement, and presenta- competences and responsibilities within the Group and also the re- tion of assets and liabilities is in line with the legal guidelines and the quirements for reporting and the communication duties are set out in principles of proper accounting. it. As part of the revision/preparation of the policies, the Group-wide risk matrix, with its dimensions of the levels of financial impact, prob- ability, and risk, was furthermore redefined and each was extended by an additional level. The switch to the new 4x4 risk matrix did not result in any significant changes in the assessment of or duty to report risks to the Executive Board and the Supervisory Board. In addition, an e-learning module was developed on the topic of risk management, which is expected to first be rolled out in Fraport AG in the first quarter of 2016. This is intended to contribute to further embedding the risk culture in the company. Group Management Report / Outlook ReportFraport Annual Report 2015 80 Group accounting at Fraport is generally organized on a local basis. The Quality assurance is carried out by Fraport Group Accounting for reconciliation of the local separate financial statements of the parent complex accounting issues or fundamental questions, as well as at company and subsidiaries, joint ventures and associated companies local companies included in the consolidated financial statements. (commercial balance sheet I) to the separate financial statements prepared in accordance with Group-wide accounting and valuation The consolidated financial statements are prepared by Fraport AG methods (commercial balance sheet II) is carried out decentralized at Group Accounting. The reporting process for the consolidated financial the respective companies. In individual cases, the bookkeeping and statements is laid down in a schedule detailing each individual step, preparation of financial statements for Group companies at the Frankfurt including deadlines and responsibilities. Group Accounting monitors site is carried out by the accountants of the Group parent company progress, reporting deadlines, and the completeness of the Group Fraport AG within the framework of service agreements. In so doing, reporting process. separation on an organizational and system level of the accounting of the parent company Fraport AG is ensured. To ensure consistent In the run-up to the preparation of the consolidated financial state- Group-wide accounting and evaluation, Fraport has developed a ments, a Group questionnaire is sent to all companies included in the policy on IFRS Group accounting principles, on the basis of which the consolidated financial statements in order to identify any issues relevant companies included in the consolidated financial statements perform to the accounting process in good time. The consolidated companies the reconciliation of commercial balance sheet I to commercial balance are also questioned about any events after the balance sheet date so sheet II. The effectiveness of the Group accounting process and its that these can be completely recorded. compliance with the relevant policies are confirmed by the companies included in the consolidated financial statements within the framework Capital, liabilities, expenses, and income are consolidated and infor- of an internal statement of completeness. mation relevant to segment reporting is processed in the SAP BPC system. Prior to consolidating liabilities, internal balances are recon- The SAP BPC system is primarily used for the accounting-related Group ciled. Capital consolidation, including the updating of the valuation of reporting process between the companies included in the consolidated investments in companies accounted for using the equity method, the financial statements and the Group parent company, Fraport AG. The elimination of intercompany profits and losses, and the preparation of financial statements to be consolidated are recognized in this system, the statement of cash flows, and of the statement of changes in equity as is required information for tax accruals and for the Group notes. are mainly carried out manually with the help of the system. Deferred Access authorization on the level of the consolidated companies is and accrued taxes are calculated and recognized by Group Accounting awarded and administered by Fraport on the basis of a user autho- in coordination with the Group Tax department. rization concept. Group reporting in SAP BPC is adapted by Group Accounting on a regular basis to the changes in accounting-relevant Group policies, which are available to all consolidated companies, legal regulations. A Group chart of accounts in the SAP BPC system is ensure that consolidation processes and the reconciliation of internal set up and administered by Group Accounting. balances are carried out properly. Accounting-related internal controls are, as far as possible, carried out Valuations in connection with assets and liabilities from the acquisition within the SAP BPC system. Manual application and monitoring con- or sale of shares in companies are generally measured on the basis of trols, especially regarding completeness and quality of the reported an external value analysis prepared by experts (e.g., calculation of data, are carried out in the context of the operating accounting pro- acquisition costs or purchase price allocation). cesses in Group Accounting. The Group notes are prepared by Group Accounting as part of the consolidated financial statement process. Once the Group notes have been drawn up, the information given in them is verified by central or local departments, where required. Group Management Report / Outlook ReportFraport Annual Report 2015 81 The central units Finance and Investor Relations, as well as Corporate The aim of the controls carried out within the framework of account- Compliance, Risk Management, and Values Management, are generally ing is to ensure completeness, correctness, existence, ownership, responsible for preparing the Group management report. They consoli- and presentation of the assets and liabilities, and items in the income date the information provided by the relevant departments. Consoli- statement recorded in the accounting process. dated information is then verified by the relevant departments in turn. During the preparation of the financial statements by the general led- The Group parent company Fraport AG prepares its own separate ger, subsequent, and mainly manual monitoring controls are carried financial statements in accordance with German commercial and stock out for the purpose of ensuring the completeness and correctness market regulations. Fraport AG has developed a HGB accounting policy of items recognized in the sub-ledgers. Preventative, system-aided to ensure that its accounts are prepared consistently and in accordance controls and a four-eyes principle are implemented as subsequent with the principles of proper accounting. controls of closing entries in order to achieve the purposes of the monitoring mentioned. Accounting at the Group parent company Fraport AG is, as far as pos- sible, carried out locally through sub-ledgers (for creditors, debtors, In order to ensure that all financial statements are complete, the Group asset accounting, treasury, accounting of local departments). During parent company Fraport AG has implemented a contract management the preparation of financial statements, the general ledger/accounting process that evaluates contracts recognized in the financial statements creates any closing entries in the general ledger, which cannot be en- to obtain a complete and correct view of all facts relevant to the tered by local departments. The general ledger also performs internal accounting process. In addition, the head of Group Accounting is a controls in the framework of preparation of financial statements for member of the RMC. As a result it is generally ensured that issues iden- important local accounting processes. tified during the risk management process are assessed for their effect on the financial statements and reported in accounting, if applicable. In order to ensure standardized procedures, important operational pro- The contract management and risk management processes are both cesses of the sub-ledgers and general ledger have been documented regulated in a separate policy. (including policies, process descriptions, manuals, and guidelines). The effectiveness and compliance of the sub-ledger processes with the A special implemented process monitors risks associated with the rec- relevant policies are verified by the responsible departments, which ognition of financial instruments in the accounting system, particularly issue an internal declaration of completeness. hedging transactions. The Group parent company Fraport AG uses the SAP R3 system for its The process for preparing the financial statements of the Group parent accounting. Accounting-related internal controls are carried out, where Fraport AG is laid down in a schedule detailing each individual step, possible, in the SAP R3 system. Manual application and monitoring including deadlines and responsibilities. Group Accounting monitors controls are carried out during the operational accounting processes the progress and schedule system-assisted. in the sub-ledgers and also during the preparation of the financial statements by the general ledger. Functions in the departments involved in the accounting process are separated on a system, personnel, and organizational level. A SAP authorization concept is used for issuing and administering access authorization for accounting-related systems. Group Management Report / Outlook ReportFraport Annual Report 2015 82 The major steps in the financial statement process are the closing of the Fraport AG is the parent company of the Fraport Group and comprises sub-ledgers, which in the case of the accounts receivable accounting all of the described segments. Therefore it is also – directly or indirectly – process includes the valuation of receivables, i.e., the creation of allow- subject to the risks described. ances. In asset accounting, the closed sub-ledger reflects scheduled depreciation and amortization and impairment losses on property, plant, and equipment. The Treasury department is responsible for the Strategic risks General economic risks operational processes of its own sub-ledger (including cash pooling) The global economy developed with limited momentum in 2015, and and for providing the information required for recognizing financial the consequences of the financial and debt crisis have been overcome instruments in the general ledger. to differing degrees. Industrial nations’ economic activities remain bur- dened by structural problems. This applies particularly to the majority After the closing of the sub-ledgers, the general ledger/accounting of EU states and to Japan. Economic momentum in emerging countries of Fraport AG carries out the necessary closing entries, which also is still comparably high but has weakened significantly in recent years, includes carrying out subsequent manual monitoring controls. This which is particularly important due to the increasing significance of mainly relates to the items other provisions and personnel provisions, China and India in the global economy. The larger economies of Latin financial assets and instruments, shareholders’ equity and expense, America, as well as Russia, are flatlining or are currently only showing and income accruals. The Tax department calculates and posts taxes moderate growth. on income, and performs manual application and monitoring controls. Fraport regularly uses external service providers within the framework also the “Business Outlook” chapter beginning on page 94). Neverthe- of the preparation of the annual financial statements for evaluating less, the risks that could arise from the economic and financial policy provisions, mainly personnel provisions, as well as financial instruments conditions remain unchanged. Another flare-up of the European debt Further expansion of the global economy is expected for 2016 (see and assets. crisis, for example as a result of insolvencies in the banking sector or political conditions within the EU, an escalation of political protests The Internal Auditing department regularly assesses major sub-pro- against reform measures and the Euro currency, the abandonment of cesses of the accounting process, including accounting-related deficit targets and reform measures introduced, turbulences in emerg- internal controls. Business risks ing countries, an aggravation of the political and military conflicts in Ukraine and the Middle East, or renewed general uncertainty among businesses or consumers could halt the slight upward trend in Europe The risks that could have a material effect on the business activities and trigger another recession in Europe. The global economy would or on the asset, financial, and earnings position and/or reputation of also be affected in this case, which would result in further weakened Fraport are explained in the following description. In this description, growth. The negative consequences for global and regional air traffic they are aggregated more intensively than they are when used for development, including Fraport, would also be considerable. internal control; however, the risks are classified according to the same risk categories that are used in the internal risk management reporting The risks currently existing in China (constrained growth as a result of system. Unless specified otherwise, the risks described relate to all structural change), Japan (recession), and Russia (continuing sanctions segments to varying extents (Aviation, Retail & Real Estate, Ground and a fall in earnings due to the drop in the price of oil) as well as in Handling, and External Activities & Services). various emerging countries could have a dampening effect on the global economy and, as a result, on Germany’s export-based economy, which would also affect Fraport’s airport business. The economic risks may become more manifest, impairing develop- ment in air traffic, which would have a negative effect on the asset, financial, and earnings position of Fraport. For this reason, Fraport closely monitors the development of supply and demand in air traffic so that reasonable countermeasures can be introduced if required. In the personnel area, Fraport has agreements with the employee repre- sentative body in order to be able to intervene with countermeasures to a certain extent. Group Management Report / Outlook ReportFraport Annual Report 2015 83 An increasingly unstable geopolitical situation in the Middle East and The amount of transfer traffic also varies depending on the number North Africa in the form of crude oil and kerosene price rises could and appeal of direct intercontinental flights offered. also have an impact on the supply and demand development of air traffic. In addition, restricted opportunities to fly over trouble spots, Due to the increasing market and competitive pressure, the potential such as Ukraine, Syria, or Iraq, or flight bans between states may lead risk also exists that future capital costs from planned capital expenditure to further limitations on services supplied. may only be capable of being priced into the achievable charges to As an international air traffic hub, Frankfurt Airport benefited in the past a limited extent. from the fact that it was possible to compensate for the effects of crises Frankfurt Airport is not only in competition with its established Euro- in a relatively short time. However, experiences with the most recent pean competitors. It is also faced increasingly with new competitors. crises could indicate that it may take increasingly long to return to the Political and regulatory decisions on regional, national, and European pre-crisis growth path. Furthermore, structural changes in business level have a partial impact on the market, and therefore competition travel (e.g. further reduction in the number of business trips) could have a direct or indirect impact on Fraport’s business. Furthermore, currency rate fluctuations, unemployment, and changes in consumer through taxes, fees, and regulations, such as the aviation tax, the EU emissions trading, the CO2 regulations, noise protection requirements, and bans on nighttime flights. There is therefore the risk of airlines behavior insofar they influence passengers’ shopping habits can also using alternative sites and routes outside Frankfurt in the medium term. impact the earnings of the Fraport Group in the retail business. The More medium- to long-term risks in the form of a weaker competitive buildings and areas that Fraport currently lets are mainly used by airlines advantage among European airlines and consequently among Euro- or companies whose business largely depends on the development of pean airports cannot be ruled out. air traffic at Frankfurt Airport. This sector of the real estate business is therefore not directly tied to general real estate market development. Moreover, the creation of new or further development of existing hub systems in the Middle East may lead to a shift in the global flows of Given the difficult situation described, Fraport estimates the potential transfer passengers. impact level of the macroeconomic factors as “very high” overall. The probability that negative macroeconomic developments can have Fraport counters these risks through continuous market monitoring for such an impact on Fraport’s asset, financial, and earnings position is prompt identification of potential changes with negative consequences assessed as being “possible”. for the business, but also through balanced, needs-based expansion planning. In view of the dynamic market environment, Fraport assesses Market, competitive and regulatory risks the potential impact (impact level) of these risks as “very high” and In addition to an attractive infrastructure, the success of a world airport the probability of occurrence as “possible”. The traffic assumptions is dependent on its airline customer structure and the associated global underlying the 2016 Business Plan were used with a growth assump- and dense route network, the fleet structure and the fares offered by tion of 2 to 3 % for passenger traffic and, due to geopolitical tensions the airlines. at the time of preparing the consolidated financial statements, were adjusted to approximately 1 to around 3 %. Subdued global economic development and the increasing competi- tive pressure in all transport sectors have led to consolidations and also some insolvencies in the past, which also cannot be ruled out in future. Changes to the alliance systems repeatedly modify the customer and supply structure, also associated with the reorientation of the offer to other airport locations. Often, changes do not occur smoothly, but if there are strikes by employees this may damage Frankfurt Airport through flight cancellations or cancellations of feeder traffic. Group Management Report / Outlook ReportFraport Annual Report 2015 84 Capital expenditure of up to €300 million for a state-of-the-art drainage The aforementioned rulings by the German Federal Administrative High system could be necessary in connection with the operation of Run- Court mean that legal recourse in the test cases is now concluded. way West and the existing parallel takeoff and landing runway system However, it is impossible to completely exclude the possibility of re- depending on the results of investigations due to the expected official sidual legal risks to the airport expansion in light, inter alia, of possible order. On August 18, 2014, a water order was imposed for the Runway appeals to the European Court of Justice and/or European Court of West area. A state-of-the-art drainage system must be implemented for Human Rights, as well as the still outstanding decisions in the non-test- the part of Runway West south of the tunnel. A state-of-the-art drainage case proceedings, which are now being continued. Fraport counters system could be necessary for the northern part due to deicing fluids these risks through comprehensively following the proceedings, in measured last winter, or their degradation products. legal and technical aspects. In a significant non-test case (Flörsheim vs. the State of Hesse) and as a result in further non-test cases, the The order does not contain any conditions for the realization of a cases heard were rejected in the first instance. Furthermore, Fraport state-of-the-art drainage for the parallel runway system. However, is committed to active noise protection and noise research. there is fundamentally a risk that, if deicing fluids are detected in the groundwater also in connection with the parallel runway system, the The total volume of capital expenditure in the airport expansion so higher water authorities will call for a state-of-the-art drainage system far has increased to approximately €2,526 million as at December 31, and impose a corresponding water order. The impact level is assessed 2015 due to the advancing building and contract award activity, as as “very high”, the risk level as “very significant” and the probability well as the capital expenditure to be made due to the supplemental of occurrence of the risk as “possible”. planning zoning decisions dated April 30, 2013 (noise protection for commercial property), May 10, 2013, and May 26, 2014 (protection Risks in connection with the airport expansion requirements regarding wake turbulences). With its appellate decision, issued on April 4, 2012, the German Federal Administrative High Court essentially confirmed that the zoning deci- In view of the initiated and upcoming measures (for example, compre- sion and thus the airport expansion complied with legal requirements hensive roof reinforcement program, particularly in the municipalities in several test cases. Insofar as it objected to the night flight policy, of Raunheim and Flörsheim) and the evaluation of the legal situation, the HMWEVL, as the responsible zoning authority, adapted the zoning Fraport estimates the probability of occurrence of the risk of a rescission decision on May 29, 2012, imposing a complete ban on all scheduled of the zoning decision regarding the expansion of Frankfurt Airport as flights between 11 p.m. and 5 a.m., and that for the hours immediately being “unlikely”. However, if the risk was realized, the impact (impact before and after the night flight ban, from 10 p.m. to 11 p.m. and from level) of the risk would be “very high”. 5 a.m. to 6 a.m., the number of aircraft movements is limited to an annual average of 133 takeoffs and landings per night. Financial risks “Risk report” pursuant to Section 315 (2) no. 2 of the HGB There is the risk that the existing night flight ban will have a long-term With regard to its financial position accounts and planned transactions, negative impact on the conditions for the development of the site. Fraport is, in particular, subject to credit risks, interest rate and currency exchange risks, and other price risks. Fraport covers interest and for- If additional restrictions of airport operation, demanded in some eign exchange rate risks by establishing naturally hedged positions, in cases in the political discussion, were implemented into law, a further which the values or cash flows of primary financial instruments offset weakening of the competitive position of Frankfurt Airport could result, each other in their timing and amount and/or by using derivative which would have a considerable impact on traffic volume, as well as financial instruments to hedge the business transactions. The scope, traffic structure, at the Frankfurt site. However, it must be considered responsibilities, and controls for the use of derivatives are stipulated that these restrictions (for example, extended night flight ban, maxi- in a binding internal policy. The existence of a risk that needs to be mum noise limits) would have to overcome high legal hurdles. hedged is the prerequisite for using derivatives. Derivatives are not used for trading or speculative purposes. To control the risk positions, simulations are regularly carried out by Risk Controlling using various worst-case and market scenarios. The Chief Financial Officer is regularly informed about the results. The Fraport AG Treasury department is responsible for efficient market risk management. Generally, only risks that affect the Group’s cash flows are managed. There can only be open derivative positions in connection with hedging transactions in which the underlying transaction is canceled or is not carried out as planned. Group Management Report / Outlook ReportFraport Annual Report 2015 85 Interest rate risks arise in particular from the capital requirements for Other price risks result from the fair value measurement of financial capital expenditure and from existing variable-interest rate financial assets. This, however, does not immediately affect cash flow. Financial liabilities and assets. Fraport assesses the probability of occurrence of assets with a fixed term are assumed to be subject to temporary market this risk as being “unlikely” and the potential impact (impact level) as fluctuations that reverse automatically by the end of the products’ “high”. As part of the interest rate risk management policy, in order to maturities, since a repayment in the full nominal amount is expected. limit the interest rate risk for the majority of the debt financing, interest Even without specific measures, Fraport assesses the probability of oc- derivatives were concluded and financing was concluded with fixed-in- currence of other price risks as “unlikely”, and the impact level as “low”. terest rate agreements. Following the commitment to these interest rate-hedging positions, there is still a risk that the market interest rate Regarding further information about the nature of risks arising from the level will decrease and as a result there will be a negative market value use of financial instruments and the scope of risks from open risk posi- of the interest rate-hedging instruments or that a negative value will tions in the context of financial instruments, please see Group note 48. be intensified. These changes can have an impact on the result, within the income statement, or also on the shareholders’ equity, depending Other financial risks on the classification of the derivative. Fraport assesses the probability Risks for Fraport’s asset, financial, and earnings position may arise of occurrence of the risk as being “unlikely” and the potential impact from the current financial market situation and its effects on the (impact level) as “medium”. overall economy, particularly on liquidity and future possible bank lending practices. As a countermeasure, Fraport continues to pursue Foreign currency risks mainly arise from financing in foreign cur- a “prefinancing” strategy, thereby securing funding for items such as rencies and from planned revenue that is not covered by expenses in upcoming capital expenditure and repayments. The capital from this matching currencies. Such risks are hedged, to the extent necessary, strategic liquidity reserve is still available. either through ongoing sale of these currencies or by entering into currency forward transactions. Due to the hedging that has taken Legal risks and compliance risks place or is planned, Fraport assesses the probability of occurrence of As a Group that operates internationally, Fraport is subject to numerous foreign currency risks as “possible” and their possible financial impact national and international laws and regulations, as well as their amend- (impact level) as “high”. ments, through which the future business success of Fraport could be negatively influenced. In addition to the industry-specific regulations Credit risks for Fraport stem, on the one hand, from primary financial of air traffic law, planning and environmental law, and safety-related instruments. Such risks arise, for example, upon the purchase of secu- regulations, the general provisions of capital market law, anti-trust, data rities in the framework of asset management and comprise the default protection law, and employment law are also of material importance. risk of the issuer. On the other hand, credit risks arise in connection The Legal Affairs departments of Fraport and its Group companies with derivative financial instruments with a positive fair value and the keep abreast of the legal developments, including the relevant case risk that the counterparty will not be able to meet the obligations law, inform the affected business units about changes, and are actively that are advantageous for Fraport. This risk is generally countered by involved in limiting any resulting risks. using financial assets and concluding derivatives only with issuers and counterparties who have a rating of at least “BBB–”. If the credit rating is downgraded below “BBB–” during the asset’s holding period or the term of the derivative, a decision is made on a case-by-case basis on the further course of action with the asset or derivative, taking into account the remaining term. As of the beginning of 2013, investments in bonds without ratings have also been possible in individual cases, within narrowly defined limits. The counterparty’s issuer and issue ratings are regularly mon- itored. In addition, ongoing reporting regarding the counterparties is monitored. Moreover, the upper limits are continually adjusted to the credit-rating development and where necessary reduced, and financial assets are diversified further under risk considerations. In consideration of the previously described measures, Fraport classifies the potential financial impact (impact level) of credit risks as “low” and their probability of occurrence as “possible”. Group Management Report / Outlook ReportFraport Annual Report 2015 86 Furthermore, the risk exists that bodies and/or employees may violate In the proceedings initiated by the Philippine government against laws, internal policies, or standards of good corporate management PIATCO in 2004 for the expropriation of the terminal, the Supreme that are recognized by Fraport. These include the risk of fraud, mis- Court of the Philippines in Manila ruled on September 8, 2015 that representation or manipulation of financial data or bribery and corrup- the Philippine government must pay PIATCO compensation of a tion, with the consequence that Fraport could suffer asset losses and/or further approximately US$510 million. This sum takes account of the reputational damage. Fraport is proactively working to counter these advance payment of around US$59 million made by the Philippine potential risks through the establishment and expansion of a Group- government to PIATCO in 2006 and interest as per December 31, wide compliance organization, adopted in the Group compliance 2014 for the Terminal 3 project in Manila. This decision is not yet management system policy, and the implementation of a compliance legally binding. It was contested by all parties with appeals before program, inter alia through the code of conduct that is binding for the Supreme Court. No decision has yet been made. Fraport is not a all employees, their training, and constant further development of party in the expropriation proceedings, as this is directed against the the central ICS. In addition to this, Fraport has implemented various project company. However, a conclusive decision in the expropriation whistle-blower systems, which employees and external parties can turn proceedings regarding the payment of compensation also affects to confidentially and anonymously. In addition, a regular review is made Fraport as a shareholder in PIATCO. of the applicable policies for whether they are current and appropri- ate. All policies adopted by the Executive Board are freely accessible At the beginning of 2003, the shareholders and directors of PIATCO to all employees via the intranet. Furthermore, Fraport documents – against Fraport’s votes and those of the PIATCO directors Fraport important business processes to create transparency, and promotes appointed – resolved to prepare a complaint for damages against the implementation of suitable control mechanisms. In view of the Fraport and its directors for alleged improper and harmful action previously described effective compliance structures, the probability against the company. Fraport denies these allegations. Moreover, it is of occurrence of a compliance violation with a “high” potential impact disputed whether these resolutions are legally valid. PIATCO has not (impact level) is assessed as being “unlikely”. further pursued the claims asserted. Manila project (segment External Activities & Services) As has already been reported in previous years, the Philippine De- The investment in Manila, the capital of the Philippines, to build and partment of Justice ordered an arraignment in the suit against various operate an airport terminal (NAIA IPT3 project) was written off com- persons associated with the Fraport Group back in 2011 due to a pletely in the financial statements for the year ended December 31, suspected violation of the “Anti-Dummy Law”. After a corresponding 2002. The ongoing material risks and legal disputes in relation to the arraignment took place in September 2013, the proceedings were project are described in the following. suspended in February 2014 for an indefinite period. Declarations of exemption were then provided to affected persons. The outcome of In the case of Fraport against the Republic of the Philippines in front these proceedings could put the legality of Fraport’s investment in the of the International Centre for Settlement of Investment Disputes Philippines in question and could, in the case of conviction, serve as the (ICSID), following the court of arbitration’s declaration in its decision basis for proceedings to seize Fraport’s assets in the Philippines. With of December 10, 2014 that it was not competent, Fraport continues reference to the allegations made in the proceedings, to the extent they to pursue claims for compensation via the local project company Phil- are known, Fraport is still of the opinion that these allegations are false. ippine International Air Terminals Co., Inc. (PIATCO), in which Fraport holds a share. As concerns the relationship between Fraport and the The probabilities of occurrence of the risks described so far regarding Federal Republic of Germany in relation to the GKA cover, the regu- the Manila investment are currently not assessable. However, if the risks lations in the indemnification notices and the closed implementation were realized, the impact of each risk would be “very high”. agreement continue to apply. As reported, one Philippine law firm as well as one former Philippine minster had each filed claims for damages against Fraport, two former board members, and two Philippine attorneys of Fraport for alleged def- amation for PHP 100 million in each of the cases (around €1.6 million) and had filed criminal charges in the same matter. The civil action tracing back to the lawsuit by the law firm has now been discontinued because of a settlement. The proceedings, which trace back to the Group Management Report / Outlook ReportFraport Annual Report 2015 87 lawsuit by the former Philippine minister, in part remain pending, Fraport estimates the potential damage at around €300 million (impact although here too it has now been possible to reach a settlement with level “very high”) and, taking the project-related monitoring measures the plaintiff, the court has not yet ruled on a motion to dismiss the into account, the probability of the risk materializing as “possible”. proceedings. The guarantee provided at court in these proceedings remains in existence for the time being. Furthermore, exemption Risks from Airport Expansion South declarations were issued to the Philippine lawyers. With regard to Airport Expansion South is also subject to the risks typical for large the criminal charges filed, investigation and criminal proceedings are construction projects described before. To this extent, the various risks currently still pending, whereas a joint motion by the plaintiff and for this project described before also apply. Due to the long duration the accused to dismiss the proceedings has now been submitted in of such specific large infrastructure projects, further risk positions arise each of the cases. No ruling has yet been made on these. In order to in relation to external influences from the public, the environment, pol- cover the still existing risk, a provision of €2.0 million continues to itics, crises or customer/market developments, technological changes, exist. Fraport denies these allegations. The probability of occurrence engineering practices or other legal requirements. of the risk described continues not to be assessable in view of the still ongoing proceedings. The project risk for further airport expansion, particularly Terminal 3, is defined as “overall deviation of current cost forecasts from the ap- All of the legal risks described are counteracted by Fraport in each case proved capital expenditure program” and its impact on cash flow. As appointing experienced law firms to represent it. at the balance sheet date, none of the risks mentioned with respect to their impact level and/or probability of occurrence are discernible Other legal risks for Airport Expansion South. Tax risks affecting the tax items in Fraport’s statement of financial posi- tion and income statement can arise from changes to tax law and case Risks attributable to investments and projects law, and from different interpretations of existing tax law. Thus, there Investments and airport operating projects are, like Fraport AG at the is the risk of back tax payments in connection with tax audits that are Frankfurt site itself, subject to general economic and company-specific still to be carried out, which might be accounted for as tax provisions risks as well as industry-specific market risks. In addition, there are on the basis of probability considerations. general political risks at individual locations abroad. To minimize tax risks, internal controls have been established in the In principle, Fraport’s investments outside of the Frankfurt site can be Tax department in order to recognize tax risks in good time as well as distinguished from one another as either capital-intensive investments, to check and value known risks. Risk-minimizing measures are agreed such as the acquisition of long-term concessions or the acquisition of between the Tax department and the responsible departments or shares in airports, or as business models with no capital investment Group companies. Operating risks Risks from capital expenditure projects or only a small amount, such as the conclusion of service contracts (management contracts). Here, Fraport is also active in countries, such as China and Russia, which can hold higher risks for investors than is the case for investments in Germany. These risks typically include country, Fraport’s capital expenditure plan covers a period of ten years and is market, and foreign exchange risks, which can lead to a significant subject to various risks. Increases in construction costs, suppliers going impairment of the future earnings outlook, right up to a total loss of out of business, changes in planning figures, or weather-related delays the investment. Furthermore, there is a risk that concessions acquired could, for example, all lead to extra costs. These risks are assessed by whose terms end and which are put out to tender as scheduled may means of the clustering and weighting of the individual construction not be won again, contrary to our assumptions. investments in three phases. In this respect, Fraport differentiates between projects in conception (requested), projects in planning, and projects in implementation. A Fraport-specific percentage that represents the risk assessment is applied to the construction invest- ments as divided in this manner. Project-specific monitoring measures are implemented so that these potential risks can be confronted appropriately thus ensuring that cost-reducing countermeasures can be introduced early on. Group Management Report / Outlook ReportFraport Annual Report 2015 88 For reasons of bidding strategy, as well as risk minimization, Fraport Fraport operates the airport in Antalya, Turkey, in cooperation with a often works in cooperation with a local partner who has experience Turkish partner. One of the main foundations of the Turkish economy with the relevant typical national regulations and customs. Within the is the tourism sector, which has continuously been expanded in recent context of major investments and depending on the project conditions, years. This is particularly reflected in a relatively high share of high- Fraport frequently employs project financing that allows no recourse quality hotel facilities at an attractive price-value ratio. As a result, Turkey or only limited recourse to Fraport AG as the capital provider. These has long been a serious competitor to traditional holiday destinations types of project financing, which are also referred to as non-recourse or in the Mediterranean or the Canary Islands. limited-recourse, are used here for risk reduction. Notwithstanding this, the subscribed shareholders’ equity of the relevant project company In view of terrorist attacks, particularly against military and police and shareholder loans granted by Fraport are exposed to a default risk. establishments but also against public institutions and at political In order to minimize these risks, Fraport uses investment protection demonstrations (almost exclusively in the urban centers of Istanbul insurances, wherever possible and economically reasonable. and Ankara), political unrest in the past, and conflicts in the border area with Iraq and Syria, security measures in Turkey remain at a high Particularly in emerging countries, political instability and/or economic level throughout the country. To this extent there continues to be a fluctuations can occur at any time. Therefore, Fraport relies on long- latent risk of terrorist activity in all parts of Turkey. So far, neither the term growth with these investments in order to participate in contin- conflicts in the Middle East nor the terrorist attacks have had a notice- ued positive development. Overall, the countries in which Fraport is able negative impact on the development of tourism in the region active show a significantly stronger long-term growth forecast for their around Antalya. The latest tensions between Russia and Turkey and the economy than is the case for Central Europe, even if this is currently resulting sanctions by Russia, which include a suspension of charter subject to uncertainties, for example, with Russia. traffic as of January 1, 2016, could have a significant negative influence on traffic in Antalya if they continue into the 2016 summer season or Risks in connection with the existing airport operating projects, which beyond. With the latter risk in particular, it appears “likely” that such are generally long-term, arise primarily in connection with the estima- a development could imply “very high” negative consequences for tion of the future development of air traffic and consumer behavior by the business performance of Antalya Airport. passengers. A possible lack of growth and/or downturn in air traffic could have a significant negative effect on the earnings development of Fraport holds 35.5 % in Northern Capital Gateway, the operating concessionary companies, which could also result in “very significant” company of St. Petersburg Airport, through Thalita Trading Limited, risks to project financing or the capital invested. Unforeseen official Cyprus. Due to political developments and the uncertainty about how interventions in the tariff, tax, and levy structure of the airports to the the relationship between Russia and in particular the USA and Europe detriment of the airport operators can also cause risks. Additional will develop, and also whether additional sanctions will be imposed risks, such as delays in connection with the construction of airport against Russia and how strongly the Russian government could react infrastructure, which as a rule adheres to a contractually stipulated to these, there are considerable uncertainties regarding the investment schedule, may also implicitly occur from this. there. Direct measures that could be taken against foreign investors would, at least in the short term, result for Fraport in a weakening For the Jorge Chávez Airport in Lima, Peru, operated by Lima Airport of the Group company in St. Petersburg. This “unlikely” risk would Partners (LAP), various risks currently exist regarding the planned ex- potentially result in a “very high” impact level for Fraport. Furthermore, pansion of the airport: The completion date of a tunnel to relocate a due to the general political and economic developments, a weaker main road, which is directly connected to the handover of land, is still ruble exchange rate and increasingly negative traffic developments uncertain. The handover of land by the government to LAP therefore cannot be ruled out. continues to be delayed. While the associated deviations regarding the expansion costs and/or the timetable can be classified as “possible” In connection with this, last year’s annual report reported on the nega- – if they occur – this would result in a presumably “very high” impact tive equity situation of Northern Capital Gateway, primarily caused by level. In order to adequately counter the risk, the management of LAP the strong depreciation of the Russian ruble. In the past fiscal year, it was is working on the new conceptual design and cost optimization of the possible to remedy this situation through restructuring. This involved terminal expansion project. the takeover of the existing liabilities of Northern Capital Gateway by Thalita Trading Limited, Cyprus, followed by their conversion into shareholders’ equity in Northern Capital Gateway, thus remedying its negative shareholders’ equity. Group Management Report / Outlook ReportFraport Annual Report 2015 89 As well as the uncertainties regarding the interest in St. Petersburg As a result of the planned change to the German Temporary and in addition to the berfore-described risk relating to the sanctions Employment Act as at January 1, 2017, the risk exists, within the announced by Russia against Turkey, there could also be negative context of employing employees through temporary employment, effects on passenger numbers – particularly at the tourist-centered that the number of employees that can be permanently employed airports in Bulgaria and Turkey in which Fraport holds shares – due to in future must be reduced. The current bill includes the principles the general political development in Russia, the currently weak ruble, already announced in the coalition agreement to in future limit tem- and the resulting changes in travel behavior, particularly among Russian porary employment contracts to a maximum of 18 months in relation and Ukrainian tourists. to the person performing temporary employment. In addition, after no later than nine (in exceptional cases twelve) months, equal pay On the basis of existing contracts between Fraport AG, its Group is to apply. Therefore, the risk exists for Fraport that the permanent companies, and various principals, guarantees and sureties from use of personnel through temporary employment contracts may no Fraport AG exist. A claim under such collateral by the contractor longer be admissible in future, compared to the current situation, and is classified as “possible”, depending on the circumstances of the thus employees from temporary employment will only be able to be respective project. If such a risk occurs, up to a “medium” impact level employed in auxiliary roles for limited periods of time and with corre- must currently be expected. Personnel risks spondingly restricted qualifications. Without alternative solutions, the required additional volume of work would need to be covered with the parent company’s personnel, which would lead to additional costs of Fraport intends to continue utilizing the growth in global air traffic to an estimated double-digit € million figure in the period under review. create sustainable and attractive jobs at all Group sites. Fraport is aware In view of this situation, adequate options for an alternative structure that the current demographic shift will intensify the competition for have already largely been worked out. The key structuring options are high-quality professionals and managers, particularly at the Frankfurt being prepared. Talks with the competent employee representatives site. This relates to the acquisition of new professionals and managers, have already commenced. Due to the measures already started, Fraport as well as retaining existing employees. In order to deal with this risk assesses the probability of occurrence of the risk as “possible”, and adequately, Fraport has taken measures in the fields of qualification, the impact level as “low”. commitment, and work satisfaction. In the qualification field, air- port-specific and universal qualification programs for employees and For the purpose of granting a company pension under the statu- managers, trainee programs, and short and medium-term assignments tory insurance scheme based on collective bargaining agreement, are offered at foreign sites. In the commitment field, Fraport offers Fraport AG is a member of the Zusatzversorgungskasse in Wiesbaden attractive company benefits, the participation of employees in the (ZVK). This is currently structured – as with the statutory insurance company’s success, and concrete measures for good work-life balance. scheme – as a solidarity model. In view of the demographic devel- In the work satisfaction field, the training and sensitization of the opment, the ZVK has the problem that the current levies are not suf- managers to the reduction and minimization of work and health risks ficient to finance the benefits in the long term. Therefore, a so-called play an important role. In addition, comprehensive employee surveys “restructuring fee” is now being collected in addition to the levies. are conducted every year in all Group companies with a substantial Furthermore, the ZVK’s solidarity model envisages that personnel who workforce. They provide Fraport with important insights into oppor- leave are replaced by new levy payers. If the requirement for work tunities to improve the working environment on all operational levels. performance declines, in addition to the demographic development, On the basis of the initiated measures, the potential impact (impact the number of employees for whom levies and restructuring charges level) of the risk is assessed as “low” and the probability of occurrence are paid will fall. Because of this, the funding shortfall will grow con- as “possible”. tinuously in the company pension plan. Therefore, it cannot be ruled out that the ZVK could charge further compensation amounts in order to cover the growing compensation funding shortfall. In view of the high complexity of the issue and unclarified legal questions, a precise assessment of the potential financing impact (impact level) is not cur- rently possible; the probability of occurrence is assessed as “possible”. However, if the risk was realized, its impact would be “very high”. Group Management Report / Outlook ReportFraport Annual Report 2015 90 Risks of unusual disruptions IT risks Operations in Frankfurt and other Group airports may be impaired All of Fraport’s important business and operating processes require IT by local events such as accidents, terrorist attacks, fires, or technical systems and IT components. A serious system failure or material loss malfunctions, as well as events that influence the operation of national of data could lead to serious business disruptions and security risks. and international air traffic (such as natural disasters, extreme weather In addition to this, attacks by viruses and hackers could lead to system conditions, armed conflicts, and epidemics). failure and ultimately to the loss of business-critical and/or confidential data. All of the IT systems of critical importance to the company are Fraport has taken a series of measures in order to minimize or counteract configured redundantly and are optionally housed at separate loca- such negative effects. In order to protect the IT infrastructure and the tions. The possibility of residual risks resulting from the architecture critical operating systems from significant negative effects, Fraport and and operation of the IT facilities cannot be completely ruled out due the other Group airports have developed plans for maintaining critical to their nature. business and operating processes (business continuity and emergency teams), as well as the restoration of the IT services. Furthermore, a Due to the ongoing development of new technologies and the central crisis team is established in Frankfurt which carries out all of growing threat of cyber attacks, there is an underlying risk potential the necessary processes airport-wide in the event of emergencies. In for IT systems. Fraport takes account of this situation with active and order to verify the adequacy of these plans and measures to contin- preventative IT security management, which particularly focuses on uously improve them, malfunction scenarios are set up and exercises Fraport AG’s business-critical IT systems and their availability. The are carried out on a regular basis. requirements for IT security are specified and compliance with these requirements is reviewed in the IT security policy and security guide- In addition to these preventative measures, Fraport AG’s insurance lines that must be followed throughout the company. Furthermore, protection covers the risks that are usually insurable at airport compa- compliance with data protection regulations is ensured. In addition to nies. It particularly includes loss events that result from the loss of or this, residual risks from failures that occur, are, in as far as economically damage to assets, including resulting business interruptions, as well reasonable, additionally covered by the general property, terror, and as the statutory third-party liability of Fraport AG from all business business interruption insurance, and by specific IT insurance policies. capacities, legal situations, and activities in relation to the operation of Frankfurt Airport, as well as all additional risks that are conventional IT systems are highly important to all of Fraport’s business and oper- or necessary in the business or industry, as well as in the operation. ational processes. Despite the preventative and proactive measures Insurance protection regularly also covers the insurable risks from introduced, the potential effects (impact level) of an IT failure lasting terrorism regarding property and third-party liability. Fraport AG and several hours are assessed as “high” in at least one scenario and the the domestic Group companies, in which an interest of at least 50 % is probability of occurrence as “unlikely”. held, are covered against risks of environmental damage from potential accidents, for statutory and public-law claims. Opportunities report The opportunities management system Foreign Group companies generally cover the aforementioned risks The opportunities management system of the Fraport Group has the using separate local insurance policies. aim of identifying and evaluating opportunities at the earliest possible stage and initiating appropriate measures so that opportunities are tak- If one of the described risks were to occur, this could have a “very high” en and lead to commercial success. Opportunities should be assessed financial impact (impact level) – in spite of possible insurance protec- for existing business, as well as from new business fields. tion – depending on the seriousness. This assessment takes account of far-reaching consequences for the Fraport business, for example, from The identification and recording of opportunities is undertaken by the natural disasters or terrorist attacks. As such unusual disruptions tend operating units/segments and the supporting Group units throughout to be rare, Fraport assesses the probability of occurrence as “unlikely”. the year, within the context of the company’s operational control and the annual revolving medium-term planning process. While the short- term result monitoring is aimed at opportunities that mainly relate to the current fiscal year, the medium-term planning process focuses on opportunities, that are of strategic importance for the Group. Group Management Report / Outlook ReportFraport Annual Report 2015 91 Within the context of the planning process, Fraport assesses market and Overall economic opportunities competitive analyses, as well as environmental scenarios and deals with The European debt crisis led to a considerable slowdown in demand the orientation of the product and service portfolio, the cost drivers, for transport. Airlines, which were strongly impacted by this in some and the critical success factors of the industry. Furthermore, Fraport cases, reacted to the excess capacities and financial imbalance with monitors the identifiable trends at its competitors, customers – such consolidation measures, which led, inter alia, to a significant reduction as airlines, passengers, and tenants – as well as in businesses outside of service supplies and lower volumes at the airports in general, as of the industry, which have an impact on air traffic in general and the well as in Frankfurt. operation of airports in particular. Fraport aims to further develop and expand the value-creating business fields that are already part of its Experience with the growth cycles has shown that market turbulence operations. Furthermore, Fraport invests in business fields and business can generally only interrupt the upward development of global air ideas in which the company can establish sufficient expertise in order traffic temporarily. The possibility of a degree of dragging out of the to operate these to create value over the long term. volume expectations cannot be ruled out; however, catch-up effects after times of crisis are conceivable. For 2016, experts expect economic In addition to the opportunities management by the strategic business growth to be at the same level as or only slightly higher than the level units and the Group’s central units, Fraport also uses the expertise of of 2015 not just for the global economy, but also for the USA, the EU the entire workforce. With a variety of instruments, Fraport aims to and Germany, which are particularly important economic areas for the identify opportunities developed by employees. In addition to the tra- hub operations in Frankfurt. Global trade is assumed more dynamic, ditional Group ideas management program, these include the “FRAnk” although German exports will be hurt by the economic slump in several innovation prize, which is awarded to particularly innovative ideas at emerging markets (see also “Business Outlook” chapter, beginning Frankfurt Airport and targeted creative workshops with employees, in on page 94). which new business ideas are sought. In general, Fraport aims for a balanced relationship between op- lieve pressure on the international and national economy, including portunities and risks, where its aim is to increase the added value the air traffic industry and consumer households, and facilitate travel for customers and shareholders by analyzing and using new market behavior. A continuing weak € would make European goods cheaper Continuing favorable crude oil prices, like as of fall 2014, would re- potential and opportunities. internationally and thus create a positive stimulus for exports from which Frankfurt Airport as a handling location could particularly benefit. If it is likely that the opportunities will occur, they have been included The economic conditions could – in conjunction with an improved in the 2016 forecast and respectively, in the medium-term outlook. financial situation of the established airlines – end the consolidation Therefore, the following section concentrates on future developments in the airline industry more quickly, stop route reductions, create new or events that may lead to a positive deviation from the outlook and airline services, and exceed the expected traffic forecasts that still tend medium-term prospects for Fraport. to be conservative. Unless specified otherwise, the opportunities described relate to all According to the preliminary figures from ACI, global passenger traffic segments to varying extents (Aviation, Retail & Real Estate, Ground grew by 6.1 % in fiscal year 2015. European airports achieved lower Handling, and External Activities & Services). growth in passenger numbers of 5.0 %. IATA assumes global passenger Fraport AG is the parent company of the Fraport Group and comprises (RPK), and a growth rate of 5.9 % for Europe. These growth rates bear all of the described segments. Therefore it is also – directly or indirectly witness to the currently dynamic development of the air traffic industry. – subject to the opportunities described. In a long-term context, the annual growth of passenger kilometers growth of 6.9 % for 2016, based on revenue passenger kilometers globally is higher than economic growth, meaning that the chance of significant growth in traffic also exists for 2016. The traffic assumptions underlying the 2016 Business Plan were used with a growth assumption of 2 to 3 % for passenger traffic and, due to geopolitical tensions at the time of preparing the consolidated financial statements, were adjusted to approximately 1 to around 3 %. Group Management Report / Outlook ReportFraport Annual Report 2015 92 Largely independent of the current economic situation, the inter- The discontinuation of regulatory measures that distort competition, national integration of the globalized world economy continues to increase. There is no foreseeable change in the trend of purchasing, production, and sales being distributed across the entire globe. Only such as the aviation tax and a competition-neutral approach, such as with the CO2 regulation or emissions trading, can result in increased traffic. shifts in production sites are discernible. For example, China is start- ing a structural change away from the “workshop of the world” to a On top of that, Fraport has identified the following significant growth service-oriented economy. drivers for the future: Global air traffic in particular provides the key infrastructure required for Airport retail continuing the internationalization of the global economy. This trend Extending and modernizing the retail, food and beverage, and service is supported by development in various developing and emerging areas in the terminals, in particular on the airside, continue to be cen- countries with lasting, favorable growth potential. The rise in the tral elements for increasing retail revenue. In the medium term, the standard of living in these countries is key to the disproportionately focus is on implementing innovative shopping concepts in potential high growth of air traffic, not least because groundside transport existing areas. The development is supported by culture-specific, infrastructure is often underdeveloped in these areas. Compared to sales-promoting measures and a more strongly individualized approach Central Europe and North America, economic development in these to customers, particularly passengers with especially high purchasing countries was far less impacted by the last financial and economic power. In view of this, Fraport is intensively analyzing the buying crisis, and the current debt crisis. However, some emerging markets behavior of passengers. Fraport is also monitoring general trends in that depend on commodity exports recently exhibited dips in growth. the retail sector in order to derive future new business opportunities As an internationally operating airport operator that is represented offer to the customer along their entire travel chain, thus increasing in virtually all parts of the world, Fraport can take advantage of this customer satisfaction. At the same time, the opportunities available regionally varied growth potential and balance out geopolitical risks in an increasingly digitizing world are used, for example through de- through investments and management agreements. Also in future, veloping innovative multichannel offers for the customer in addition for the company. The aim is to offer a tailored shopping and service Fraport will continue to expand selectively and on a success-orientated to bricks-and-mortar retail. basis in international business. This can compensate certain signs of saturation in the demand for air traffic in western countries, which also External business affect the Frankfurt site. Fraport’s expertise is now represented at 14 airports worldwide. In addition to Frankfurt, five further airports are operated or managed Opportunities in corporate strategy by Group companies in which Fraport AG holds an interest of at least Through the completion of Runway Northwest, Fraport has managed 50 %. The Group rounds out its direct investment portfolio with four to create sufficient airside capacities at the Frankfurt site in the last few minority-owned airports. In addition to this portfolio, Fraport holds all years as the basis for dynamic passenger growth. the shares in the US company AMU Holdings Inc., which is in turn the sole owner of Airmall USA Holdings Inc. (Airmall Group). The Airmall The construction work for the new Terminal 3 in Frankfurt began with Group markets areas at the North American air traffic hubs of Baltimore, the official ground-breaking ceremony on October 5, 2015. With Ter- Pittsburgh, Cleveland, and Boston with an annual total volume of ap- minal 3, Fraport has the potential to also participate in the worldwide proximately 70 million passengers. On December 14, 2015, Fraport growth in air traffic in the medium and long term. The inauguration also signed concession agreements with its consortium partner, the of the first construction phase with a capacity of up to 14 million Copelouzos Group, to operate the 40-year concessions of 14 Greek passengers per year is planned for 2022. regional airports. At the time of preparing the consolidated financial statements, the Executive Board expects the transaction to be closed and Fraport to take over the concessions at the end of 2016. Clear aim is to increase the result from the external business in the next few years. Group Management Report / Outlook ReportFraport Annual Report 2015 93 Airport city Around the world, hub airports are developing into airport cities. Financial opportunities Favorable changes on the financial markets Fraport recognized this trend at an early stage and identified sites that Favorable exchange rate and interest developments can have a positive are worth consideration for real estate development and marketing. impact on the Group’s financial result. Exchange rate effects from the For instance, Fraport is intensively developing and marketing attractive conversion of results that are not denominated in € into the functional commercial space in direct proximity to Frankfurt Airport (such as the currency of the Group, the €, can have a positive impact on the Group’s Mönchhof site or Gateway Gardens). Other projects are the Tauben- financial result. Overall, Fraport holds the view that advantageous grund commercial area and the expansion of CargoCity South to meet changes on the financial markets could have a “very significant” impact the high demand for additional logistics space at the Frankfurt site. and, in view of the volatility of the financial markets and the exchange Depending on the particular project, Fraport decides if and to what rate developments, Fraport regards it as “possible” to profit from it. extent it will participate in the real estate development. Opportunities in conjunction with organizational and process-related improvements Overall assessment of the opportunities and risks by the company management Fraport consolidates and aggregates all of the risks and opportunities A continuous optimization of key business processes and constant cost reported by the various company units and Group companies that are control are of essential importance for ensuring stable profitability and reported within the context of the quarterly risk analysis process. Fur- capital returns. Fraport holds the view that the possibilities for further thermore, the Group’s risks and opportunities are regularly discussed optimization of the cost structures within the Group are not yet fully and assessed at Executive Board level and within the context of the utilized. The functions of corporate management include continuously regular planning process. They have not materially changed overall in investigating the organization to determine how it can be structured comparison to the previous year. In the opinion of the Executive Board, more effectively and efficiently. Case-by-case projects are initiated to the risks described before are not of a nature, individually or in their use the identified optimization potential (such as the lean manage- entirety, that might jeopardize the company as a going concern in ment initiative). Through this continuous process, it shall be possible consideration of their respective risks of occurrence and their financial to achieve additional earnings potential over and above the forecasts. impact, as well as in view of the stable balance sheet structure and anticipated business development. The Executive Board continues to Opportunities for improving the processes not only result from within be optimistic that the Group’s financial strength forms a solid basis for the Group, but also in cooperation with customers and suppliers. future business development and provides the necessary resources to Therefore, Fraport also aims to review the processes at these intersec- effectively pursue and utilize opportunities that present themselves tions on a regular basis and leverage further potential, which will have to the Group. a positive impact on the corporate result and the quality delivered. Overall, Fraport regards the potential impact of the organizational and process-related improvements as being very significant for the Group’s future development. Therefore, Fraport has focused specifically on setting additional impulses here during the past fiscal year. Here, specific challenges of an integrated business model in the Group, as well as the importance of the Group in terms of social and regional policy need also to be taken into account. Group Management Report / Outlook ReportFraport Annual Report 2015 94 Business Outlook Information about Reporting The business outlook is based on the assumption that the domestic and the Group’s current plans. The Executive Board does not anticipate any material effects on the structure of the Fraport Group or impacts on the future asset, financial, and earnings position from the change. international economy and air traffic will not be impaired by external Development of control shocks such as terrorist attacks, wars, epidemics, natural catastrophes, Compared with the 2015 fiscal year, the Executive Board does not or renewed turbulences on the financial markets. Moreover, statements expect any fundamental changes in 2016 in the financial and non- concerning the anticipated asset, financial, and earnings position reflect financial performance indicators that are used to control the Group the accounting standards to be applied in the EU at the start of the and derived from the strategy. Due to regular reviews and the further 2016 fiscal year. No material effects on the asset, financial, and earnings development of the Group strategy, however, changes to individual position will result from amendments of the accounting standards. parameters and key figures may arise. The Executive Board does not The medium-term forecasted period comprises a period of five years. expect any fundamental changes to the strategic focus of finance management in 2016. As already described in the General Statement of the Outlook Report, at the time of preparing the consolidated financial statements the Ex- ecutive Board assumes that it will close the transaction to operate the 14 Greek regional airports at the end of 2016. As there were still con- Forecasted economic and industry-specific conditions for 2016 Development of the economic conditions ditions precedent at the time of preparing the consolidated financial Financial and economic institutions expect the global economy to statements (see chapter titled “Significant Events” on page 48), there expand further in the 2016 fiscal year. Following global economic is, however, the possibility that the closing of the transaction will be growth of approximately 3.1 % in 2015, an increase of 3.0 % to 3.4 % delayed. The Executive Board therefore forecasts the development of is expected for the current fiscal year. Global trade will rise by up to the asset, financial, and earnings position for the 2016 fiscal year first 3.4 %, according to current forecasts. Overall, inflation is expected to without effects from the closing of the Greece transaction, followed by be moderate. The expansionary monetary support by central banks a forecast of the impact of the transaction. The order selected does not counteracts the price decrease in commodity markets. With regard to reflect the probability of occurrence expected by the Executive Board, the € to US$ exchange rate, it is assumed that the slight depreciation but rather is aimed at giving the reader the best possible transparency trend will continue. With regard to the oil price, oil futures suggest and comprehensibility of the future development, as the comparable a slight price rise. However, the opening of the Iranian market could company development of the previous fiscal year is presented first. counteract a price increase. Risks and opportunities that do not form part of the business outlook The USA will continue to show positive growth in 2016 (GDP forecast and may lead to significant negative or positive changes to the fore- approximately 2.0 to 2.6 %). While only moderate development is casted developments can be found in the chapter entitled “Risk and anticipated in Japan – due to limited economic policy stimulus and Opportunities Report” starting on page 75. the consolidation of public finances – the growth rates for emerging Forecasted situation of the Group for 2016 Development of structure countries are again expected to significantly exceed those for indus- trial countries. Growth in China is likely to weaken. As before, only a recovery and not an upturn is anticipated in the Eurozone, which will The planned closing of the transaction for the operation of the continue to be burdened with political uncertainty. After achieving 14 Greek regional airports will result in a new key Group site (“Greece”). growth of 1.5 % in 2015, economic growth of approximately 1.7 % The site will in future have a material impact on the Group’s asset, is forecasted for the 2016 fiscal year. For Germany, many forecasts financial, and earnings position. The Executive Board does not expect continue to expect growth at the level of the past year (2015: +1.7 %). any further changes to the Group structure in fiscal year 2016 that will The favorable oil price and weak € support export. The mainstay of the have a significant impact on the asset, financial, and earnings position. economy will be government and private consumption. Development of strategy The following growth rates are expected for the countries with key As described in the “Strategy” chapter on page 33, the new mission investments: Slovenia +1.8 %, Peru +3.3 %, Greece – 1.3 %, Bulgaria statement converts the previous strategy “Agenda 2015” into a new +1.9 %, Turkey +2.9 %, Russia – 1.0 %, and China +6.3 %. strategy. This will be introduced in the Group starting from 2016 and rolled out in the individual segments and Group companies. The new mission statement underpins the existing business model and Sources: OECD (February 2016), IMF (January 2016, October 2015), Deutsche Bank Research (January 2016), DekaBank (December 2015), German Federal Statistical Office (January 2016). Group Management Report / Outlook ReportFraport Annual Report 2015 95 Development of the legal environment and between Russia and Turkey. These will particularly impact traffic At the time the consolidated annual financial statements were prepared, development at the St. Petersburg, Antalya , Varna and Burgas the Executive Board saw no changes in the legal environment in the sites. Here, travel restrictions between Russia and Turkey will have a 2016 fiscal year that will have significant effects on the Fraport Group. negative impact on the Antalya and St. Petersburg sites. In connection with the terrorist attacks that have taken place in Istanbul and Ankara Development of the global aviation market since the start of 2016, there is additionally a negative development Based on the expected development of economic conditions, and in tourist traffic in Antalya in fiscal year 2016 to be expected. If the taking into account the financial situation of the airlines, IATA anticipates situation remains tense or if crises intensify, significant decreases in global passenger growth of 6.9 % in 2016, based on revenue passenger passenger numbers at the sites cannot be ruled out. Russian passengers kilometers (RPK). Regionally IATA anticipates the following growth rates switching to alternative vacation destinations may, in contrast, have (also based on RPK): Europe: 5.9 %, North America: 4.4 %, Asia-Pacific: a positive impact on the Varna and Burgas sites, meaning that figures 8.0 %, Latin America: 6.8 %, Middle East: 12.5 %, and Africa: 1.4 %. slightly higher than the previous year’s level are expected for these sites. Globally, cargo is expected to grow by 2.8 %. Positive stimulus is also expected from the low price forecasted for crude oil. With regard to Forecasted results of operations for 2016 global passenger numbers, DKMA expects growth of 4.5 % in 2016. The expected overall positive business development will be reflected On the basis of the German airports, ADV forecasts solid passenger additional revenue from the Retail & Real Estate segment at the Frank- growth of 3.1 % despite international crises and strikes. ADV also furt site over and above the traffic development in 2016. Due to the expects an increase of 1.7 % in the area of cargo. withdrawal of the charge proposal for the Frankfurt site (see also the in an increase in 2016 Group revenue. The Executive Board expects Source: IATA “Airline Industry Economic Performance” (December 2015), DKMA (December 2015), ADV Forecast, press release (December 2015). “Significant Events” chapter on page 48), the Executive Board does not expect a price rise in airport charges in the current 2016 fiscal year. The Executive Board expects negative effects from, among other things, the Forecasted business development for 2016 absence of revenue from the Group companies FCS, Air-Transport IT Taking economic and industry-specific conditions into account and Services, Inc. and FSG Flughafen-Service GmbH, whose shares were in the currently hard to predict intensity of any strikes and development some cases fully divested in fiscal year 2015. In Frankfurt, the Executive of core tourist markets resulting from geopolitical crises, the Executive Board also expects a decrease in revenue in the security business due Board expects a growth rate of between approximately 1 % and around to the loss of the tender to perform security services at Pier B. 3 % for passenger traffic at the Frankfurt site for fiscal year 2016. While the slightly favorable economic environment will continue to have At sites outside of Frankfurt, the Group companies Lima and Ljubljana a positive impact on passenger business, uncertainties continue to will continue to develop positively. As in the previous fiscal year, the result from political crises and airlines’ short-term yield and capacity financial development of the Lima site will additionally be influenced management. With regard to cargo tonnage handled, the Executive by exchange rate effects in connection with the translation of the reve- Board does not expect a significant recovery compared to 2015 in fiscal nue denominated in US$ into the Group currency. Depending on the year 2016 and expects cargo throughput at around the level of 2015. extent of growth in passenger numbers at the consolidated airports, The reasons for this are particularly the slower forecasted economic the Executive Board expects Group revenue of up to approximately growth in China, which will have a negative impact on the country’s €2.65 billion. The Executive Board is also taking higher capacitive imports and exports, and political crises, particularly in Russia and capital expenditure in connection with the application of IFRIC 12 in the Middle East. the Group company Lima into account here. As a result of the positive economic assumptions and tourism forecasts, Adjusted for the recognition of capacitive capital expenditure, the the Executive Board largely expects further growth at the Group sites Executive Board expects a slight decrease in expenses in 2016. This outside of Frankfurt in 2016. The sites in Lima and Xi’an continue to will result, inter alia, from the absence of expenses from the Group experience disproportionately strong growth of 5 % and more. The companies FCS, Air-Transport IT Services, Inc. and FSG. On a compara- growth rates at the Ljubljana and Hanover sites are also expected ble basis, at the Frankfurt site a slight increase on the expense side will to be robust in the mid-single-digit percentage range. Uncertainties result primarily from increases in salaries and wages. In the Lima Group continue to result from the political crises between Russia and Ukraine company, higher traffic-related concession payments are also expected. Group Management Report / Outlook ReportFraport Annual Report 2015 96 Overall, the Executive Board expects a Group EBITDA of between In connection with the first-time accounting of the concessions to around €850 million and approximately €880 million for the 2016 fiscal operate the Greek regional airports, the Executive Board also expects year. Slightly higher depreciation and amortization will lead to a a rise in Group capital costs and thus a negative effect on the value Group EBIT of approximately €520 million up to about €550 million. added of up to approximately €20 million. Correspondingly, ROFRA will be negatively impacted by Greece. Due to the continuing difficulty in predicting interest-rate and ex- change-rate effects and the difficulty in estimating the Group company In view of the long-term positive outlook for earnings, the Executive Antalya’s operating, and financial development, the development of Board intends to hold the dividend per share at least stable for fiscal the 2016 financial result can only be predicted to a limited extent. year 2016 at €1.35. Positive effects are, among other things, assumed from net financial debt decreasing during the year, lower interest rates and the positive Forecasted segment development for 2016 expectations of the business development of Group company Xi’an, For the segment forecasts, the Executive Board, for simplification which is accounted for using the equity method. In view of the purposes, expects passenger growth of 2 % in Frankfurt. As a result earnings performance of the Group company Antalya, the Executive of the aforementioned range for passenger growth in Frankfurt of ap- Board expects a negative effect on the result of companies account- proximately 1 % to around 3 %, segment developments in fiscal year ed for using the equity method of up to approximately €30 million. 2016 may also deviate from the following descriptions. Depending on the deterioration of the Group company Antalya, the Executive Board therefore expects the financial result to decrease by The assumed passenger growth at the Frankfurt site will have a positive up to approximately €15 million. impact on the Aviation segment’s revenue development in 2016. Due to the withdrawal of the charge proposal for the 2016 fiscal year (see The positive development of Group EBIT and the assumed negative also the “Significant Events” chapter on page 48), the Executive Board development of the financial result will lead to a Group EBT of between does not expect a price rise in airport charges in the current fiscal approximately €420 million and about €450 million. The Executive year. The Executive Board forecasts the revenue from security services Board therefore expects the Group result to be approximately at at below the level of fiscal year 2015 primarily due to the loss of the the previous year’s level or slightly above it. If the Group company tender to perform security services at Pier B in Frankfurt. Depending on in Antalya performs more positively or negatively than previously traffic development in fiscal year 2016, the Executive Board therefore assumed, the Group EBT and Group result figures may differ from the expects revenue in the Aviation segment to be approximately at the aforementioned ranges. level of the 2015 fiscal year or slightly below it. The development of the Group company Antalya will also influence On the expense side, the Executive Board forecasts a decrease. The rea- the development of 2016 Group value added. While the assumed son for this will, among other things, be the absence of base effects in overall positive development of Group EBIT will have the impact of connection with the creation of provisions in fiscal year 2015. At lower increasing the 2016 value added, due to the development of the Group forecasted other income and revenue being assumed at approximately company Antalya, the Executive Board in total expects value added the previous year’s level to slightly below it, the planned decrease to be between approximately at the previous year’s level and approx- in expenses will lead to segment EBITDA slightly above the level of imately €30 million below it. ROFRA will accordingly be at the level 2015. Assumed slightly lower depreciation and amortization will lead of fiscal year 2015 or fall similarly to the decrease of the value added. to a slightly more positive development of segment EBIT in 2016. The value added of the segment will also benefit from the slightly positive In the event that the Greece transaction will be closed at the end of development of segment EBIT, but remain clearly in negative territory. 2016, the following possible effects on the Fraport Group’s results of operations will arise: The Retail & Real Estate segment will also benefit from the positive In the event of closing the transaction and takeover of the business at passenger outlook at the Frankfurt site in 2016, which will primarily the end of 2016 – depending on the date of the takeover – revenue impact revenue in the Retail division. Additional revenue will result growth of up to approximately €25 million and only a slight impact on from a change to the offsetting of rental income from the Group com- Group EBITDA are expected. This is particularly connected with the fact pany FCS, which will be consolidated in the Group using the equity that as at the date of takeover, a significant part of the tourist season method for the entire 2016 fiscal year. The change to offsetting will not will already be over. Due to pro rata depreciation and amortization, have the impact of increasing segment EBITDA. Overall, the Executive the Executive Board expects a negative effect on Group EBIT of up to Board forecasts a rise in revenue of up to approximately €20 million, approximately €10 million. In connection with financing the Greece with around €7 to 8 million of additional revenue from the change transaction, the Executive Board expects a negative contribution to in the offsetting of rental income of FCS being assumed. Beyond the Group EBT and to the Group result of between around €10 million and planned development of revenue, currency rate effects can have both approximately €30 million – depending on the date of the takeover. positive and negative effects on the purchasing power of passengers. Group Management Report / Outlook ReportFraport Annual Report 2015 97 The realization or absence of land sales may also lead to additional rev- Despite lower other income, which particularly arose from the sale of enue as well as a decrease in revenue in the segment. On the expense the Group company Air-Transport IT Services, Inc. in fiscal year 2015, side, the Executive Board is expecting a slight increase in personnel the Executive Board expects a rise in segment EBITDA and segment expenses for fiscal year 2016. The realization of land sales or the absence EBIT of approximately up to €10 million in each case. The development of these may also have an impact on expense development. Despite of the 2016 segment value added will additionally be influenced by the forecasted rise in revenue, partly due to the assumed decrease in the development of the Group companies accounted for using the other income, the Executive Board expects flat to slightly decreasing equity method. While the assumed positive development of segment figures for the segment EBITDA and EBIT. The Executive Board also EBIT will have the impact of increasing the 2016 segment value added, expects the level of the 2016 segment value added to remain almost due to the development of the Group company Antalya, overall the flat or decrease. Executive Board expects value added to be between €10 million higher and up to approximately €20 million lower than the figure for The assumed passenger growth will also have a positive impact on the 2015 fiscal year. the Ground Handling segment’s revenue development in 2016. The absence of revenue from the Group company FCS, which has been In the event that the Greece transaction is closed at the end of 2016, consolidated in the Group using the equity method as of November the following possible effects on the segment’s results of operations 2015, will have the opposite effect. Contrary to the 2015 fiscal year, the will arise: 2016 forecast does not contain any price changes to the infrastructure In the event of closing the transaction and takeover of the business at charges. Overall, due to the absence of revenue from the Group com- the end of 2016 – depending on the date of the takeover – revenue pany FCS, the Executive Board expects a decrease in revenue in the growth of up to approximately €25 million and only a slight impact on Ground Handling segment of up to approximately €40 million. Due segment EBITDA are expected. This is particularly connected with the to the Group company FCS’s low operating margin, this will, however, fact that as at the date of takeover, a significant part of the tourist season only have an insignificant impact on the segment’s EBITDA in 2016. will already be over. Due to pro rata depreciation and amortization, In connection with the positive underlying operating development, the Executive Board expects a negative effect on segment EBIT of up to the Executive Board therefore expects segment EBITDA to be slightly approximately €10 million. In connection with the first-time accounting higher than the figure for fiscal year 2015. On an assumed decrease in of the concessions to operate the Greek regional airports, the Executive depreciation and amortization, the Executive Board expects segment Board also expects a rise in segment capital costs and thus a negative EBIT to increase slightly more than EBITDA. The segment value added is effect on the segment value added of up to approximately €20 million. also expected to be slightly higher on a slight decrease in capital costs. Forecasted asset and financial position for 2016 In connection with the expected positive business developments The Executive Board expects the capital expenditure volume in in the Group companies Lima and Ljubljana and the recognition of property, plant, and equipment at the Frankfurt site in fiscal year 2016 earnings-neutral capacitive capital expenditure in connection with to be at about or slightly above the level of the past fiscal year. The the application of IFRIC 12, the Executive Board expects a significant reason for the possible increase will particularly be the progressing increase in revenue in the External Activities & Services segment for construction activity on Terminal 3 in Frankfurt. The Executive Board fiscal year 2016. As in the previous fiscal year, the financial development forecasts capital expenditure on airport operating projects in 2016 to of the Lima site will additionally be influenced by exchange rate effects be slightly higher than the level of fiscal year 2015, particularly due in connection with the translation of the revenue denominated in US$ to additional capital expenditure at the Lima site. Capital expenditure into the Group currency. Decreases in revenue will result from the on intangible assets and investment property is expected to be at absence of the Group companies Air-Transport IT Services, Inc. and approximately 2015’s level. Mainly depending on the development of FSG Flughafen-Service GmbH, whose shares were divested in fiscal year traffic at the Frankfurt site, the Executive Board expects the operating 2015. Without taking account of the earnings-neutral recognition of cash flow to be slightly higher than the previous year’s figure. Despite capacitive capital expenditure, the Executive Board expects an increase the potentially higher capital expenditure volume in property, plant, in segment revenue of up to approximately 5 %. and equipment, the Executive Board therefore expects continuing significantly positive free cash flow, which will clearly exceed the dividend payment for fiscal year 2015. Due to a possible decrease in the dividends from the Group company Antalya, which is accounted for using the equity method, the Executive Board does not, however, expect free cash flow in 2016 to exceed the figure for the 2015 fiscal year. Depending on the development in Antalya, the free cash flow can be at the level of 2015 or even lower than the figure for 2015. Group Management Report / Outlook ReportFraport Annual Report 2015 98 The remaining free cash flow that exceeds the dividend payment will Forecasted non-financial performance indicators for 2016 be used, inter alia, to service financial liabilities due and have a positive In connection with the focus on the development of non-financial impact on the Group’s net financial debt and gearing ratio. Here, performance indicators, the Executive Board is expecting the following the Executive Board expects a decrease in net financial debt of up to developments in fiscal year 2016: approximately 10 % and a gearing ratio that will be up to approximately 10 percentage points lower than the figure as at the 2015 balance In the area of customer satisfaction and product quality, the sheet date. Despite the positive free cash flow, due to the scheduled Executive Board continues to expect global passenger satisfaction of repayment of loans, the Executive Board expects a significant decrease at least 80 % at the Frankfurt site as well as continued high customer in the Group liquidity in fiscal year 2016. This does not take account satisfaction figures at the Group sites with a Fraport share of at least of a rise in liquidity from possible refinancing measures. Depending 50 %. The Executive Board expects the punctuality rate to remain at on the level of the Group result, shareholders’ equity as at the 2016 approximately the same high level, and for baggage connectivity to balance sheet date is expected to be noticeably higher than the fig- continue to be better than 98.5 %. The Executive Board continues to ure as at the end of the 2015 fiscal year. On an assumed decrease in expect a value significantly above 90 % for the equipment availability total assets, the shareholders’ equity ratio is forecasted to be up rate. In the field of appeal as an employer – despite continuing to approximately 3 to 4 percentage points higher than the level of the uncertain economic conditions – the Executive Board is aiming for 2015 balance sheet date. employee satisfaction to stabilize at a level of better than 3.0 in 2016. In addition, the Executive Board expects confirmation of the rate per In the event that the Greece transaction is closed at the end of 2016, 1,000 employees at the low level of fiscal year 2015. the following effects on the asset and financial position will arise: Medium-term outlook As a result of the late date of the takeover, the Greece transaction will In the medium-term forecasted period, the Executive Board expects not have a material impact on the development of the Fraport Group’s a further expansion of the global economy, which will have a positive operating cash flow. However, in connection with the planned cap- impact on the development of air traffic in general as well as on the ital expenditure on upgrading and expanding airport infrastructure, Group airports. Correspondingly, the Executive Board forecasts pos- slightly negative effects on the development of the free cash flow in itive operating development for the company overall. Uncertainties the Fraport Group may arise in 2016. Depending on the financing of continue to result from the political crises between Russia and Ukraine the one-off payment of €1,234 million, there will also be a significant and between Russia and Turkey. These will particularly impact business increase in net financial debt in fiscal year 2016. The Executive Board developments at the St. Petersburg, Antalya, Varna and Burgas sites. estimates the potential rise in net financial debt as a result of the Terrorists attacks or the threat of terrorist attacks in tourist areas may transaction up to €1.1 billion. The overall positive free cash flow will also have a negative effect on the demand situation at the Group sites. counter this, meaning that net financial debt in the current full year At the Frankfurt site, the situation in the Ground Handling segment may rise by up to approximately €900 million. Correspondingly, the in particular remains challenging and difficult in view of the intense Executive Board expects an increase in the gearing ratio. Due to the competitive environment (also see chapter titled “Risk and Opportu- significant rise in shareholders’ equity still expected, the gearing ratio nities Report” beginning on page 75). on the closing of the Greece transaction will reach a figure of up to approximately 100 %. The closing of the transaction will lead to an In addition to the expected traffic growth, the Executive Board ex- expansion of the balance sheet and thus an increase in total assets com- pects additional revenue from the further development of the retail pared to 2015. In this case, the shareholders’ equity ratio is expected business. Exchange rate fluctuations that impact the purchasing power to be approximately the same as to slightly lower than the level of the of passengers may additionally have positive or negative effects. In 2015 balance sheet date. connection with the continuing shortfall in covering the cost of cap- ital in Frankfurt and the further investing activities at the airport sites, particularly in Frankfurt, in the forecasted period the Executive Board expects increases in airport charges, which he expects to materialize in Frankfurt from fiscal year 2017 onwards. The Executive Board continues to expect negative effects at the Frankfurt site from additional personnel expenses in connection with pay increases under collective bargaining agreements and from a higher cost of materials due to traffic volumes. Group Management Report / Outlook ReportFraport Annual Report 2015 99 Outside of Frankfurt, the operation of the Greek regional airports in par- For the dividend payment, the Executive Board continues to aim for ticular will have the impact of increasing the result in the medium-term a pay-out ratio in a range of approximately 40 to 60 % of the profit forecasted period. Here, the Executive Board expects significant growth attributable to shareholders of Fraport AG, whereby the dividend per in revenue in the lower triple digit million € range for the 2017 fiscal share should at least reach the level of the corresponding previous year. year and an associated significant increase in EBITDA. The financial development of the Lima site – in addition to the assumed positive Furthermore, the focus remains on the development of non-financial operating development – will continue to be particularly character- performance indicators. The objective remains to achieve a high level ized by exchange rate effects in connection with the translation of the of customer satisfaction and product quality as well as appeal as an revenue denominated in US$ into the Group currency. As previously employer. described, the development of the Varna and Burgas, Antalya and St. Petersburg sites is largely determined by the political developments Apart from the takeover of the operation of the concessions of the around Russia. Here, especially the further development between 14 Greek regional airports, there are no further significant acquisitions Russia and Turkey will have to be observed. This may also have an or disposals of companies or increases or reductions in shareholdings impact on the development of the Varna and Burgas sites. The Execu- included in the forecasted period. In the event of larger acquisitions tive Board assesses the further development of the Ljubljana, Hanover or divestments, the actual development of the asset, financial, and and Xi’an sites as positive overall, whereas the Xi’an site should exhibit earnings position could deviate significantly from the aforementioned continuing high momentum. forecast. Although it remains difficult to forecast the financial result, which results Frankfurt am Main, February 29, 2016 from future changes in interest rates and exchange rates, the uncertain operating and financial development of the Group company Antalya Fraport AG and from the – as at the time of preparing the consolidated financial Frankfurt Airport Services Worldwide statements – not yet finalized financing of the transaction to acquire the concession agreements in Greece, the Executive Board anticipates The Executive Board a positive overall development in the Group result in the forecasted period. Additional income may result from further Group companies accounted for using the equity method. Following the expected rise in net financial debt from the closing of the Greece transaction, in connection with the medium-term capital expenditure requirements at the Frankfurt site and the sites in Lima Dr. Schulte Giesen and Greece, the Executive Board expects another temporary increase Müller Dr. Zieschang in the Group’s net financial debt and gearing ratio. Despite the higher indebtedness, the Executive Board continues to assess the Group’s financial situation in the forecasted period as stable. Where the statements made in this document relate to the future rather than the past, these statements are based on a number of assumptions about future events and are subject to a number of uncertainties and other factors, many of which are beyond the control of Fraport AG Frankfurt Airport Services Worldwide and which could have the effect that the actual results will differ materially from these statements. These factors include, but are not limited to, the competitive environment in deregulated markets, regulatory changes, the success of business operations, and a substantial deterioration in basic economic conditions in the markets in which Fraport AG Frankfurt Airport Services Worldwide and its Group companies operate. Readers are cautioned not to rely to an inappropriately large extent on statements made about the future. Group Management Report / Outlook ReportFraport Annual Report 2015 100 Consolidated Financial Statements / Consolidated Income Statement Consolidated Financial Statements for the 2015 Fiscal Year Consolidated Income Statement € million Revenue Change in work-in-process Other internal work capitalized Other operating income Total revenue Cost of materials Personnel expenses Depreciation and amortization Other operating expenses Operating result Interest income Interest expenses Result from companies accounted for using the equity method Other financial result Financial result Result from ordinary operations Taxes on income Group result thereof profit attributable to non-controlling interests thereof profit attributable to shareholders of Fraport AG Earnings per € 10 share in € basic diluted EBIT ( = Operating result) EBITDA ( = EBIT + Depreciation and amortization) Notes 2015 2014 (5) (6) (7) (8) (9) (10) (11) (12) (13) (13) (14) (15) (16) (17) 2,598.9 2,394.6 0.5 29.9 49.8 2,679.1 – 610.4 – 1,026.7 – 328.3 – 193.2 520.5 30.6 – 156.2 37.6 1.3 – 86.7 433.8 – 136.8 297.0 20.5 276.5 3.00 2.99 520.5 848.8 0.6 28.3 42.5 2,466.0 – 533.3 – 970.4 – 307.3 – 172.2 482.8 35.6 – 176.7 43.5 – 10.5 – 108.1 374.7 – 122.9 251.8 17.1 234.7 2.54 2.54 482.8 790.1 Table 31 Fraport Annual Report 2015 Consolidated Financial Statements / Consolidated Statement of Comprehensive Income 101 Consolidated Statement of Comprehensive Income € million Group result Remeasurements of defined benefit pension plans (Deferred taxes related to those items Expenses of companies accounted for using the equity method (Deferred taxes related to those items Items that will not be reclassified subsequently to profit or loss Fair value changes of derivatives Changes directly recognized in equity realized gains (+)/losses (–) (Deferred taxes related to those items Fair value changes of financial assets available for sale Changes directly recognized in equity realized gains (+)/losses (–) (Deferred taxes related to those items Currency translation of foreign Group companies Changes directly recognized in equity realized gains (+)/losses (–) Income and expenses from companies accounted for using the equity method directly recognized in equity (Deferred taxes related to those items Items that will be reclassified subsequently to profit or loss Other result after deferred taxes Comprehensive income thereof attributable to non-controlling interests thereof attributable to shareholders of Fraport AG 2015 297.0 2.9 – 0.4 0.0 0.0 2.5 – 5.3 – 37.6 32.3 – 10.0 9.0 0.0 9.0 2.1 18.1 0.5 17.6 12.1 – 1.2 61.9 64.4 361.4 23.2 338.2 2014 251.8 – 7.4 1.7) – 0.3 0.1) – 5.9 – 32.3 – 40.3 8.0 – 2.5) 25.4 0.0 25.4 – 2.3) 13.6 0.0 13.6 12.6 0.0) 54.8 48.9 300.7 20.1 280.6 Table 32 Fraport Annual Report 2015 102 Consolidated Financial Statements / Consolidated Statement of Financial Position Consolidated Statement of Financial Position as at December 31, 2015 Assets € million Non-current assets Goodwill Investments in airport operating projects Other intangible assets Property, plant, and equipment Investment property Investments in companies accounted for using the equity method Other financial assets Other receivables and financial assets Income tax receivables Deferred tax assets Current assets Inventories Trade accounts receivable Other receivables and financial assets Income tax receivables Cash and cash equivalents Non-current assets held for sale Total Liabilities and equity € million Shareholders’ equity Issued capital Capital reserve Revenue reserves Equity attributable to shareholders of Fraport AG Non-controlling interests Non-current liabilities Financial liabilities Trade accounts payable Other liabilities Deferred tax liabilities Provisions for pensions and similar obligations Provisions for taxes on income Other provisions Current liabilities Financial liabilities Trade accounts payable Other liabilities Provisions for taxes on income Other provisions Liabilities in the context of non-current assets held for sale Total Notes December 31, 2015 December 31, 2014 (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (25) (26) (30) (31) 41.7 500.9 161.2 6,045.4 74.5 237.6 659.2 167.0 5.4 33.4 41.7 479.2 157.1 6,127.7 63.0 216.9 773.3 181.1 10.2 31.1 7,926.3 8,081.3 42.8 154.0 310.8 7.4 406.0 921.0 0.0 921.0 43.7 174.7 297.6 7.7 401.1 924.8 7.1 931.9 8,847.3 9,013.2 Notes December 31, 2015 December 31, 2014 (32) (32) (32) (32) (33) (34) (35) (36) (37) (38) (39) (40) (34) (35) (36) (39) (40) (41) 923.1 594.3 1,919.9 3,437.3 74.4 3,511.7 922.7 592.3 1,706.1 3,221.1 64.9 3,286.0 3,273.8 3,874.3 42.5 447.7 172.2 30.7 62.1 201.6 4,230.6 543.6 143.1 129.4 56.0 232.9 1,105.0 0.0 1,105.0 8,847.3 47.1 497.5 158.7 33.7 68.8 228.0 4,908.1 318.1 134.5 123.7 14.7 223.8 814.8 4.3 819.1 9,013.2 Table 33 Fraport Annual Report 2015 Consolidated Financial Statements / Consolidated Statement of Cash Flows 103 Consolidated Statement of Cash Flows € million Profit attributable to shareholders of Fraport AG Profit attributable to non-controlling interests Adjustments for Taxes on income Depreciation and amortization Interest result Gains/losses from disposal of non-current assets Other Fair value changes of companies accounted for using the equity method Changes in inventories Changes in accounts receivable and financial assets Changes in liabilities Changes in provisions Operating activities Financial activities Interest paid Interest received Taxes on income paid Cash flow from operating activities Investments in airport operating projects Capital expenditure for other intangible assets Capital expenditure for property, plant, and equipment Investment property Capital expenditure in companies accounted for using the equity method Sale of consolidated subsidiaries Acquisition of fully consolidated subsidiaries Dividends from companies accounted for using the equity method Revenue from disposal of non-current assets Cash flow used in investing activities without investments in cash deposits and securities Financial investments in securities and promissory note loans Revenue from disposal of securities and promissory note loans Decrease of time deposits with a term of more than three months Cash flow used in investing activities Dividends paid to shareholders of Fraport AG Dividends paid to non-controlling interests Capital increase Acquisition of non-controlling interests Cash inflow from long-term financial liabilities Repayment of long-term financial liabilities Changes in short-term financial liabilities Cash flow used in financing activities Change in cash and cash equivalents Cash and cash equivalents as at January 1 Notes (16) (11) (13) (14) (28) (25)(29) (35 – 36) (38 – 40) (44) (19) (20) (21) (22) (2) (23) (24) (30) (44) (32) (32) (34) (44) Foreign currency translation effects on cash and cash equivalents Cash and cash equivalents as at December 31 (44)(30) 2015 276.5 20.5 136.8 328.3 125.6 – 2.8 5.8 – 37.6 0.9 12.3 – 15.3 – 6.3 844.7 – 131.3 16.0 – 77.2 652.2 – 16.1 – 15.7 – 247.1 – 10.2 – 2.0 9.7 0.0 32.5 4.6 – 244.3 – 312.8 441.4 58.0 – 57.7 – 124.6 – 8.9 2.4 – 4.2 125.0 – 561.1 29.6 – 541.8 52.7 167.8 10.2 230.7 2014 234.7 17.1 122.9 307.3 141.1 0.7 0.7 – 43.5 – 1.1 4.6 – 52.0 – 10.0 722.5 – 148.7 18.4 – 86.0 506.2 – 12.7 – 7.7 – 251.7 – 19.1 0.0 0.0 – 271.1 31.8 6.7 – 523.8 – 555.5 664.2 122.4 – 292.7 – 115.3 – 5.3 2.5 0.0 400.0 – 460.0 – 6.4 – 184.5 29.0 131.2 7.6 167.8 Table 34 Fraport Annual Report 2015 104 Consolidated Financial Statements / Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity € million Notes Issued capital Capital reserve Revenue reserves Foreign currency Financial instruments Revenue reserves Equity Non-controlling As at January 1, 2015 Foreign currency translation effects Income and expenses of companies accounted for using the equity method directly recognized in equity Remeasurements of defined benefit plans Fair value changes of financial assets available for sale Fair value changes of derivatives Other result Issue of shares for employee investment plan Distributions Group result Transactions with non-controlling interests Consolidation activities/other changes As at December 31, 2015 As at January 1, 2014 Foreign currency translation effects Income and expenses of companies accounted for using the equity method directly recognized in equity Remeasurements of defined benefit plans Fair value changes of financial assets available for sale Fair value changes of derivatives Other result Issue of shares for employee investment plan Management stock options plan Capital increase for exercise of subscription rights Distributions Group result Changes from company acquisitions Transactions with non-controlling interests Consolidation activities/other changes Balance as at December 31, 2014 922.7 592.3 – 52.3 1,706.1 3,221.1 reserve (total) interests attributable to shareholders of Fraport AG (32), (33) – – – – – 0.0 0.4 – – – – 923.1 922.1 – – – – – 0.0 0.5 0.1 – – – – – – – – – – 0.0 2.0 – – – – 594.3 590.2 – – – – – 0.0 2.0 0.1 – – – – – (32), (33) 922.7 592.3 1,731.8 26.6 – 52.3 1,706.1 3,221.1 1,731.8 – 2.5 – – 2.5 – – 0.2 – 124.6 276.5 1,886.4 1,618.4 – – 0.2 – 5.8 – 6.0 – – – – – 115.3 234.7 – – 0.0 26.6 14.9 6.2 – – 21.1 47.7 3.7 10.7 12.2 22.9 – – – – – – – – – – – – – – – 4.7 – 11.1 22.3 38.1 – – – – – – 14.2 – 81.3 – 0.4 – 23.1 5.5 29.0 – – – – – – – 14.9 10.9 2.5 11.1 22.3 61.7 – – 124.6 276.5 – 0.2 1,919.9 1,540.8 10.7 12.4 – 5.8 23.1 5.5 45.9 – – – 115.3 234.7 – – 0.0 14.9 10.9 2.5 11.1 22.3 61.7 2.4 – 124.6 276.5 – 0.2 3,437.3 3,053.1 10.7 12.4 – 5.8 23.1 5.5 45.9 2.5 0.2 – 115.3 234.7 – – 0.0 Equity (total) 3,286.0 17.6 10.9 2.5 11.1 22.3 64.4 2.4 – 133.5 297.0 – 4.7 0.1 3,511.7 3,098.8 13.6 12.4 – 5.7 23.1 5.5 48.9 2.5 0.2 – 120.6 251.8 4.7 – 0.3 0.0 3,286.0 64.9 2.7 – – – – 2.7 – – 8.9 20.5 – 4.7 – 0.1 74.4 45.7 2.9 – 0.1 – – 3.0 – – – 5.3 17.1 4.7 – 0.3 0.0 64.9 Fraport Annual Report 2015 Consolidated Financial Statements / Consolidated Statement of Changes in Equity 105 € million Notes Issued capital Capital reserve Revenue reserves Foreign currency reserve Financial instruments Revenue reserves (total) Equity attributable to shareholders of Fraport AG Non-controlling interests Equity (total) As at January 1, 2015 Foreign currency translation effects Income and expenses of companies accounted for using the equity method directly recognized in equity Remeasurements of defined benefit plans Fair value changes of financial assets available for sale Fair value changes of derivatives Issue of shares for employee investment plan Other result Distributions Group result Transactions with non-controlling interests Consolidation activities/other changes As at December 31, 2015 As at January 1, 2014 Foreign currency translation effects Income and expenses of companies accounted for using the equity method directly recognized in equity Remeasurements of defined benefit plans Fair value changes of financial assets available for sale Fair value changes of derivatives Other result Issue of shares for employee investment plan Management stock options plan Capital increase for exercise of subscription rights Distributions Group result Changes from company acquisitions Transactions with non-controlling interests Consolidation activities/other changes Balance as at December 31, 2014 (32), (33) 923.1 922.1 594.3 590.2 922.7 592.3 0.0 0.4 – – – – – – – – – – – – – – 0.0 0.5 0.1 – – – – – 0.0 2.0 – – – – – – – – – – – – – – 0.0 2.0 0.1 – – – – – 1,731.8 – 2.5 – – 2.5 – – 124.6 276.5 – 0.2 1,886.4 1,618.4 – – 0.2 – 5.8 – – – 6.0 – – – 115.3 234.7 – – 0.0 26.6 14.9 6.2 – – 21.1 – – – – – 47.7 3.7 10.7 12.2 – – 22.9 – – – – – – – – 52.3 1,706.1 3,221.1 – 4.7 – 11.1 22.3 38.1 – – – – – – 14.2 – 81.3 – 0.4 – 23.1 5.5 29.0 – – – – – – – 14.9 10.9 2.5 11.1 22.3 61.7 – – 124.6 276.5 – 0.2 1,919.9 1,540.8 10.7 12.4 – 5.8 23.1 5.5 45.9 – – – 115.3 234.7 – – 0.0 14.9 10.9 2.5 11.1 22.3 61.7 2.4 – 124.6 276.5 – 0.2 3,437.3 3,053.1 10.7 12.4 – 5.8 23.1 5.5 45.9 2.5 0.2 – 115.3 234.7 – – 0.0 (32), (33) 922.7 592.3 1,731.8 26.6 – 52.3 1,706.1 3,221.1 64.9 2.7 – – – – 2.7 – – 8.9 20.5 – 4.7 – 0.1 74.4 45.7 2.9 – 0.1 – – 3.0 – – – 5.3 17.1 4.7 – 0.3 0.0 64.9 3,286.0 17.6 10.9 2.5 11.1 22.3 64.4 2.4 – 133.5 297.0 – 4.7 0.1 3,511.7 3,098.8 13.6 12.4 – 5.7 23.1 5.5 48.9 2.5 0.2 – 120.6 251.8 4.7 – 0.3 0.0 3,286.0 Table 35 Fraport Annual Report 2015 106 Consolidated Financial Statements / Consolidated Statement of Changes in Non-Current Assets Consolidated Statement of Changes in Non-Current Assets (Note 18 to 22) € million Goodwill Investments in airport operating projects Other intangible assets Acquisition/production costs Balance as at January 1, 2015 Foreign currency translation effects Additions Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2015 Accumulated depreciation and amortization Balance as at January 1, 2015 Foreign currency translation effects Additions Impairment losses Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2015 Residual carrying amounts Balance as at December 31, 2015 Acquisition/production costs Balance as at January 1, 2014 Foreign currency translation effects Additions Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2014 Accumulated depreciation and amortization Balance as at January 1, 2014 Foreign currency translation effects Additions Disposals Reclassifications Write-ups Balance as at December 31, 2014 Residual carrying amounts Balance as at December 31, 2014 651.2 47.8 16.1 0.3 715.4 172.0 16.4 25.8 0.3 214.5 243.2 4.6 15.7 – 0.2 3.9 – 5.8 261.4 86.1 0.2 16.9 – 0.2 – 2.8 100.2 500.9 161.2 3,569.1 1,676.9 162.0 637.4 6,045.4 Land, land rights, Technical equipment and buildings, and machinery Other equipment, operating, and office equipment including buildings on leased land Construction in Property, plant, progress and equipment (total) Investment property 6,014.1 3,175.6 2,347.8 1,439.7 1.1 4,037.7 38.9 – 26.9 26.7 – 13.8 6,039.0 151.2 1.1 – 25.4 – 4.8 2,469.9 57.6 – 28.1 55.8 74.1 6,014.1 32.8 – 35.1 15.4 – 12.8 3,175.9 99.2 1.0 – 29.1 – 11.8 1,499.0 92.9 – 47.6 52.4 80.4 3,175.6 5,854.7 2,997.5 408.5 3.9 31.1 – 17.9 2.0 – 2.0 425.6 249.1 1.1 32.0 – 17.3 – 1.3 263.6 388.5 3.3 21.3 – 31.6 1.6 25.4 408.5 248.3 1.2 30.2 – 30.6 1.1 4,233.6 567.2 132.5 – 8.6 – 52.4 – 0.2 638.5 586.5 98.5 – 4.6 – 117.6 4.4 567.2 10,165.4 3.9 235.3 – 88.5 – 8.3 – 28.8 10,279.0 1.1 282.4 2.1 – 71.8 0.0 – 17.9 9,827.2 3.3 270.3 – 111.9 – 7.8 184.3 10,165.4 1.2 271.4 – 99.8 0.0 0.0 2,228.1 1,387.4 1.1 3,864.9 145.6 – 25.9 95.6 – 43.3 2,347.8 1,439.7 249.1 1.1 4,037.7 69.7 8.4 – 0.2 4.4 82.3 6.7 1.1 7.8 74.5 54.6 16.4 – 2.5 1.2 69.7 6.9 0.3 – 0.5 6.7 63.0 479.2 157.1 3,666.3 1,735.9 159.4 566.1 6,127.7 591.1 47.4 12.7 133.0 15.7 23.3 172.0 132.4 4.3 7.7 – 8.9 6.6 101.1 243.2 81.3 0.4 12.3 – 7.9 86.1 138.3 – 6.0 132.3 96.6 – 6.0 90.6 41.7 119.3 19.0 96.6 96.6 41.7 138.3 651.2 Fraport Annual Report 2015 Consolidated Financial Statements / Consolidated Statement of Changes in Non-Current Assets 107 € million Goodwill Investments in airport Other intangible operating projects assets Land, land rights, and buildings, including buildings on leased land Technical equipment and machinery Other equipment, operating, and office equipment Construction in progress Property, plant, and equipment (total) Investment property Acquisition/production costs Balance as at January 1, 2015 Foreign currency translation effects Additions Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2015 Accumulated depreciation and amortization Balance as at January 1, 2015 Foreign currency translation effects Additions Impairment losses Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2015 Residual carrying amounts Balance as at December 31, 2015 Acquisition/production costs Balance as at January 1, 2014 Foreign currency translation effects Additions Disposals Reclassifications Changes in the scope of consolidation Balance as at December 31, 2014 Accumulated depreciation and amortization Balance as at January 1, 2014 Foreign currency translation effects Additions Disposals Reclassifications Write-ups Balance as at December 31, 2014 Residual carrying amounts Balance as at December 31, 2014 651.2 47.8 16.1 0.3 715.4 172.0 16.4 25.8 0.3 214.5 591.1 47.4 12.7 133.0 15.7 23.3 172.0 243.2 4.6 15.7 – 0.2 3.9 – 5.8 261.4 86.1 0.2 16.9 – 0.2 – 2.8 100.2 132.4 4.3 7.7 – 8.9 6.6 101.1 243.2 81.3 0.4 12.3 – 7.9 86.1 138.3 – 6.0 132.3 96.6 – 6.0 90.6 41.7 119.3 19.0 96.6 96.6 41.7 138.3 651.2 6,014.1 3,175.6 38.9 – 26.9 26.7 – 13.8 6,039.0 32.8 – 35.1 15.4 – 12.8 3,175.9 2,347.8 1,439.7 151.2 1.1 – 25.4 – 4.8 2,469.9 99.2 1.0 – 29.1 – 11.8 1,499.0 408.5 3.9 31.1 – 17.9 2.0 – 2.0 425.6 249.1 1.1 32.0 – 17.3 – 1.3 263.6 567.2 132.5 – 8.6 – 52.4 – 0.2 638.5 10,165.4 3.9 235.3 – 88.5 – 8.3 – 28.8 10,279.0 1.1 4,037.7 1.1 282.4 2.1 – 71.8 0.0 – 17.9 1.1 4,233.6 500.9 161.2 3,569.1 1,676.9 162.0 637.4 6,045.4 5,854.7 2,997.5 57.6 – 28.1 55.8 74.1 6,014.1 92.9 – 47.6 52.4 80.4 3,175.6 2,228.1 1,387.4 145.6 – 25.9 95.6 – 43.3 388.5 3.3 21.3 – 31.6 1.6 25.4 408.5 248.3 1.2 30.2 – 30.6 586.5 98.5 – 4.6 – 117.6 4.4 567.2 9,827.2 3.3 270.3 – 111.9 – 7.8 184.3 10,165.4 1.1 3,864.9 1.2 271.4 – 99.8 0.0 0.0 2,347.8 1,439.7 249.1 1.1 4,037.7 479.2 157.1 3,666.3 1,735.9 159.4 566.1 6,127.7 69.7 8.4 – 0.2 4.4 82.3 6.7 1.1 7.8 74.5 54.6 16.4 – 2.5 1.2 69.7 6.9 0.3 – 0.5 6.7 63.0 Table 36 Fraport Annual Report 2015 108 Consolidated Financial Statements / Segment Reporting Segment Reporting (Note 43) € million Revenue Other income Third-party revenue Intersegment revenue Total revenue Segment result EBIT Depreciation and amortization of segment assets EBITDA Share of result from companies accounted for using the equity method Income from investments Book value of segment assets Segment liabilities Acquisition cost of additions to property, plant, and equipment, investments in airport operating projects, goodwill, intangible assets, and investment property Other significant non-cash effective expenses 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 2015 2014 2015 2014 Investments in companies accounted for using the equity method December 31, 2015 December 31, 2014 Aviation Retail & Real Estate Ground Handling External Activities & Services Reconciliation Group 927.3 884.2 32.8 29.2 960.1 913.4 80.4 77.2 1,040.5 990.6 116.3 115.5 121.2 121.4 237.5 236.9 0.0 0.0 0.0 0.0 3,853.8 4,049.8 2,573.7 2,819.9 88.5 143.8 68.1 73.4 0.0 0.0 488.2 455.7 16.7 15.8 504.9 471.5 236.7 233.5 741.6 705.0 295.1 275.0 83.7 81.5 378.8 356.5 – 0.3 – 0.3 0.0 0.0 2,414.8 2,538.0 1,478.4 1,604.3 63.7 87.2 43.9 27.5 3.7 4.0 673.1 656.2 12.0 15.2 685.1 671.4 46.1 36.9 731.2 708.3 6.0 7.5 40.4 36.8 46.4 44.3 0.7 0.8 0.1 0.0 620.4 668.4 370.9 433.2 39.5 31.2 13.2 11.3 17.4 11.9 510.3 398.5 18.7 11.2 529.0 409.7 367.0 357.0 896.0 766.7 103.1 84.8 83.0 67.6 186.1 152.4 37.2 43.0 0.0 0.0 1,912.1 1,708.0 620.3 627.6 83.8 63.9 6.4 5.8 216.5 201.0 2,598.9 2,394.6 80.2 71.4 – – 2,679.1 2,466.0 – 730.2 – 704.6 – 730.2 – 704.6 0.0 0.0 – – – – – – – – 46.2 49.0 290.3 242.2 – – – – – – – – 2,679.1 2,466.0 520.5 482.8 328.3 307.3 848.8 790.1 37.6 43.5 0.1 0.0 8,847.3 9,013.2 5,333.6 5,727.2 275.5 326.1 131.6 118.0 237.6 216.9 Table 37 Fraport Annual Report 2015 Consolidated Financial Statements / Segment Reporting 109 Geographical information € million Revenue Other income Third-party revenue Book value of segment assets Germany Rest of Europe 2015 2014 2015 2014 2015 2014 December 31, 2015 December 31, 2014 2,131.3 2,042.7 68.9 68.6 2,200.2 2,111.3 7,144.7 7,499.7 Asia 18.5 37.6 0.9 1.1 19.4 38.7 319.1 292.2 0.0 0.0 Rest of World Reconciliation Group 350.6 238.8 9.5 1.0 360.1 239.8 515.9 453.7 15.4 10.5 2,598.9 2,394.6 80.2 71.4 2,679.1 2,466.0 8,847.3 9,013.2 275.5 326.1 Table 38 – – 46.2 49.0 – – 98.5 75.5 0.9 0.7 99.4 76.2 821.4 718.6 10.0 28.6 Acquisition cost of additions to property, plant and equipment, investments in airport operating projects, goodwill, intangible assets and investment property 2015 2014 250.1 287.0 Fraport Annual Report 2015 110 Group Notes / Notes to the Consolidation and Accounting Policies Group Notes for the 2015 Fiscal Year Notes to the Consolidation and Accounting Policies 1 Basis for the preparation of the consolidated financial statements Fraport AG Frankfurt Airport Services Worldwide, Frankfurt am Main (hereinafter: Fraport AG), is a global airport operator and its main business focus is the operation of Frankfurt Main airport, one of Europe’s most important air transport hubs. Fraport AG is headquartered in Frankfurt am Main. Fraport AG has prepared its consolidated financial statements as at December 31, 2015 in accordance with the standards issued by the International Accounting Standards Board (IASB). We have applied the International Financial Reporting Standards (IFRS) for the consolidated financial statements and the interpretations about them issued by the International Financial Reporting Committee (IFRC, IC) as adopted in the European Union (EU), in force on the balance sheet date, completely and without any restriction in accounting, measurement and disclosure in the 2015 consolidated financial statements. Pursuant to Section 315a (1) of the German Commercial Code (HGB), these notes to the financial statements contain the supplementary disclosures according to Sections 313, 314 HGB. As a capital market-oriented parent company of the Fraport Group, Fraport AG must prepare its consolidated financial statements in accordance with IFRS, pursuant to Regulation (EC) No 1606/2002 of the European Parliament and the Council dated July 19, 2002 (new version dated April 9, 2008) on the application of international accounting standards. The consolidated income statement is prepared according to the nature of expenditure method. The consolidated financial statements are prepared in Euros (€). All figures are in € million unless stated otherwise. The business activities and the organization of the Fraport Group are presented in the management report. The consolidated financial statements of Fraport AG for the 2015 fiscal year were approved for publication by the Executive Board on February 29, 2016. The Supervisory Board approved the consolidated financial statements in its meeting on March 14, 2016. 2 Companies included in the consolidation and balance sheet date Fraport AG and all subsidiaries are included in the consolidated financial statements in full. Joint ventures and associated companies are accounted for in the consolidated financial statements using the equity method. Companies controlled by Fraport AG are considered to be subsidiaries. A company is controlled by Fraport AG if Fraport AG holds decision-making power on the basis of voting or other rights allowing it to determine the significant activities of the affiliated company, participates in positive or negative variable returns from the affiliated company, and is able to affect these returns through its decision-making power. Inclusion in the consolidated financial statements commences on the date when control is obtained. A joint arrangement applies if the Fraport Group makes joint decisions on operations on the basis of a contractual agreement with third parties. Joint management is exercised if decisions on significant activities require the unanimous agreement of all parties. A joint arrangement is either a joint operation or a joint venture. For all joint arrangements in the Fraport Group, the partners have a share in the net assets of a jointly managed, legally independent company; these are therefore joint ventures. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 111 Associated companies are Fraport investments in which Fraport AG is able to exercise major influence on financial and business policies. The annual financial statements of the companies included in the consolidated financial statements are prepared on the basis of shared accounting and valuation principles. The fiscal year of Fraport AG and all consolidated companies is the calendar year. The consolidated financial statements of Fraport AG are dominated by the parent company. The companies included in the consolidated financial statements changed as follows during the 2015 fiscal year: Companies included in Consolidation Germany Other countries Total Fraport AG December 31, 2014 Additions Interim consolidation Disposals December 31, 2015 Companies accounted for using the equity method Joint ventures December 31, 2014 Additions Interim consolidation Disposals December 31, 2015 Associated companies December 31, 2014 Additions Disposals December 31, 2015 Companies consolidated including companies accounted for using the equity method on December 31, 2014 Companies consolidated including companies accounted for using the equity method on December 31, 2015 1 24 3 – 1 – 2 24 5 0 1 0 6 4 0 0 4 34 35 0 22 3 0 – 1 24 5 0 0 0 5 4 0 – 1 3 31 32 1 46 6 – 1 – 3 48 10 0 1 0 11 8 0 – 1 7 65 67 Table 39 The additions in the case of the fully consolidated affiliated companies relate to the founding of three foreign compa- nies in connection with the management and operation of 14 Greek regional airports and three domestic companies in the area of disposal services. All the new additions were not operationally active in the year under review, meaning that the effects on the Fraport Group’s financial statements were insignificant. The interim consolidation of the affiliated companies and joint ventures relates to the sale on November 2, 2015 of 51 % of the capital shares in FCS. The sale was carried out within the scope of a strategic partnership for freight handling at Frankfurt Airport concluded previously with Worldwide Flight Services (WFS). The company’s assets and liabilities were recognized as “held for sale” from the date of initial classification pursuant to IFRS 5 and measured at fair value less costs to sell. The income accruing on the date of initial consolidation of –€0.7 million from the disposal loss (–€2.2 million) and the valuation of the remaining capital shares at fair value (+€1.5 million) was reported under other operating expenses. The disposal in the case of the associated companies relates to the sale on November 24, 2015 of the 47.67 % capital shares held by Aerodrome Ljubljana in Adria Airways Tehnika d.d. The deconsolidation of the company already ac- counted for as of December 31, 2014 pursuant to IFRS 5 did not have a significant impact on the financial statements of the Fraport Group. Fraport Annual Report 2015 112 Group Notes / Notes to the Consolidation and Accounting Policies Fraport sold its shares in Air-Transport IT Services, Inc., USA with effect as at April 22, 2015. A net income of €8.0 million resulted from the sale. On September 21, 2015, Fraport also sold its 33.33 % share in the capital of FSG Flughafen Service GmbH. A further disposal relates to the no longer operational FRA Vorfeldaufsicht GmbH, which was liqui- dated in November 2015. The deconsolidation of the companies has had no material effect on Fraport’s consolidated financial statements. The generally insignificant effects from company disposals are shown in the following overview: Disposal and interim consolidation effects 2015 € million Air Transport IT Non-current assets Current assets Cash and cash equivalents Total assets Non-current liabilities Current liabilities Total liabilities Net assets Sale price/Received consideration in cash Income from foreign currency reserve Non-controlling interests Remaining fair value shares Disposal profit/loss Inflow of funds from the sale of subsidiaries (sale price less sold cash and cash equivalents) 3.5 4.4 2.1 10.0 – 0.6 – 4.8 – 5.4 4.6 12.1 0.5 8.0 10.0 FSG 0.0 0.5 0.4 0.9 – 0.1 – 0.6 – 0.7 0.2 0.1 0.1 0.0 – 0.3 FCS 13.6 10.3 0.0 23.9 – 12.0 – 7.5 – 19.5 4.4 0.0 3.7 – 0.7 0.0 Total 17.1 15.2 2.5 34.8 – 12.7 – 12.9 – 25.6 9.2 12.2 0.5 0.1 3.7 7.3 9.7 Table 40 At the beginning of the year the remaining shares in the already fully consolidated GCS Gesellschaft für Cleaning Services mbH Co. Airport Frankfurt/Main KG, Frankfurt am Main, were acquired. As this involved the acquisition of limited partner shares in a partnership, which were recognized in the consolidated financial statements as borrowed capital pursuant to IAS 32, the acquisition was shown as the repayment of liabilities. On January 19, 2015 the shareholder meeting of Aerodrom Ljubljana, d.d. resolved the squeeze-out of the remaining minority shareholders. In March 2015, registration of the resolution and the formal transfer of the remaining 2.01 % capital shares in Fraport AG took place. Directly before the acquisition of the stake, the carrying amount of the non- controlling shares in Aerodrom Ljubljana amounted to €4.7 million. The non-controlling shares were fully derecognized based on the acquisition of the stake. The purchase price for the non-controlling shares was also €4.7 million. As the shares were acquired at the carrying amount, the transaction had no effect on the shareholders’ equity attributable to the shareholders of Fraport AG. Overall, both acquisitions had no material effect on the consolidated financial statements. Fraport AG holds a 52 % capital share of the company N*ICE Aircraft Services & Support GmbH, Frankfurt am Main. The company is included in the consolidated financial statements as a joint venture according to the equity method due to contractually agreed joint management. Operational services GmbH & Co. KG, Frankfurt am Main, in which Fraport holds 50 % of the shares, is recognized as an associated company based on the contractual arrangements. The full list of the shareholding pursuant to Section 313 (2) HGB is shown under Note 57 of the Notes to the consol- idated financial statements. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 113 Disclosure of interests in subsidiaries The following table shows summarized financial information for the companies Lima and Twin Star, from which the Fraport Group has substantial non-controlling interests. Lima Airport Partners S.R.L., Lima, operates Lima International Airport in Peru. Fraport Twin Star Airport Management AD, Varna, operates Varna and Burgas airports in Bulgaria. Further information on both companies is contained in Note 50 (Service Concession Arrangements). Disclosure of interests in subsidiaries € million Lima Twin Star December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 Participation quota, non-controlling interests 29.99 % 29.99 % 40.00 % 40.00 % Non-current assets Current assets Non-current liabilities Current liabilities Shareholders’ equity/net assets Carrying amount, non-controlling interests Revenue Result after taxes Other result Comprehensive income Proportion of non-controlling interests in comprehensive income Cash flow from operating activities Cash flow used in investing activities Cash flow used in financing activities Change in cash and cash equivalents Cash and cash equivalents as at January 1 Foreign currency translation effects on cash and cash equivalents Cash and cash equivalents as at December 31 Dividends to non-controlling interests 346.0 124.6 272.4 81.1 117.1 35.1 2015 277.9 46.3 8.8 55.1 16.5 65.6 – 14.6 – 30.6 20.4 81.9 9.5 111.8 5.5 312.2 94.1 258.6 68.6 79.1 23.7 2014 214.3 32.1 9.1 41.2 12.4 45.7 – 10.1 – 14.4 21.2 53.6 7.1 81.9 2.5 198.0 25.8 91.8 44.7 87.3 34.9 2015 53.9 13.3 0.0 13.3 5.3 24.5 – 5.3 – 18.3 0.9 19.8 0.0 20.7 2.4 204.3 26.6 97.6 53.1 80.2 32.1 2014 60.7 15.8 0.1 15.9 6.4 23.9 – 6.5 – 16.2 1.2 18.6 0.0 19.8 1.6 Table 41 All subsidiaries are fully consolidated in the Fraport consolidated financial statements. The capital shares in the subsid- iaries directly held by Fraport AG as a parent company do not differ from the proportion of voting rights held. There are no preferred shares in the subsidiaries. For possible restrictions in connection with project financing for the airport operator concession in Lima, please refer to the statements in Note 48. Fraport Annual Report 2015 114 Group Notes / Notes to the Consolidation and Accounting Policies 3 Consolidation principles Capital consolidation of all business combinations follows the purchase method. All identifiable acquired assets and the acquired liabilities, including contingent liabilities, are recorded at fair value on the acquisition date. The acquisition costs for company acquisitions correspond to the fair value of the transferred assets and liabilities. Incidental acquisition costs are recorded as expenses as they are incurred. Conditional purchase price payments are recorded at fair value on the acquisition date. Subsequent changes in the fair value of a conditional consideration, that is deemed to be an asset or a liability are recognized either through profit or loss or as a change in other income. Non-controlling interests are valued at fair value or the corresponding proportion of the identifiable net assets of the acquired company. In the case of step-by-step company acquisitions, the shares already held in the acquired company are revalued through profit or loss at fair value on the date that control is obtained. Goodwill is recorded insofar as the sum of the consideration that is transferred, the amount of all non-controlling interests in the acquired company and any equity that was previously held and revalued on the acquisition date is higher than the balance of the acquired and revalued identifiable assets and the revalued acquired liabilities. If the comparison results in a lower amount, a net income on acquisition at a price below the fair value is recorded after the assigned values are reviewed. Joint ventures and associated companies are accounted for in the consolidated financial statements using the equity method. Initial measurements of companies accounted for using the equity method are carried out at fair value at the time of acquisition, similarly to capital consolidation for subsidiaries. Subsequent changes in the shareholders’ equity and the updating of the difference from initial valuation change the amount accounted for at equity. Intercompany profits and losses on trade accounts payable between companies included in the consolidated financial statements were minimal. Elimination was waived since the impact on the asset and financial situation of the Group would have been negligible. Loans, accounts receivable, and liabilities, contingencies and other contingent liabilities between companies included in the consolidated financial statements, internal expenses, and income, as well as income from Group investments are eliminated. Currency translation Annual financial statements of companies outside Germany denominated in foreign currencies are translated on the basis of the functional currency concept in accordance with IAS 21. The assets and liabilities of the consolidated companies are translated at the exchange rate on the balance sheet date and shareholders’ equity at the historical exchange rate, whereas, for the purpose of simplification, the expenses and income are translated at annual average exchange rates, since the companies are financially, economically, and organizationally independent. Foreign currency translation differences are included directly in equity without affecting profit or loss. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 115 The following material exchange rates were used for the currency translation: Exchange rates Unit/Currency in € 1 US Dollar (US$) 1 Turkish New Lira (TRY) 1 Renminbi Yuan (CNY) 1 Hong Kong Dollar (HKD) 1 Peruvian Nuevo Sol (PEN) 100 Russian Ruble (RUB) Exchange rate December 31, 2015 Average exchange rate 2015 Exchange rate December 31, 2014 Average exchange rate 2014 0.9181 0.3143 0.1398 0.1184 0.2689 1.2434 0.9013 0.3305 0.1434 0.1163 0.2829 1.4690 0.8227 0.3535 0.1327 0.1061 0.2750 1.3874 0.7527 0.3441 0.1222 0.0971 0.2653 1.9626 Table 42 Business transactions in foreign currencies are accounted at the exchange rate on the date of the business transaction. Measurement of the resulting assets and liabilities that are nominally bound in the foreign currency as at the balance sheet date takes place at the exchange rate as at the balance sheet date. Translation differences are generally recorded through profit or loss. 4 Accounting principles Uniform accounting measurement policies The financial statements of the Fraport Group are based on accounting and measurement policies that are applied consistently throughout the Group. The consolidated financial statements are drafted on the basis of historic acquisition and production costs. Particular exceptions include financial assets available for sale and derivative financial instruments. Recognition of income and expenses Revenue and other income are recognized in accordance with IAS 18 when the goods have been delivered or the service rendered, when it is reasonably probable that an economic benefit will be received, and when this benefit can be quantified reliably. In addition, the significant opportunities and risks must have been transferred to the buyer. Income and expenses from the same transactions and/or events are recognized in the same period. Traffic charges for the provision of the airport infrastructure are divided into those subject to regulation (according to Section 19b (1) of the German Air Traffic Act [LuftVG]), which include, among others, landing and take-off charges, parking charges, passenger and security charges and other charges not subject to regulation, such as ground services and ground handling infrastructure. In addition, the Fraport Group mainly generates revenue from revenue-based payments, renting, parking, sale of land, and security services. Revenue from renting is recorded using the straight-line method over the term of the lease. Revenue from revenue-based payments is recorded appropriate to the period based on the revenue generated. Revenue from sales of land is realized after transfer of the opportunities and risks. In the context of the airport operating projects outside of Germany (see also note 50), income and expenses from the operation of airport infrastructure and the provision of construction and expansion services are generated. Fraport Annual Report 2015 116 Group Notes / Notes to the Consolidation and Accounting Policies Revenue from the operation of airport infrastructure is recognized in accordance with IAS 18 when the services has been rendered, when it is reasonably probable that an economic benefit will be received, and that this benefit can be quantified reliably. Income and expenses from the provision of construction and expansion services are recorded pursuant to IAS 11. The order costs are expensed as incurred pursuant to IAS 11.32, since the result of production orders cannot be estimated reliably. Proceeds from production are recorded in the amount of the incurred order costs expected to be recovered. Interest income is recorded using the effective interest rate method. Goodwill After the initial recognition of goodwill acquired in the course of a business merger (see also note 3), it is measured at acquisition costs less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in the course of a business merger is assigned to the cash-generating units of the Group on the acquisition date. Goodwill impairment testing is performed by comparing the recoverable amount of a cash-generating unit to its carrying amount, including goodwill. The recoverable amount corresponds to the higher amount of the fair value less costs to sell and the value in use. Essentially in the Fraport Group the value in use based on a company valuation model (discounted cash flow method) is used to calculate the recoverable amount. All goodwill items are tested for impairment at least once a year in December in accordance with IAS 36.88 – 99. In the event of an impairment, an impairment loss is recognized. Goodwill is not written up when the reasons for impairment are eliminated. Goodwill is not subject to regular depreciation and amortization. Investments in airport operating projects To allow for better transparency, investments in airport operating projects are presented separately. These consist of concessions for the operation of airports in Varna and Burgas (Bulgaria) and Lima (Peru) acquired within the scope of service concession agreements (see also note 50). The concession agreements for the operation of the airports fall under the application of IFRIC 12.17 and are recognized according to the intangible asset model, since Fraport receives the right in each case to impose a charge on airport users in exchange for the obligation to pay concession fees and provide construction and expansion services. The contractual obligations to pay concession fees that are not variable but contractually fixed in amount are recorded as financial liabilities. These liabilities are initially recognized at fair value using a risk-adjusted discount rate. Airport operation rights received as consideration are recorded as intangible assets at the same amount and reported under investments in airport operating projects. The rights received as consideration for construction and expansion services are recognized at the cost of production for the period in which the production costs are incurred. Revenue and expenses from construction and expansion services are generally recorded pursuant to IFRIC 12.14 and in accordance with IAS 11. Borrowing costs are capitalized as part of the costs of acquisition if the requirements (see “Borrowing costs”) are fulfilled. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 117 The recognized financial liabilities are subsequently measured at amortized cost using the effective interest method. Subsequent measurement of the capitalized rights is at the cost of acquisition or production less cumulative regular depreciation and amortization over the term of the concessions. Impairment losses are recognized in accordance with IAS 36, where necessary. Other intangible assets Acquired intangible assets (IAS 38) are recognized at acquisition cost. Their useful life is limited. They are amortized over their useful lives using straight-line depreciation and amortization. Where necessary, impairment losses are rec- ognized in accordance with IAS 36. If the recoverable amount of the asset later exceeds the carrying amount after an impairment loss has been recognized, the asset is written up to a maximum of the recoverable amount. The write-up through profit or loss is limited to the amortized carrying amount that would have resulted if no impairment losses had been recognized in the past. Development costs for internally generated intangible assets are capitalized at manufacturing cost when it is probable that the manufacture of these assets will generate future economic benefits for the company and the costs can be measured reliably. The manufacturing costs cover all costs directly attributable to the manufacturing process. If the conditions for capitalization are not met, the expenses are recognized in the income statement in the year in which they are incurred. Internally generated intangible assets are amortized over their useful lives using the straight-line method. Borrowing costs of other intangible assets that constitute qualifying assets are recognized (see “borrowing costs”). Property, plant, and equipment Property, plant, and equipment (IAS 16) are recognized at the cost of acquisition or production less straight-line depreciation and amortization and any impairment losses pursuant to IAS 36, where applicable. If the recoverable amount of the asset later exceeds the carrying amount after an impairment loss has been recognized pursuant to IAS 36, the asset is written up to a maximum of the recoverable amount. The write-up through profit or loss is limited to the amortized carrying amount that would have resulted if no impairment loss had been recognized in the past. Subsequent acquisition costs are capitalized. Production costs essentially include all direct costs including appropriate overheads. Borrowing costs of property, plant, and equipment that constitute qualifying assets are recognized (see “borrowing costs”). Each part of an item of property, plant, and equipment with an acquisition cost that is significant in relation to the total value of the item is measured and depreciated separately with regard to its useful life and the appropriate depreciation method. Government grants and third-party grants related to assets are included in liabilities and are released straight-line over the useful life of the asset for which the grant has been given. Grants related to income are included as other operating income through profit or loss (IAS 20). Fraport Annual Report 2015 118 Group Notes / Notes to the Consolidation and Accounting Policies Investment property Investment property (IAS 40) includes property held to earn long-term lease revenue or capital appreciation, which is not owner-occupied; it also consists of land held for a currently undetermined future use. If land as yet held for an undetermined use is now defined as being held for sale and development has begun, it is transferred to inventories; if it is intended for owner-occupation, it is transferred to property, plant, and equipment. Investment property is measured initially at the cost of acquisition or production. Subsequent measurement is at the cost of acquisition or production less regular straight-line depreciation and amortization and impairment losses according to IAS 36, where applicable. Borrowing costs of investment properties that constitute qualifying assets are capitalized (see “Borrowing costs”). Borrowing costs Borrowing costs (IAS 23) that relate to the acquisition, construction, or production of a qualifying asset are required to be capitalized as part of the acquisition/production cost of such assets. Due to the scope of Fraport’s capital expen- diture, qualifying assets are determined on the basis of planned investment measures. If the volume of the planned measures at Fraport AG exceeds €25 million, and if the construction period is more than one year, all assets produced as part of the measure are recognized as qualifying assets. Interest, financing charges in respect of finance leases, and currency differences are included in borrowing costs to the extent that they are regarded as an adjustment to interest costs. Each Group company defines its own individual criteria for what constitutes the presence of qualifying assets. Regular depreciation and amortization Regular depreciation and amortization is carried out on the basis of estimated useful technical and economic life. It takes place fundamentally on a Group-wide basis according to the straight-line method. The data on expected useful life also includes the useful lifespans of individual components. The following useful lifespans are taken as a basis: Regular depreciation and amortization in years Investments in airport operating projects Other concession and operator rights Software and other intangible assets Buildings (structural sections) Technical buildings Building equipment Ground equipment Flight operating areas Takeoff/landing runways Aprons Taxiway bridges Taxiways Other technical equipment and machinery Vehicles (including special vehicles) Other equipment, operating, and office equipment 30 – 35 4 – 39 2 – 25 3 – 80 20 – 40 12 – 38 3 – 52 7 – 99 33 – 99 80 20 – 99 2 – 33 4 – 20 2 – 25 Table 43 The expected useful life of investment property corresponds to the expected useful life of the property, which is part of property, plant, and equipment. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 119 Impairment losses pursuant to IAS 36 Impairment losses on assets are recognized pursuant to IAS 36. Assets are tested for impairment if there are indications of an impairment loss. An impairment test is carried out annually for existing goodwill. Impairment losses are recorded if the recoverable amount of the asset has fallen below its carrying amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. The value in use is the present value of the estimated future cash inflows and outflows from the use and subsequent disposal of the asset. Since it is not generally possible in the Fraport Group to allocate cash flows to individual assets, cash-generating units are formed and the existing goodwill is allocated to them. A cash-generating unit is defined as the smallest identifiable group of assets that generates separate cash inflows and outflows. Regardless of indicators for possible impairment losses, assets are subject to an annual impairment test pursuant to IAS 36. Generally the value in use is calculated as the recoverable amount. The value in use is determined by the entity through application of the discounted cash flow method. Determination of the future cash flows of the cash-generating units is based on the planning figures. The value in use is generally determined based on the future cash flows estimated on the basis of the current planning figures for the years between 2016 to 2021 as approved by the Executive Board and in effect at the time the impairment tests are made (in December of the year under review), and on the basis of the current long-term plans up to 2025 or over the respective contractual periods in the case of investments in airport operating projects and other concession and operator rights. These forecasts are based on past experience and the expected market performance. A growth rate of between 0 % and 2.0 % (previous year: 0 % to 2 %) based on the planning assumptions is taken into account in the perpetual annuity. The discount factor was a country-specific, weighted average cost of capital (WACC) after taxes of between 5.40 % and 8.82 % (previous year: 5.80 % and 9.08 %). Leasing Agreements that transfer the right to use a specific asset for a specified period of time in exchange for compensation are deemed to be leases. Fraport is both a lessor and a lessee. A decision as to whether economic ownership is assigned to the lessor (operating lease) or the lessee (finance lease) is made based on which party bears the opportunities and risks associated with the respective leased asset. Finance lease If economic ownership can be attributed to the Fraport Group as lessee, the lease is capitalized at the inception of the lease at the present value of the minimum lease payments plus any incidental costs that are paid or at the fair value of the lease object if this value is lower. This asset is depreciated straight-line over its useful life or the lease term, if this is shorter. Impairment losses are recorded against the carrying amount of the capitalized leased asset. If economic ownership cannot be attributed to the Fraport Group as the lessor, a receivable equivalent to the present value of the lease payments is recognized. Fraport Annual Report 2015 120 Group Notes / Notes to the Consolidation and Accounting Policies Operating lease If economic ownership of the leased assets remains with the lessor and Fraport AG assumes the role of the lessee, lease payments are recognized on a straight-line basis over the lease term. If Fraport assumes the role of the lessor, leased assets are capitalized at the cost of acquisition or production and regularly depreciated and amortized on a straight- line basis. Lease revenue is generally recognized on a linear straight-line over the lease term. Investments in companies accounted for using the equity method Investments in joint ventures and associated companies are recognized at the pro rata share of equity, including good- will. Impairment losses are recorded if the recoverable amount is lower than the carrying amount. The investments are tested for impairment annually. Other financial assets Other financial assets include securities, loans with a remaining term of more than one year, and other investments. Other financial assets are recognized at fair value on the settlement date, i.e., at the time the asset is created or trans- ferred, plus transaction costs. Non-current low-interest or interest-free loans are recognized at their present value. The subsequent valuation of financial assets depends on the respective category pursuant to IAS 39 (see note 42). Securities are allocated to the “available for sale” category. Securities exclusively comprise debt instruments. Subsequent measurement is at fair value, taking into account the effective interest method, where changes in value are included directly in shareholders’ equity without affecting profit or loss. Loans are assigned to the “loans and receivables” category. These financial instruments are subsequently measured at amortized cost of acquisition using the effective interest method. Other investments are allocated to the “available for sale” category. They are recognized at fair value as long as they can be reliably calculated, and the gains or losses are included directly in shareholders’ equity without affecting profit or loss. When deciding whether to dispose of a financial asset as a result of a contractual amendment, quantitative and qual- itative criteria are taken into account. Other receivables and financial assets Other receivables and financial assets mainly consist of trade accounts receivable, receivables from banks, other financial and non-financial receivables, as well as derivatives and marketable securities with a remaining term of less than one year. These assets are recognized on the settlement date, i.e., at the time the asset is created or economic ownership is transferred, at fair value plus transaction costs. Trade accounts receivable, accounts receivable from banks, and all other financial receivables with fixed or ascertainable payments that are not listed in an active market are assigned to the “loans and receivables” category. Subsequent measurement is carried out at amortized cost of acquistion, based on the effective interest method. Receivables in foreign currencies are translated at the exchange rate on the balance sheet date. Securities are allocated to the “available for sale” category. The financial debt instruments are measured at fair value, according to the effective interest method. Changes of value are included directly in shareholders’ equity without affecting profit or loss. Securities largely comprise debt instruments. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 121 Impairment losses of financial assets On each balance sheet date, the carrying amounts of financial assets which are not measured at fair value through profit or loss are assessed to see whether there is any objective evidence (such as considerable financial difficulties of the debtor, high probability of insolvency proceedings against the debtor, or a permanent decline of the fair value below amortized cost) that the asset may be impaired. In general, impairment losses are recognized through profit or loss by directly reducing the carrying amount of the financial asset. The impairment loss of trade accounts receivable is recognized in an item-by-item allowance account through profit or loss. If there is an indication in subsequent periods that the reasons for an impairment loss no longer exist, a write-up is recognized through profit or loss. If an already impaired receivable is designated as non-recoverable, the asset is derecognized. Impairments of equity instruments in the “Available for sale” category are recognized through profit or loss if there is a prolonged decline in fair value below cost of acquisition. If in subsequent periods, as a result of events that took place after the date of recognition of the impairment, the fair value has objectively increased, reversals of impairment losses must be carried out in the corresponding amount and recognized directly in equity. Inventories Inventories include work-in-process, raw materials, consumables, supplies, and property held for sale within the ordinary course of business. Work-in-process, raw materials, consumables, and supplies are measured at the lower of acquisition or production cost or net realizable value. Acquisition or production costs are generally calculated using the average cost method. Production costs include direct costs and adequate overheads. Property held for sale within the ordinary course of business is also measured at the lower of acquisition or production cost or net realizable value. The subsequent production cost required for land development is estimated for the entire marketable land area on the basis of specific cost unit rates for individual development measures. Depending on the land sales recognized in the respective reporting year, the development costs are allocated on a pro rata basis to the remaining land area to be sold. Net realizable value is the estimated selling price less the costs incurred until the time of sale, and discounted over the planned selling period. External reports on the fair value of the land being sold, as well as information about previous land sales, form the basis for the calculation of the estimated selling price. Where the inventories constitute qualifying assets, the borrowing costs are capitalized. If a write-down made in previous periods is no longer necessary, a write-up is recognized. Fraport Annual Report 2015 122 Group Notes / Notes to the Consolidation and Accounting Policies Cash and cash equivalents Cash and cash equivalents basically include cash, cash accounts, and short-term cash deposits with banks maturing in three months or less. Cash deposits and cash equivalents with a term of more than three months from the time of acquisition are recorded in this item if their values do not fluctuate significantly and they can be liquidated at any time without deduction for risk. Cash and cash equivalents are recognized at nominal value. Cash in foreign currencies is translated at the exchange rate on the balance sheet date. Non-current assets held for sale Non-current assets held for sale are recognized at either the carrying amount or at fair value less costs to sell, whichever is the lower amount. Accounting of taxes on income Taxes on income are recognized using the liability method pursuant to IAS 12. All tax expenses and refunds directly related to income are recorded as taxes on income. These also include withholding taxes, penalties, and interest n retroactively assessed taxes from the date it appears probable that a reduction of taxes will be denied. Current taxes are recognized on the date when the liability for taxes on income is incurred. Deferred taxes are recognized pursuant to IAS 12 using the liability method based on temporary differences on a case by case basis. Deferred taxes are recognized for temporary differences between the IFRS and tax financial positions of the single entities, and differences arising from unused, utilizable loss carry-forwards and consolidation transactions. The recognition of goodwill that is not deductible for tax purposes does not lead to deferred taxes. If the carrying amount of an asset in the IFRS financial position exceeds its tax base (e.g., non-current assets depreciated on a straight-line basis), and if the difference is temporary, a deferred tax liability is recognized. Pursuant to the IFRS, deferred tax assets are recognized from financial position differences and for carry-forwards of unused tax losses, to the extent that it is probable that taxable profit will be available, against which the unused tax losses and unused tax credits can be utilized. Deferred taxes are calculated at future tax rates insofar as these have already been legally established and/or the legis- lative process is largely completed. Changes in deferred taxes on the financial position generally lead to deferred tax income or expense. When transactions resulting in a change to deferred taxes are recorded directly in shareholders’ equity without affecting profit or loss, the change to deferred taxes is also included directly in shareholders’ equity without affecting profit or loss. No deferred tax liabilities are recognized for temporary differences in connection with shares in subsidiaries and joint ventures if Fraport can control the timing of the reversal and it is not expected that these differences will reverse in the foreseeable future. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 123 Provisions for pensions and similar obligations The provisions for pensions relate to defined benefit plans and have been calculated in accordance with IAS 19 under the application of actuarial methods and an interest rate of 2.20 % (previous year: 2.10 %). For the calculation of the interest expense from the defined benefit plans and the income from plan assets, the same interest rate is used as a basis. Remeasurements resulting from the change in the interest rate or from the difference between actual and computed income from plan assets, for example, are recognized in other comprehensive income (OCI) as non-reclassifiable. The present value of the defined benefit obligation (DBO) is calculated annually by an independent actuary using the projected unit credit method. The calculation takes place by discounting the future estimated cash outflows with the interest rate from industry bonds of the highest creditworthiness. The industry bonds are denominated in the currency of the distribution amounts and show the relevant maturities of the pension liabilities. If benefit claims from the defined benefit plans are covered by plan assets in the form of reinsurance, the fair value of the plan assets is netted with the DBO. Benefit claims that are not covered by plan assets are recognized as pension provisions. As in the previous year, the calculations did not include salary increases for the active members of the Executive Board. For former members of the Executive Board pensions are valued in accordance with the “Gesetz über die Anpassung von Dienst- und Versorgungsbezügen in Bund und Ländern 2003/2004” (BBVAnpG). The calculation of provisions for pensions was based on the 2005G mortality tables of Professor Heubeck. The service cost and net interest are recognized in personnel expenses. With regard to the description of the various plans, see note 38. Provisions for taxes Provisions for current taxes are recognized for tax expected to be payable in the reporting year and/or previous years taking into account anticipated risks. Other provisions Provisions represent liabilities that are uncertain with regard to amount and/or maturity. Other provisions are recog- nized in the amount required to settle the obligations. The amount recognized represents the most probable value. Provisions are recognized to the extent that there is a current commitment to third parties. In addition, they must be the result of a past event, lead to a future cash outflow, and more likely than not be needed to settle the obligation (IAS 37). Refund claims toward third parties are capitalized separately from the provisions as “other receivables”, provided that their realization is virtually certain. Fraport Annual Report 2015 124 Group Notes / Notes to the Consolidation and Accounting Policies Non-current provisions with terms of more than one year are discounted at a capital market interest rate with a matching maturity, taking future cost increases into account, provided that the interest effect is material. This especially applies to the provisions for passive noise abatement, which are discounted over a period until 2026 and according to the expected cash outflow dates of matching interest rates up to a maximum of 0.89 % (previous year: 0.82 %). The provision for partial retirement is recognized pursuant to IAS 19. The recognition of the liability from step-ups starts at the time when Fraport can legally and factually no longer withdraw from the liability. The step-up amounts are added to the liability in installments until the end of the active phase on a pro rata basis. The utilization begins with the passive phase. Contingent liabilities Contingent liabilities are possible liabilities that are based on past events, and the existence of which is only con- firmed by the occurrence of one or more indeterminate future events that are nonetheless beyond Fraport’s control. Furthermore, current obligations may constitute contingent liabilities if the probability of the outflow of resources is not sufficient for a liability to be recognized, or if the extent of the liability cannot be reliably estimated. Contingent liabilities are not recorded in the financial position, but rather shown in the notes. Liabilities Financial liabilities, trade accounts payable, and other liabilities are recorded at their fair value upon initial recog- nition. For current liabilities, this corresponds generally to the nominal value. Non-current low-interest or non- interest-bearing liabilities are carried at their present value at the time of addition less the transaction costs. Liabilities in foreign currencies are translated at the exchange rate on the balance sheet date. Finance lease liabilities are reported at the lower of the present value of the minimum lease payments and the fair value of the leased asset. Subsequent measurement of financial liabilities is based on the effective interest method at amortized acquisition cost. Each difference between the refund amount and the repayment amount is recorded in the income statement over the term of the contract in question using the effective interest method. Derivative financial instruments, hedging transactions The Fraport Group basically uses derivative financial instruments to hedge existing and future interest and exchange rate risks. Derivative financial instruments with positive or negative market values are measured at fair value in accordance with IAS 39. Changes of value on cash flow hedges are recorded in shareholders’ equity in the reserve for financial instruments without affecting profit or loss. Corresponding to this, deferred taxes on the fair values of cash flow hedges are also recorded in shareholders’ equity without affecting profit or loss. The effectiveness of the cash flow hedges is assessed on a regular basis. Ineffective cash flow hedges are recorded in the income statement through profit or loss under ‘Financial result on other items’. If the criteria for a cash flow hedge are not met, the derivative financial instruments are allocated to the “held for trading” category. In this case, the changes in the fair value and the related deferred taxes are recognized through profit or loss in the income statement. The fair value changes are recorded under ‘Financial result on other items’. Derivative financial instruments are recognized at the trading date. Treasury shares Repurchased treasury shares are deducted from the issued capital and the capital reserve. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 125 Stock options The subscription rights issued on shares of Fraport AG in connection with the contingent capital have been recognized and measured in accordance with IFRS 2. Performance takes place by issuing shares. The measurement of the share- based remuneration is based on fair value on the date the option is granted. The cost of the payment is allocated as personnel expenses over the period during which option holders have an unrestricted claim to the instruments. The share options granted within the framework of the MSOP expired in full in fiscal year 2014. The value of the remuneration within the scope of the annual employee investment plan is not based on the performance of the shares, which means that the employee investment plan does not fall within the scope of application of IFRS 2. Virtual stock options Virtual stock options have been issued since January 1, 2010 as part of the remuneration for the Executive Board and Senior Managers. This virtual stock options program (“Long-Term Incentive Program”) replaces the previous stock options program (Fraport Management Stock Options Plan 2005). They are paid out in cash immediately at the end of the performance period of four years. The measurement of virtual shares is at fair value pursuant to IFRS 2. Up to the end of the performance period, the fair value is re-determined on each reporting date and on the date of performance and is recorded in personnel expenses on a pro rata basis. Judgment and uncertainty of estimates The presentation of the asset, financial, and earnings position in the consolidated financial statements depends on accounting and valuation methods as well as assumptions and estimates. The assumptions and estimates made by the management in drawing up the consolidated financial statements are based on the circumstances and assess- ments on the balance sheet date. Although the management assumes that the assumptions and estimates applied are reasonable, there may be unforeseen changes in these assumptions that could affect the Group’s asset, financial, and earnings position. Balance sheet items for which assumptions and estimates have a significant effect on the reported carrying amount are shown below. Property, plant, and equipment Experience, planning, and estimates play a crucial role in determining the useful life of property, plant, and equipment. Carrying amounts and useful lifespans are checked on each reporting date and adjusted as required. Other financial assets The valuation of loans included in the other financial assets is based in part on cash flow forecasts. Accounts receivable For accounts receivable, the assessment of impairment depends on the probability assessment of future payment defaults. Taxes on income Fraport is subject to taxation in various countries. In assessing global income tax receivables and liabilities, estimates sometimes need to be made. The possibility cannot be ruled out that the tax authorities will come to a different tax assessment. The associated uncertainty is accounted for by recognizing uncertain tax receivables and liabilities when they are considered by Fraport to have a probability of occurring of more than 50 %. A change to the assessment, for example, as a result of final tax assessments, will have an effect on current and deferred tax items. For uncertain income tax items that have been recognized, the expected tax payment is used as a basis for the best estimate. Deferred tax assets are recognized if it is probable that future tax benefits can be realized. The actual tax earnings situation in future fiscal years, and therefore the actual usability of deferred tax assets, could differ from the forecasts at the time the deferred tax assets are recognized. Fraport Annual Report 2015 126 Group Notes / Notes to the Consolidation and Accounting Policies Provisions for pensions and similar obligations Material valuation parameters for the valuation of provisions for pensions and similar obligations are the discount factor as well as trend factors (see also note 38). Other provisions The valuation of the other provisions is subject to uncertainty with regard to estimations of amount and the time of occurrence of future cash outflows. As a result, changes in the assumptions on which the valuation is based could have a material impact on the asset, financial, and earnings position of the Fraport Group. In connection with legal disputes, Fraport draws on information and estimates provided by the Legal Affairs department and any mandated external lawyers when assessing a possible obligation to recognize provisions and when valuing potential outflows of resources. The existing provisions for passive noise abatement as at December 31, 2015 (€122.1 million; previous year: €143.5 million) and wake turbulences (€31.0 million; previous year: €42.6 million) are substantially dependent with regard to their amounts on the utilization of the underlying programs by the eligible beneficiaries. The existing provisions for compensation in accordance with nature protection laws as at December 31, 2015 (€30.2 million; previous year: €31.7 million) are dependent with regard to their amount on the extent and time of implementation of the environmental compensation measures. Contingent liabilities The contingent liabilities are subject to uncertainty with respect to estimations of their amounts and, in particular, the timing of cash outflows. The time of the expected cash outflow is specified if it can be determined sufficiently reliably. Company acquisitions When an acquired company is consolidated for the first time, all identifiable assets, liabilities, and contingent liabilities must be recognized at their fair value at the time of acquisition. One of the main estimates relates to the determi- nation of the fair value of these assets and liabilities at the time of acquisition. The measurement is usually based on independent expert reports. Marketable assets are recognized at market or stock exchange prices. If intangible assets are identified, the fair value is usually measured by an independent external expert using appropriate measurement methods which are primarily based on future expected cash flows. These measurements are considerably influenced by assumptions about the developments of future cash flows as well as the applied discount rates. The actual cash flows may differ significantly from the cash flows used as a basis for determining the fair values. Impairment losses The impairment test for goodwill and other assets within the scope of IAS 36 is based on assumptions about future developments. Fraport AG carries out these tests annually as well as when there are reasons to believe that goodwill has been impaired. In the case of cash-generating units, the recoverable amount is determined. This corresponds to the higher of fair value less costs to sell and value in use. The measurement of the value in use includes estimates regarding the forecasting and discounting of future cash flows. The underlying assumptions could change on account of unforeseeable events and may therefore impact the asset, financial, and earnings positions. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 127 In connection with the write-down on items of property, plant, and equipment in the Ground Handling segment carried out in 2009 (in the amount of €20.0 million), it may be possible for the underlying assumptions to change in the future. When assessing the impairment of carrying amounts as of December 31, 2015 (€67.3 million) sustained cost savings which will lead to an increase in the average EBITDA margin in the planning period 2016 to 2025 of 9.8 % were taken into account. Should these cost savings not be realized as planned, a significant adjustment of the carrying amounts may be necessary. Specific estimates or assumptions for individual accounting and valuation methods are explained in the relevant sec- tion. These are based on the circumstances and estimates on the balance sheet date, and in this respect also affect the amount of the reported income and expense amounts of the fiscal years shown. New standards, interpretations, and changes Of the new standards, interpretations and changes, Fraport generally applies those for which application was mandatory; i.e., those applicable to fiscal years beginning on or before January 1, 2015. On May 20, 2013, the IASB published an interpretation on accounting for public levies, IFRIC 21. The interpretation regulates accounting for payment liabilities for public levies, that are not levies pursuant to IAS 12 “Taxes on income”. According to IFRIC 21, a liability is recognized in the annual financial statements as soon as the event occurs, that gives rise to the payment liability. IFRIC 21 was adopted under EU law on June 14, 2014, and enters into force in the EU for fiscal years starting on or after June 17, 2014. The provisions of IFRIC 21 have not had a material impact on the presentation of the asset, financial and earnings position of the Fraport Group. On December 12, 2013, the IASB published the “Improvements to IFRS 2011 – 2013” (Annual Improvements). The changes relate to the following in detail: IFRS 3 in respect of the exemption from the application scope for the creation of a joint agreement in the financial statements of the jointly controlled entity itself, IFRS 13 in relation to the applica- tion scope of what is known as the portfolio exception, and IAS 40 regarding answering the question of whether the acquisition of investment property constitutes a merger combination, with the regulations of IFRS 3 being relevant. The “Improvements to IFRS 2011 – 2013” were accepted into European law on December 19, 2014 and are to be first applied in the reporting periods starting on or after January 1, 2015. The “Improvements to IFRS 2011 – 2013” have not had any impact on the presentation of the asset, financial and earnings position of the Fraport Group. Fraport Annual Report 2015 128 Group Notes / Notes to the Consolidation and Accounting Policies Standards which have not been applied prematurely For the following new or amended standards and interpretations, which the Fraport Group is not obliged to adopt until future fiscal years, there will be no early application. Unless otherwise specified, the effects on the Fraport Group’s financial statements are assessed presently. Standards, interpretations, and amendments published and accepted into European law by the EU Commission On November 21, 2013, the IASB published changes to IAS 19 “Employee Benefits” under “Defined Benefit Plans: Employee Contributions”. This clarifies how contributions that are paid by employees (or third parties) themselves for the service components are recorded in the accounting by the company issuing the commitment. In the past, with the application of IAS 19 (old version), the nominal amount of employee contributions was frequently deducted from the service cost in the period in which the respective period of service was rendered. This accounting practice can be maintained if the amount of the contributions is independent of the number of years of service. For example, these include amounts that are defined as a fixed percentage rate of annual salary. The amendments to IAS 19 were adopted into European law on January 9, 2015, and, unlike the initial application under IASB (years under review beginning on or after July 1, 2014), are only to be applied in years under review beginning on or after February 1, 2015. Earlier application is permitted. The amendments will not have a material impact on the reporting of the asset, financial, and earnings position of the Fraport Group. On December 12, 2013, the IASB published the “Improvements to IFRS 2010 – 2012”. The “Improvements to IFRS 2010 – 2012” relate in detail to: IFRS 2 regarding the definition of “vesting conditions” and “service conditions” for transactions where services are received as well as the treatment of vesting conditions, IFRS 3 regarding the accounting of conditional purchase price payments for company acquisitions, IFRS 8 regarding notes disclosures in relation to the merger of business segments and regarding the reconciliation of segment assets to Group assets, IAS 16 regarding the proportional adjustment of cumulative depreciation when using the remeasurement method, IAS 24 regarding the definition of “related companies” and its influence on the interpretation of the term “members of management in key positions”, and IAS 38 regarding the proportional adjustment of cumulative depreciation when using the remeasure- ment method. The “Improvements to IFRS 2010 – 2012” were accepted into European law on January 9, 2015 and are to be first applied in the reporting periods starting on or after February 1, 2015. The impact of the new regulations on the consolidated financial statements of Fraport AG is currently being assessed. On May 6, 2014, the IASB approved amendments to IFRS 11 “Joint Arrangements”. For the purchase of interests in jointly controlled operations that constitute a business combination as defined by IFRS 3 “Business Combinations”, the provisions and disclosure requirements of IFRS 3 apply. The changes are to be applied prospectively for purchases of interests that take place in the reporting periods starting on or after January 1, 2016. The amendments will not have a material impact on the reporting of the asset, financial, and earnings position of the Fraport Group in future. Fraport Annual Report 2015 Group Notes / Notes to the Consolidation and Accounting Policies 129 On May 12, 2014, the IASB published amendments to IAS 16 “Property, Plant, and Equipment” and IAS 38 “Intangible Assets”. The changes include guidelines for determining proper depreciation methods for property, plant, and equip- ment and intangible assets. Accordingly, depreciations and amortizations must reflect the use of the future economic benefit generated by the assets as expected by the company. The amendments are to be applied prospectively to fiscal years starting on or after January 1, 2016. Earlier application is permitted. The amendments will not have a material impact on the reporting of the asset, financial, and earnings position of the Fraport Group in future. On September 25, 2014, the IASB published the “Improvements to IFRS 2012 – 2014”. The changes particularly affect clarifications regarding the interpretation of the following standards: IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, IFRS 7 “Financial Instruments: Disclosures”, IAS 19 “Employee Benefits”, and IAS 34 “Interim Financial Reporting”. The changes enter into force for fiscal years beginning on or after January 1, 2016; voluntary early application is permitted. The amendments will not have a material impact on the reporting of the asset, financial, and earnings position of the Fraport Group in future. On December 18, 2014, the IASB published changes to IAS 1 “Presentation of Financial Statements”. The aim of the changes is to remove non-essential information from IFRS financial statements and to promote the provision of relevant data. Accordingly, non-essential information does not also need to be shown separately if it is explicitly required to be shown by a standard. Furthermore, the changes particularly affect explanations on the aggregation of end-of-year items, the presentation of the result accounted for using the equity method in the statement of comprehensive income, and options for structuring the notes. The changes enter into force for fiscal years beginning on or after January 1, 2016; voluntary early application is permitted. The amendments will not have a material impact on the reporting of the asset, financial, and earnings position of the Fraport Group. Standards, interpretations and amendments that have been published but not yet adopted into European law by the EU Commission On May 28, 2014, the IASB published the new standard IFRS 15 “Revenue from Contracts with Customers”. The objective of the new standard for recognition of revenue is to bring together existing regulations and to set standard- ized basic principles that are applicable to all sectors and categories of revenue. According to IFRS 15, revenue must be recognized when the customer receives the authority to dispose of the agreed goods and services and is able to draw benefits from them. The recognition of revenue is determined using a five-stage schematic and a range of further detailed regulations, such as the illustration of contract costs. IFRS 15 will replace IAS 11 “Construction Contracts” and IAS 18 “Revenue” as well as the associated interpretations. Subject to its adoption into European law and after postponement of the initial application date by the IASB, IFRS 15 is to be first applied for fiscal years starting on or after January 1, 2018. The early application of IFRS 15 is still permitted. On the basis of initial analyses, no material impact on the consolidated financial statements is expected. Fraport Annual Report 2015 130 Group Notes / Notes to the Consolidation and Accounting Policies On July 24, 2014, the IASB published the fourth and final version of the new IFRS 9 “Financial Instruments”. The accounting and measurement of financial instruments pursuant to IFRS 9 will supersede IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces a standardized approach to categorizing and measuring financial assets on the basis of their cash flow characteristics and of the business models according to which they are managed. In principle, IFRS 9 provides for the models: “Hold to obtain contractual cash flows”, “hold and sell” and “intention to trade”. The impairment losses of financial assets are not only recognized for incurred losses; expected losses must also be recorded. In principle, financial liabilities are categorized and measured as before. For liabilities designated at fair value, changes to the fair value, provided that they are due to changes in own credit risk, are no longer recorded in the income statement but rather under other comprehensive income. For the recognition of hedge accounting, IFRS 9 contains new regulations geared towards a company’s risk management activities, particularly in relation to the management of non-financial risks. The new IFRS 9 is to be applied to fiscal years starting on or after January 1, 2018; early voluntary early application is permitted. The effects of the new IFRS 9 regulation on the consolidated financial statements of Fraport AG are currently still being assessed. On September 11, 2014, the IASB published amendments to IAS 28 “Investments in Associates and Joint Ventures” and IFRS 10 “Consolidated Financial Statements”. The changes relate to the sale or contribution of assets to/in an associated company or joint venture. In future, the net income or loss from such transactions should only be recorded if the assets sold or contributed constitute a business operation for the purposes of IFRS 3. If the assets do not constitute a business operation, only a pro rata recording of results is permitted. The originally intended date of initial application for fiscal years starting on or after January 1, 2016 has been postponed indefinitely by the IASB. On January 13, 2016 the IASB published the accounting standard IFRS 16 “Leases”. IFRS 16 contains the new rules on accounting for leases and replaces the current IAS 17. The new rules are mandatory for fiscal years starting on or after January 1, 2019. Earlier application is permitted provided IFRS 15 is also applied. The effects of the new IFRS 16 regulation on the consolidated financial statements of Fraport AG are currently still being assessed. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Income Statement 131 Notes to the Consolidated Income Statement 5 Revenue Revenue € million Aviation Airport charges Security services Other revenue Retail & Real Estate Real Estate Retail Parking Other revenue Ground Handling Ground Services Infrastructure charges External Activities & Services Total 2015 2014 768.9 117.5 40.9 927.3 183.7 209.2 81.9 13.4 488.2 375.8 297.3 673.1 510.3 731.8 109.4 43.0 884.2 179.4 193.1 77.7 5.5 455.7 380.6 275.6 656.2 398.5 2,598.9 2,394.6 Table 44 Information on revenue can be found in the management report under the chapter “Results of Operations” as well as the segment reporting (see note 43). The segment Retail & Real Estate includes revenue from operating leases. The revenue-related surface rentals recog- nized in the fiscal year amount to €174.7 million (previous year: €164.7 million). The operating leases mainly relate to the renting of buildings, land, terminal areas and offices. The contract term ends in 2070 at latest. No purchase options have been agreed upon. As in the previous year, the remaining term of hereditary building rights contracts was 43 years on average. No purchase options exist for these, either. The acquisition and production costs of the leased buildings and land amounts to €424.3 million (previous year: €425.7 million). Cumulative depreciation and amortization came to €297.6 million (previous year: €293.2 million), of which depreciation and amortization amounted to €6.4 million for the fiscal year (previous year: €8.2 million). Revenue in the External Activities & Services segment includes contract revenue from construction and expansion services related to airport operating projects abroad in the amount of €15.1 million (previous year: €10.8 million). Fraport Annual Report 2015 132 Group Notes / Notes to the Consolidated Income Statement The total amount of future income from minimum lease payments arising from non-cancelable leases is as follows: Minimum lease payments € million Remaining term < 1 year 1 – 5 years > 5 years Total 2015 Minimum lease payments 92.8 187.5 784.2 1,064.5 € million Remaining term < 1 year 1 – 5 years > 5 years Total 2014 Minimum lease payments 88.8 198.9 833.5 1,121.2 Table 45 The total future income from minimum leasing payments under subleasing arrangements amounted on the reporting date to €1.8 million (previous year: €2.1 million). 6 Change in work-in-process Change in work-in-process € million Change in work-in-process 2015 0.5 2014 0.6 Table 46 The change in work-in-process relates to work-in-process as well as to land and buildings for sale. 7 Other internal work capitalized Other internal work capitalized € million Other internal work capitalized 2015 29.9 2014 28.3 Table 47 The other internal work capitalized primarily relates to engineering, planning, and construction services and services of commercial project managers, as well as other performance work. The internal work capitalized primarily arose as part of the expansion program and for the expansion of the airport infrastructure at Frankfurt Airport. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Income Statement 133 8 Other operating income Other operating income € million Releases of provisions Income from compensation payments Income from deconsolidations Releases of special items for investment grants Releases of allowances Gains from disposal of non-current assets Others Total The release of provisions mainly relates to current provisions for rebates and refunds. Income from deconsolidations relates to the sale of Air Transport IT (see also Note 2). 9 Cost of materials Cost of materials € million Cost of raw materials, consumables, supplies, and real estate inventories Cost of purchased services Total 2015 22.4 2.3 8.0 1.3 0.9 0.6 14.3 49.8 2014 17.2 1.1 0.0 1.3 3.6 2.3 17.0 42.5 Table 48 2015 2014 – 77.3 – 533.1 – 610.4 – 77.1 – 456.2 – 533.3 Table 49 Among other things, the cost of raw materials, consumables, supplies, and real estate inventories includes production costs for finished property. The proceeds already realized are included under revenue in the Retail & Real Estate segment. In the context of the airport operating projects outside of Germany (see also note 50) the cost of purchased services includes accrued revenue-related concession charges of €130.8 million (previous year: €102.8 million), as well as order costs for construction and expansion services in the amount of €15.1 million (previous year: €10.8 million). Fraport Annual Report 2015 134 Group Notes / Notes to the Consolidated Income Statement 10 Personnel expenses and number of employees Personnel expenses and average number of employees € million Remuneration for staff Social security and welfare expenses Pension expenses Total 2015 2014 – 832.8 – 150.1 – 43.8 – 1,026.7 – 783.4 – 143.6 – 43.4 – 970.4 Average number of employees 2015 2014 Permanent employees Temporary staff (interns, students, and scholars) Total 19,770 950 20,720 19,307 1,088 20,395 Table 50 Additions to pension provisions and additions to obligations arising from time-account models are included in personnel expenses. 11 Depreciation and amortization Depreciation and amortization € million Composition of depreciation and amortization Investments in airport operating projects Other intangible assets Property, plant, and equipment regular non-regular Investment property Total 2015 2014 – 25.8 – 16.9 – 282.4 – 2.1 – 1.1 – 328.3 – 23.3 – 12.3 – 271.4 0.0 – 0.3 – 307.3 Table 51 Regular depreciation and amortization The useful lives of some assets were remeasured in the year under review, resulting in increased depreciation and amortization of €4.6 million (previous year: €5.6 million) and reduced depreciation and amortization of €10.5 million (previous year: €5.5 million). Impairment losses pursuant to IAS 36 The non-regular depreciation and amortization recorded in the year under review relate to the property, plant, and equipment of FCS and result from a company valuation carried out in connection with the disposal of shares in the company (see also Note 2). Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Income Statement 135 12 Other operating expenses Other operating expenses € million Insurances Consulting, legal, and auditing expenses Rental and lease expenses Costs for advertising and representation Other taxes Losses from disposal of non-current assets Expenses from obligations to environmental and local areas Write-downs of trade accounts receivable Others Total 2015 – 25.3 – 15.4 – 14.1 – 19.3 – 10.3 – 5.9 – 3.0 – 11.5 – 88.4 – 193.2 2014 – 24.7 – 19.7 – 19.2 – 15.7 – 9.6 – 3.2 – 3.2 – 1.2 – 75.7 – 172.2 Table 52 Rental and lease expenses include minimum lease payments in the amount of €9.5 million (previous year: €14.4 million) and expenses arising from subleases of €0.3 million (previous year: €0.1 million). In the fiscal year, contingent rental payments of €0.3 million (previous year: none) were accrued. Among other things, other operating expenses include: travel costs, office supplies, course and seminar fees, enter- tainment expenses, administration fees, postage, and costs from compensation payments. The consulting, legal, and auditing expenses include Group auditor fees (disclosed in accordance with Section 314 (1) no. 9 HGB) amounting to €1.8 million (previous year: €1.9 million). They are comprised as follows: Group auditor fees € million Audit services Other certification services Tax audit services Other benefits Total Fraport AG 2015 Consolidated companies Fraport AG 2014 Consolidated companies 1.4 0.1 0.0 0.0 1.5 0.3 0.0 0.0 0.0 0.3 1.2 0.2 0.0 0.2 1.6 0.3 0.0 0.0 0.0 0.3 Table 53 Fraport Annual Report 2015 136 Group Notes / Notes to the Consolidated Income Statement 13 Interest income and interest expenses Interest income and interest expenses € million Interest and similar income Interest and similar expenses 2015 2014 30.6 – 156.2 35.6 – 176.7 Table 54 Interest income and interest expenses include interest from non-current loans and time deposits as well as interest expenses and interest income from interest cost added back on non-current liabilities, provisions, and non-current assets. The net interest payments of derivative financial instruments as well as interest income from securities are recorded as interest result. Interest income and interest expenses for financial instruments, which are not recognized at fair value € million Interest income from financial instruments Interest expenses from financial instruments 14 Result from companies accounted for using the equity method The result from companies accounted for using the equity method breaks down as follows: Result from companies accounted for using the equity method € million Joint ventures Associated companies Total 15 Other financial result The other financial result breaks down as follows: Other financial result € million Income Foreign currency translation rate gains, unrealized Foreign currency translation rate gains, realized Valuation of derivatives Other Total Expenses Foreign currency translation rate losses, unrealized Foreign currency translation rate losses, realized Valuation of derivatives Other Total Total other financial result 2015 2014 26.9 – 151.1 27.9 – 165.3 Table 55 2015 30.5 7.1 37.6 2014 39.2 4.3 43.5 Table 56 2015 2014 2.4 3.8 7.7 0.8 14.7 – 8.2 – 5.1 0.0 – 0.1 – 13.4 1.3 2.2 1.2 0.1 0.2 3.7 – 2.9 – 1.4 – 8.2 – 1.7 – 14.2 – 10.5 Table 57 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Income Statement 137 16 Taxes on income Income tax expense breaks down as follows: Taxes on income € million Current taxes on income Deferred taxes on income Total 2015 2014 – 131.5 – 5.3 – 136.8 – 113.2 – 9.7 – 122.9 Table 58 Current income tax expense consists of current taxes on income for the year under review and taxes on income for previous years. Current income tax expense for Fraport AG for the 2015 fiscal year amounts to €101.0 million (previous year: €88.8 million), €12.0 million of which relates to previous years (previous year: €0.0 million). The tax expenses include corporation and trade income taxes, the solidarity surcharge of the companies in Germany, and comparable taxes on income of the foreign companies. The effective taxes result from the taxable results of the fiscal year and any revisions to previous assessment periods, to which the local tax rates of the respective Group company are applied. Deferred taxes are generally valued on the basis of the tax rate applicable in the respective country. A combined income tax rate of around 31 % including trade taxes, unchanged from the previous year, has been applied to German companies. Deferred taxes are recognized for all temporary differences between the tax and IFRS financial statements and for the utilizable carry-forwards of unused tax losses. In the previous year, €2.0 million deferred tax assets were formed. These related to a Group company that had generated losses in the prior year and in past years, as it was assessed as being of value based on the planning. The company was deconsolidated in the year under review. The probability of the future use of the losses carried forward is decisive for the evaluation of the recoverability of deferred tax assets. This depends on whether future taxable profits will be available in the periods in which the carry-forward of unused tax losses can be utilized. As at December 31, 2015, based on current information, the Fraport Group had non-utilizable tax loss carry-forwards forward in the amount of €5.0 million (of which €5.0 million related to trade taxes and €0.0 million to corporation taxes; previous year: €20.6 million, of which €10.3 million trade taxes and €10.3 million corporation taxes). Loss carry-forwards that are not expected to be utilizable are due to Fraport Immobilienservice und -entwicklungs GmbH & Co. KG and can be carried forward indefinitely. For temporary differences in connection with shares in subsidiaries amounting to €186.3 million (previous year: €152.4 million), no deferred tax liabilities were recognized, as Fraport can control the timing of the reversal and it is not expected that these differences will reverse in the foreseeable future. These potential deferred tax liabilities are, however, limited to 1.55 % of the difference as well as local withholding taxes in the case of future dividend payments from certain foreign subsidiaries. In addition, deferred taxes result from consolidation measures. Pursuant to IAS 12, no deferred tax is recognized in the context of initial consolidation with respect to goodwill capitalized or any impairment losses of goodwill. Deferred tax assets and liabilities are netted insofar as these income tax claims and liabilities relate to the same tax authority and to the same taxable entity or a group of different taxable entities that, however, are assessed jointly for income tax purposes. Fraport Annual Report 2015 138 Group Notes / Notes to the Consolidated Income Statement Deferred taxes resulting from temporary differences between tax financial valuation and assets/liabilities accounted according to IFRS are assigned to the following financial position items: Allocation of deferred taxes € million Investments in airport operating projects Other intangible assets Property, plant, and equipment Financial assets Accounts receivable and other assets Provisions for pensions and similar obligations Other provisions Liabilities Financial derivatives Losses carried forward Total separate financial statements Offsetting Consolidation measures Statement of financial position 2015 2014 Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities 0.0 0.0 0.5 0.2 7.5 6.2 27.3 56.5 21.0 0.0 119.2 – 85.8 0.0 33.4 – 10.6 – 29.3 – 210.5 0.0 – 0.9 0.0 – 1.4 – 2.1 – 0.1 0.0 – 254.9 85.8 – 3.1 – 172.2 0.0 1.4 1.3 1.9 2.8 7.0 26.3 59.9 28.9 0.8 130.3 – 99.2 0.0 31.1 – 10.3 – 29.7 – 203.2 0.0 – 6.5 0.0 – 1.7 – 3.0 – 0.1 0.0 – 254.5 99.2 – 3.4 – 158.7 Table 59 The vast majority of the deferred tax assets and liabilities result from non-current assets (investments in airport operating projects, other intangible assets, property, plant, and equipment) and non-current liabilities (concession liabilities and non-current provisions, such as provisions for noise abatement measures). Over the fiscal year, equity-decreasing deferred taxes in the amount of €7.9 million (previous year: €4.8 million) from the change in the fair values of financial derivatives and securities were recognized directly in shareholders’ equity without affecting profit or loss. Further equity-reducing deferred taxes resulted primarily from the revaluation of defined benefit plans in the amount of €0.4 million (previous year: equity-increasing deferred taxes of €1.7 million). The following reconciliation shows the relationship between expected tax expense and tax expense in the consolidated income statement: Tax reconciliation € million Earnings before taxes on income Expected tax income/expense 1) Tax effects from differences in foreign tax rates Taxes on non-deductible operating expenses Non-creditable non-German withholding tax Permanent differences including non-deductible tax provisions Results of companies accounted for using the equity method Non-utilizable tax losses carried forward Trade effects and other effects from local taxes Other Taxes on income according to the income statement 1) Expected tax rate around 31 %, for corporation tax 15.0 % plus solidarity surcharge 5.5 % and trade taxes of around 15.5 % (unchanged compared to previous year ). The consolidated tax rate for the 2015 fiscal year is 31.5 % (previous year: 32.8 %). 2015 2014 433.8 – 134.5 12.3 – 1.3 – 1.6 – 18.0 11.6 0.0 – 4.5 – 0.8 – 136.8 374.7 – 116.2 7.8 – 1.2 0.0 – 19.5 13.5 – 1.8 – 5.1 – 0.4 – 122.9 Table 60 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Income Statement / Notes to the Consolidated Financial Position 139 17 Earnings per share Earnings per share basic 2015 diluted basic 2014 diluted Group result attributable to shareholders of Fraport AG in € million 276.5 276.5 234.7 234.7 Weighted average number of shares 92,289,839 92,548,167 92,240,662 92,541,318 Earnings per €10 share in € 3.00 2.99 2.54 2.54 Table 61 The basic earnings per share for the 2015 fiscal year were calculated using the weighted average number of floating shares, each corresponding to a €10 share of the capital stock. Due to the capital increase, the number of floating shares during the period rose from 92,265,383 to 92,307,711 as at December 31, 2015. With a weighted average number of 92,289,839 shares, the basic earnings per €10 share amounted to €3.00. As a result of the rights granted to employees to buy shares (authorized capital) within the scope of the employee investment plan, the diluted number of shares amounts to 92,548,167 (weighted average) and the diluted earnings per €10 share are therefore €2.99. Notes to the Consolidated Financial Position The composition and development of goodwill, investments in airport operating projects, other intangible assets, property, plant, and equipment, and investment property are shown in the Consolidated Statement of Changes in Non-Current Assets. 18 Goodwill Goodwill arising from consolidation relates to: Goodwill € million FraSec Aerodrom Ljubljana AMU Holdings Inc. Media Total Carrying amount December 31, 2015 Carrying amount December 31, 2014 22.4 18.0 1.0 0.3 41.7 22.4 18.0 1.0 0.3 41.7 Table 62 The following table provides an overview of the assumptions incorporated in the main goodwill impairment tests: Goodwill impairment test Designation CGU Carrying amount Goodwill Discount rate before taxes Growth rate of perpetual annuity Average revenue growth in detailed planning period Average EBITDA margin in detailed planning period Detailed planning period FraSec €22.4 million Aerodrom Ljubljana €18.0 million 8.6 % 8.2 % 1.0 % – – 2.6 % 1.5 % 2016 to 2025 – 2016 to 2053 Table 63 Fraport Annual Report 2015 140 Group Notes / Notes to the Consolidated Financial Position The parameters used within the scope of the impairment tests are based on the current plan approved by the Executive Board. This takes account of internal empirical values and external economic framework data. The revenue forecasts used to determine growth assumptions are based in particular on expected air traffic trends derived from external market forecasts and expected order development. A variation in the discount rate of +0.5 percentage points, growth forecasts of – 0.5 percentage points or in the average EBITDA margin (FraSec) of – 10 % will not affect the recoverability of the reported goodwill. The planning period that forms the basis for the FraSec impairment test is subdivided into a plan for 2016 – 2021 approved by the Executive Board and the Supervisory Board and an additional long-term plan up to 2025. The back- ground for the planning period is capacity expansion at Frankfurt Airport. Accordingly the detailed planning period for the free cash flows will be extended until 2025. It is expected that the situation will be stable from this year, which means that subsequently a perpetual annuity can be determined. The planning period on which the impairment test for Ljubljana Aerodrome is based corresponds to the term of the right derived from a long-term land use contract to operate the airport in Ljubljana. 19 Investments in airport operating projects Investments in airport operating projects € million Investments in airport operating projects December 31, 2015 December 31, 2014 500.9 479.2 Table 64 Investments in airport operating projects comprise minimum concession payments capitalized due to the applica- tion of IFRIC 12 (see also note 4 and note 50) of €296.9 million (previous year: €298.0 million) and incurred capital expenditure of €204.0 million (previous year: €181.2 million). They relate to the terminal operation at the concession airports in Lima at €315.8 million (previous year: €288.4 million) and in Varna and Burgas at €185.1 million (previous year: €190.8 million). 20 Other intangible assets Other intangible assets € million Other concession and operator rights Software and other intangible assets December 31, 2015 December 31, 2014 101.5 59.7 161.2 100.4 56.7 157.1 Table 65 The other concession and operator rights include the right derived from an existing, long-term land use contract to operate the airport in Ljubljana (€62.8 million, previous year: €64.6 million) with a residual term of 38 years and the concession rights shown in the balance sheet of the AMU Group (€38.7 million, previous year: €36.0 million) in the retail sector with residual terms of up to 14 years. The other intangible assets included as of the reporting date internally generated intangible assets with residual car- rying amounts of €12.7 million. The capitalized manufacturing costs are attributable in full to the development phase. The depreciation and amortization is carried out on a straight-line basis taking into account the scheduled useful lives between two and 16 years. Depreciation and amortization in the fiscal year amounted to €1.9 million. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 141 21 Property, plant, and equipment Property, plant, and equipment € million Land, land rights, and buildings, including buildings on leased lands Technical equipment and machinery Other equipment, operating, and office equipment Construction in progress Total December 31, 2015 December 31, 2014 3,569.1 1,676.9 162.0 637.4 6,045.4 3,666.3 1,735.9 159.4 566.1 6,127.7 Table 66 Additions in the 2015 fiscal year amounted to €235.3 million. Of this, €63.1 million was attributable to projects relating to the capacitive expansion of Frankfurt Airport. Borrowing costs were capitalized in the amount of €15.7 million (previous year: €15.0 million). These borrowing costs were used for capital expenditure whose financing could not be clearly classified for the purpose of creating a specific qualifying asset. The cost of debt for general project financing was approximately 4.5 % on average (previous year: around 4.3 %). Borrowing costs were mainly incurred for projects relating to the capacitive expansion of Frankfurt Airport. As in the previous year, no borrowing costs were incurred from concrete project financing. As at the balance sheet date, property, plant and equipment with a carrying amount totaling €10.3 million carry mortgages (previous year: €13.0 million). Assets from finance lease contracts amounting to €23.8 million were recognized in property, plant, and equipment at the balance sheet date (previous year: €44.0 million): Finance lease contracts (2015) € million Carrying amount January 1, 2015 Additions Disposals Depreciation and amortization Carrying amount December 31, 2015 Land, land rights and buildings, including buildings on leased land Technical equipment and machinery Other equipment, operating and office equipment Total 20.1 23.8 0.1 44.0 0.0 0.0 0.1 0.1 7.6 3.7 0.0 11.3 2.1 6.8 0.1 9.0 10.4 13.3 0.1 23.8 Table 67 Finance lease contracts (2014) € million Carrying amount January 1, 2014 Additions Disposals Depreciation and amortization Carrying amount December 31, 2014 Land, land rights and buildings, including buildings on leased lands Technical equipment and machinery Other equipment, operating and office equipment Total 22.6 30.6 0.1 53.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 6.8 0.0 9.3 20.1 23.8 0.1 44.0 Table 68 Land, land rights and buildings, including buildings on leased lands, include an energy plant located on the site of Fraport AG. Given the exclusive use by Fraport AG and the existence of a special lease contract, Fraport AG is considered to be the beneficial owner of the plant. The contract expires in 2020. Fraport Annual Report 2015 142 Group Notes / Notes to the Consolidated Financial Position Technical equipment and machinery includes an IT service agreement for the provision of an IT network on the Frankfurt Airport site and related services. As the network is located on the site of Fraport AG and is of no reasonable commercial use to any other party, Fraport AG is considered to be the beneficial owner. Technical equipment and machinery also includes another IT service agreement for the provision of server and data storage capacities. The computer center required for this purpose is located on the site of Fraport AG, and Fraport AG is the sole recipient of the server and data storage services. Both contracts run until 2018. The quantity of infrastructure supplied for the two aforementioned agreements declined during the fiscal year, so the leases were adjusted accordingly. Disposals totaling €3.7 million are accounted for by this. The disposals of €7.6 million in the category land, land rights and buildings, including buildings on leased land can be solely attributed to changes in the scope of consolidation. 22 Investment property Investment property includes land and buildings situated in direct vicinity to the airport, which are classified as follows: Investment property € million Undeveloped land – Level 2 Undeveloped land – Level 3 Developed land – Level 3 Total Carrying amount December 31, 2015 Carrying amount December 31, 2014 Fair value December 31, 2015 Fair value December 31, 2014 3.1 8.8 62.6 74.5 3.0 8.1 51.9 63.0 50.7 9.9 96.7 157.3 3.0 10.2 138.0 151.2 Table 69 Undeveloped land – Level 2 is agricultural land in the Kelsterbach district which is partly located in a bird sanctuary and undeveloped land in the southern part of the airport site. The fair value of the land is calculated internally using the comparative value procedure pursuant to the Real Estate Valuation Regulation of May 19, 2010 (ImmoWertV) applicable in Germany based on the standard ground values published by a committee of experts. The fair value of the undeveloped land – Level 3 is also calculated internally using the comparative value procedure. The square meter prices of real estate transactions currently being carried out in the same land use area are, however, not observable on the market. The land is in the immediate vicinity of Frankfurt Airport. The developed land – Level 3 comprises real estate leased for residential purposes from the voluntary purchase program for real estate in Flörsheim in the flight zone of Runway Northwest, commercially leased real estate with low flight altitude in Kelsterbach, and commercially leased properties situated in the south of the airport site. In addition, this class includes commercially used real estate with third-party hereditary building rights. The fair values in the developed land – Level 3 category are calculated partly using the capitalization of earnings meth- od pursuant to ImmoWertV and partly using the discounted cash flow method by independent assessors. Key input parameters in the capitalization of earnings method include the multiplier, depending on the useful life and property yields, and the underlying annual rent. A perpetual annuity is assumed in the discounted cash flow method. The key input parameters here are the discount rate, the sustainable market rent, the assumed remaining useful life, predicted maintenance costs, and the anticipated development in rents. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 143 At €4.7 million, the additions in the reporting year are mainly attributed to additions to the property in the southern part of the airport site. They consist of already finished and still to be built commercial property that is or is to be leased long term to air freight companies. The reclassifications in the year under review can also be attributed in full to this commercial property. The changes in the fair values of the undeveloped land – Level 2 and the developed land – Level 3 are due to the further reclassification of land in the southern part of the airport site from property, plant, and equipment and to splitting of land that took place in the fiscal year, which led to shifts between the two said categories. As of the balance sheet date, the investment property included assets under construction of €1.8 million (previous year: €13.4 million). For major parts of the investment property, foreseeable restrictions on salability arise from the fact that these areas are located in the immediate vicinity of Runway Northwest. Lease revenue from investment property during the 2015 fiscal year amounted to €4.6 million (previous year: €2.9 million). The total costs incurred for the maintenance of investment property were €1.7 million (previous year: €1.7 million), of which €0.1 million (previous year: €0.5 million) was incurred for property for which no lease revenue was earned during the fiscal year. As of the balance sheet date, there were no obligations to acquire investment property (previous year: €0.3 million). 23 Investments in companies accounted for using the equity method Companies that are Group airports outside of Frankfurt are considered to be substantial joint ventures and associated companies in the Fraport Group. This applies to the airports in Antalya, Pulkovo, Hanover, and Xi’an. Shares in joint ventures: Fraport IC Ictas Antalya Havalimani Terminal Yatirim ve Isletmeciligi Anonim Sirketi, Antalya/Turkey (franchisee) is a joint venture of Fraport AG and IC Yatirim Holding A.S. that operates the terminals at Antalya Airport as part of the concession agreement of May 22, 2007 with the Turkish airport authority (DHMI franchisor). The concession for the operation of the terminals and the right to use all assets listed in the concession agreement runs for a total of 17 years to the end of 2024. With regard to the authorized use of infrastructure, the company is obligated to perform maintenance and capacity expansions (as required). Distributed over the term of the concession agreement, concession fees of €2.01 billion net must be paid to DHMI. In exchange, the franchisee receives the right to use the existing and future terminal infrastructure to operate the airport and the right to generate revenue from passenger charges paid by the airlines and from other services related to terminal operations. Passenger charges are regulated by the franchisor. Fraport holds a 51 % interest in the company’s share capital, of which 13.36 % is held indirectly through Antalya Havali- mani Uluslararasi Terminal Isletmeciligi A.S., though neither party may make a decision unilaterally due to the voting system laid down in the partnership agreement. The division of the variable returns from the company is governed separately in the partnership agreement, according to which both partners are entitled to equal amounts in returns. The company accounts for 50 % according to the equity method on the basis of the division of the dividend rights and the joint management and control. The dividends are for the most part distributed through the non-operating joint venture Fraport IC Ictas Havalimani Isletme Anonim Sirketi, Antalya/Turkey. Since the companies are not listed on a stock exchange, there is no available active market value for the shares. Fraport Annual Report 2015 144 Group Notes / Notes to the Consolidated Financial Position The following overviews contain summarized financial position and results data from the Antalya companies accounted for using the equity method (Fraport IC Ictas Antalya Havalimani Terminal Yatirim ve Isletmeciligi Anonim Sirketi, Antalya/ Turkey, and Fraport IC Ictas Havalimani Isletme Anonim Sirketi, Antalya/Turkey). Financial position data for Antalya € million December 31, 2015 December 31, 2014 Non-current assets Non-current liabilities thereof financial liabilities thereof other liabilities (including trade accounts payable) Current assets thereof cash and cash equivalents thereof other assets Current liabilities thereof financial liabilities thereof other liabilities (including trade accounts payable) Net assets Share of net assets Goodwill Investment carrying amount Results data for Antalya € million Revenue Regular depreciation and amortization Interest income Interest expenses Taxes on income Result after taxes Other result Comprehensive income 960.7 937.5 257.0 680.5 267.1 226.5 40.5 188.0 74.2 113.8 102.3 51.2 16.9 68.1 1,065.5 1,082.6 331.1 751.5 265.4 235.9 29.5 154.1 41.8 112.3 94.2 47.1 16.9 64.0 Table 70 2015 2014 301.0 – 108.5 3.0 – 75.4 – 16.3 59.2 9.2 68.4 326.8 – 109.4 4.6 – 82.3 – 29.5 76.6 2.2 78.8 Table 71 The reconciliation for the carrying amount in joint ventures recognized in the Group is shown in the following overview: Reconciliation for carrying amount in joint ventures € million Antalya Other joint ventures 2015 2014 2015 2014 2015 Investment carrying amount on January 1 (Fraport share) Share of annual net profit/losses Share of other result Comprehensive income Dividends Other adjustments Addition and capital increase FCS Investment carrying amount on December 31 (Fraport share) Unrecorded pro rata results/losses In the reporting period Cumulative 64.0 29.6 4.6 34.2 – 28.9 – 1.2 0.0 52.9 38.3 1.1 39.4 – 27.5 – 0.8 0.0 68.1 64.0 20.1 0.9 0.0 0.9 – 0.3 0.0 5.7 26.4 1.0 – 0.4 20.8 0.9 0.0 0.9 – 1.3 – 0.3 0.0 20.1 0.7 – 1.3 Total 2014 73.7 39.2 1.1 40.3 – 28.8 – 1.1 0.0 84.1 30.5 4.6 35.1 – 29.2 – 1.2 5.7 94.5 84.1 Table 72 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 145 In connection with financing the concession in Antalya, €206.4 million of bank balances are subject to a drawing restriction (previous year: €235.9 million). There are no further significant restrictions pursuant to IFRS 12. Investments in associated companies Thalita Trading Ltd. and its wholly-owned subsidiary Northern Capital Gateway LLC (NCG) were founded as companies by Fraport AG, the Russian bank VTB, and the Greek Copelouzos Group. NCG develops and operates Pulkovo Airport (St. Petersburg, Russia) as part of a 30-year concession agreement with the city of St. Petersburg. The company is responsible for the entire airport infrastructure. Fraport holds 35.5 % of the shares in Thalita Trading Ltd. Xi’an Xianyang International Airport Co., Ltd. (Xi’an) was founded by Fraport AG and three Chinese companies. The company operates Xi’an International Airport, China. The company’s scope of responsibility includes the operation of the terminal including the commercial areas, as well as certain parts of the landside infrastructure. Fraport holds 24.5 % of the shares in Xi’an through its subsidiary, Fraport Asia Ltd. Flughafen Hannover-Langenhagen GmbH operates the airport of Lower Saxony’s capital city of Hanover. Fraport AG holds 30 % of the shares and the City of Hanover and the State of Lower Saxony each have a 35 % stake in the company. NCG, Xi’an, and Hannover-Langenhagen GmbH are not listed companies. There are no available active market values for the shares. The following information shows the IFRS financial statements of the associated companies. Accounting and valuation differences were adjusted to the requirements of the Group. Summarized financial position € million Thalita/NCG Xi’an Hanover December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 Share of shareholders’ equity 35.50 % 35.50 % 24.50 % 24.50 % 30.00 % 30.00 % Non-current assets Non-current liabilities thereof financial liabilities thereof other liabilities (including trade accounts payable) Current assets thereof cash and cash equivalents thereof other assets Current liabilities thereof financial liabilities thereof other liabilities (including trade accounts payable) Net assets Pro rata share of net assets Adjustments/accumulated impairments Investment carrying amount 789.1 256.7 239.7 17.0 95.9 68.3 27.6 151.2 0.0 718.0 1,119.6 1,063.3 815.5 607.3 524.3 736.1 261.7 234.1 56.3 83.0 27.6 128.7 104.9 23.8 86.8 36.1 50.7 – 359.7 – 179.9 0.0 0.0 150.5 123.0 27.5 610.4 535.3 178.9 138.5 40.3 140.3 0.0 75.1 140.3 151.2 – 251.7 – 125.9 0.0 0.0 513.0 125.7 0.0 125.7 477.1 116.8 0.0 116.8 335.6 159.2 130.8 28.4 12.3 1.0 11.3 53.2 21.0 32.2 135.5 40.7 – 25.7 15.0 338.8 166.7 137.6 29.1 12.0 0.7 11.3 52.8 23.2 29.6 131.3 39.5 – 25.7 13.8 Table 73 Fraport Annual Report 2015 146 Group Notes / Notes to the Consolidated Financial Position Result data € million Revenue Regular depreciation and amortization Interest income Interest expenses Taxes on income Result after taxes Other result Comprehensive income Thalita/NCG 2015 2014 2015 233.1 – 38.3 0.0 – 90.9 6.6 – 8.8 4.7 – 4.1 369.9 – 41.7 0.0 – 73.3 48.5 – 291.7 – 10.9 – 302.6 200.7 – 48.6 4.2 – 15.8 – 4.0 20.5 0.0 20.5 Xi’an 2014 143.9 – 27.6 2.0 – 15.9 – 2.5 12.6 0.0 12.6 Hanover 2015 2014 146.1 – 20.2 0.0 – 6.2 1.0 3.8 0.3 4.1 142.0 – 19.9 0.0 – 6.8 – 0.2 1.1 – 3.1 – 2.0 Table 74 The reconciliation for the carrying amount in associated companies recognized in the Group is shown in the following overview: Reconciliation for carrying amount in associated companies € million Thalita/NCG Xi’an Hanover Other associated companies 2015 2014 2015 2014 2015 2014 2015 2014 Investment carrying amount on January 1 (Fraport share) Share of annual net profit/losses Share of other result Currency translation differences Comprehensive income Dividends Other adjustments Investment carrying amount on December 31 (Fraport share) Unrecorded pro rata results/losses in the reporting period Cumulative 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 116.8 104.2 13.8 5.1 0.0 6.2 11.3 – 2.4 0.0 3.1 0.0 11.3 14.4 – 1.8 0.0 1.1 0.1 0.0 1.2 0.0 0.0 14.4 0.3 – 0.9 0.0 – 0.6 0.0 0.0 2.2 0.9 0.0 0.0 0.9 2.6 0.9 0.0 0.0 0.9 – 0.8 0.1 – 1.3 0.0 0.0 125.7 116.8 15.0 13.8 2.4 2.2 – 3.1 – 103.5 – 107.2 – 104.1 Table 75 There are no significant restrictions pursuant to IFRS 12. 24 Other financial assets Other financial assets € million Available for sale financial assets Securities Other investments Loans Loans to joint ventures Loans to associated companies Other loans Total December 31, 2015 December 31, 2014 408.2 91.8 4.3 120.3 34.6 659.2 539.5 76.0 4.3 122.0 31.5 773.3 Table 76 Cash deposits of €90.5 million in securities which were classified as “available for sale” were made in the year under review. Other changes resulted from reclassifications to current other financial assets due to securities of €220.0 million maturing in 2016 and changes arising from valuation of €2.6 million. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 147 Investment securities include fund units that have been acquired exclusively for the insolvency protection of credits from the time-account models and partial retirement claims in particular of employees of Fraport AG. In the 2015 fiscal year, fund units were increased by €0.9 million (previous year: a reduction of €11.7 million). As at the reporting date, acquisition costs amounted to €47.5 million (previous year: €46.5 million). These securities are measured at fair value and credited against the corresponding obligations in the amount of €37.3 million (previous year: €43.5 million) (see also note 40). At year-end, there was an overfunding from fund units of €13.7 million (previous year: €6.4 million). The change in other investments of the “available for sale” category relates to shares in Delhi International Airport Private Ltd., New Delhi, India, for which there was a newly derived price as fair value in the year under review. The loans to associated companies relate to a loan granted to Northern Capital Gateway LLC (NCG), St. Petersburg/ Russia in previous years. In the fiscal year, the loan liability was assumed by the parent company of NCG, Thalita Ltd, Cyprus. The guarantee that existed for direct investments abroad through the Federal Republic of Germany up until the assumption of the liability by Thalita Ltd. was replaced by commercial insurance. The interest receivables arising from the interest accrued according to the effective interest method are reported as non-current receivables from associated companies (see also note 25). 25 Non-current and current other receivables and financial assets Non-current and current other receivables and financial assets € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 Accounts receivable from joint ventures Accounts receivable from associated companies Accounts receivable from other investments Financial assets “available for sale” Refunds from “passive noise abatement” Other assets Accruals Total thereof financial assets 5.7 0.4 2.1 213.3 11.7 68.4 9.2 310.8 263.5 6.8 56.4 – – 77.0 4.6 22.2 167.0 75.9 12.5 56.8 2.1 1.1 0.2 0.9 213.3 199.3 88.7 73.0 31.4 477.8 339.4 13.3 75.1 7.7 297.6 256.3 7.9 41.8 – – 103.6 4.2 23.6 181.1 52.8 9.0 42.0 0.9 199.3 116.9 79.3 31.3 478.7 309.1 Table 77 The financial assets in the “available for sale” category include securities with a remaining term of up to one year. The change in the total amount as of December 31, 2015 compared to the previous year results from scheduled reclassifi- cations from the balance sheet item “Other financial assets”, additions in the reporting year of around €438.7 million (previous year: €530.6 million) and disposals of securities that matured in the fiscal year of around €423.9 million (previous year: €634.3 million). The item “Refunds from passive noise abatement” includes the expected full reimbursement amount from noise abate- ment charges from the airlines, which was recognized as other assets in compliance with IAS 37.53 in connection with the provisions created for the obligation of Fraport AG to reimburse costs for noise abatement construction measures and expenses from refund claims for reduced utilization of outdoor facilities. The value was determined based on the estimated expenses for reimbursing the costs of noise abatement construction measures and estimated expenses for refund claims for reduced utilization of outdoor facilities. More information about the corresponding other provisions can be found in Note 40. No effects arose from changes in credit ratings as the credit ratings of the issuers and issues did not change. Accounts receivable from associated companies primarily include interest receivables from the interest cost added back pursuant to the effective interest method to the loan to Thalita Ltd. recorded under “Other loans” (see note 24). Fraport Annual Report 2015 148 Group Notes / Notes to the Consolidated Financial Position The accruals are mainly construction cost subsidies paid by Fraport AG. They are especially paid to public utilities who set up facilities for special requirements of Fraport AG. The utility companies own the utility equipment. Where applicable, the appropriate allowance is recognized for other financial assets as at the reporting date. No material allowances were applied in the reporting year (previous year: €0.1 million). There are no material overdue non-impaired items. 26 Income tax receivables Income tax receivables € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 Income tax receivables 7.4 5.4 12.8 7.7 10.2 17.9 Table 78 The income tax receivables primarily include the corporation tax credit capitalized in the 2006 fiscal year. On December 12, 2006, the revised Section 37 of the German Corporation Tax Act (KStG) became legally effective in connection with amendments to the law based upon the Act on tax assistance measures for the introduction of the European Company and changes to further tax requirements (SEStEG). According to Section 37 (4) of the KStG (new version), the corporation tax credit of Fraport AG had to be established most recently on December 31, 2006. In accordance with Section 37 (5) of the KStG (new version), Fraport AG is entitled to a refund of its corporation tax credit in ten equal annual installments during a payout period between 2008 and 2017. The refund claim arose after the end of December 31, 2006 and is non-interest-bearing. The first installment was refunded in 2008 and is payable on September 30 of each year. Corporation tax credit totaled €12.2 million as at December 31, 2015 (previous year: €18.2 million), and is discounted at a rate of 3.75 % as in the previous year due to its long-term nature. The present value of this claim to a tax refund amounts to a total of €10.5 million as at the balance sheet date (previous year: €15.5 million). Economically, this refund claim is an overpayment pursuant to IAS 12.12. 27 Deferred tax assets Deferred tax assets € million Deferred tax assets December 31, 2015 December 31, 2014 33.4 31.1 Table 79 Deferred tax assets are recognized in accordance with IAS 12. Further explanations are given in the “Taxes on income” section (see note 16). Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 149 28 Inventories Inventories € million Land and buildings for sale Raw materials, consumables, and supplies Work-in-process/other Total December 31, 2015 December 31, 2014 24.7 17.4 0.7 42.8 26.6 16.6 0.5 43.7 Table 80 Land and buildings for sale are entirely attributable to the Mönchhof site situated in the immediate vicinity of Frankfurt Airport, which is held for sale. Based on the ongoing development of the real estate held for sale, €0.9 million was capitalized in the year under review (previous year: €2.8 million). Carrying amount reductions in the amount of €2.8 million (previous year: €0.3 million) were the result of real estate sale transactions. Borrowing costs were capitalized in the amount of €0.1 million (previous year: €0.2 million). The cost of debt was set at around 0.5 % (previous year: around 0.6 %). The net realizable value of the real estate held for sale was calculated using the discounted cash flow method over the remaining planned selling period, with a discount rate adequate for the risk and related to the term of 3.1 % after tax (previous year: 4.5 %). When calculating the discount rate, further discounts were applied in addition to the general sector risk premium, particularly for as yet unknown environmental and selling risks. When calculating the net realizable value, the selling prices of sales which have already taken place and expenses planned for further development and selling are taken into account. As was the case last year, the net realizable values were higher than the carrying amounts. Additional costs that will be incurred up to the date of sale mainly relate to expenses for the further development of the Mönchhof site property held for sale. Sales of real estate with a carrying amount of around €5.9 million are planned for 2016 (previous year: around €6 million). The sale of other land and buildings (€18.8 million) should be realized in 2017 and subsequent years. Expenses for the maintenance of real estate inventories during the year under review were minor. Raw materials, consumables, and supplies mainly relate to consumables for the airport operation. 29 Trade accounts receivable Trade accounts receivable € million From third parties December 31, 2015 December 31, 2014 154.0 174.7 Table 81 For 2015, as at the reporting date, the maximum default risk without taking securities into account equaled the carrying amount of €154.0 million (previous year: €174.7 million). The following table provides information on the extent of the default risk with regard to the non-impaired trade accounts receivable. Fraport Annual Report 2015 150 Group Notes / Notes to the Consolidated Financial Position Default risk analysis € million Carrying amount Thereof not over- due or impaired Thereof in stated term overdue and not impaired < 30 days 30 – 180 days > 180 days December 31, 2015 December 31, 2014 154.0 174.7 99.4 82.3 30.7 45.2 8.8 18.1 15.1 29.1 Table 82 With regard to trade accounts receivable which are neither impaired nor in default, there is no indication as at the reporting date for 2015 that the debtors will not meet their payment obligations. 30 % (previous year: 35 %) of out- standing accounts receivable are due from two customers. Cash security in the amount of €6.6 million (previous year: €6.6 million) and non-cash guarantees (mainly loan guar- antees) in the nominal amount of €27.6 million (previous year: €26.5 million) were accepted as security for unsettled trade accounts receivable. The guarantees received until the reporting date were neither sold nor passed on as security and will be returned to the respective debtor after termination of the business relationship. The guarantees received will be used only in the event of the debtor’s default. Allowances for trade accounts receivable developed as follows in the fiscal year: Allowances € million Balance as at January 1 Allowances included in other operating expenses Revenue-decreasing allowances Release Availments Changes in the scope of consolidation Exchange rate differences Balance as at December 31 30 Cash and cash equivalents Cash and cash equivalents € million Cash in hand, bank balances, and checks 2015 2014 49.1 11.5 3.5 – 0.9 – 4.1 – 1.5 – 0.4 57.2 34.4 1.2 17.9 – 4.2 – 0.2 0.0 0.0 49.1 Table 83 December 31, 2015 December 31, 2014 406.0 401.1 Table 84 The bank balances mainly include short-term time deposits as well as overnight deposits. Cash and cash equivalents include time deposits of €152.0 million (previous year: €210.0 million) with a term of more than three months from the time of acquisition. These funds are not subject to any significant fluctuations in value and can be realized at any time. In connection with financing the concession in Antalya, €23.3 million of bank balances are subject to a drawing restriction, as in the previous year. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 151 31 Non-current assets held for sale Non-current assets held for sale € million Non-current assets held for sale December 31, 2015 December 31, 2014 0.0 7.1 Table 85 The non-current assets held for sale in the previous year were assets pertaining to Air Transport IT Inc., FSG Flughafen Services GmbH and the investment in Adria Airways Tehnika d.d., which were all allocated to the External Activities segment. The sales took place in 2015 (see also note 2). The reasons for the sales are based on strategic considerations. 32 Equity attributable to shareholders of Fraport AG Equity attributable to shareholders of Fraport AG € million Issued capital Capital reserve Revenue reserves Total Issued capital December 31, 2015 December 31, 2014 923.1 594.3 1,919.9 3,437.3 922.7 592.3 1,706.1 3,221.1 Table 86 Issued capital (less treasury shares) increased by €0.4 million in fiscal year 2015 and is fully paid up as at the balance sheet date. This increase relates to the partial use of authorized capital following the capital increase in exchange for cash contri- butions to issue shares in connection with the employee investment plan. Number of floating shares and treasury shares Issued capital consisted of 92,385,076 (previous year: 92,342,748) bearer shares with no-par value, each of which accounts for €10.00 of the capital stock. Fraport Annual Report 2015 152 Group Notes / Notes to the Consolidated Financial Position Development of floating and treasury shares pursuant to Section 160 of the AktG Issued capital Number Floating shares Number Treasury shares Amount of capital stock Share of capital stock Number in € in % 92,342,748 92,265,383 77,365 773,650 0.0838 42,328 42,328 Balance as at Jan. 1, 2015 Employee investment plan Capital increase Balance as at Dec. 31, 2015 92,385,076 92,307,711 77,365 773,650 0.0837 Issued capital Number Floating shares Number Treasury shares Amount of capital stock Share of capital stock Number in € in % Balance as at Jan. 1, 2014 92,289,654 92,212,289 77,365 773,650 0.0838 Management Stock Options Plan 2005 Capital increases Employee investment plan Capital increase 3,750 3,750 49,344 49,344 Balance at Dec. 31, 2014 92,342,748 92,265,383 77,365 773,650 0.0838 Table 87 The new shares created for the employee investment plan were issued to employees at a price of €57.37 each in June 2015. Authorized capital Pursuant to Sections 202 et seqq. of the AktG, the Executive Board was authorized by resolution of the AGM held on May 27, 2009 to increase the capital stock by up to €5.5 million on one or more occasions until May 26, 2014, with the approval of the Supervisory Board. It was possible to exclude the statutory subscription rights of the shareholders. At the AGM of May 31, 2013, the existing authorized capital was canceled and new authorized capital of €3.5 million was approved, which can be used for issuing shares to employees of Fraport AG and companies controlled by Fraport AG. The Executive Board is now entitled, with the approval of the Supervisory Board, to increase the capital stock on one or more occasions by up to a total of €3.5 million until May 30, 2018, by issuing new shares in return for cash. The statutory subscription rights of the shareholders may be excluded. In 2015, a total of €423,280 of authorized capital was used to issue shares within the scope of the employee investment plan. Therefore, €2.6 million of authorized capital remained as at December 31, 2015, which can be used for issuing shares to employees of Fraport AG and companies controlled by Fraport AG. The subscription rights of the shareholders may be excluded. Contingent capital A contingent capital increase of €13.9 million was approved pursuant to Sections 192 et seqq. of the AktG at the AGM held on March 14, 2001. The purpose of the contingent capital was expanded at the AGM on June 1, 2005. The contingent capital increase also served to fulfill subscription rights under the approved Fraport Management Stock Options Plan 2005 (MSOP 2005). The Executive Board and Supervisory Board were authorized to issue up to a total of 1,515,000 stock options to beneficiaries entitled to subscribe until August 31, 2009, in accordance with more detailed provisions in this regard. Some of the shares issued in the context of performance-related remuneration to members of the Executive Board up to 2010 were subject to a vesting period of 12 or 24 months. The exercise period of the last MSOP 2005 tranche ended on April 10, 2014. Contingent capital totaled €3.4 million as at December 31, 2014. The Supervisory Board increased the contingent capital in its meeting of March 16, 2015 and passed a resolution for the deletion without replacement of the relevant passage in Section 4 (4) of the company statutes. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 153 Capital reserve The capital reserve contains the premium from the issue of Fraport AG shares. The €2.0 million increase in the capital reserve results from the excess in the issue amount (€47.37 per share) of new shares issued under the employee investment plan (42,328 shares in total). Revenue reserves The revenue reserves consist not only of the reserves of Fraport AG (including the statutory reserve of €36.5 million), but also the revenue reserves and retained earnings of the Group companies included in the consolidated financial statements, as well as effects of consolidation adjustments. Furthermore, the revenue reserves include reserves for currency translation differences and financial instruments. The derivative valuation reserve is –€52.7 million as at the balance sheet date (previous year: –€79.7 million). The reserve for the fair value valuation of financial assets available for sale totals €38.5 million (previous year: €27.4 million). Pursuant to Section 268 (8) of the HGB, a total of €48.4 million of the shareholders’ equity attributable to Fraport AG shareholders (previous year: €39.6 million) is subject to a distribution block. However, the distribution block did not take effect insofar as sufficient free reserves were available. The proposed dividend is €1.35 per share, as in the previous year. In the 2015 fiscal year, the AGM of May 29, 2015 resolved to pay a dividend of €1.35 per no-par value share entitled to dividends. The distributed amount thus came to €124.6 million (previous year: €115.3 million). 33 Non-controlling interests Non-controlling interests € million Non-controlling interests (excluding the attributable Group result) Group result attributable to non-controlling interests Total December 31, 2015 December 31, 2014 53.9 20.5 74.4 47.8 17.1 64.9 Table 88 Non-controlling interests include allocated equity and earnings of Fraport Twin Star Airport Management AD, FraCare- Services GmbH, Media Frankfurt GmbH, Lima Airport Partners S.R.L., and in the previous year FSG Flughafen-Service GmbH and Aerodrom Ljubljana d.d. 34 Non-current and current financial liabilities Non-current and current financial liabilities € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 Financial liabilities 543.6 3,273.8 3,817.4 318.1 3,874.3 4,192.4 Table 89 Please refer to the presentation of finance management and the asset and financial position in the Group management report for additional explanations of financial liabilities. Fraport Annual Report 2015 154 Group Notes / Notes to the Consolidated Financial Position 35 Trade accounts payable Trade accounts payable € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 To third parties 143.1 42.5 185.6 134.5 47.1 181.6 Table 90 Trade accounts payable include liabilities in connection with compensation measures in connection with nature protection law in the amount of €27.9 million (previous year: €28.7 million). The liabilities relate to the contractual obligations to carry out environmental compensation measures based on the finished work to clear the forest south of the airport and near the Runway Northwest, as was necessary for the airport expansion. 36 Non-current and current other liabilities Non-current and current other liabilities € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 Prepayment for orders To joint ventures To associated companies To investments Investment grants for non-current assets Other accruals Liabilities in connection with concession obligations Negative fair values of derivative financial instruments Other liabilities Total thereof primary financial liabilities 1.9 8.1 0.7 3.9 1.3 7.1 – – – – 10.4 36.4 1.9 8.1 0.7 3.9 11.7 43.5 1.4 7.2 0.8 1.7 1.3 6.9 – – – – 11.5 38.0 1.4 7.2 0.8 1.7 12.8 44.9 26.4 251.6 278.0 25.4 236.7 262.1 4.1 75.9 129.4 75.6 109.4 39.9 447.7 268.3 113.5 115.8 577.1 343.9 – 79.0 123.7 61.6 153.4 57.9 497.5 254.2 153.4 136.9 621.2 315.8 Table 91 Investment grants for non-current assets include, in particular, investment grants for additional services provided by Fraport AG in the terminals, which are billed to the users thereof. Investment grants include government grants of €6.2 million (previous year: €7.1 million) and grants from other grant donors of €5.5 million (previous year: €5.7 million). The government grants relate, in particular, to capital expenditure incurred for baggage controls at Frankfurt Airport. The special items are straight-line released according to the useful life of the granted assets. Other accruals are earnings received and relating to future periods. The liabilities in connection with concession obligations relate to obligations to pay fixed and variable airport operation concession fees for the airport operating projects in Lima, Varna, and Burgas. The remaining other liabilities primarily consist of finance lease liabilities, wage and church taxes, outstanding social security contributions, liabilities from accrued interest and liabilities to company employees. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 155 The following lease payments are due from the lease contracts: Maturity of lease payments € million Lease payments Discount amounts Present value € million Lease payments Discount amounts Present value up to 1 year 1 – 5 years over 5 years December 31, 2015 Remaining term Total 9.4 1.4 8.0 21.3 1.6 19.7 0.0 0.0 0.0 30.7 3.0 27.7 up to 1 year 1 – 5 years over 5 years December 31, 2014 Remaining term Total 11.9 2.6 9.3 35.0 5.1 29.9 13.5 3.3 10.2 60.4 11.0 49.4 Table 92 Discount rates, as in the previous year, are between 4.90 % and 6.00 %. 37 Deferred tax liabilities Deferred tax liabilities € million Deferred tax liabilities December 31, 2015 December 31, 2014 172.2 158.7 Table 93 Deferred tax liabilities were recognized in compliance with IAS 12 using the temporary concept. Further explanations of deferred tax liabilities can be found in “Taxes on income” (see note 16). 38 Provisions for pensions and similar obligations Defined benefit plans Within the Fraport Group, there are pension obligations for the members of the Executive Board of Fraport AG and their surviving dependents as well as obligations for Senior Managers and employees not covered by collective bar- gaining agreements. Pension obligations primarily include 17 (previous year: 20) vested pension benefits promised in individual pension commitments to members of the Fraport AG Executive Board and their surviving dependents. A reinsurance was already obtained in 2005 to reduce actuarial risks and protect pension obligations for the former and current (in some cases still active) members of the Executive Board against insolvency. This is a group insurance policy with an annual, constant minimum insurance amount for the entire group. The pension benefits from the reinsurance correspond to the total achievable retirement, occupational disability, and widow’s/widower's benefits in accordance with the pension com- mitments. Reinsurance benefits are recognized at the active value reported by the insurance company in the amount of €21.3 million (previous year: €20.4 million), of which €0.5 million (previous year: €0.3 million) is attributable to reserved trust assets. The reinsurance is not traded on an active market. Plan assets are invested in shares, real estate, fixed-interest securities, and other assets. Reinsurance installments of €1.0 million have been paid for 2015 (previous year: €1.0 million) and €1.0 million is expected for the next year (previous year: €1.0 million). The average weighted term of the members of the Executive Board’s defined benefit plans is 16.2 years (previous year: 16.8 years) for pensions with reinsurance and 9.0 years (previous year: 9.1 years) for pensions without reinsurance. Fraport Annual Report 2015 156 Group Notes / Notes to the Consolidated Financial Position The Executive Board members are entitled to pension benefits and provision for surviving dependents. An Executive Board member is generally entitled to a retirement pension if he or she becomes permanently unable to work or retires from office during the term of, or upon expiry of, his or her employment agreement. If an Executive Board member dies, benefits are paid to his or her surviving dependents. This amounts to 60 % of the retirement pension for the widower or widow; children entitled to receive benefits receive 12 % each. If no widow’s/widower's pension is paid, the children each receive 20 % of the retirement pension. Upon retirement, income from active employment as well as retirement pension payments from previous or, where applicable, later employment relationships are credited against accrued retirement pay up to the age of 60, insofar as without such credit the total of these emoluments and the retirement pension would exceed 75 % of the fixed salary (100 % of the fixed salary if Fraport AG wishes the employment to be terminated or not to be extended). Effective January 1 of each year, the retirement pensions are adjusted at discretion, taking into account the interests of the former Executive Board member and the company’s economic situation. The adjustment obligation is considered to be satisfied if the adjustment does not fall below the increase in the consumer price index for the cost of living for private households in Germany. The retirement pension of an Executive Board member is defined by the percentage of a contractually agreed basis of assessment, with the percentage rising annually by 2 % up to a limit of 75 %, dependent on the duration of time an Executive Board member is appointed. As at December 31, 2015, Dr. Schulte is entitled to 62.0 % of his fixed annual gross salary. As at December 31, 2015, Dr. Zieschang is entitled to 46.0 % of his fixed annual gross salary. In the event of occupational disability, the pension rate for Dr. Schulte and Dr. Zieschang amounts to at least 55 % of their respective fixed annual gross salaries or of the contractually agreed basis of assessment. For Executive Board members appointed from 2012 onwards, the pension benefits, provision for surviving depen- dents, and provision for long-term occupational disability are governed by a separate benefit agreement. This calls for the payment of a one-time pension capital or lifelong retirement pension after the insured event. Pension capital is generated when Fraport AG credits 40 % of the paid fixed annual gross salary to a pension account on an annual basis. The pension capital accumulated at the end of the previous year pays interest annually at the interest rate used for the valuation of the pension obligations in the German balance sheet of Fraport AG at the end of the previous year pursuant to Section 253 (2) of the German Commercial Code (HGB), which is at least 3 % and at most 6 %. This is increased by 1 % on January 1 of each year for life-long retirement payments. No further adjustment is made. If the pension capital reached is less than €600,000 when retirement benefits fall due as a result of long-term occupational disability, Fraport AG will increase it to this amount. In the event of long-term occupational disability within the first five years of their activities performed as members of the Executive Board, it is foreseen that Executive Board members can postpone the receipt of a monthly retirement pension payment by a maximum of five years from the start of the employment contract. Until the postponed start of the pension benefit payments, they will receive a monthly benefit of €2,500. The risk of pension payments in the increase phase and of payments for the increase has been reinsured by an occupational disability insurance policy. The full amount of all income pursuant to the Income Tax Act from employment or self-employment is credited against the retirement pension paid until the end of the month in which the Executive Board member reaches the age of 62. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 157 Survivor benefits for Executive Board members appointed from 2012 onwards are regulated as follows: If there is no prior event giving rise to retirement benefits, the widow or widower receives the pension capital generated so far. If there is no widow or widower entitled to benefits, each half-orphan receives 10 % and each full orphan receives 25 % of the pension capital generated thus far as a one-time payment. If the pension capital reached is less than €600,000 upon death, Fraport will increase it to this amount. The payment risk of this increase has been reinsured by a term life insurance policy. If an Executive Board member dies while collecting a retirement pension, the widow or widower is entitled to 60 % of the last retirement pension paid. Half-orphans receive 10 % and full orphans receive 25 % of the last retirement pension paid. If there are no surviving dependents as set forth above, the heirs receive a one-time death grant in the amount of €8,000. Moreover, each member of the Executive Board has entered into a two-year restrictive covenant. During this term, reasonable compensation in the form of an annual gross salary (fixed salary) pursuant to Section 90a of the HGB will be paid. Part payments will be made monthly. The compensation will be generally credited against any retirement pensions owed by Fraport AG, inasmuch as the compensation together with the retirement pensions and other gen- erated income exceeds 100 % of the last fixed salary received. No other benefits have been promised to Executive Board members should their employment be terminated. The retirement pension payments entitlement of former Executive Board members is determined by a percentage of a contractually agreed fixed basis of assessment. For senior managers and employees not covered by collective bargaining agreements who joined the company as senior managers or employees not covered by collective bargaining agreements after December 31, 1997 or who will join in future, the pension benefits and provision for surviving dependents on the monthly compensation liable to top-up pension payments, for which contributions are payable, are restricted to the upper limit defined in Section 38 of the ATV-K in the amount of 1.133 times payment group 15 level 6 of the Collective Bargaining Agreement for Civil Servants (TVöD). In addition to said limited pension benefits and benefits for surviving dependents, there exists a supplementary company retirement benefit for these persons. Hereafter, Fraport AG makes an annual contribution in the amount of 13 % of the eligible income as capital components and pays this into an individually managed pension account. The period of contribution began on January 1, 1998 for employees who entered into an employment not covered by a collective bargaining agreement before January 1, 2000. Furthermore, this applies to employees who changed from an employment covered by a collective bargaining agreement to one not covered by a collective bargain- ing agreement after December 31, 1997 or who entered into an employment not covered by a collective bargaining agreement after December 31, 1997, effective as at the time of the change in status. There were 408 benefits (of which 356 vested) as at the end of the year. The present value of the non-vested benefits amounts to €0.2 million (previous year: €0.2 million); the present value of the vested benefits amounted to €8.6 million in the 2015 annual financial statements (previous year: €8.0 million). Future obligations amount to €6.6 million for active employees and €2.2 million for former and retired employees. No significant provision amounts were paid this fiscal year due to the young age structure. The obligations for Senior Managers and employees not covered by collective bargaining agreements had an average weighted term of 9.8 years (previous year: 10.5 years). Furthermore, senior managers have had the opportunity to participate in an employee-financed company pension scheme (“deferred compensation”) since 1996. The employee contribution is generated through converting a portion that can be chosen freely each year. This portion is converted into an insured sum and is accumulated by Fraport AG and accrues interest. At the end of the fiscal year, there were 13 vested pension commitments totaling €4.5 million (previous year: €4.9 million). Obligations amount to €3.5 million for active employees (previous year: €3.2 million); obligations amount to €1.0 million for former and retired employees (previous year: €1.7 million). The average weighted term of the employee-financed company pension scheme was 6.7 years (previous year: 6.4 years). Fraport Annual Report 2015 158 Group Notes / Notes to the Consolidated Financial Position The valuation of pension obligations is based on the provisions of IAS 19. The pension obligations as at December 31, 2015 were calculated on the basis of actuarial opinions. Changes to the obligations outlined above were as follows: Pension obligations (2015) € million As at January 1, 2015 Service cost Current service cost Supplementary service cost Gains and losses on compensation Total service cost Net interest income/expense Interest income and interest expenses Remeasurements Income on plan assets, excluding interest Actuarial gains and losses from changes in demographic assumptions Actuarial gains and losses from the adjustment of the obligation based on experience Actuarial gains and losses from changes in financial assumptions Total remeasurements Impacts of exchange rate differences Contributions of the employer to the plan Contributions of the employee to the plan Payments from the plan Overfunding As at December 31, 2015 Present value of the obligation Plan assets Total 54.1 – 20.4 33.7 2.3 0.0 0.0 2.3 1.1 0.0 0.0 – 2.1 – 0.6 – 2.7 0.0 0.0 0.0 – 2.8 0.0 52.0 0.0 0.0 0.0 0.0 – 0.4 – 0.2 0.0 0.0 0.0 – 0.2 0.0 – 1.0 0.0 0.7 0.0 – 21.3 2.3 0.0 0.0 2.3 0.7 – 0.2 0.0 – 2.1 – 0.6 – 2.9 0.0 – 1.0 0.0 – 2.1 0.0 30.7 Table 94 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 159 Present value of the obligation Plan assets Total Pension obligations (2014) € million As at January 1, 2014 Overfunding in previous year Service cost Current service cost Supplementary service cost Gains and losses on compensation Total service cost Net interest income/expense Interest income and interest expenses Remeasurements Income on plan assets, excluding interest Actuarial gains and losses from changes in demographic assumptions Actuarial gains and losses from the adjustment of the obligation based on experience Actuarial gains and losses from changes in financial assumptions Total remeasurements Impacts of exchange rate differences Contributions of the employer to the plan Contributions of the employee to the plan Payments from the plan Overfunding As at December 31, 2014 45.3 0.0 1.8 0.0 0.0 1.8 1.6 0.0 0.0 0.9 6.5 7.4 0.0 0.0 0.0 – 2.0 0.0 54.1 Pension obligations are offset against the plan assets reserved for insolvency insurance below: Offsetting € million Offsetting Reconciliation to assets and liabilities recognized in the financial position Present value of an obligation funded through a reinsurance/trust assets Fair value of plan assets Overfunding (not included in the net liability)/underfunding Present value of an obligation not funded through a reinsurance/trust assets (Net) liabilities recognized in the financial position Significant actuarial assumptions Salary trend Interest rate Pension growth Mortality Retirement age 2015 0.00 % 2.20 % 2.00 %/2.50 % 2.00 %/2.50 % Reduction by one year Reduction by one year Termination of contract period, earliest pensionable age in pension commitments Termination of contract period, earliest pensionable age in pension commitments Table 97 – 19.3 – 0.8 0.0 0.0 0.0 0.0 – 0.7 0.0 0.0 0.0 0.0 0.0 0.0 – 1.0 0.0 0.6 0.0 – 20.4 26.7 – 0.8 1.8 0.0 0.0 1.8 0.9 0.0 0.0 0.9 6.5 7.4 0.0 – 1.1 0.0 – 1.3 0.0 33.7 Table 95 2015 2014 23.8 – 21.3 2.5 28.2 30.7 23.6 – 20.4 3.2 30.5 33.7 Table 96 2014 0.00 % 2.10 % Fraport Annual Report 2015 160 Group Notes / Notes to the Consolidated Financial Position The significant actuarial assumptions relate to the pension obligations of the Fraport Group. All pension obligations largely have the same assumptions where the adjustment to pensions is only calculated on pension obligations of the Executive Board members. Sensitivity analysis The sensitivity analysis is based on changes in the assumptions while other factors remained constant. In practice, it is unlikely that only one actuarial assumption would change. Changes in actuarial assumptions may correlate with other actuarial assumptions. The method for determining the sensitivity analysis did not change. The pension provision would vary by the following amounts in the event of a change in assumptions: Sensitivity analysis (December 31, 2015) € million 2015 Interest rate Pension growth Mortality 1) Retirement age Decrease in interest rate by 0.5 % Increase in interest rate by 0.5 % 3.2 – 2.9 Decrease in pension growth by 0.25 % Increase in pension growth by 0.25 % – 1.0 1.0 Reduction by one year 1.4 Increase by one year 0.3 1) The obligation would increase for all beneficiaries by €1.4 million as a result of the decrease in mortality of one year. Table 98 Sensitivity analysis (December 31, 2014) € million 2014 Interest rate Inflation Mortality Retirement age Decrease in interest rate by 0.5 % Increase in interest rate by 0.5 % 3.4 – 3.1 Decrease in inflation by 0.25 % Increase in inflation by 0.25 % – 1.1 1.7 Reduction by one year 1.1 Increase by one year 0.3 Table 99 The retirement age has no influence on the pensions received by members of the Executive Board and was only calculated for other pensions. Due to the structure of the respective pension plans, the salary adjustment has no effect on pension obligations. In connection with the defined benefit plans, the Group is exposed to the actuarial risks mentioned above as well as the interest rate risk. Due to the liquidity available in the Group, there is no risk with regard to fulfillment of non- reinsured obligations. Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 161 Multi-employer plans Fraport AG has insured its employees for the purposes of granting a company pension under the statutory insurance scheme based on a collective agreement (Altersvorsorge-TV-Kommunal – [ATV-K]) with the Zusatzversorgungskasse (top-up provision insurance scheme) for local authority and municipal employers in Wiesbaden (ZVK). The contribu- tions are collected based on a pay-as-you-go model. As in the previous year, the contribution rate of the ZVK is 6.2 % on compensation liable to top-up pension payments; thereof, the employer pays 5.7 %, with the contribution paid by the employee amounting to 0.5 %. In addition, a tax-free restructuring charge of 2.3 % of the compensation liable to top-up pension payments is levied by the employer in accordance with Section 63 of the ZVK Statutes (ZVKS). An additional contribution of 9 % is paid for some employees included in the statutory social security insurance scheme (generally employees exempted from collective bargaining agreements and senior executives) for the consideration subject to ZVK that, according to Section 38 ATV-K, exceeds the upper limit defined in the collective agreement. This plan is a multi-employer plan (IAS 19.8), since the companies involved share the risk of the investment and also the biometric risk. Reference is also made to the collective bargaining agreement risks arising from the ZVK insurance in the Risks and Opportunities Report in the management report. The ZVK insurance is generally to be classified as a defined benefit plan (IAS 19.30). Because there is not sufficient information on the plan and the company also covers the risks of other insuring companies with its contributions (IAS 19.34), only the current contributions are accounted for as if it were a defined contribution plan. Due to its structure, the ZVK does not provide any information to participating companies that would allow the allocation of obligations, plan assets, service costs, and, if applicable, over- or underfunding or the extent of Fraport’s participation in the plan. In the consolidated financial statements of Fraport, the consideration of contributions corresponds to defined-contribution pension commitments. Along with the remaining member companies, Fraport AG is obliged to finance accrued obligations not covered by assets as well as future obligations. The precise share of the remaining extent of the obligation cannot be determined. In the event of Fraport AG withdrawing from the multi-employer plan (for example, through terminating the agreement), compensation in the amount of the present value of the obligation at the point of the membership being terminated is to be paid to the ZVK. This amount cannot be determined due to only insufficient information being available. Should the multi-employer plan be dissolved by a resolution of the administrative committee, no share in any possible remaining overfunding will be due to Fraport. In the fiscal year, €29.1 million (previous year: €28.8 million) was recorded as contributions to defined contribution plans for ZVK. Contributions of €30.7 million are expected for the next fiscal year. Furthermore, due to statutory provisions, contributions are also made to state-administered pension funds in Germany. The current contributions are shown as expense for the respective year. Employer contributions made by the Fraport Group to state-administered pension funds totaled €70.5 million (previous year: €67.2 million). Fraport Annual Report 2015 162 Group Notes / Notes to the Consolidated Financial Position 39 Non-current and current income tax provisions Non-current and current income tax provisions € million Remaining term Total Remaining term Total up to 1 year over 1 year December 31, 2015 up to 1 year over 1 year December 31, 2014 Provisions for taxes on income 56.0 62.1 118.1 14.7 68.8 83.5 Table 100 Tax provisions amounting to €118.1 million (previous year: €83.5 million) were accrued for unassessed corporation tax and trade taxes, as well as for tax audit risks. 40 Non-current and current other provisions The development in the non-current and current provisions is shown in the following tables: Non-current and current personnel-related provisions € million Personnel thereof non-current thereof current January 1, 2015 79.5 11.6 67.9 Use Release Additions December 31, 2015 – 59.3 – 3.5 76.3 93.0 25.1 67.9 Table 101 A large part of the personnel-related provisions was generated for partial retirement and incentive schemes for the employees of Fraport AG. The partial retirement provisions are recognized pursuant to IAS 19. The credit for partial retirement is offset against the fund units (see also note 24). Other provisions € million Environment Passive noise abatement Nature protection law compensation Wake turbulences Others Total thereof non-current thereof current January 1, 2015 Use Release Additions Interest effect December 31, 2015 – 2.9 – 5.7 – 0.2 – 11.8 – 29.6 – 50.2 0.0 – 16.6 – 1.7 0.0 – 18.9 – 37.2 3.3 0.0 0.0 0.0 52.0 55.3 – 0.2 0.9 0.4 0.2 0.0 1.3 33.8 143.5 31.7 42.6 120.7 372.3 216.4 155.9 34.0 122.1 30.2 31.0 124.2 341.5 176.5 165.0 Table 102 Releases include releases recognized directly in equity in the amount of €18.3 million which were made in relation to the corresponding asset. Environmental provisions have been formed largely for probable restructuring costs for the elimination of groundwater contamination on the Frankfurt Airport site in Frankfurt/Main, as well as for environmental pollution in the southern section of the airport. As at December 31, 2015, estimated cash outflows amount to €6.4 million within one year (previous year: €7.8 million), €14.5 million after one to five years (previous year: €15.9 million), and €13.1 million after five years (previous year: €10.1 million). Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 163 The “passive noise abatement” provision includes obligations to refund the passive noise abatement expenses of owners of private and commercial land and obligations to pay outdoor living and commercial area compensation. The obligations result from the planning approval notice made by the Hessian Ministry of Economics, Energy, Transport and Regional Development (HMWEVL) on December 18, 2007 in conjunction with the Act for Protection against Aircraft Noise (Aircraft Noise Act), and the planning approval notice of April 30, 2013. In the fiscal year, estimated future cash outflows for compensation in accordance with the Regulation on Outdoor Living Areas were changed on account of new experience. This resulted in the reduction of the present value of the relevant provision by €16.6 million. As at December 31, 2015, estimated cash outflows amount to €26.6 million within one year (previous year: €17.0 million), €77.3 million after one to five years (previous year: €99.8 million), and €18.2 million after five years (previous year: €26.7 million). There is a corresponding refund claim for part of the obligations under other accounts receivable (see also note 25). The adjustment to the provision in the fiscal year was made to a corresponding extent on the receivables side. A provision for environmental protection compensating measures was created in previous years due to the long-term obligation to implement ecological compensating measures resulting from the work performed to clear the land in the southern part of the airport and in the area of Runway Northwest required for the airport expansion. As at December 31, 2015, estimated cash outflows amount to €0.7 million within one year (previous year: €0.6 million), €4.8 million after one to five years (previous year: €4.2 million), and €24.7 million after five years (previous year: €26.9 million). The wake turbulence protection program concerns the protection of roofs in the defined entitlement areas to protect against damage to roof cladding due to gusts of wind caused by wake turbulences. The obligations result from the corresponding supplementation decision dated May 10, 2013 and May 26, 2014. As at December 31, 2015, estimated cash outflows amount to €14.4 million within one year (previous year: €14.0 million), €14.4 million after one to five years (previous year: €25.7 million), and €2.2 million after five years (previous year: €2.9 million). The remaining provisions include provisions for risks arising from renting and other services for which no further information is provided due to disputed facts, provisions for development measures to be carried out in connection with the sale of real estate inventories in the amount of €19.8 million (previous year: €20.9 million) (also see note 28), provisions relating to legal disputes in the amount of €9.4 million (previous year: €9.5 million), and provisions for the purchase and compensation program for residential properties (Fraport Casa) in the amount of €0.3 million (previous year: €8.3 million). In addition, other provisions include provisions established mainly for rebates, refunds, and claim events. 41 Liabilities in the context of assets held for sale Liabilities in the context of assets held for sale € million Liabilities in the context of assets held for sale December 31, 2015 December 31, 2014 0.0 4.3 Table 103 Liabilities concerning non-current assets held for sale related to Air Transport IT Inc. and FSG Flughafen Services GmbH in the previous year (also see note 2). Fraport Annual Report 2015 164 Group Notes / Notes to the Consolidated Financial Position 42 Financial instruments Disclosures on Carrying Amounts and Fair Values The following tables present the carrying amounts and fair values of the financial instruments as at December 31, 2015 and December 31, 2014, respectively: Financial instruments as at December 31, 2015 € million Measured at amortized cost Measured at fair value December 31, 2015 Measurement category according to IAS 39 Financial assets Cash and cash equivalents Trade accounts receivable Other financial receivables and assets Other financial assets Securities Other investments Loans to joint ventures Loans to associated companies Other loans Total Loans and receivables Carrying amount Fair value 406.0 154.0 406.0 154.0 126.1 126.1 4.3 120.3 34.6 845.3 4.3 120.3 34.6 845.3 Recognized in profit or loss Held for trading Carrying amount 1) Available for sale Carrying amount 1) Hedging derivative Carrying amount 1) Total fair value 213.3 408.2 91.8 406.0 154.0 339.4 408.2 91.8 4.3 120.3 34.6 0.0 713.3 0.0 1,558.6 Other financial liabilities Carrying amount Fair value Held for trading Carrying amount 1) IAS 17 liability Carrying amount Fair value Total fair value Hedging derivative Carrying amount 1) Financial liabilities Trade accounts payable Other financial liabilities Financial liabilities Liabilities from finance leases Derivative financial liabilities Hedging derivative Other derivatives Total 185.5 343.9 190.3 438.0 3,817.4 3,987.9 4,346.8 4,616.2 34.1 34.1 27.7 30.1 79.4 190.3 438.0 3,987.9 30.1 79.4 34.1 27.7 30.1 79.4 4,759.8 1) The carrying amount equals the fair value of the financial instruments. Table 104 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 165 Financial instruments as at December 31, 2014 € million Measured at amortized cost Measured at fair value December 31, 2014 Measurement category according to IAS 39 Financial assets Cash and cash equivalents Trade accounts receivable Other financial receivables and assets Other financial assets Securities Other investments Loans to joint ventures Loans to associated companies Other loans Total Loans and receivables Carrying amount Fair value 401.1 174.7 401.1 174.7 109.8 109.3 4.3 122.0 31.5 843.4 4.3 120.3 31.5 841.2 Recognized in profit or loss Held for trading Carrying amount 1) Available for sale Carrying amount 1) Hedging derivative Carrying amount 1) Total fair value 199.3 539.5 76.0 401.1 174.7 308.6 539.5 76.0 4.3 120.3 31.5 0.0 814.8 0.0 1,656.0 Other financial liabilities Carrying amount Fair value Held for trading Carrying amount 1) IAS 17 liability Carrying amount Fair value Total fair value Hedging derivative Carrying amount 1) Financial liabilities Trade accounts payable Other financial liabilities Financial liabilities Liabilities from finance leases Derivative financial liabilities Hedging derivative Other derivatives Total 181.6 315.8 187.2 438.5 4,192.4 4,429.1 4,689.8 5,054.8 41.7 41.7 49.4 54.9 111.7 187.2 438.5 4,429.1 54.9 111.7 41.7 49.4 54.9 111.7 5,263.1 1) The carrying amount equals the fair value of the financial instruments. Table 105 Given the short terms, the carrying amounts of cash and cash equivalents, trade accounts receivable, and current other financial receivables and assets as at the reporting date correspond to the fair value. The fair values of listed securities are identical to the stock market prices on the reporting date. The valuation of unlisted securities was based on market data applicable on the valuation date using reliable and specialized sources and data providers. The values are determined using established valuation models. The derivative financial instruments relate to interest rate hedging transactions. The fair values of these financial instru- ments are determined on the basis of discounted future expected cash flows, using market interest rates corresponding to the terms to maturity. In order to determine the fair value of financial liabilities, the future expected cash flows are determined and discounted based on the yield curve on the reporting date. The market-driven and maturity-linked risk premium of the respective borrower on the reporting date is added to the cash flows. Fraport Annual Report 2015 166 Group Notes / Notes to the Consolidated Financial Position Other investments mainly relate to shares in Delhi International Airport Private Ltd. The fair value was determined based on a current bid and taking current foreign currency rates into account. The fair values of loans to joint ventures and associated companies, as well as other non-current financial assets, are determined as the present value of future cash flows. Discounting was applied using the current maturity-linked interest rate as at the balance sheet date. The fair value of the loan including interest receivables to NCG is mainly affected by cash flow forecasts and interest rate developments. The carrying amounts of other loans correspond to the respective fair values. Some of the other loans are subject to a market interest rate, and their carrying amounts therefore represent a reliable valuation for their fair values. Another part of the other loans is reported at present value as at the balance sheet date. The remaining other loans are promissory note loans with a remaining term of less than five years. Due to the lack of an active market, no information is available on the risk premiums of their respective issuers. As the promissory note loans are mainly floating interest rate loans, their carrying amounts were used as the most reliable value for their fair values. These are not intended for sale as at the 2015 balance sheet date. Non-current liabilities are recognized at their present value. Interest rates with similar terms on the date of addition are used as a basis for discounting future cash outflows. To determine fair value, the respective cash outflows are discounted at interest rates with similar terms and with the Fraport credit risk as at the reporting date. The carrying amounts of current liabilities are equal to the fair value. There is a general interest rate risk for fixed-interest loans that are extended at the ends of their terms. The fair values of financial instruments belong to the measurement categories of the hierarchy pursuant to IFRS 13: Measurement categories pursuant to IFRS 13 (2015) € million Financial assets Other financial receivables and financial assets Available for sale Loans and receivables Other financial assets Securities Other investments Loans to joint ventures Loans to associated companies Other loans Total Financial liabilities Trade accounts payable Other financial liabilities Financial liabilities Liabilities from finance leases Derivative financial liabilities Derivatives without hedging relationships Derivatives with hedging relationships Total December 31, 2015 Level 1 Level 2 Level 3 Quoted prices Derived prices Prices that cannot be derived 213.3 126.1 408.2 91.8 4.3 120.3 34.6 998.6 190.3 438.0 3,987.9 30.1 34.1 79.4 4,759.8 213.3 0.0 350.3 0.0 0.0 0.0 0.0 563.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 69.7 57.9 91.8 4.3 0.0 34.6 258.3 190.3 438.0 3,987.9 30.1 34.1 79.4 4,759.8 0.0 56.4 0.0 0.0 0.0 120.3 0.0 176.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Table 106 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 167 The fair values of financial instruments belonged to the following measurement categories of the hierarchy pursuant to IFRS 13 as at December 31, 2014: Measurement categories pursuant to IFRS 13 (2014) € million Financial assets Other financial receivables and financial assets Available for sale Loans and receivables Other financial assets Securities Other investments Loans to joint ventures Loans to associated companies Other loans Total Financial liabilities Trade accounts payable Other financial liabilities Financial liabilities Liabilities from finance leases Derivative financial liabilities Derivatives without hedging relationships Derivatives with hedging relationships Total Net results of the measurement categories € million Financial assets Loans and receivables Available for sale Financial liabilities At amortized cost Held for trading December 31, 2014 Level 1 Level 2 Level 3 Quoted prices Derived prices Prices that cannot be derived 199.3 109.3 539.5 76.0 4.3 120.3 31.5 199.3 0.0 469.6 0.0 0.0 0.0 0.0 1,080.2 668.9 187.2 438.5 4,429.1 54.9 41.7 111.7 5,263.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 68.0 69.9 76.0 4.3 1.5 31.5 251.2 187.2 438.5 4,429.1 54.9 41.7 111.7 5,263.1 0.0 41.3 0.0 0.0 0.0 118.8 0.0 160.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Table 107 2015 2014 – 2.5 11.0 – 3.3 7.7 1.0 11.7 – 6.0 – 8.1 Table 108 The net result consists of changes in fair values recognized through profit or loss, impairment losses and write-ups recognized through profit or loss, exchange rate changes, and gains and losses of disposals. Interest and dividend income of the category “available for sale” are also included in the computation of the net result. Interest and dividend income of the other categories are not included in the net result disclosed. Fraport Annual Report 2015 168 Group Notes / Notes to the Consolidated Financial Position In addition to the recognized fair value changes, gains on financial liabilities in the “held for trading” category also include the fair values of two interest rate swaps for which there were no hedged items in the course of the 2015 fiscal year. Derivative financial instruments With regard to the items in its statement of financial position and planned transactions, Fraport is, in particular, subject to interest rate and currency exchange risks. Fraport covers interest rate risks by establishing naturally hedged positions, in which the values or cash flows of primary financial instruments offset each other in their timing and amount, and/ or by using derivative financial instruments to hedge the business transactions. Derivatives are not used for trading or speculative purposes. Interest rate risks arise in particular from the capital requirements associated with capital expenditure and from existing floating interest rate financial liabilities and assets. As part of the interest rate risk management policy, interest rate derivatives were concluded in order to limit the interest rate risk arising from financial instruments with floating interest rates and assure planning security. The Group holds 35 interest rate swaps as at the reporting date (previous year: 44). Options were sold on four interest rate swaps (previous year: five) in order to optimize financing costs. The value of the options was taken into account in the fair value of the interest rate swaps. Derivative financial instruments € million Nominal volume Fair value Credit risk December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 Interest rate swaps thereof hedge accounting thereof trading 970.0 775.0 195.0 1,200.0 – 113.5 – 153.4 975.0 225.0 – 79.4 – 34.1 – 111.7 – 41.7 0.0 0.0 0.0 0.0 0.0 0.0 Table 109 The fair values of the derivative financial instruments are recorded as follows in the statement of financial position: Fair values of derivative financial instruments € million Other assets Other liabilities December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 Interest rate swaps – cash flow hedges Interest rate swaps – trading 0.0 0.0 0.0 0.0 79.4 34.1 111.7 41.7 Table 110 Fraport Annual Report 2015 Group Notes / Notes to the Consolidated Financial Position 169 29 interest rate swaps (previous year: 37) are already assigned to existing floating interest-bearing liabilities. A total of 29 interest rate swaps (previous year: 37) are accounted for as cash flow hedges in accordance with IAS 39. Changes in the fair values of these instruments are recorded in a shareholders’ equity sub-account without affecting profit or loss. The effectiveness of these cash flow hedges has been verified and is confirmed and documented at regular intervals. Six interest rate swaps (previous year: seven) are classified as “held for trading”. All changes in value resulting from this classification are recorded through profit or loss. The payments under the cash flow hedges become due in the following years. This is also the time when the respective hedged item affects profit or loss. Interest rate swaps (2015 hedge accounting) € million Beginning of term End of term Nominal volume Fair value December 31, 2015 2006 2007 2008 2009 2009 2009 2010 2010 Total 2016 2017 2018 2016 2017 2019 2017 2020 70.0 60.0 115.0 100.0 25.0 220.0 100.0 85.0 775.0 – 1.4 – 4.2 – 13.2 – 2.0 – 1.7 – 33.0 – 6.9 – 17.0 – 79.4 Table 111 There were the following time periods as at December 31, 2014: Interest rate swaps (2014 hedge accounting) € million Beginning of term End of term Nominal volume Fair value December 31, 2014 2006 2007 2008 2009 2009 2009 2009 2010 2010 2010 2011 Total 2016 2017 2018 2015 2016 2017 2019 2015 2017 2020 2015 70.0 60.0 115.0 45.0 100.0 25.0 220.0 85.0 100.0 85.0 70.0 975.0 – 4.1 – 6.5 – 17.0 – 0.9 – 6.0 – 2.7 – 40.5 – 1.8 – 10.9 – 20.0 – 1.3 – 111.7 Table 112 Unrealized losses of €5.3 million were recorded in shareholders’ equity from the change in fair value of derivatives in the 2015 fiscal year (previous year: €32.2 million). During the year under review, losses of €37.6 million (previous year: €40.3 million) were transferred from shareholders’ equity to the financial result. In addition, ineffectiveness of the interest rate swaps amounting to €0.1 million was recorded through profit and loss as in the previous year. Fraport Annual Report 2015 170 Group Notes / Notes to the Segment Reporting Notes to the Segment Reporting 43 Notes to the Segment Reporting Segment reporting in the Fraport Group according to IFRS 8 is based on internal reporting to the Executive Board as principle decision-maker and is attached as an appendix to the notes. The same accounting principles as those used in the consolidated financial statements underlie segment reporting. The strategic business units of Fraport AG in Frankfurt are clearly assigned to the Aviation, Retail & Real Estate and Ground Handling segments. In addition, these segments include Group companies integrated in the business pro- cesses at the Frankfurt site. The Aviation segment incorporates the strategic business units “Airside and Terminal Management, Corporate Safety and Security” and “Airport Security Management” at the Frankfurt site. Furthermore, FraSec Fraport Security Services GmbH and FRA-Vorfeldkontrolle GmbH are assigned to this segment. The Retail & Real Estate segment consists of the strategic business unit “Retail and Properties”, comprising the retailing activities, parking facility management, and the rental and marketing of real estate at the Frankfurt site. In addition, the Group companies integrated into these activities on the Frankfurt site are allocated to this segment. The Ground Handling segment combines the “Ground Services” strategic business unit and the Group companies involved in these operations at the Frankfurt site. The External Activities & Services segment encompasses the internal service units of “Integrated Facility Management”, “Corporate Infrastructure Management”, and “Project Expansion South”, as well as “Information and Telecommuni- cation” and their Group companies. Group companies that are not integrated in the processes at the Frankfurt site and Group companies that carry out their business operations outside of Frankfurt are also allocated to the External Activities & Services segment. Corporate data at Fraport AG is divided into market-oriented business and service units on the one hand and into central units on the other hand. All the business and service units are allocated clearly to one segment each. The central units are categorized appropriately. The data about the Group companies that are not integrated in the processes at the Frankfurt site and Group companies that carry out their business operations outside the Frankfurt site are allocated to the External Activities & Services segment during reporting. The Group companies that are integrated in the processes at the Frankfurt site are allocated to the relevant segment according to their business operations. Fraport Annual Report 2015 Group Notes / Notes to the Segment Reporting 171 Inter-segment revenue is primarily generated by the allocation of rent for land, buildings and space, as well as maintenance services and energy supply within Fraport AG. The corresponding assets are allocated to the Retail & Real Estate segment. The relevant units are charged on the basis of the costs incurred, including imputed interest. Inter-segment revenue also reflects revenue that has been generated between the companies included in different segments. Goodwill from business mergers and the appropriate impairment losses, where applicable, have been allocated clearly to a segment according to this segment structure. The reconciliation of segment assets/segment liabilities column includes the income tax assets/liabilities (including the deferred tax assets/liabilities) of the Group. In the additional disclosures “Geographical Information”, allocation is according to the current main areas of opera- tion: Germany, rest of Europe, Asia and rest of the world. The figures shown under “Asia” relate mainly to Turkey and the People’s Republic of China. The figures shown under “rest of the world” relate mainly to the USA and Peru. The revenue of Lima Airport Partners S.R.L., Lima, amounted to €277.9 million in 2015 (previous year: €214.3 million). The three foreign companies founded in the fiscal year in connection with the management and operation of 14 Greek regional airports and the three domestic companies in the waste management services sector have been assigned to the External Activities & Services segment. All newly founded companies were not yet active in the fiscal year and therefore had no significant effect on the segment reporting. The disposals during the year of the companies FRA Vorfeldaufsicht GmbH (Aviation segment), FSG Flughafen Service GmbH and Air-Transport IT Services, Inc. (External Activities & Services segment) and the sale of shares in FCS Frankfurt Cargo Services GmbH (Ground Handling segment) had no significant effect on the segment reporting. Segment assets of the Ground Handling segment in the year under review included impairment losses in accordance with IAS 36 amounting to €2.1 million (see also notes 2 and 4). Segment assets of the Retail & Real Estate segment include real estate inventories of €24.7 million (previous year: €26.6 million). During the 2015 fiscal year, revenue of €932.1 million was generated in all four segments from one customer (previous year: €895.2 million). Further explanations about segment reporting can be found in the management report. Fraport Annual Report 2015 172 Group Notes / Notes to the Consolidated Statement of Cash Flows Notes to the Consolidated Statement of Cash Flows 44 Notes to the Consolidated Statement of Cash Flows Cash flow from operating activities Cash flow from operating activities of €652.2 million (previous year: €506.2 million) resulted in €844.0 million (previous year: €722.5 million) from operating activities, €114.6 million (previous year: €130.3 million) from financial activities, and €77.2 million (previous year: €86.0 million) from cash flow used in taxes on income. Cash flow from operating activities includes cash outflows for fixed and variable concession payments in connection with the airport operator projects. Cash flow used in investing activities Cash flow used in investing activities excluding investments in cash deposits and securities amounted to €244.3 million in the reporting period, a decrease of €279.5 million year-on-year. In the previous year, there was a total cash outflow of €271.1 million for company acquisitions (AMU Holdings Inc. and Aerodrom Ljubljana d.d.). Major capital expenditure on property, plant, and equipment was made as part of the airport expansion program and the extension projects at Frankfurt Airport. The cash flow used in investing activities includes payments for capacitive capital expenditure in infrastructure in connection with the airport operator projects. Cash flow used in financing activities Cash flow used in financing activities of €541.8 million mainly resulted from the repayment of non-current financial liabilities (previous year: €184.5 million). Reconciliation to the cash and cash equivalents as at the statement of financial position € million Bank balances and cash in hand Time deposits with a remaining term of less than three months Cash and cash equivalents as at the consolidated statement of cash flows Time deposits with a remaining term of more than three months Restricted cash Cash and cash equivalents as at the consolidated statement of financial position December 31, 2015 December 31, 2014 39.8 190.9 230.7 152.0 23.3 406.0 17.4 150.4 167.8 210.0 23.3 401.1 Table 113 Fraport Annual Report 2015 Other Disclosures 45 Contingent Liabilities Contingent liabilities € million Guarantees Warranties thereof contract performance guarantees Other contingent liabilities Total Group Notes / Other Disclosures 173 December 31, 2015 December 31, 2014 3.3 176.0 129.0 30.9 210.2 12.2 178.2 125.7 31.3 221.7 Table 114 The warranties concluded mainly result from the respective contract terms in connection with national and interna- tional investment projects. Alongside performance guarantees, the guarantees mainly include tender guarantees amounting to €19.5 million in connection with tenders for airport operator concessions as well as guarantees assumed by Fraport AG in connection with financing agreements signed by the Antalya operating company amounting to €4.5 million. The performance guarantees of €129.0 million (previous year: €125.7 million) are mainly attributable to the following investments: A performance guarantee, excluding recourse against Fraport AG, was signed between GMR Holdings Private Ltd., Fraport AG, and ICICI Bank Ltd. to the amount of €41.3 million (INR 3,000 million) to modernize, expand and operate Delhi Airport (India). If, however, the party to the contract, GMR Holdings Private Ltd., fails to meet its contractual obligations, Fraport AG’s liability may not be excluded given the fact that Fraport AG is party to the contract. Fraport AG assumed a contract performance guarantee of €35.6 million for the Antalya operating company in connection with the terminal operation at Antalya Airport (Turkey). The contractual performance of its Group company Fraport Twin Star Airport Management AD, established in 2006, is guaranteed to the amount of €15.0 million (previous year: €15.0 million) in the context of operating the airports in Varna and Burgas, Bulgaria. The contract performance guarantee relating to the concession agreement for the operation of the airport in Lima, Peru, amounted to €14.7 million (US$16.0 million) on the balance sheet date. As part of the existing management contracts with the General Authority of Civil Aviation, Saudi Arabia, for the airports in Riyadh and Jeddah, Fraport AG has assumed performance guarantees totaling €10.1 million (SAR 41.4 million). The management contracts expired on June 13, 2014. Complete release from liability is still pending as at the reporting date. Fraport Annual Report 2015 174 Group Notes / Other Disclosures The other contingent liabilities include that Fraport AG is held liable to the amount of €10.9 million for rentals payable by Lufthansa Cargo Aktiengesellschaft to ACC Animal Cargo Center Frankfurt GmbH if Lufthansa Cargo Aktiengesellschaft exercises an extraordinary right to terminate the contract (previous year: €11.6 million), contingent liabilities at Lima from tax risks in the amount of €12.4 million (previous year: €12.0 million), as well as at Twin Star from penalties for obligations for capital expenditure in arrears in the amount of €7.5 million (previous year: €7.7 million). There are contingent liabilities amounting to €53.4 million (previous year: €52.4 million) in connection with invest- ments in joint ventures. 46 Other financial obligations Order commitments for capital expenditure € million Orders for capital expenditure in property, plant, and equipment, intangible assets, and investment property December 31, 2015 December 31, 2014 196.1 175.0 Table 115 Order commitments for intangible assets and investment property comprise an insignificant portion of the total amount. Operating leases € million Rental and leasing contracts up to 1 year more than 1 up to 5 years more than 5 years Total December 31, 2015 December 31, 2014 7.8 10.1 30.3 48.2 7.9 9.7 30.9 48.5 Table 116 In addition to order commitments, other financial obligations include future expenses arising from rental and leasing contracts. The contracts entered into relate to building rental agreements and the lease of equipment. The equipment leases showed an average remaining term of two years on the reporting date. In view of their economic content, the relevant leases qualify as operating leases, i.e., the leased asset is attributable to the lessor. Other obligations In addition, the following other important obligations exist at the reporting date: Obligations arising from a long-term heat supply contract (€41.9 million, previous year: €78.4 million) with Mainova AG and loan commitments to Northern Capital Gateway LCC to finance the development and modernization of Pulkovo Airport in St. Petersburg, remaining at €45.4 million. The other obligations amount to €45.4 million (previous year: €45.4 million) to associated companies and €1.0 million (previous year: €1.0 million) to joint ventures. Revenue-related concession fees and additional obligations for capital expenditure of unspecified amounts on airport infrastructure have been agreed based on the existing concession agreements related to the operation of the airports in Varna and Burgas, Bulgaria (term until 2041) and Lima, Peru (minimum term until 2031) (see also note 50). Fraport Annual Report 2015 Group Notes / Other Disclosures 175 47 Long-Term Incentive Program The Long-Term Incentive Program (LTIP) for the Executive Board and Senior Managers was introduced effective January 1, 2010 to replace the previous MSOP 2005 (see also note 32). A certain number of virtual shares (so-called performance shares) is allocated annually depending on certain perfor- mance objectives. Target achievement is measured over four years (performance period); payment in cash takes place immediately at the end of the four-year performance period. The number of virtual shares actually allocated depends on the extent to which two performance targets are met: > Earnings per share (EPS) (target weighting 70 %) This internal performance target is determined by comparing the actual average EPS in the performance period with the weighted average plan EPS at the time of awarding. > Rank total shareholder return MDAX (TSR) (target weighting 30 %) The TSR measures the development of shares over a certain period of time subject to dividends and share price developments. Therefore, it constitutes a market-dependent performance target. The amount of the actual tranche is limited to 150 % of the target tranche (virtual shares awarded). A total of 43,373 virtual shares (previous year: 45,444) were issued in the 2015 fiscal year. A provision for the LTIP in the amount of €7.4 million (previous year: €7.6 million) was reported as at December 31, 2015. The number of vested virtual shares (LTIP 2012) on the reporting date was 68,930 with a value of €3.3 million. Expense reported in the 2015 fiscal year amounted to €3.5 million (previous year: €1.7 million), thereof €1.7 million (previous year: €0.9 million) attributable to Executive Board members and €1.8 million (previous year: €0.8 million) attributable to Senior Managers of Fraport AG. Development of the fair values of the virtual shares for the Executive Board and Senior Managers Tranche All figures in € Fiscal year 2012 Fiscal year 2013 Fiscal year 2014 Fiscal year 2015 Fair value December 31, 2015 Executive Board Fair value December 31, 2015 Senior Managers Fair value December 31, 2014 Executive Board Fair value December 31, 2014 Senior Managers 49.61 47.29 54.21 53.04 47.78 44.39 52.31 52.84 39.43 41.26 43.45 41.13 37.24 38.83 42.11 41.13 Table 117 On January 1 of the years 2012 to 2015, the Executive Board and Senior Managers in the Fraport Group were each promised a tranche. The tranches for the Executive Board and for Senior Managers differ in the calculation of the extent to which objectives have been reached for the targets in the weighting of the individual years of the performance period. Fraport Annual Report 2015 176 Group Notes / Other Disclosures Virtual share conditions The virtual shares in the 2015 tranche were issued on January 1, 2015. Their term is four years and thus ends on December 31, 2018. The payout per virtual share corresponds to the weighted average closing prices of the Fraport share in the XETRA trading system on the first 30 stock market trading days immediately following the last day of the performance period. Entitlement to LTIP payments is established by the approval by the Supervisory Board of the consolidated financial statements for the last fiscal year of the performance period. Payments are made within one month. The valuation of the virtual shares takes place on the basis of the fair value per share for a tranche. A Monte Carlo simulation is used to determine the fair value. In this process, the log-normal distributed processes of the Fraport share price are simulated to determine the relevant payment according to the respective performance targets. The fair value of virtual shares to be measured in the 2012 to 2015 fiscal years was calculated based on the following assumptions: The basis of the computations on the respective valuation date was a continuous zero interest rate. The interest rates were computed from the interest rate structures of government bonds maturing between one and ten years. The computation basis for future dividend payments is public estimates made by ten banks. The arithmetic mean of these estimates is taken to determine the dividends. Historic volatility is used for the calculations. The calculations are based on the daily XETRA closing price for Fraport AG. The remaining term of the LTIP is used as the time horizon to determine volatility. 48 Risk management Fraport is exposed to market price risks mainly due to changes in exchange rates and interest rates. The Group is additionally exposed to credit risks. There are also liquidity risks arising in connection with credit and market price risks or resulting from a worsening of the operating business or disturbances on the financial markets. It is the objective of financial risk management to monitor and limit these risks by means of current operating and finance-related activities. Depending on a risk assessment, selected hedging instruments are used for these purposes. In general, Fraport hedges only those risks that affect the Group’s cash flows. Recently concluded derivative financial instruments are used as hedging instruments; i.e., they are not used for trading purposes. Reporting to the Executive Board of risk positions is made once per quarter as part of the early risk recognition system. In addition, the Chief Financial Officer receives a current financial report each month with all important financial risk positions. These are also part of the monthly Treasury Committee Meetings (TCM) in which the Chief Financial Officer and representatives of the financial department participate. The processes of risk control and the use of financial instruments, among others, are regulated as part of the Group’s financial guidelines. These regulations also include requirements for the unambiguous segregation of functions in respect of operating financial activities, their settlement and accounting, and the controlling of the financial instruments. The guidelines, which are the basis of the risk man- agement processes, aim to limit and control the risks appropriately and monitor them. Both the guidelines and the systems are regularly reviewed and adjusted to current market and product developments. For further details, please refer to the opportunity and risk reporting in the group management report. Fraport Annual Report 2015 Group Notes / Other Disclosures 177 Credit risk Fraport is subject to default risks from its operating business and certain financial positions. The default risks arising from financial positions are controlled by a broad diversification of counterparties and issuers, as well as regular verification of their credit ratings and the limits derived from this. It is the company’s risk policy that financial assets and derivative transactions are in principle only carried out with issuers and counterparties with a credit rating of at least “BBB–”. If the credit rating is downgraded to a grade worse than “BBB–” during the asset’s holding period or the term of the derivative, a decision will be made on a case-by-case basis on how to deal with the asset or derivative in future, taking into account the remaining term. The maximum credit risk on the balance sheet date is mainly reflected in the carrying amounts of the assets reported in the financial position. The amount of the debt instruments corresponds to the credit risks of the securities and promissory note loans. The breakdown on the balance sheet date is as follows: Classification of securities € million Debt instruments December 31, 2015 December 31, 2014 637.1 778.5 Table 118 Securities and promissory note loans have the following long-term issuer ratings: Issuer ratings of securities and promissory note loans (2015) € million AAA AA+ AA AA– A+ A A– BBB+ BBB BBB– Not rated Total In 2014, the securities and promissory note loans had the following issuer ratings: Issuer ratings of securities and promissory note loans (2014) € million AAA AA+ AA AA– A+ A A– BBB+ BBB BBB– Total December 31, 2015 15.2 16.2 30.2 110.2 72.5 111.3 115.6 90.1 37.9 32.9 4.8 637.1 Table 119 December 31, 2014 15.5 21.8 30.5 82.5 105.9 249.8 134.5 50.6 54.6 32.8 778.5 Table 120 Fraport Annual Report 2015 178 Group Notes / Other Disclosures The credit risk on liquid funds applies solely with regard to banks. Here, current cash deposits are maintained with banks. The banks where liquid funds are deposited have the following long-term issuer ratings: Issuer ratings of liquid funds (2015) € million AAA AA+ AA AA– A+ A A– BBB+ BBB BBB– BB+ BB BB– Not rated Total In 2014, the banks where liquid funds were deposited had the following issuer ratings: Issuer ratings of liquid funds (2014) € million AAA AA+ AA AA– A+ A A– BBB+ BBB BBB– BB+ BB BB– Not rated Total Liquidity risk December 31, 2015 0.0 0.0 0.0 43.7 0.7 148.9 13.5 97.0 57.9 0.9 23.7 0.0 0.3 19.4 406.0 Table 121 December 31, 2014 0.0 0.0 0.0 35.3 0.0 222.7 88.4 0.5 20.5 1.4 23.9 0.0 0.1 8.3 401.1 Table 122 Fraport generates financial funds mainly through its operating business and external financing. The funds are primarily used to finance capital expenditure for items of property, plant, and equipment and intangible assets. The operating cash flow, the available liquid funds (including cash and cash equivalents and current realizable securities and other financial instruments), as well as current and non-current credit lines and loan commitments, give sufficient flexibility to ensure the liquidity of the Fraport Group. Given the diversity both of the financing sources, and the liquid funds, and financial assets, there is no risk of concen- tration in the liquidity. Fraport Annual Report 2015 Group Notes / Other Disclosures 179 The operating liquidity management comprises a cash concentration process, which, on a daily basis, combines the liquid funds of most of the Group companies headquartered in Germany. This allows optimum control of liquidity surpluses and requirements in line with the needs of individual Group companies. Short and medium-term liquidity management includes the maturities of financial assets and financial liabilities and estimates of the operating cash flow. The following list of maturities shows how the liability cash flows as at December 31, 2015 influenced the Group’s future liquidity. Liquidity profile as at December 31, 2015 € million Total 2016 2017 2018 – 2022 2023 – 2027 2028 et seqq. Primary financial instruments Financial liabilities Finance leases Concessions payable Trade accounts payable Derivative financial instruments Interest rate swaps Thereof trading Thereof hedge accounting 4,325.5 30.7 663.7 185.5 116.5 32.1 84.4 604.3 9.4 26.4 143.1 39.1 7.8 31.3 380.1 2,910.5 9.5 21.8 22.8 30.5 6.8 23.7 11.8 113.8 10.8 45.1 15.7 29.4 87.6 0.0 122.7 7.5 1.8 1.8 0.0 343.0 0.0 379.0 1.3 0.0 0.0 0.0 Table 123 The liquidity profile as at December 31, 2014 was as follows: Liquidity profile as at December 31, 2014 € million Total 2015 2016 2017 – 2021 2022 – 2026 2027 et seqq. Primary financial instruments Financial liabilities Finance leases Concessions payable Trade accounts payable Derivative financial instruments Interest rate swaps Thereof trading Thereof hedge accounting 4,832.2 60.4 637.7 181.6 157.0 39.6 117.4 390.7 11.8 25.4 134.5 45.5 8.5 37.0 561.7 3,013.8 11.8 20.0 18.8 37.9 7.6 30.3 27.6 104.5 13.2 70.8 20.7 50.1 505.5 4.0 112.4 10.8 2.8 2.8 0.0 360.5 5.2 375.4 4.3 0.0 0.0 0.0 Table 124 All financial instruments that are subject to agreements as of the reporting date were included to determine the un- discounted payments. If a contractual partner can release a payment at different points of time, the earliest deadline was taken into account. The respective forward interest rates derived from the interest curve as at the balance sheet date were used to determine the interest payments on primary financial liabilities bearing interest at floating rates and the net payments on derivative financial instruments. The respective forward interest rates were used to determine the interest payments on primary financial liabilities in foreign currency. Fraport Annual Report 2015 180 Group Notes / Other Disclosures Financial liabilities of certain Group companies outside Germany arising from independent project financing with a nominal value of €109.6 million include numerous credit clauses that are typical for this type of financing. These clauses include, inter alia, regulations under which certain debt service coverage ratios and control indicators for debt ratio and credit periods must be complied with. Failure to comply with the agreed credit clauses may lead to restrictions on the distribution of dividends and/or to the early redemption of loans or to the additional payment of shareholders’ equity. Additionally, there are contractually agreed credit clauses for specific earmarked and/or project-related public loans issued by public business development banks and taken out by Fraport AG in the amount of €1,020.0 million. These clauses relate, among other things, to changes in the shareholder structure and control of the company. If these changes have a proven negative effect on the credit rating of Fraport AG, the creditors have above a certain threshold the right to call the loans due ahead of time. In connection with the project financing of the airport operator concession in Lima, Peru (carrying amount: €110 million), there is also a credit clause under which the transfer of construction land for expanding the airport as laid down in the concession agreement was planned by the Peruvian government to the airport operator Lima Airport Partners S.A. (LAP) by December 31, 2015. This transfer constitutes an obligation on the part of the Peruvian gov- ernment to LAP under the concession agreement for the operation of the airport for the capital, Lima. As the transfer has not been completed at December 31, 2015, LAP has not observed the credit clause at the end of December 31, 2015. Until this situation is resolved, LAP is only permitted to issue dividends following the prior agreement of the creditors. There are also investment restrictions. If LAP formally reports to the Peruvian government the failure to transfer the construction land, this will give LAP the right to terminate the concession agreement if the construction land is not transferred within 90 days. This right of termination would entitle the creditors of the project financing to demand the early repayment of the project financing after an additional period. LAP is currently in negotiations with the Peruvian government with the aim of resolving the situation. All other agreed borrowing terms and conditions were met in 2015. There are currently no indications that there will be any failure to comply with the essential agreed borrowing terms and conditions. Currency risk The international focus of the Fraport Group makes its operating business, the financial results reported, and the cash flows subject to foreign currency fluctuation risks. Within the Group, foreign currency risks mainly arise from revenue in foreign currencies, that are not covered by expenses in matching currencies. This results in a cash flow risk between foreign currency revenue and functional currency revenue. Only the transaction risks affecting cash flows are actively controlled. These mainly apply between the US Dollar (US$) and the Peruvian Nuevo Sol (PEN). To reduce the foreign currency effects in the operating business, the transaction risk is assessed on an ongoing basis and hedged in part by using derivative financial instruments. Entering into financial instrument transactions is the responsibility of the Group companies in close coordination with the Treasury department of Fraport AG. The transaction risks are assessed by means of sensitivity analyses. The calculation rates on which the analyses are based are the result of the mean value for the respective exchange rate in the period under review, less or in addition to a standard deviation. Taking these assumptions as a basis, the result for the period would have been affected in the year under review as follows: Currency rate sensitivity Risk in € million December 31, 2015 December 31, 2014 US$/PEN 0.21 0.23 0.24 Net income Loss Net income Loss 0.25 Table 125 Fraport Annual Report 2015 Group Notes / Other Disclosures 181 Currency effects in connection with the shares in Delhi International Airport Private Ltd. classed as available for sale are recorded under shareholders’ equity. A 10 % revaluation or devaluation of the Euro against the Indian Rupee (INR) at December 31, 2015 would decrease or increase shareholders’ equity by €0.9 million (previous year: €0.7 million). In addition, there are effects in the Group from the translation of foreign currency assets or liabilities into Euros and/ or from the consolidation of Group companies not accounted for in Euros. These translational risks are met as far as possible by applying natural hedging. Fraport holds an isolated foreign currency liability of CHF 72.9 million with a term lasting until 2016. A 10 % revalua- tion or devaluation of the Euro against the CHF at December 31, 2015 would result in a €6.1 million (previous year: €5.5 million) lower or a €7.5 million (previous year: €6.7 million) higher financial liability. This would lead to a net income in the financial result of €6.1 million (previous year: €5.5 million) or a loss of €7.5 million (previous year: €6.7 million). Interest rate risk The Fraport Group is exposed to interest rate risks on a variety of primary and derivative financial assets and liabilities, as well as future planned capital requirements. In regard to assets and liabilities that are currently held, the objective of refinancing at matching maturities is generally pursued. The interest rate risk arising in the next twelve months is relevant for control. Therefore, it is assessed every quarter and reported to the financial risk committee. Sensitivity analyses are prepared to determine the risk. These show the effects of changes in market interest rates on interest payments, interest income and expenses, other profit or loss portions, and shareholders’ equity. Interest rate changes are defined to be the maximum fluctuation of the key interest rate in the past for the respective currency and the respective period of time and/or the maximum fluctuation of the ten year swap rate in the past. Here, the deviation in absolute terms is taken into consideration. To limit the interest rate risks, derivative financial instruments, such as interest rate swaps and swaptions, are used. The sensitivity analyses are based on the following assumptions: Changes in market interest rates of primary financial instruments with fixed interest rates affect profit or loss, or share- holders’ equity, only if the instruments are measured at fair value. The sensitivity analysis for these financial instruments assumes a parallel shift of the interest rate curve by 169 basis points over a period of twelve months. The financial instruments measured at amortized acquisition cost with fixed interest rates do not affect the result for the period or the shareholders’ equity of the Fraport Group. Market interest rate changes of primary floating-rate financial instruments, that are not designated hedged items in a cash flow hedge of interest rate exposures affect the interest result and are therefore included in the calculation of profit or loss related sensitivities. The respective net financial position for each currency is taken into account in the process. The interest rate sensitivity analysis are based on the following assumptions: €: 3.25 percentage points; US dollar (US$): 4.75 percentage points; Turkish Lira (TRY): 10.25 percentage points; Peruvian Nuevo Sol (PEN): 7.10 percentage points; Saudi Riyal (SAR): 4.50 percentage points; Bulgarian Lew (BGN): 5.22 percentage points; Hong Kong Dollar (HKD): 5.25 percentage points. The individual sensitivities are then aggregated to become one profit or loss related sensitivity in €. Changes in market interest rates of financial instruments which were designated as hedging instruments in an interest rate related cash flow hedge affect shareholders’ equity and are therefore included in the equity-related sensitivity computations. The maximum variability is taken to be a parallel shift of the interest rate curve by 169 basis points over a period of twelve months. Fraport Annual Report 2015 182 Group Notes / Other Disclosures Changes in market interest rates of interest rate derivatives which are not part of a hedging relationship pursuant to IAS 39 affect the other financial result and are therefore included in the profit or loss related sensitivities. The maximum variability is taken to be a parallel shift of the interest rate curve by 169 basis points over a period of twelve months. Based on the portfolios and the structure of the statement of financial position as at December 31, 2015 and the assumptions made, the profit or loss related sensitivity is –€0.7 million in the event of an increase (decrease) in the market interest rate (previous year: –€0.5 million). This means that the financial result could hypothetically have increased (decreased) by €0.7 million. This hypothetical effect on the result would have resulted from the potential effects of interest rate derivatives of €11.1 million (previous year: €16.0 million) and an increase (decrease) in the interest result from primary floating-rate net financial positions of –€11.8 million (previous year: –€16.5 million). Interest sensitivity on financial result Interest sensitivity in € million Thereof derivative financial instruments Thereof primary financial instruments December 31, 2015 December 31, 2014 – 0.7 – 0.5 11.1 16.0 – 11.8 – 16.5 Table 126 The equity-related sensitivity is €8.6 million (previous year: €19.6 million). By applying the assumptions made, an increase (decrease) in interest rates would have resulted in an increase (decrease) in shareholders’ equity of €8.6 million. Assuming a parallel shift in the interest rate curve of 58 basis points over a twelve-month period in the current interest rate environment as in the previous year gives the following interest sensitivity: Interest sensitivity on equity Interest sensitivity in € million Thereof derivative financial instruments Thereof primary financial instruments December 31, 2015 December 31, 2014 – 8.0 – 11.0 3.8 5.5 – 11.8 – 16.5 Table 127 The equity-related sensitivity for 58 basis points is €2.9 million (previous year: €6.7 million). By applying the assump- tions made, an increase (decrease) in interest rates would have resulted in an increase (decrease) in shareholders’ equity of €2.9 million. Capital management The Group’s objectives with a view to capital management are ensuring the company’s continued existence and a sustained increase in the company’s value. As a capital market-oriented company with continuing capital expenditure requirements, Fraport monitors the development of its financial debt using ratios, that relate EBITDA to net financial debt and/or interest expense. As long as the company remains within the following margins, Fraport’s present view is that there is sufficient access to debt capital sources at reasonable costs. Fraport Annual Report 2015 Group Notes / Other Disclosures 183 The components of the control indicators are defined as follows: Components of the control indicators Net financial debt EBITDA Interest expense Current financial liabilities + Non-current financial liabilities – Liquid funds – Current realizable assets in “other financial assets” and “other receivables and financial assets” Operating result + depreciation and amortization Interest expense Table 128 The financial ratios developed as follows in the period under review: Financial debt ratios Key figures Net debt/EBITDA EBITDA/interest expense 49 Related party disclosures Corridor December 31, 2015 December 31, 2014 max. 4 – 6 × min. 3 – 4 × 3.3 5.4 3.8 4.5 Table 129 Relationships with related parties and the State of Hesse Alongside the Group companies included in the consolidated financial statements, in the context of the course of ordinary business operations, the Group is also related to parties that are not included as well as associated companies and joint ventures, which are parties related to the Group according to IAS 24. Thus, Fraport AG has numerous business relationships with the State of Hesse and the City of Frankfurt and their majority-owned investments. Related companies and authorities with which major business relationships are maintained include Landesbetrieb Hessen-Forst, Mainova AG, and Messe Frankfurt Venue GmbH & Co. KG. All transactions with related parties have been concluded under conditions customary in the market as with unrelated third parties. The services rendered to authorities are generally based on cost prices. The following table shows the scope of the respective business relationships: Relationships with related parties and the State of Hesse € million Majority shareholders State of Hesse Stadtwerke Frankfurt am Main Holding GmbH Joint ventures at equity Associated companies at equity Companies controlled and significantly influenced by majority shareholders Revenue Purchased goods and services Interest Accounts receivable Loans Liabilities 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 1.6 1.6 5.9 10.6 – 0.8 – 0.9 – – – – – – 0.2 0.2 10.1 13.2 – – – – – – 0.2 – 7.3 5.7 15.3 16.2 0.1 0.1 12.5 9.0 4.2 4.2 8.1 7.2 5.5 4.4 9.5 11.1 2.7 12.2 56.8 42.0 120.3 122.0 0.7 0.8 13.9 14.7 104.7 121.2 – – 0.1 – – – 9.1 13.3 Table 130 Fraport Annual Report 2015 184 Group Notes / Other Disclosures Relationships with related persons The Executive Board, Supervisory Board, and their family members are defined as related persons pursuant to IAS 24. Remuneration for management in key positions in accordance with IAS 24 comprises the remuneration of the active Executive Board and Supervisory Board. These were compensated as follows: Remuneration of management € million Salaries and other short-term employee benefits Termination benefits Post-employment benefits Other long-term benefits Share-based remuneration Total 2015 2014 4.5 0.0 1.1 0.4 1.3 7.3 5.0 0.0 1.1 0.4 1.3 7.8 Table 131 Information regarding salaries and other short-term employee benefits for employee representatives on the Supervisory Board exclusively includes remuneration for their Supervisory Board activities. Post-employment benefits include service costs from pension provisions for the active members of the Executive Board. The benefits granted for the Long-Term Strategy Award (LSA, see also note 54) are accounted for as other long-term employee benefits in the 2015 fiscal year. The statement of share-based remuneration includes the granted amount for the Long-Term Incentive Program awarded in the 2015 fiscal year (LTIP, see also note 54). At the end of the fiscal year, there were outstanding balances for the Executive Board members’ bonuses amounting to €1.3 million (previous year: €1.2 million). In the 2015 fiscal year, there was a consulting agreement in place between Fraport AG and Korthäuer & Partner GmbH, Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Essen. One of the non-controlling managing partners of Korthäuer & Partner is Mr. Arno Prangenberg. Mr. Prangenberg is a member of the Supervisory Board of Fraport AG. The signing of the agreement followed the approval by the Supervisory Board of Fraport AG in accordance with Section 114 (1) of the AktG. The activities arising from this agreement were terminated in the fiscal year. The fee of €41 thousand net was paid by Fraport AG in 2015. The contract was concluded on an arm’s length basis. Fraport Annual Report 2015 Group Notes / Other Disclosures 185 50 Operating permit and service concession agreements The following Group companies in the Fraport Group have been granted service concessions or similar permits, which give the public access to important economic and social facilities: Fraport AG On December 20, 1957, the Minister of Labor, Economics and Transport for the State of Hesse, in agreement with the German Federal Minister of Transport, approved operations at Frankfurt am Main Airport in accordance with Section 7 of the German Air Traffic Act as amended on August 21, 1936. This permit does not expire at any specific time and was last amended by the decision of October 29, 2012 based on the outcome of the planning approval notice for the expansion of the airport, in particular regarding Runway Northwest, taking into account the relevant ruling of the German Federal Administrative High Court. The right to operate the airport is linked to various obligations that are specified in the permit. According to this, Fraport AG is required, among other things, to keep the airport in good operating condition at all times, to provide and maintain the equipment and signs needed to monitor and control air traffic at the airport, and to guarantee the availability of fire prevention and protection systems that take account of the special operating conditions. The restric- tions on night flight traffic that were initially imposed in 1971 and subsequently updated have been tightened by the aforementioned amendment and extension to the permit. In addition, daytime operational restrictions on aircraft for civil aviation purposes at Frankfurt Main Airport that do not comply with the International Civil Aviation Organization (ICAO) noise protection regulations have been further tightened. Furthermore, there are statutory requirements for passive noise abatement and outdoor living area compensation as a result of the construction work for the airport expansion around Runway Northwest. The company charges airlines that fly to Frankfurt Airport what are known as “traffic charges” for provision of the transport infrastructure. These traffic charges are broken down into airport charges that require approval and other charges that do not require approval. > The airport charges that require approval pursuant to Section 19b of the German Air Traffic Law (LuftVG) are divided into take-off and landing charges, including noise components and emission charges, parking charges, and passenger and security charges, as well as charges for the financing of passive noise abatement measures (noise surcharges). The amount of the charges is specified in a related charge table. Fraport AG and airline representatives reached an agreement on airport charges for 2012 to 2015 as early as February 19, 2010. The contract stipulates an annual charge increase by 2.9 % for each year until 2015. If passenger development exceeds or falls below the forecasted figures, the contract calls for a bonus/malus approach to be used. The charge table effective since January 1, 2014 was approved by the HMWEVL and published in the Air Transport Bulletin (NfL). Charges for the financing of passive noise abatement measures (noise surcharges) have been levied since July 1, 2012 (see also note 25). Airport charges accounted for 36.89 % (previous year: 36.87 %) of Fraport AG’s revenue in the year under review. Furthermore, Fraport proposed an incentive program for the years 2014 and 2015, which was approved by the HMWEVL on December 4, 2013. It provides for retroactive discounts per departing passenger when the airlines have reached a minimum passenger quantity as well as a minimum level of growth and when the passenger is transported via low-noise aircraft. Fraport Annual Report 2015 186 Group Notes / Other Disclosures > The remaining charges not subject to approval are classified as charges for central Ground Services infrastructure facilities and Ground Services charges. In accordance with EU regulations, ground services on the apron were opened up to competition on November 1, 1999 (opened up in practice on April 15, 2000), by issuing a permit to another third-party ground handling company along with Fraport AG. The services in the area of central ground handling infrastructure facilities continue to be excluded from competition (monopoly sector) and are completely segregated from the ground handling services when they are offset with the airlines. Of Fraport AG’s revenue in 2015, 15.37 % was generated by ground handling services (previous year: 16.11 %) and 14.21 % by infrastructure charges (previous year: 14.03 %). Above and beyond the traffic charges, Fraport AG generates revenue essentially from revenue-based payments, renting and parking, and security services. The earnings from these operations which do not require approval accounted for 33.53 % (previous year: 32.99 %) of Fraport AG’s entire revenue in the year under review. Fraport Twin Star Airport Management AD Fraport Twin Star Airport Management AD (franchisee) and the Republic of Bulgaria (franchisor), represented by its Minister of Transport, signed a concession agreement on September 10, 2006, for the operation and management of the Bulgarian airports in Varna and Burgas on the Black Sea. According to the concession agreement, the franchisee is obligated to render various airport services and to improve services in line with international standards, national laws, and the provisions stipulated in the concession agreement. In addition, the franchisee is obligated to invest €243.7 million in the expansion and a capacity increase of the airports in Varna and Burgas and to maintain the assets ceded for use. In addition, the franchisee pays an annual concession fee of 19.2 % of total revenue, at least 19.2 % of BGN 57 million (€29.1 million), adjusted for the development of the national inflation rate, to the franchisor. The franchisee paid an additional non-recurring concession fee in the amount of €3.0 million to the franchisor after the agreement was signed. In return, the franchisee receives the right to use the existing and future infrastructure for airport operations and the right to generate revenues, in particular through airport charges (passenger, landing, and parking fees), and for ground handling services. Airport charges are regulated by the franchisor. The concession agreement started on November 10, 2006, and has a duration of 35 years. There are no options for renewal. The franchisee is obligated to furnish the franchisor with a performance bond issued by a bank rated BB– or higher, in the annual amount of €15.0 million in the first ten years and in the annual amount of €7.5 million during the remaining term of the agreement. At the end of the concession term, the infrastructure pursuant to the contract that is essential for airport operations must be returned to the franchisor in proper operating condition without receiving any consideration in return. Lima Airport Partners S.R.L. (LAP) On February 14, 2001, LAP (franchisee) and the Peruvian government (franchisor), represented by its Minister of Transportation (MTC), signed the concession agreement for Jorge Chavez International Airport on the operation, expansion, maintenance, and use of the Jorge Chavez International Airport in Lima (Peru). The term of the concession agreement is 30 years. The contract may be renewed for another ten years. Further renewals are possible under certain conditions; the overall concession term must not exceed 60 years, however. Fraport Annual Report 2015 Group Notes / Other Disclosures 187 In addition to operating and maintaining the airport infrastructure, the franchisee is obligated vis-a-vis the franchisor to invest at least US$100 million for the remodeling of the airport, in particular the terminal, and to build a second landing runway. The contractual amount of US$100 million has been invested already. The transfer of land for the construction of the second landing runway by the Peruvian government, planned for late 2015, has not taken place at December 31, 2015 (see also note 49). The franchisee is also obligated to pay concession fees. The concession fee is the higher of two amounts: either the contractually fixed minimum payment (basic payment of US$15 million per year, inflation-fed by the US CPI) or 46.511 % of total revenue after deduction and transfer to Corpac (Aviation Regulatory Authority) of 50 % of landing fees and 20 % of the international passenger fees (TUUA). In addition, a regulatory charge of 1 % of the same assessment basis is payable. In return, the franchisee receives the right to use the existing and future infrastructure for airport operations and the right to generate revenue, in particular through airport charges (passenger, landing, and parking fees), and for ground handling and other services. Airport charges are regulated by the franchisor. At the end of the contract term, the infrastructure pursuant to the contract that is essential for airport operations must be returned to the franchisor by the franchisee in the contractually defined operational condition. The franchisee has the right to have the residual carrying amount of said infrastructure reimbursed by the franchisor for a limited period of time. This does not apply if the concession agreement is terminated early. 51 Significant events after the balance sheet date There were no significant events after December 31, 2015 for the Fraport Group. 52 Information on investments pursuant to the German Securities Trading Act (WpHG) Fraport AG received the following notifications pursuant to Section 21 (1) of the WpHG in fiscal year 2015: RARE Infrastructure Limited, Sydney, Australia notified us on March 16, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany fell below the threshold of 5 % of voting rights on March 10, 2015 and amounted to 4.8736 % (corresponding to 4,500,447 voting rights) on that date. RARE Infrastructure Limited, Sydney, Australia notified us on September 2, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany fell below the threshold of 3 % of voting rights on August 25, 2015 and amounted to 2.99 % (corresponding to 2,762,302 voting rights) on that date. RARE Infrastructure Limited, Sydney, Australia notified us on September 14, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany rose above the threshold of 3 % of voting rights on September 10, 2015 and amounted to 3.002 % (corresponding to 2,773,140 voting rights) on that date. Fraport Annual Report 2015 188 Group Notes / Other Disclosures RARE Infrastructure Limited, Sydney, Australia notified us on September 17, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany fell below the threshold of 3 % of voting rights on September 11, 2015 and amounted to 2.99 % (corresponding to 2,762,938 voting rights) on that date. Legg Mason, Inc, Baltimore, USA notified us on December 15, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany rose above the threshold of 3 % of voting rights on December 2, 2015 and amounted to 3.001 % (corresponding to 2,772,583 voting rights) on that date. BlackRock, Inc, Wilmington, USA notified us on December 23, 2015 in accordance with Section 21 (1) of the WpHG that its share of voting rights in Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, Germany rose above the threshold of 3 % of voting rights on December 18, 2015 and amounted to 3.003 % (corresponding to 2,900,014 voting rights) on that date. As at December 31, 2015, the shareholder structure of Fraport AG was as follows: The total voting rights in Fraport AG held by the State of Hesse and Stadtwerke Frankfurt am Main Holding GmbH calculated in accordance with Section 22 (2) of the WpHG amounted to 51.35 % as at December 31, 2015. State of Hesse held 31.34 % and Stadtwerke Frankfurt am Main Holding GmbH held 20.01 %. The voting rights in Fraport AG owned by the City of Frankfurt am Main are held indirectly via the subsidiary Stadtwerke Frankfurt am Main Holding GmbH. According to the last official report in accordance with the WpHG or disclosures by individual shareholders, the other voting rights in Fraport AG were attributable as follows (as at December 31, 2015): Deutsche Lufthansa AG 8.45 %, BlackRock Inc. 3.00 %, and Legg Mason, Inc. 3.00 %. The relative ownership interests were adjusted to the current total number of shares as at the balance sheet date and may therefore differ from the figures given at the time of reporting or from the respective shareholders’ own disclosures. There are no reports for the remaining 34.20 % (free float). 53 Statement issued by the Executive Board and the Supervisory Board of Fraport AG pursuant to Section 161 of the AktG On December 14, 2015, the Executive Board and the Supervisory Board of Fraport AG issued the Statement of Compliance with the Corporate Governance Code pursuant to Section 161 of the AktG and made it available to the public on a permanent basis on the company website www.fraport.com under the header “The Fraport Group” in the “Corporate Compliance” section. Fraport Annual Report 2015 Group Notes / Other Disclosures 189 54 Information concerning the Executive Board, Supervisory Board, and Economic Advisory Board Remuneration of the Executive Board and Supervisory Board in fiscal year 2015 The essential features of the remuneration system, and the information on the individualized remuneration of the Executive Board and the Supervisory Board, are shown in the remuneration report. The remuneration report is part of the management report. Total remuneration of the Executive Board amounted to €5,409.5 thousand (previous year: €5,829.5 thousand) plus service costs for pensions of €1,122.6 thousand (previous year: €1,054.4 thousand). As part of the Long-Term Strategy Award (LSA), each Executive Board member is promised a prospective financial reward for one fiscal year, the first being in 2010 for the fiscal year 2013. After three fiscal years have expired (the fiscal year in question and the two following years), the extent to which the targets have been met is determined and the actual payment is calculated based on these results. The paid amount can exceed or fall below the prospective amount but is capped at 125 % of the amount originally stated. Performance targets are customer satisfaction, sustained employee development, and share performance. All three targets are equally important under the LSA. Total obligations as part of the LSA amounted to €509 thousand as at December 31, 2015 (previous year: €250 thousand). The fair values of the LSA for Dr. Schulte amounted to €65.1 thousand as at the balance sheet date December 31, 2015 for the 2013 tranche (previous year: €64.6 thousand), €93.4 thousand for the 2014 tranche (previous year: €89.3 thousand), and €122.0 thousand for the 2015 tranche. The fair values of the LSA for Ms. Giesen, Mr. Müller, and Dr. Zieschang amounted to €35.1 thousand each as at December 31, 2015 for the 2013 tranche (previous year: €34.8 thousand), €63.2 thousand each for the 2014 tranche (previous year: €59.2 thousand), and €90.3 thousand each for the 2015 tranche. The Executive Board received short-term remuneration components of €2,339.4 thousand for the fiscal year 2015 (previous year: €2,396.2 thousand). In addition, long-term remuneration components were allocated with an issue fair value of €1,215.3 thousand (2015 LTIP tranche) and €390.0 thousand (2015 LSA tranche) as part of the LTIP and LSA programs (previous year for the 2014 LTIP tranche: €1,283.4 thousand, 2014 LSA tranche: €410.0 thousand). All active members of the Supervisory Board received a total remuneration of €889 thousand in the 2015 fiscal year (previous year: €877 thousand). No loans or advances were granted to members of the Executive Board or the Supervisory Board in the year under review. Former Executive Board members and their dependents received €1,732 thousand (previous year: €1,885 thousand). The pension obligations towards active members of the Executive Board as at the balance sheet date were €10,088 thousand (previous year: €9,204 thousand) and towards former Executive Board members and their surviving dependents €25,341 thousand (previous year: €28,526 thousand). The information concerning the members of the Executive Board and Supervisory Board is presented in notes 55 and 56. Remuneration of the Economic Advisory Board in fiscal year 2015 In the 2015 fiscal year, aggregate remuneration of the Economic Advisory Board amounted to €97.0 thousand (previous year: €90.5 thousand). Disclosures pursuant to Section 15a of the WpHG Pursuant to Section 15a of the WpHG, members of the Executive Board and Supervisory Board of Fraport AG are required to disclose transactions with shares of Fraport AG or any related financial instruments to the company and the German Federal Financial Supervisory Authority (BaFin) within five business days. This also applies to persons who are closely related to members of the Executive Board and Supervisory Board as defined in Section 15a (3) of the WpHG. These transactions have been published by Fraport AG in accordance with the deadlines set out in Section 15a of the WpHG. Fraport Annual Report 2015 190 Group Notes / Other Disclosures 55 Executive Board Mandates of the Executive Board Members of the Executive Board Chairman of the Executive Board Dr. Stefan Schulte Executive Director Operations Anke Giesen Executive Director Labor Relations Michael Müller Executive Director Controlling & Finance Dr. Matthias Zieschang 56 Supervisory Board Mandates of the Supervisory Board Members of the Supervisory Board Chairman Karlheinz Weimar Former Finance Minister of the State of Hesse (Remuneration 2015: €63,000, 2014: €62,200) Vice-Chairman Gerold Schaub Regional Director Traffic ver.di Hessen (Remuneration 2015: €54,150, 2014: €54,150) Claudia Amier Chairperson of the Works Council (Remuneration 2015: €58,150, 2014: €57,350) Memberships in mandatory Supervisory Boards and comparable control bodies Member of the Supervisory Board: > Deutsche Post AG Chairman of the Supervisory Board: > FraSec Fraport Security Services GmbH Member of the Shareholders’ Meeting: > Airport Cater Service GmbH > Medical Airport Service GmbH > Terminal for Kids gGmbH Chairman of the Supervisory Board: > Flughafen Hannover-Langenhagen GmbH (until March 1, 2015) Vice-Chairman of the Supervisory Board: > Shanghai Frankfurt Airport Consulting Services Co., Ltd. Member of the Supervisory Board: > Fraport IC Ictas Antalya Havalimani Terminal Yatirim ve Isletmeciligi Anonim Sirketi > Flughafen Hannover-Langenhagen GmbH (from March 1, 2015) Member of the Shareholders’ Meeting: > Flughafen Hannover-Langenhagen GmbH Member of the Administrative Board: > Frankfurter Sparkasse Table 132 Memberships in mandatory Supervisory Boards and comparable control bodies Member of the University Council: > University of Frankfurt am Main Member of the Board of Trustees: > Institute for Law and Finance Vice-Chairman of the Supervisory Board: > LSG Lufthansa Service Holding AG > APS Airport Personal Service GmbH > LSG Sky Chefs Frankfurt ZD GmbH Devrim Arslan Chairman of the Works Council of APS Airport Personal Service GmbH Member of the Supervisory Board: > APS Airport Personal Service GmbH (Remuneration 2015: €40,500, 2014: €40,500) Fraport Annual Report 2015 Mandates of the Supervisory Board Members of the Supervisory Board Uwe Becker City Treasurer of the City of Frankfurt am Main (Remuneration 2015: €41,300, 2014: €41,300) Hakan Cicek Member of the Works Council relieved of duty (Remuneration 2015: €35,500, 2014: €35,500) Kathrin Dahnke Member of the Executive Board at Wilhelm Wehrhahn KG (Remuneration 2015: €36,300, 2014: €34,700) Group Notes / Other Disclosures 191 Memberships in mandatory Supervisory Boards and comparable control bodies Membership in mandatory control bodies: > Stadtwerke Verkehrsgesellschaft Frankfurt/Main mbH (Chairperson) > ABG FRANKFURT HOLDING Wohnungsbau- und Beteiligungsgesellschaft mbH > Frankfurter Aufbau-Aktiengesellschaft > Mainova AG (Chairperson) > Messe Frankfurt GmbH > Stadtwerke Frankfurt am Main Holding GmbH > Süwag Energie AG Membership in comparable control bodies: > Hafenbetriebe der Stadt Frankfurt am Main > Kommunale Kinder-, Jugend- und Familienhilfe Frankfurt/Main > Marktbetriebe der Stadt Frankfurt am Main > Stadtentwässerung Frankfurt am Main > Kita Frankfurt > Städtische Kliniken Frankfurt am Main-Höchst > Volkshochschule Frankfurt am Main > Dom Römer GmbH (Vice-Chairperson from Nov 24, 2015) > Erdgas Westthüringen Beteiligungsgesellschaft mbH (until May 22, 2015) > Gas-Union GmbH (Chairperson) > Gateway Gardens Projektentwicklungs-GmbH > Nassauische Sparkasse > Klinikum Frankfurt Höchst GmbH > Sparkassenzweckverband Nassau > Sportpark Stadion Frankfurt am Main Gesellschaft für Projektentwicklungen mbH > Tourismus- und Congress GmbH Frankfurt am Main > Wirtschaftsförderung Frankfurt – Frankfurt Economic Development – GmbH > Zentrale Errichtungsgesellschaft mit beschränkter Haftung > Frankfurt Ticket RheinMain GmbH (until March 17, 2015) > RMA Rhein-Main Abfall GmbH Chairman of the Supervisory Board: > Frankfurt Ticket RheinMain GmbH (from March 18, 2015) Member of the Supervisory Board: (wholly-owned subsidiaries of Wilhelm Wehrhahn KG): > Bank11 für Privatkunden und Handel GmbH > abcbank GmbH > ZWILLING J.A. Henckels AG (until June 7, 2015) Chairperson of the Supervisory Board: > ZWILLING J.A. Henckels AG (from June 8, 2015) Vice-Chairperson of the Supervisory Board: > Basalt-Actien-Gesellschaft Member of the Administrative Board: (wholly-owned subsidiary of Wilhelm Wehrhahn KG): > abcfinance GmbH Member of the Executive Board: (wholly-owned subsidiary of Wilhelm Wehrhahn KG): > Wehrhahn Industrieholding AG Table 133 Fraport Annual Report 2015 192 Group Notes / Other Disclosures Mandates of the Supervisory Board Members of the Supervisory Board Memberships in mandatory Supervisory Boards and comparable control bodies Peter Feldmann Lord Mayor of the City of Frankfurt am Main (Remuneration 2015: €39,700, 2014: €38,900) Chairman of the Supervisory Board: > ABG FRANKFURT HOLDING Wohnungsbau- und Beteiligungsgesellschaft mbH > Messe Frankfurt GmbH > Stadtwerke Frankfurt am Main Holding GmbH Membership in Supervisory Boards and comparable control bodies of business enterprises: > Alte Oper Frankfurt Konzert- und Kongresszentrum GmbH > FrankfurtRheinMain GmbH International Marketing of the Region > Gas Union GmbH > Nassauische Heimstätte Wohnungsbau- und Entwicklungsgesellschaft mbH (Vice-Chairperson) > Rhein-Main-Verkehrsverbund GmbH > Schirn Kunsthalle Frankfurt am Main GmbH > Tourismus- und Congress GmbH Frankfurt am Main > Wirtschaftsförderung Frankfurt – Frankfurt Economic Development – GmbH > Landesbank Hessen Thüringen (Helaba) (acting member from July 1, 2015) Member of the Executive Board: > Sparkassenzweckverband Nassau Member of the Advisory Board: > Thüga AG Chairman of the Supervisory Board: > Lufthansa Cityline GmbH Member of the Supervisory Board: > Albatros Versicherungsdienste GmbH Membership in comparable control bodies pursuant to Section 125 of the AktG: > DEUTZ (Dalian) Engine Co. Ltd. > Deutz Engines (Shandong) Co. Ltd. (Chairperson) > Deutz Engines (China) Ltd. Co. (Chairperson) Member of the Supervisory Board: > ElringKlinger AG (until May 13, 2015) > ZF Friedrichshafen AG Peter Gerber Chairman of the Executive Board of Lufthansa Cargo AG (Remuneration 2015: €27,300, 2014: €16,325) Dr. Margarete Haase Member of the Executive Board of DEUTZ AG (Remuneration 2015: €67,000, 2014: €67,800) Frank-Peter Kaufmann Member of the Hessian State Parliament Member of the Supervisory Board: > Hessische Staatsweingüter Kloster Eberbach GmbH Eltville (Remuneration 2015: €46,900, 2014: €26,158.33) Lothar Klemm Former Hessian State Minister (Remuneration 2015: €58,150, 2014: €52,993.75) Dr. Roland Krieg Head of the Information and Telecommunication Service Unit (Remuneration 2015: €37,900, 2014: €37,900) Michael Odenwald State Secretary of the German Federal Ministry for Transport and Digital Infrastructure (Remuneration 2015: €33,900, 2014: €33,900) Chairman of the Supervisory Board: > Dietz AG Chairman of the Executive Board: > Förderverein für integrierte Verkehrssysteme (Darmstadt) Chairman of the Supervisory Board: > AirIT Services AG > operational services GmbH & Co. KG Member of the Supervisory Board: > FraSec Fraport Security Services GmbH Member of the Shareholders’ Meeting: > AirITSystems GmbH > operational services GmbH & Co. KG Chairman of the Supervisory Board: > DFS Deutsche Flugsicherung GmbH Member of the Supervisory Board: > Deutsche Bahn AG > DB Mobility Logistics AG Fraport Annual Report 2015 Group Notes / Other Disclosures 193 Memberships in mandatory Supervisory Boards and comparable control bodies Chairman of the Executive Board: > Arbeitsgemeinschaft unabhängiger Flughafenbeschäftigter (AUF e. V.) Vice-Chairman of the Executive Board: > komba gewerkschaft, Kreisverband Flughafen Frankfurt/Main Member of the Supervisory Board: > FraSec Fraport Security Services GmbH Member of the Supervisory Board: > Airmail Center Frankfurt GmbH Member of the Supervisory Board: > Deutsche Post AG Table 133 Mandates of the Supervisory Board Members of the Supervisory Board Mehmet Özdemir Member of the Works Council (Remuneration 2015: €35,500, 2014: €35,500) Arno Prangenberg Auditor, tax consultant (Remuneration 2015: €37,900, 2014: €37,900) Hans-Jürgen Schmidt First State Vice-Chairman komba gewerkschaft Hessen Chairman komba gewerkschaft Kreisverband Flughafen Frankfurt/Main (until May 1, 2015) (Remuneration 2015: €37,900, 2014: €37,900) Werner Schmidt Vice-Chairman of the Group Works Council (Remuneration 2015: €44,500, 2014: €42,900) Edgar Stejskal Chairman of the Group Works Council (Remuneration 2015: €49,300, 2014: €48,500) Prof Dr. Katja Windt President Jacobs University Bremen gGmbH (Remuneration 2015: €43,700, 2014: €42,900) Fraport Annual Report 2015 194 Group Notes / Other Disclosures 57 Disclosure of shareholding pursuant to Section 313 (2) of the HGB Subsidiaries Name and registered office Aerodrom Ljubljana,d.o.o. Zgornji Brnik/Slovenia Afriport S.A., Luxembourg/Luxembourg AirlT Services AG, Lautzenhausen AIRMALL Boston Inc., Boston/USA AIRMALL Cleveland Inc., Cleveland/USA AIRMALL Maryland Inc., Maryland/USA AIRMALL Pittsburgh Inc., Pittsburgh/USA AIRMALL USA Holdings Inc., Pittsburgh/USA AIRMALL USA Inc., Pittsburgh/USA Airport Assekuranz Vermittlungs-GmbH, Frankfurt am Main Airport Cater Service GmbH, Frankfurt am Main AIRWAYMALL Inc., Wilmington/USA AMU Holdings Inc., Pittsburgh/USA Antalya Havalimani Uluslararasi Terminal Isletmeciligi Anonim Sirketi, Istanbul/Turkey APS Airport Personal Service GmbH, Frankfurt am Main Daport S.A., Dakar/Senegal Energy Air GmbH, Frankfurt am Main Flughafen Kanalreinigungsgesellschaft mbH, Kelsterbach FraCareServices GmbH, Frankfurt am Main Frankfurter Kanalreinigungsgesellschaft mbH, Kelsterbach Fraport Asia Ltd., Hong Kong/China Fraport Beteiligungsgesellschaft mbH, Neu-Isenburg Fraport Beteiligungs-Holding GmbH, Kelsterbach Fraport Casa GmbH, Neu-Isenburg Fraport Casa Commercial GmbH, Neu-Isenburg Fraport Frankfurt Airport Services Worldwide (Greece) Monoprosopi EPE, Athens/Greece Fraport Immobilienservice und -entwicklungs GmbH & Co. KG, Frankfurt am Main 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2015 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 2014 2015 2014 2015 2014 Shareholding in % Shareholders’ equity (pursuant to IFRS) in €’000 Result (pursuant to IFRS) in €’000 100 97.99 217,759 215,028 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 1,586 1,492 2,504 2,392 21,697 18,165 4,275 3,594 19,953 17,224 10,608 8,811 – 672 – 769 – 1,812 – 372 162,606 153,870 26 26 0 0 3,882 3,309 51,027 49,017 1,412 817 467 551 2,340 2,109 22 1,251 1,283 25 110,805 99,164 73 75 75 42,785 42,465 3,195 3,218 38 47 11,538 11,538 3,267 – 601 – 6 – 24 363 368 1,400 697 259 – 107 719 – 111 761 335 183 67 – 1,371 – 341 8,801 9,877 0 0 0 1) 0 1) 186 9 7,823 2) 6,696 2) 595 267 – 46 1) – 33 1) 2,288 2,011 – 3 3) 108 140 0 3) 2,050 1,455 – 1 – 1 0 3) 754 434 – 24 – 33 – 9 1) – 8 1) 4,483 4) 5) 3,266 4) 5) Fraport Annual Report 2015 Group Notes / Other Disclosures 195 Subsidiaries Name and registered office Fraport Malta Business Services Ltd., St. Julians/Malta Fraport Malta Ltd., St. Julians/Malta Fraport Objekte 162 163 GmbH, Frankfurt am Main Fraport (Philippines) Services, Inc., Manila/Philippines Fraport Peru S.A.C., Lima/Peru Fraport Passenger Services GmbH, Frankfurt am Main Fraport Objekt Mönchhof GmbH, Frankfurt am Main Fraport Real Estate Mönchhof GmbH & Co. KG, Frankfurt am Main Fraport Real Estate Verwaltungs GmbH, Frankfurt am Main Fraport Real Estate 162 163 GmbH & Co. KG, Frankfurt am Main Fraport Regional Airports of Greece A S.A. Athens/Greece Fraport Regional Airports of Greece B S.A. Athens/Greece Fraport Regional Airports of Greece Management Company Fraport Saudi Arabia for Airport Management and Development Services Company Ltd., Riyadh/Saudi Arabia Fraport Twin Star Airport Management AD, Varna/Bulgaria FraSec Fraport Security Services GmbH, Frankfurt am Main FRA - Vorfeldkontrolle GmbH, Kelsterbach GCS Gesellschaft für Cleaning Service mbH & Co. Airport Frankfurt/Main KG, Frankfurt am Main Lima Airport Partners S.R.L., Lima/Peru Media Frankfurt GmbH, Frankfurt am Main VCS Verwaltungsgesellschaft für Cleaning Service mbH, Frankfurt am Main 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2015 2015 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Shareholding in % Shareholders’ equity (pursuant to IFRS) in €’000 Result (pursuant to IFRS) in €’000 100 100 100 100 100 100 99.99 99.99 100 100 100 100 100 100 100 100 100 100 100 100 65 65 65 100 100 60 60 100 100 100 100 100 40 70.01 70.01 51 51 100 100 466,446 103,767 470,748 103,907 26 25 – 3,822 – 3,581 1,068 505 804 724 26 25 4,286 4,210 32 30 5,745 5,421 4,954 4,965 22 7,782 8,096 87,319 80,172 11,098 12,878 361 232 2,298 3,356 117,012 79,055 7,603 7,058 41 40 2,829 1,910 4,061 337 1 0 0 1) 0 1) 914 111 454 374 1 0 2,582 4) 5) 1,273 4) 5) 2 2 2,402 4) 5) 2,288 4) 5) – 70 3) – 59 3) – 2 3) – 1,230 1) 2,032 13,210 15,837 1,920 6,160 247 69 1,152 4) 5) 2,175 46,289 32,053 2,536 2,028 1 1 Table 134 Fraport Annual Report 2015 196 Group Notes / Other Disclosures Joint ventures Name and registered office AirITSystems GmbH, Hanover FCS Frankfurt Cargo Services GmbH, Frankfurt am Main Fraport IC Ictas Havalimani Isletme Anonim Sirketi, Antalya/Turkey Fraport IC Ictas Antalya Havalimani Terminal Yatirim ve Isletmeciligi Anonim Sirketi, Antalya/Turkey Fraport IC Ictas Havalimani Yer Hizmetleri Anonim Sirketi, Antalya/Turkey Grundstücksgesellschaft Gateway Gardens GmbH, Frankfurt am Main Medical Airport Service GmbH, Kelsterbach Multi Park II Mönchhof GmbH, Walldorf (Baden) N*ICE Aircraft Services & Support GmbH, Frankfurt am Main Pantares Tradeport Asia Ltd., Hong Kong/China Shanghai Frankfurt Airport Consulting Services Co., Ltd., Shanghai/China Associated companies Name and registered office Aerodrom Portoroz,d.o.o. Secovlje/Slovenia Airmail Center Frankfurt GmbH, Frankfurt am Main ASG Airport Service Gesellschaft mbH, Frankfurt am Main Flughafen Hannover-Langenhagen GmbH, Hanover operational services GmbH & Co. KG, Frankfurt am Main Xi’an Xianyang International Airport Co., Ltd., Xianyang City/China Thalita Trading Ltd., Lakatamia/Cyprus; Northern Capital Gateway LLC, St. Petersburg/Russia 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Shareholding in % Shareholders’ equity (pursuant to IFRS) in €’000 Result (pursuant to IFRS) in €’000 50 50 49 100 51/50 51/50 51/50 51/50 50 50 33.33 33.33 50 50 50 50 52 52 50 50 50 50 3,703 2,895 10,996 10,904 59,734 40,582 – 14,895 – 8,667 221 257 2,874 3,417 8,101 7,078 71 75 17,778 18,630 11,727 8,791 376 349 808 744 – 3,704 6) – 6,349 78,867 7) 48,611 7) 67,754 7) 85,150 7) – 36 1) 10 1) – 544 – 701 1,652 1,472 21 – 5 – 852 – 110 1,876 1,373 9 6 Table 135 Shareholding in % Shareholders’ equity (pursuant to IFRS) in €’000 Result (pursuant to IFRS) in €’000 30.46 30.46 40 40 49 49 30 30 50 50 24.5 24.5 35.5 35.5 3,192 3,183 4,850 4,345 763 982 135,453 131,319 27,839 18,277 513,006 477,055 – 359,711 – 251,663 0 0 1,614 1,310 503 722 3,820 1,089 9,562 5,336 20,503 12,570 – 8,802 – 291,659 Table 136 Fraport Annual Report 2015 Group Notes / Other Disclosures 197 Other investments Name and registered office Shareholding in % Shareholders’ equity (pursuant to IFRS) in €’000 Result (pursuant to IFRS) in €’000 Delhi International Airport Private Ltd., New Delhi/India Gateways for India Airports Private Ltd., Bangalore/India Ineuropa Handling Alicante, U.T.E., Madrid/Spain Ineuropa Handling Madrid, U.T.E., Madrid/Spain Ineuropa Handling Mallorca, U.T.E., Madrid/Spain Ineuropa Handling Teneriffa, U.T.E., Madrid/Spain Perishable-Center Verwaltungs-GmbH Zentrum für verderbliche Güter Frankfurt, Frankfurt am Main Philippine Airport and Ground Services Terminals Holdings, Inc., Pasay City/Philippines (PTH) Philippine Airport and Ground Services Terminals, Inc., Manila/Philippines (PTI) Philippine Airport and Ground Services, Inc., Manila/Philippines (PAGS) Philippine International Air Terminals Co., Inc., Pasay City/Philippines (PIATCO) 2015 2014 2015 2014 2015 2007 2015 2007 2015 2007 2015 2007 2015 2014 2015 2005 2015 2005 2015 2005 2015 2005 10 10 13.51 13.51 20 20 20 20 20 20 20 20 10 10 40 40 40 40 40 40 30 30 236,842 180,117 0 0 0 – 575 0 – 1,282 0 871 0 1,642 0 2,036 0 – 1,590 0 – 2,937 0 4,533 0 98,747 32,065 8) 50,820 8) 0 1) 0 1) 0 1) 9) 10) – 786 1) 10) 11) 0 1) 9) 10) – 2,604 1) 10) 11) 0 1) 9) 10) 270 1) 10) 11) 0 1) 9) 10) – 762 1) 10) 11) 0 11) 501 0 1) 9) 11) 833 0 1) 9) 11) 1,390 0 1) 9) 11) 9 0 1) 9) 11) 4,761 Table 137 1) Company inactive or in liquidation. 2) 0.01 % of shares are held by natural persons. 3) Company founded in 2015. 4) 5) IFRS result before consolidation. In the shareholders’ equity of commercial partnerships, capital shares as well as shares in profit and loss of the limited partners are recognized (according to IAS 32, these represent debt). 6) Previously Fraport Cargo Services GmbH, Frankfurt am Main 7) 51 % capital shares, 50 % dividend rights. 8) Fiscal year of the company ends on March 31. 9) There is no influence on financial and business policies. 10) Shareholders’ equity has been largely or wholly repaid. 11) Current financial statements not yet available. Frankfurt am Main, February 29, 2016 Fraport AG Frankfurt Airport Services Worldwide The Executive Board Dr. Schulte Giesen Müller Dr. Zieschang Fraport Annual Report 2015 198 Further Information / Responsibility Statement Responsibility Statement To the best of our knowledge and in accordance with the applicable accounting principles, the consolidated financial state- ments give a true and fair view of the asset, financial, and earnings position and profit or loss of the Group. Furthermore, the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Frankfurt am Main, February 29, 2016 Fraport AG Frankfurt Airport Services Worldwide The Executive Board Dr. Schulte Giesen Müller Dr. Zieschang Fraport Annual Report 2015 Further Information / Auditor’s Report 199 Auditor’s Report We have audited the consolidated financial statements prepared by the Fraport AG Frankfurt Airport Services Worldwide, Frankfurt/Main, comprising the income statement, the statement of comprehensive income, the statement of financial position, the cash flow statement, the statement of changes in equity, and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, 2015. The preparation of the consolidated financial statements and the group management report in accordance with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § (Article) 315a (1) HGB (“Handelsgesetz- buch”: German Commercial Code) is the responsibility of the parent Company’s Board of Management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial state- ments in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company’s Board of Management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion based on the findings of our audit the consolidated financial statements comply with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development. Frankfurt am Main, February 29, 2016 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Dietmar Prümm Thomas Noll German Public Auditor German Public Auditor Fraport Annual Report 2015 200 Further Information / Seven-Year Overview Seven-Year Overview 1) Consolidated income statement € million Revenue Change in work-in-process Other internal work capitalized Other operating income Total revenue Cost of materials Personnel expenses Other operating expenses EBITDA Depreciation and amortization Operating result/EBIT Interest result Result from companies accounted for using the equity method Income from investments Write-down on financial assets Other financial result Financial result Result from ordinary operations/EBT Taxes on income Group result thereof profit attributable to non-controlling interests thereof profit attributable to shareholders of Fraport AG Earnings per €10 share in € (basic) Earnings per €10 share in € (diluted) 2015 2014 2013 2012 2011 2010 2009 2,598.9 2,394.6 2,375.7 2,442.0 2,371.2 2,194.6 2,010.3 0.5 29.9 49.8 2,679.1 – 610.4 – 1,026.7 – 193.2 848.8 – 328.3 520.5 – 125.6 37.6 0.0 0.0 1.3 – 86.7 433.8 – 136.8 297.0 20.5 276.5 3.00 2.99 0.6 28.3 42.5 0.6 32.3 32.5 0.5 44.0 55.8 0.4 40.3 40.9 0.4 36.9 52.1 0.9 39.1 45.3 2,466.0 2,441.1 2,542.3 2,452.8 2,284.0 2,095.6 – 533.3 – 970.4 – 172.2 790.1 – 307.3 482.8 – 141.1 43.5 0.0 0.0 – 10.5 – 108.1 374.7 – 122.9 251.8 17.1 234.7 2.54 2.54 – 595.2 – 928.9 – 184.1 732.9 – 294.3 438.6 – 136.0 18.5 0.0 0.0 10.4 – 107.1 331.5 – 95.8 235.7 14.7 221.0 2.40 2.39 – 558.1 – 942.9 – 192.6 848.7 – 352.7 496.0 – 174.1 11.7 0.0 0.0 30.5 – 131.9 364.1 – 112.6 251.5 13.3 238.2 2.59 2.58 – 541.1 – 906.3 – 203.1 802.3 – 305.7 496.6 – 144.4 11.5 0.0 0.0 – 16.4 – 149.3 347.3 – 96.5 250.8 10.4 240.4 2.62 2.60 – 491.1 – 880.4 – 201.9 710.6 – 279.7 430.9 – 137.7 7.0 0.0 0.0 – 21.5 – 152.2 278.7 – 7.2 271.5 8.6 262.9 2.86 2.85 – 471.6 – 866.9 – 187.4 569.7 – 268.8 300.9 – 99.7 4.3 0.1 – 7.2 – 3.9 – 106.4 194.5 – 42.5 152.0 5.6 146.4 1.60 1.59 Key figures 2015 2014 2013 2012 2011 2010 2009 EBITDA margin in % EBIT margin in % Return on revenue in % Fraport assets in € million ROFRA in % Year-end closing price of the Fraport share in € Dividend per share in € 32.7 20.0 16.7 33.0 20.2 15.6 30.8 18.5 14.0 34.8 20.3 14.9 33.8 20.9 14.6 32.4 19.6 12.7 28.3 15.0 9.7 6,071.0 5,830.5 5,061.7 5,152.3 4,447.3 4,019.7 3,820.2 9.4 58.94 1.35 2) 9.2 48.04 1.35 8.7 54.39 1.25 9.6 43.94 1.25 11.2 38.00 1.25 10.7 47.16 1.25 7.9 36.28 1.15 Financial position key figures Balance at Dec. 31, 2015 Balance at Dec. 31, 2014 Balance at Dec. 31, 2013 Balance at Dec. 31, 2012 Balance at Dec. 31, 2011 Balance at Dec. 31, 2010 Balance at Dec. 31, 2009 Profit earmarked for distribution in € million Net financial debt in € million Capital employed in € million Gearing ratio in % Debt-to-equity ratio in % Dynamic debt ratio in % Working capital in € million 124.7 2,774.3 6,086.9 83.7 31.4 425.4 606.0 124.7 3,012.8 6,109.2 97.3 33.4 595.2 626.6 115.4 2,870.6 5,808.3 97.7 32.6 632.0 797.6 115.5 2,934.5 5,731.5 104.9 30.4 530.7 1,057.8 115.4 2,647.0 5,362.1 97.5 28.7 427.8 977.6 115.6 2,024.4 4,626.9 77.8 22.1 356.7 106.2 1,614.5 4,043.5 66.5 18.2 378.5 1,878.4 2,030.0 1) Due to new accounting policies, and shifts in Group definitions, figures reported in previous years may differ. Retroactive adjustment of all previous-year figures wasn‘t carried out. 2) Proposed dividend. Fraport Annual Report 2015 Further Information / Seven-Year Overview 201 Consolidated statement of financial position € million Goodwill Investments in airport operating projects Other intangible assets Property, plant, and equipment Investment property Investments in companies accounted for using the equity method Other financial assets Other receivables and financial assets Income tax receivables Deferred tax assets Non-current assets Inventories Trade accounts receivable Other receivables and financial assets Income tax receivables Cash and cash equivalents Non-current assets held for sale Current assets Issued capital Capital reserve Revenue reserves Equity attributable to shareholders of Fraport AG Non-controlling interests Shareholders’ equity Financial liabilities Trade accounts payable Other liabilities Deferred tax liabilities Provisions for pensions and similar obligations Provisions for income taxes Other provisions Non-current liabilities Financial liabilities Trade accounts payable Other liabilities Provisions for income taxes Other provisions Liabilities in the context of non-current assets held for sale Current liabilities Total assets Balance at Dec. 31, 2015 Balance at Dec. 31, 2014 Balance at Dec. 31, 2013 Balance at Dec. 31, 2012 Balance at Dec. 31, 2011 Balance at Dec. 31, 2010 Balance at Dec. 31, 2009 41.7 500.9 161.2 41.7 479.2 157.1 22.7 458.1 51.1 38.6 38.6 38.6 40.0 1,031.2 1,067.1 1,073.4 1,098.4 44.2 43.6 32.4 34.0 6,045.4 6,127.7 5,962.3 5,927.3 5,643.8 5,013.3 4,486.4 74.5 237.6 659.2 167.0 5.4 33.4 63.0 216.9 773.3 181.1 10.2 31.1 47.7 194.9 728.6 172.2 20.3 27.9 34.4 136.6 742.7 117.1 19.5 49.2 74.6 138.0 648.6 33.5 29.6 48.2 34.0 97.1 394.6 20.9 29.6 43.1 34.7 72.9 474.7 20.0 23.6 68.3 7,926.3 8,081.3 7,685.8 8,140.8 7,765.6 6,777.0 6,353.0 42.8 154.0 310.8 7.4 406.0 – 921.0 923.1 594.3 1,919.9 3,437.3 74.4 3,511.7 3,273.8 42.5 447.7 172.2 30.7 62.1 201.6 43.7 174.7 297.6 7.7 401.1 7.1 931.9 922.7 592.3 1,706.1 3,221.1 64.9 3,286.0 3,874.3 47.1 497.5 158.7 33.7 68.8 228.0 42.3 174.4 426.4 1.0 486.9 77.7 180.0 385.2 35.0 821.9 81.4 163.9 280.2 6.2 927.1 77.9 178.3 319.2 5.5 54.0 158.4 492.2 5.3 1,812.6 1,802.3 – – – – – 1,131.0 1,499.8 1,458.8 2,393.5 2,512.2 922.1 590.2 1,540.8 3,053.1 45.7 3,098.8 3,948.1 50.8 491.7 107.2 26.7 54.1 223.9 921.3 588.0 1,403.2 2,912.5 35.7 2,948.2 4,401.0 64.4 918.8 584.7 1,327.0 2,830.5 29.4 2,859.9 4,034.0 64.9 1,006.4 1,001.0 102.5 27.4 80.2 211.2 110.8 22.9 68.1 201.8 918.4 582.0 1,217.7 2,718.1 21.2 2,739.3 4,256.6 60.0 949.2 105.5 22.1 68.0 147.0 917.7 578.3 1,039.2 2,535.2 22.6 2,557.8 4,126.9 114.7 904.7 143.9 20.3 135.0 129.9 4,230.6 4,908.1 4,902.5 5,893.1 5,503.5 5,608.4 5,575.4 543.6 143.1 129.4 56.0 232.9 – 1,105.0 8,847.3 318.1 134.5 123.7 14.7 223.8 4.3 819.1 290.6 159.6 123.0 7.7 234.6 196.6 214.4 163.2 5.3 219.8 219.9 228.9 187.4 2.4 222.4 151.8 274.6 180.5 12.9 203.0 118.9 219.8 147.7 6.7 238.9 – – – – – 815.5 799.3 861.0 822.8 732.0 9,013.2 8,816.8 9,640.6 9,224.4 9,170.5 8,865.2 Change over the previous year in % Balance at Dec. 31, 2015 Balance at Dec. 31, 2014 Balance at Dec. 31, 2013 Balance at Dec. 31, 2012 Balance at Dec. 31, 2011 Balance at Dec. 31, 2010 Balance at Dec. 31, 2009 Non-current assets Shareholders’ equity (less non-controlling interests and profit earmarked for distribution) Share of total assets in % Non-current assets Shareholders’ equity ratio – 1.9 7.0 89.6 37.4 5.1 5.4 89.7 34.4 – 5.6 5.0 87.2 33.3 4.8 3.0 84.4 29.0 14.6 4.3 84.2 29.4 6.7 7.1 73.9 28.4 26.8 1.1 71.7 27.4 Table 138 Fraport Annual Report 2015 202 Further Information / List of Graphics and Tables List of Graphics and Tables List of Graphics Group Management Report Page Graphic 1 2 Segment structure Share in the Group result by site 3 Agenda 2015 4 Crude oil price and significant exchange rates 2015 27 27 30 47 49 57 57 58 59 60 62 63 63 70 71 72 76 78 List of Tables Cover Page C2 C2 C2 Table 1 Financial performance indicators 2 Non-financial performance indicators 3 Employees 5 6 7 8 2015 passenger and cargo development at Frankfurt Airport To Our Shareholders Segment contribution to Group revenue 2015 Page Table Segment contribution to Group EBITDA 2015 Structure of the consolidated financial position as at December 31 18 19 4 Composition of the Supervisory Board 5 Committees of the Supervisory Board 9 Additions by segment Summary of the statement of cash flows and reconciliation to the Group’s liquidity 10 Group Management Report Page Table 11 Maturity profile as at December 31, 2015 12 Allocation of industrial assets 13 Rating structure of assets Development of the Fraport share compared to the market and European competitors Shareholder structure as at December 31, 2015 14 15 16 Allocation of free float 17 18 The risk management system Reporting matrix 29 42 42 44 45 46 47 50 51 54 54 55 55 56 60 61 62 64 65 66 66 67 70 71 73 6 7 8 9 Forecasts for the long-term development of global air traffic Remuneration of the Executive Board (contributions granted) Remuneration of the Executive Board (inflows) Provisions for pensions and similar obligations 10 Remuneration of the Supervisory Board 2015 11 Gross domestic product (GDP)/world trade 12 13 14 Passenger and cargo development by region Traffic development at the Group sites Summary of the income statement 15 Aviation 16 Retail & Real Estate 17 Ground Handling 18 External Activities & Services 19 Development of the key Group companies outside of Frankfurt Reconciliation to the cash and cash equivalents as at the consolidated statement of financial position Financial debt structure 20 21 22 Asset structure of Fraport AG 23 Development of the value added 2015 24 Non-financial performance indicators 25 Development of employees in the Group 26 Development of employees in the segments 27 Development of total employees in the Group 28 Fraport share Notification of voting right pursuant to Section 21 of the German Securities Trading Act (WpHG) 29 30 Data relevant to the capital market Consolidated Financial Statements Page Table 100 101 102 103 104 106 108 109 31 Consolidated Income Statement 32 Consolidated Statement of Comprehensive Income 33 Consolidated Statement of Financial Position as at December 31, 2015 34 Consolidated Statement of Cash Flows 35 Consolidated Statement of Changes in Equity 36 Consolidated Statement of Changes in Non-Current Assets 37 Segment Reporting 38 Geographical information Fraport Annual Report 2015 Further Information / List of Graphics and Tables 203 Group Notes Page Table Group Notes Page Table 111 112 113 115 118 131 132 132 132 133 133 134 134 135 135 136 136 136 136 137 138 138 139 139 139 140 140 141 141 141 142 144 144 144 145 146 146 146 147 148 148 149 149 150 150 150 151 151 152 153 153 154 154 39 Companies included in Consolidation 40 Disposal and interim consolidation effects 2015 41 Disclosure of interests in subsidiaries 42 43 44 Exchange rates Regular depreciation and amortization Revenue 45 Minimum lease payments 46 Change in work-in-process 47 Other internal work capitalized 48 Other operating income 49 Cost of materials 50 Personnel expenses and average number of employees 51 Depreciation and amortization 52 Other operating expenses 53 Group auditor fees 54 Interest income and interest expenses Interest income and interest expenses for financial instruments, which are not recognized at fair value Result from companies accounted for using the equity method 55 56 57 Other financial result 58 Taxes on income 59 Allocation of deferred taxes 60 61 Tax reconciliation Earnings per share 62 Goodwill 63 Goodwill impairment test 64 Investments in airport operating projects 65 Other intangible assets 66 67 68 69 70 71 72 73 74 75 Property, plant, and equipment Finance lease contracts (2015) Finance lease contracts (2014) Investment property Financial position data for Antalya Results data for Antalya Reconciliation for carrying amount in joint ventures Summarized financial position Result data Reconciliation for carrying amount in associated companies 76 Other financial assets 77 Non-current and current other receivables and financial assets 78 Income tax receivables 79 Deferred tax assets 80 81 Inventories Trade accounts receivable 82 Default risk analysis 83 Allowances 84 Cash and cash equivalents 85 Non-current assets held for sale 86 Equity attributable to shareholders of Fraport AG Development of floating and treasury shares pursuant to Section 160 of the AktG 87 88 Non-controlling interests 89 Non-current and current financial liabilities 90 Trade accounts payable 91 Non-current and current other liabilities 155 155 158 159 159 159 160 160 162 162 162 163 164 165 166 167 167 168 168 169 169 172 173 174 174 175 177 177 177 178 178 179 179 180 182 182 183 183 183 184 190 190 194 196 196 197 92 Maturity of lease payments 93 Deferred tax liabilities 94 95 Pension obligations (2015) Pension obligations (2014) 96 Offsetting 97 98 99 Significant actuarial assumptions Sensitivity analysis (December 31, 2015) Sensitivity analysis (December 31, 2014) 100 Non-current and current income tax provisions 101 Non-current and current personnel-related provisions 102 Other provisions 103 104 105 Liabilities in the context of assets held for sale Financial instruments as at December 31, 2015 Financial instruments as at December 31, 2014 106 Measurement categories pursuant to IFRS 13 (2015) 107 Measurement categories pursuant to IFRS 13 (2014) 108 Net results of the measurement categories 109 Derivative financial instruments 110 111 112 113 Fair values of derivative financial instruments Interest rate swaps (2015 hedge accounting) Interest rate swaps (2014 hedge accounting) Reconciliation to the cash and cash equivalents as at the statement of financial position 114 Contingent liabilities 115 Order commitments for capital expenditure 116 Operating leases Development of the fair values of the virtual shares for the Executive Board and Senior Managers 117 118 Classification of securities 119 120 121 122 123 124 Issuer ratings of securities and promissory note loans (2015) Issuer ratings of securities and promissory note loans (2014) Issuer ratings of liquid funds (2015) Issuer ratings of liquid funds (2014) Liquidity profile as at December 31, 2015 Liquidity profile as at December 31, 2014 125 Currency rate sensitivity 126 127 Interest sensitivity on financial result Interest sensitivity on equity 128 Components of the control indicators 129 130 131 Financial debt ratios Relationships with related parties and the State of Hesse Remuneration of management 132 Mandates of the Executive Board 133 Mandates of the Supervisory Board 134 135 Subsidiaries Joint ventures 136 Associated companies 137 Other investments Further Information Page 200 Table 138 Seven-Year Overview Fraport Annual Report 2015 204 Further Information / Glossary Glossary Annual performance of the Fraport share Free cash flow (Year-end closing price of the Fraport share + dividend per share)/ Cash flow from operating activities + dividends from companies previous year-end closing price Capital employed accounted for using the equity method – capital expenditure in property, plant, and equipment – investment property – capital expenditure for other intangible assets – investments in airport Net financial debt + shareholders’ equity 1) operating projects (excluding payments to acquire Group Debt-to-equity ratio Net financial debt/total assets Dividend yield Dividend per share/year-end closing price of the share companies and concessions) – capital expenditure in investments accounted for using the equity method Gearing ratio Net financial debt/shareholders’ equity 1) Liquidity Dynamic debt ratio Cash and cash equivalents (as at financial position) + short-term Net financial debt/cash flow from operating activities realizable items in “other financial assets” and “other receivables and EBIT Abbreviation for: earnings before interest and taxes Market capitalization financial assets” EBIT margin EBIT/revenue EBITDA Abbreviation for: earnings before interest, taxes, depreciation, and amortization EBITDA margin EBITDA/revenue EBT Year-end closing price of the Fraport share × number of shares Net financial debt Non-current financial liabilities + current financial liabilities – liquidity Price-earnings ratio Year-end closing price of the Fraport share/earnings per share (basic) Return on revenue EBT/revenue Abbreviation for: earnings before taxes Return on shareholders’ equity Profit attributable to shareholders of Fraport AG/shareholders’ equity 1) EURIBOR Abbreviation for: European Interbank Offered Rate = Interest rate ROCE used by European banks when trading fixed-term deposits with Abbreviation for: return on capital employed = each other. It is one of the most important reference interest rates, EBIT/capital employed among European bonds, bearing floating interest payments. ROFRA Fraport assets Abbreviation for: return on Fraport assets = EBIT/Fraport assets Capital required for operations = Goodwill + other intangible assets at cost/2 + investments in airport operating projects at cost/2 + Shareholders’ equity ratio property, plant, and equipment at cost/2 + carrying amounts of Shareholders’ equity 1)/total assets investments accounted for using the equity method + inventories + trade accounts receivable – current trade accounts payable Total employees 1) Shareholders’ equity less non-controlling interests and profit earmarked for distribution. Current assets – trade accounts payable – other current liabilities Employees of Fraport AG, subsidiaries, and joint ventures as at the balance sheet date (including temporary staff, apprentices, and employees on leave) Working capital Fraport Annual Report 2015 Further Information / Financial Calendar / Traffic Calendar / Imprint 205 Financial Calendar 2016 Wednesday, May 4, 2016 Interim release Q1 2016 Thursday, August 4, 2016 Interim Report Q2/6M 2016 Online publication, conference call with Online publication, conference call with analysts and investors analysts and investors Thursday, November 3, 2016 Interim release Q3/9M 2016 Online publication, press conference, and conference call with analysts and investors Friday, May 20, 2016 Annual General Meeting 2016 Frankfurt am Main, Jahrhunderthalle Monday, May 23, 2016 Dividend payment Traffic Calendar 2016 (Online publication) Tuesday, April 12, 2016 March 2016/Q1 2016 Tuesday, July 12, 2016 June 2016/6M 2016 Thursday, October 13, 2016 September 2016/9M 2016 Thursday, May 12, 2016 Wednesday, August 10, 2016 Thursday, November 10, 2016 April 2016 July 2016 October 2016 Friday, June 10, 2016 Monday, September 12, 2016 Monday, December 12, 2016 May 2016 August 2016 November 2016 Imprint Publisher Fraport AG Contact Investor Relations Stefan J. Rüter Publication Date March 16, 2016 Frankfurt Airport Services Worldwide Head of Finance and Investor Relations 60547 Frankfurt am Main Germany Telephone: + 49 69 690-74840 Fax: + 49 69 690-74843 Editorial Deadline February 29, 2016 Telephone: +49 (0)1806 3724636 1) Website: www.meet-ir.com Website: www.fraport.com E-mail: investor.relations@fraport.de Disclaimer 1) 20 cents (€) per call from a German landline; maximum of 60 cents (€) per call from a German cell phone. Concept and Design heureka GmbH, Essen In case of any uncertainties which arise due to errors in translation, the German version of the Annual Report is the binding one. Photography Rounding Michael Gernhuber, Essen The use of rounded amounts and percentages means slight discrepancies may occur due to commercial rounding. Fraport Annual Report 2015