Corporate governance statement

MIG is a Macquarie Bank Group branded externally managed vehicle.
The Macquarie Bank Group’s expertise in managing fund assets and sourcing new value-adding opportunities is a key attraction for its managed vehicles. Investors are principally seeking to harness Macquarie Bank Group’s expertise (made available through the management arrangements) as well as the expertise of appropriately qualified external directors.

Legal framework

MIG is a triple stapled structure. The entities which currently comprise MIG are two Australian trusts and a Bermudan exempted mutual fund company:

The securities of the three entities in the MIG structure are stapled together and quoted as one on the Australian Stock Exchange (ASX). As a result the securities cannot be traded separately.

MIT(I) and MIT(II) are Australian registered managed investment schemes. The combined trustee/manager, known as a Responsible Entity, for each of these trusts is Macquarie Infrastructure Investment Management Limited (MIIML), a wholly owned subsidiary of Macquarie Bank Limited (MBL).

MIIML is responsible for the operational activity of the Australian trusts, including all investment and divestment decisions, asset and capital management, financial reporting and investor communications and meetings. It is also responsible for overall corporate governance of the trusts and the general protection of unit holders’ interests. The Corporations Act, ASX Listing Rules, constitutions of the trusts and the general law regulate the workings of MIT(I) and MIT(II) and the essential practices, responsibilities and duties of the Responsible Entity and its officers.

Registry services are provided by Computershare Investor Services Pty Limited ABN 48 078 279 277 and custodial services by Trust Company Limited ABN 59 004 027 749.

The MIGIL board is responsible for MIGIL’s operational activity and overall corporate governance in the same way that MIIML is responsible for the Australian trusts. MIGIL has few staff and is advised by a UK-based wholly owned subsidiary of MBL, Macquarie Investment Management (UK) Limited (MIMUK).

Under the terms of the Advisory Deed appointing MIMUK as Advisor, MIMUK makes recommendations to MIGIL in respect of prospective investments and advises on appropriate strategies and actions to maintain and enhance the value, performance and profitability of MIGIL’s investments and advises on general capital management for MIGIL. MIMUK also undertakes certain administrative functions, including financial reporting and investor communications and monitors fund administration services provided by Butterfield Fund Services (Bermuda) Limited.

MIGIL is regulated by the Bermudan Companies Act, ASX Listing Rules, MIGIL constitution and general Bermudan law.

The MIG entities, MIIML and MIMUK have entered into a Stapling Deed which governs cooperation, investment policy and the making of investments, capital raising, borrowings, continuous disclosure and certain other administrative matters for the three stapled entities with a view to ensuring consistency in the management of MIG.

As at 30 June 2007, MIG’s portfolio investments are split between the three entities in the following proportions:

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MIG’s approach to corporate governance

The MIG boards are committed to MIG seeking to achieve superior financial performance and long-term prosperity, while meeting stakeholders’ expectations of sound corporate governance practices. This Statement outlines MIG’s main corporate governance practices as at 30 June 2007. Unless otherwise stated, they reflect the practices in place throughout the financial year ending on that date.

The boards determine the corporate governance arrangements for MIG. As with all its business activities, MIG is proactive in respect of corporate governance and puts in place those arrangements which it considers are in the best interests of MIG and its stapled security holders and consistent with its responsibilities to other stakeholders. It actively reviews Australian and international developments in corporate governance.

MIG is part of the stable of MBL Group managed vehicles. Accordingly, in setting the corporate governance framework the MIG boards have also undertaken to comply with the MBL Funds Management Activity Policy (MBL Fund Policy). This policy been devised by MBL to safeguard the interests of investors in the managed vehicles, which at times may conflict with those of the MBL Group sponsors of the vehicles.

The key elements are as follows:

ASX Corporate Governance Principles

The ASX Corporate Governance Committee has Corporate Governance Principles and Best Practice Recommendations (the Principles) which are designed to maximise corporate performance and accountability in the interests of shareholders and the broader economy. The Principles encompass matters such as board composition, committees and compliance procedures.

Details of the Principles can be viewed at www.asx.com.au/supervision/governance/index.htm. The Principles are not prescriptive, however listed entities (including MIG) are required to disclose the extent of their compliance with the Principles, and to explain why they have not adopted a Principle if they consider it inappropriate in their particular circumstances.

MIG’s corporate governance statement is in the form of a report against the Principles as set out below. MIG’s corporate governance policies largely conform with the Principles. Any deviation is because of MIG’s externally managed structure and the requirements of the MBL Fund Policy. We have noted the differences in our reporting.

Principle 1 – Lay solid foundations for management and oversight

Responsibility for corporate governance and the internal working of each MIG entity rests with the board of MIIML or MIGIL, as the case may be. The board of each company has adopted a formal charter of directors’ functions and matters to be delegated to management, having regard to the recommendations in the Principles.

These charters vary slightly between MIIML and MIGIL to reflect the differing management structure adopted for MIGIL. MIIML has its own management staff whereas MIGIL has few staff and is advised by MIMUK staff pursuant to the Advisory Deed. Appropriate staff are provided by MIIML and MIMUK to perform the CEO and CFO roles for each of the MIG entities.

An outline of the boards’ responsibilities as set out in each company’s charter is set out below:

Full board meetings are held at least bimonthly for MIIML and MIGIL, and other meetings are called as required. Directors are provided with board reports in advance of board meetings, which contain sufficient information to enable informed discussion of all agenda items.

Each non-executive director of MIIML and MIGIL has received a letter of appointment which details the key terms of their appointment. This letter has been enhanced for the more recent board appointments to include all of the recommended matters in the Principles.

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Principle 2 – Structure the board to add value

1. Composition

MIIML - Board of directors

The MIIML board of directors is comprised as follows:

Mark Johnson became a non-executive director with effect from 19 July 2007. Michael Easson retired from the board of directors on 28 August 2007. John Roberts resigned from the board of directors on 28 August 2007 and was appointed as an alternate director to Mark Johnson and Nicholas Moore.

Profiles of these directors can be found later in this report.

MIGIL - Board of directors

The MIGIL board of directors is comprised as follows:

Mark Johnson became a non-executive director with effect from 19 July 2007.

2. Appointment to the boards

MIIML

MIIML is a wholly owned subsidiary of MBL and directors are appointed to MIIML in consultation with the MIIML board. The following board composition and membership criteria have been adopted by the board in consultation with MBL:

The importance of having appropriately independent directors determined by objective criteria is acknowledged as being desirable to protect investor interests and optimise the financial performance of the fund and returns to investors.

In determining the status of a director, both MBL and the board have adopted the standards of independence required by the MBL Fund Policy. Details are as follows.

An independent director is a director of the responsible entity and/or special purpose vehicle who is not a member of management (a non-executive director) and who (to the satisfaction of the MBL board Corporate Governance Committee) meets the following criteria:

The standards of independence which have been applied are substantively similar to, but are not the same as, those which are suggested in the Principles.

The main area of difference is that the MBL Fund Policy is designed to achieve independence from both the fund (in this case MIG) and MBL. The directors believe that the adoption of the MBL Fund Policy definition of independence better reflects the true nature of independence in the present circumstances and does not materially prejudice security holders.

The ability of independent directors to serve on up to two separate managed vehicle boards is considered appropriate because the time commitment and level of remuneration for these roles is not so significant as to compromise independence.

Under its externally managed structure and ASX waivers granted to MIG, most of the MIG independent directors are appointed by MBL Group companies (see details below) rather than elected by security holders. The selection of appropriately experienced independent directors is seen by the MBL Group as an important contribution to MIG’s performance.

MIG considers that the independence of its directors, each of whom is a highly qualified and reputable business person and professional who satisfies the above criteria, does not depend on who appoints them but on their independence of mind, including an ability to constructively challenge and independently contribute to the boards. Independent directors are asked to confirm their independence status on appointment, on an annual basis and to notify at any time if they cease to satisfy the criteria.

The following guidelines apply to director selection and nomination by MBL:

The board has not appointed a nomination committee.The board does not consider such a committee appropriate in circumstances where there is only one shareholder and it has adopted the MBL Fund Policy set out above. It is considered that this process is sufficiently transparent to justify not appointing a nomination committee.

MIGIL

The procedure for appointing the board of MIGIL reflects the inherent requirements of the stapling which exists between shares in MIGIL and units in MIT(I) and MIT(II) and the Advisory Deed with MIMUK.

Under the MIGIL bye-laws, MIMUK has been issued with an A Special Share (and has rights under the Advisory Deed) which entitles it to appoint the managing director and other director(s) constituting up to 50% of the MIGIL board. MIIML, as Responsible Entity of MIT(II), has been issued with a B Special Share which entitles it to appoint director(s) constituting up to 25% of the MIGIL board while the entities are stapled. Neither the A nor B Special Share has any economic interest, which means that the holders of those shares are not entitled to any dividends and are only entitled to the par value of those shares on a winding up of MIGIL.

The balance of the directors are elected by MIG stapled security holders. Of the present board, Jeffrey Conyers is subject to rotation and security holder approval. The MIGIL board has 50% independent directors rather than a majority of independent directors. This reflects the requirement of MBL Fund Policy for the boards of the responsible entity of the stapled trust/s and the stapled company to have at least 50% independent directors and at least one of the boards in each stapled structure to have a majority of independent directors.

The rationale for this approach is that in the stapled structure:

(i) The provisions of the stapling (cooperation) deed between MIIML, MIGIL and MIMUK and also the practical operation of the MIIML and MIGIL boards are such that no significant decision (in particular strategy, capital raisings, borrowings, and investments) can be made by one board without the consultation and consideration of the other board

(ii) The MIGIL board has a sufficient quorum of independent directors to vote on transactions with MBL Group companies

(iii) Under the Corporations Act (in respect of MIIML) and the Advisory Deed (in respect of MIMUK) if security holders are not satisfied with the performance of the MBL Group managers, MIIML and MIMUK, they can be removed by ordinary security holder resolution.

The MIGIL board charter also provides that there must not be half or more of the board located in any jurisdiction other than Bermuda. Robert Mulderig and Jeffrey Conyers are Bermuda based. Mark Johnson is based in Australia and Dr Peter Dyer in the UK.

In determining the status of directors, the MIGIL board has adopted the standards of independence required by the MBL Fund Policy.

Additionally, under APRA guidelines for MBL-sponsored vehicles such as MIGIL, MIGIL must have only one in four or two in seven MBL Group directors or executives on its board.

The candidates for the board are selected by MIMUK or MIIML, as the case may be, using the same selection and MBL nomination approval process as for MIIML directors. In the case of candidates to be elected by security holders, the nominee is then recommended by MIMUK to the MIGIL board for approval.

The MIGIL board has not constituted a nomination committee because, as a consequence of the management arrangements established for MIGIL and its participation in the stapling arrangements with MIT(I) and MIT(II), its directors are nominated by the relevant MBL Group companies having regard to the board charter criteria and MBL Fund Policy requirements.

3. Chairman

Mark Johnson, being the deputy chairman of Macquarie Bank until his retirement on 19 July 2007, is an executive chairman of MIIML and does not satisfy the independence recommendation of the Principles. The MBL Fund Policy requires the chairman of the MIIML board to be an executive chairman, as MIIML is an MBL Group company and MIG is a Macquarie branded fund.

The MIIML board has resolved to appoint a lead independent director. David Mortimer was the lead independent director from July 2006 to June 2007 and David Walsh is lead independent director until 30 June 2008. A different lead independent director is to be appointed each financial year using an alphabetical rotation system.

It is MIGIL’s policy to have an independent chairman and Robert Mulderig, chairman of MIGIL, is independent even though he is appointed by MIMUK. Mr Mulderig satisfies the independence test in the MBL Fund Policy.

In both cases, the chairman does not exercise the role of CEO. That role is performed by Stephen Allen who was appointed as CEO in April 2003. Both the MIIML and MIGIL board charters provide that all independent directors will meet at least once per year in the absence of management and at other times as they determine. The convenor of the meetings will be the lead independent director in the case of MIIML and the chairman in the case of MIGIL.

4. Independent professional advice

The directors of MIIML and MIGIL are entitled to obtain independent professional advice at the cost of the relevant trust or company subject to the estimated costs being first approved by the chairman as reasonable.

Principle 3 – Promote ethical and responsible decision making

MIIML, MIGIL, MIMUK and their directors and seconded executives are required to act in accordance with the MIG code of conduct. The code sets out principles and standards for the directors and executives in respect of practices necessary to maintain confidence in MIG’s integrity, and the responsibility and accountability of individuals for reporting and investigating reports of unethical behaviour. The code includes whistleblower, anti-corruption and dealing with governments and anti-money laundering policies.

The code also encompasses principles for compliance with legal and other obligations to MIG’s stakeholders, including security holders, employees, customers, and the broader financial and other communities in which MIG operates.

The code is periodically reviewed and endorsed by the MIIML, MIGIL and MIMUK boards. The code is distributed to all directors and staff and reinforced at induction and other training programs.

A policy on securities dealings is in place under which directors and staff involved in the management of MIG are restricted in their ability to deal in MIG stapled securities. Security trading by MIG directors, officers and staff is permitted only during four-week special trading windows following the release of MIG’s half-yearly and yearly financial results, and following the annual general meeting or lodgement with ASIC and ASX of a disclosure document for a capital raising or a cleansing statement for a rights issue.

When trading cannot take place during the trading windows following results announcements, pending disclosure of significant transactional activity being undertaken by MIG, a special four-week trading window may apply following an ASX release in respect of the transaction.

Special arrangements apply for the trading by MIIML, MIMUK and associates of MIG securities issued in connection with base fees and performance fees. Standing instructions must be given to an MBL Group broker during a designated directors and staff trading window to sell at above a designated price with the trade to take place at any time in accordance with the instructions. Any instructions given will be on the basis that Chinese walls are operating with the broker at all times during the currency of the instruction. Alternatively the securities will be placed in a blind trust with an external broker during a trading window with irrevocable instructions to sell at above a designated price with the trade to take place at any time in accordance with instructions.

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Principle 4 – Safeguard integrity in financial reporting

1. Audit and risk committees

Each of MIIML and MIGIL has appointed an audit and risk committee.

MIIML

The audit and risk committee, which complies with the requirements of the Principles, is currently comprised as follows:

* Meetings attended (4 held).

David Walsh replaced Michael Easson as a member of the audit and risk committee on 28 August 2007.

MIGIL

The audit and risk committee does not comply with the principles and is currently comprised as follows:

* Meetings attended (4 held).

Given the size and composition of the MIGIL board, the audit and risk committee does not comply with the ASX 3 member recommendation. However the members of both the MIIML and MIGIL committees are all independent directors.

As the MIIML board alone is responsible for signing the MIG consolidated financial statements, the ASX has advised that only the MIIML audit committee must comply with the ASX listing rule requirements in respect of size and composition.

The qualifications of the members of both audit and risk committees can be found on our website and later in this report.

2. Audit and risk committee

Charters

In establishing its audit and risk committee, each of MIIML and MIGIL has established a charter under which the committee is to operate. The charter is materially the same for both companies and was enhanced in June 2003 to cover the recommendations in the ASX principles.

The responsibilities of the audit and risk committee under each charter in relation to financial reporting are to:

Details of the risk monitoring duties of the audit and risk committee, together with a discussion of auditor independence, are set out in the Principle 7 commentary.

3. Senior executive reporting

Each of MIIML and MIGIL requires representation letters from the CEO (or equivalent) and the CFO (or equivalent) in relation to the financial statements of each entity and the consolidated MIG financial statements. The letters are required to state:

(i) The financial reports of each of MIT(I) MIT(II), MIGIL and the consolidated financial statements of MIG as the case may be, present a true and fair view, in all material respects, of the relevant entity’s financial condition and operational results and are in accordance with relevant accounting standards

(ii) The statement given in paragraph (i) is founded on a sound system of risk management and internal compliance and control systems which implement in all material respects the policies adopted by the relevant board

(iii) MIG’s risk management and internal compliance and control systems, to the extent that they relate to financial reporting, are operating effectively for the year ended 30 June 2007, in all material respects.

The statements provide a reasonable, but not absolute, level of assurance and do not imply a guarantee against adverse events or more volatile outcomes arising in the future.

The CEO of MIIML and MIGIL is Stephen Allen.
The CFO is Mary Nicholson.

The MIIML directors alone have responsibility for signing the consolidated MIG financial statements and accordingly the MIIML CEO and CFO provide the representation letters for the consolidated financial statements.

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Principle 5 – Make timely and balanced disclosure

It is MIG’s policy to provide timely, open and accurate information to all stakeholders, including stapled, security holders, regulators and the wider investment community. Under the terms of the Stapling Deed, MIIML, MIGIL and MIMUK are obliged to exchange relevant information and coordinate ASX releases and financial reporting.

Each of MIIML and MIGIL has developed policies and procedures (which are part of the communications policy referred to below) in relation to disclosure and compliance with ASX listing rules disclosure requirements.

The procedures include dealing with potentially price-sensitive information which includes referral to the CEO and company secretary/general counsel for a determination as to disclosure required. The ASX liaison person is the MIIML company secretary.

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Principle 6 – Respect the rights of shareholders

MIG has developed a security holder communications policy. The cornerstone of this policy is the delivery of timely and relevant information as described below.

Stapled security holders receive an annual report and financial statements and a half-yearly update which keep them informed of MIG’s performance and operations. Newsletters are also sent to stapled security holders from time to time.

MIG’s policy is to lodge market-sensitive information with the ASX and place it on its website, including annual and interim result announcements and analyst presentations, as soon as practically possible. MIG’s website (www.macquarie.com/mig) contains recent announcements, presentations, past and current reports to security holders, answers to frequently asked questions and a three-year summary of key financial data. Investors may also register here to receive email copies of MIG’s significant ASX announcements.

Domestic investor road shows are held regularly throughout Australia. International road shows are also held for institutional stapled security holders. Where they contain new information, analyst and road show presentations are released to the ASX and included on the MIG website.

MIG also produces an analyst package which is updated annually. This comprehensive guide aims to provide transparency of MIG’s investments and structure. The analyst package is released to the ASX and consists of detailed asset descriptions, corresponding financial variables and financial modelling tools.

Meetings of the three MIG entities are convened at least once a year, usually in October or November.

In the case of the trusts, which are not required under the Corporations Act to hold an AGM, these are usually informal annual meetings unless there is formal business to be considered. An AGM is held for MIGIL at the same time.

Presentations by the chairman and CEO at the AGM are webcast.

For formal meetings an explanatory memorandum on the resolutions is included with the Notice of Meeting.

Unless specifically stated in the Notice of Meeting, all holders of fully paid securities are eligible to vote on all resolutions. In the event that security holders cannot attend formal meetings they are able to lodge a proxy in accordance with the Corporations Act or Bermudian Companies Act as applicable.

Proxy forms can be mailed or lodged by facsimile or electronically.

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Principle 7 – Recognise and manage risk

Both MIIML and MIGIL have formalised risk management policies. Compliance with these policies is monitored by their respective audit and risk committees.

Risks are managed through the risk management framework in place and include:

As part of its risk monitoring duties each audit and risk committee is required to:

(i) Enquire of management and the external auditor about significant risks or exposures and assess the steps management (MIIML) or the Advisor (MIMUK) has taken to minimise such risk to the trusts or company as applicable

(ii) Consider and review with the external auditor:

(iii) Monitor and review (at least annually) the effectiveness of the trusts’/company’s operational risk management framework and compliance with key risk management policies

(iv) Review the scope of any internal audit to be conducted and the independence of any internal audit team.

Both MIIML and MIMUK, as part of the MBL Group, are subject to periodic review conducted by MBL’s internal audit division.

Each asset of MIG maintains its own risk management framework and supporting infrastructure to manage its own risk. MIG’s ability to control or influence this framework and infrastructure differs based on MIG’s level of ownership and control. It is MIG’s policy to confirm that each asset has an appropriate risk management framework in place to assist the asset to effectively manage its risks.

Each of MIIML and MIGIL require representation letters from MIG management (see Principle 4: Paragraph 3) to address risk management and internal controls.

The audit and risk committee has adopted a policy which includes the following to ensure the independence of the external auditor:

The MIIML and MIGIL boards and audit and risk committees are of the view that, at the present time, PricewaterhouseCoopers (PwC) is best placed to provide MIG’s audit services because PwC is a top tier professional service firm. PwC has provided audit services to MIG since its establishment and is familiar with its structure and assets. The auditor is required to be independent from MIG and MBL. PwC meets this requirement.

The auditor attends MIG’s annual general meetings and is available to answer security holder questions on the conduct of the audit, and the preparation and content of the auditor’s report.

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Principle 8 – Encourage enhanced performance

To ensure that the directors and senior executives of MIIML and MIGIL are properly performing their duties, MIIML and MIGIL have implemented the following:

The procedure for evaluation of the board’s performance is:

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Principle 9 – Remunerate fairly and responsibly

Below is a brief description of management and performance fee arrangements for MIIML as Responsible Entity and MIMUK as Advisor, remuneration arrangements in relation to MIG staff (whose remuneration is paid by the MBL Group, not MIG) and also the fees paid to MIG external directors. Full details, and a discussion of MIG remuneration arrangements, alignment of interest and manager and staff incentivisations are set out in the Remuneration Report on page 74. Responsible Entity and Advisor expenses reimbursed by MIG are set out below.

1. Responsible Entity and Advisor fees

MIIML, as Responsible Entity of MIT(I) and MIT(II), and MIMUK, as Advisor of MIGIL, are entitled to be paid base management fees and also performance fees for discharging their management/advisory functions.

These fees are calculated in accordance with a defined formula under the trust constitutions and the Advisory Deed. The fee arrangements were fully disclosed to investors on fund inception and subsequent restructure and continue to be disclosed on the MIG website and in annual reports so that investors originally invested and continue to invest on this basis. The structure and level of the fee arrangements are consistent with those paid in the market in respect of similar externally managed vehicles and are not subject to review. Any changes to the fee provisions which would have the effect of increasing the fees would need to be approved by stapled security holders.

2. Reimbursement of Responsible Entity and Advisor expenses

MIMUK and MIIML are also entitled to be reimbursed for expenses incurred by them in relation to the proper performance of their duties, out of the assets of MIG. This includes routine ongoing expenses such as the third party costs of acquiring assets and managing them, as well as capital raising costs, registry, audit, insurance, compliance costs and other expenses as set out in the trust constitutions and Advisory Deed.

3. Staff remuneration

One of the responsibilities of MIIML and MIMUK is to make available employees (including senior executives) to discharge their obligations to the relevant MIG entity. These staff are employed by entities in the MBL Group and made available to MIG through formalised resourcing arrangements with MIIML and MIMUK. MIGIL does not have employees and relies on the MIMUK management staff under the Advisory Deed arrangements to implement operational decisions and carry out administrative functions.

None of the MIG stapled entities pays any expenses referable to the staff provided by the MBL Group. These are all paid by the MBL Group.

MIG holds its toll road investments through interests in special purpose project vehicles. Most of these vehicles have their own internal management paid for at the vehicle level. Where MIIML or MIMUK staff are required to serve as directors on the boards of these vehicles, or are seconded to them from time to time, any fees paid in respect of these arrangements are paid to MIG.

Senior MIIML and MIMUK executives may have some or their entire performance bonus retentions notionally invested by MBL in MIG securities so that the amount varies as if they were actually invested in the securities, and may also receive MBL options as part of their MBL remuneration package.

4. Director remuneration

MIIML independent director fees are paid by MIIML in its personal capacity. They are not paid by the trusts.

In the case of the Macquarie executive directors, remuneration earned in connection with their roles as MIIML or MIGIL directors as the case may be is paid by MBL and not by MIIML or MIGIL.

MIGIL non-executive director fees are paid by MIGIL. None of the MIIML or MIGIL directors is entitled to MIG options or securities or to retirement benefits as part of their remuneration package.

Senior MBL executives who are MIG directors may have some or all of their performance bonus retentions notionally invested by MBL in MIG securities so that the amount varies as if they were actually invested in the securities, and may also receive MBL options as part of their MBL remuneration package.

5. Remuneration committee

The boards of each of MIIML, as Responsible Entity of MIT(I) and MIT(II), and MIGIL do not consider it necessary or appropriate to constitute a remuneration committee. Given the payment of the management fee (and the fact that any change to the determination of that fee would require security holder approval) and MIIML’s and MIGIL’s lack of exposure to remuneration expenses, a remuneration committee is not justified.

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Principle 10 – Recognise the legitimate interests of stakeholders

The code of conduct adopted by MIIML and MIGIL (see Principle 3) establishes a code of conduct which among other things addresses matters relevant to the company’s compliance with its legal obligations to stakeholders.

The code of conduct covers those areas which the boards of both MIIML and MIGIL consider relevant to the operations of MIG. There is a compliance procedure in place to ensure the code is adhered to and a formal complaints handling procedure has been implemented.

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Specific issues related to MIG Related party transactions

MBL Group companies and managed entities undertake various transactions with, and perform various services (such as financial advisory, underwriting, FX hedging) for MIG from time to time. These transactions and services are undertaken on arm’s length terms and fees and other terms are approved solely by MIIML’s or MIGIL’s (as the case may be) independent directors. Macquarie executive directors do not vote or, unless invited to do so by the independent directors, participate in discussion on related party matters.

All related party transactions involving MIT(I), MIT(II) and MIGIL and their controlled entities are tested by reference to whether they meet market standards. In particular, fees and mandate terms and conditions are subject to third party independent review unless the independent directors determine otherwise on the basis of appropriate market information or practice.

Third party independent review is mostly carried out by the corporate advisory divisions of large accounting firms. In the case of the provision of services the reviewers have regard to market evidence gathered from their own enquiries including information requested from the MBL Group. For asset sales or acquisitions the reviewer carries out its own valuation. MIG independent directors have put in place a panel of reviewers (which does not include the MIG auditor) and the reviewer for a particular service or transaction is usually chosen by them on a rotational basis.

Foreign exchange transactions where commissions to MBL Group companies are less than A$100,000 are transacted with reference to independent pricing checks and arrangements and benchmarked annually. However, in the case of foreign exchange transactions requiring strict confidentiality, MBL is usually engaged subject to management ensuring pricing is competitive and independent director approval.

MIG entities may co-invest from time to time with other MBL Group companies or managed entities.

Co-investment arrangements may include pre-emption and tag-along and drag-along rights in favour of each other, including rights which are triggered on removal of MBL Group companies as manager or advisor or if the manager or advisor ceases to be part of the MBL Group. Where such arrangements are put in place the MIG independent directors obtain separate legal advice as necessary and the arrangements are approved by the independent directors and disclosed to stapled security holders.

In addition, contract counterparties such as lenders may impose similar conditions of ongoing involvement by MBL Group manager entities and their removal may have adverse consequences such as an acceleration of loan repayments. Details of related party transactions involving the payment of fees to MBL Group companies who have provided services to MIG are disclosed on page 48 of the MIG full financial report for the year ended 30 June 2007.

Compliance committee

Under the Corporations Act managed investments regime, MIIML as the Responsible Entity of MIT(I) and MIT(II) is required to register a compliance plan for each trust with the Australian Securities and Investments Commission (ASIC). The compliance plans outline the measures undertaken to ensure compliance with the Corporations Act and each trust constitution. It is the compliance committee’s responsibility to monitor MIIML’s compliance with the compliance plans and report its findings to the board or ASIC if necessary.

The compliance committee is currently comprised as follows:

Compliance officers have been appointed for MIT(I) and MIT(II) and they are responsible for reviewing and monitoring the efficiency of compliance systems on an ongoing basis so that appropriate compliance procedures, staff education and compliance committee reporting arrangements are in place to enable observance of the compliance plans.

The external compliance committee members must satisfy the independence criteria set out in s601JB (2) of the Corporations Act. External members are required to certify their compliance with these requirements on an annual basis and otherwise notify MIIML if they cease to satisfy the criteria.

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