Corporate governance

MMG's approach to corporate governance

The MMG boards are committed to MMG's achievement of superior financial performance and long–term prosperity, while meeting stakeholders' expectations of sound corporate governance practices. This statement outlines MMG's main corporate governance policies as at 30 June 2008. 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 MMG. As with all its business activities, MMG is proactive in respect of corporate governance and puts in place those arrangements which it considers are in the best interests of MMG and its investors and consistent with its responsibilities to other stakeholders. It actively reviews Australian and international developments in corporate governance.

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

The key elements of the Macquarie Fund Policy are:

• Conflicts of interest arising between Macquarie managed vehicles and their related parties should be managed appropriately and, in particular:
  • Related party transactions should be identified clearly and conducted on arm's length terms
  • Related party transactions should be tested by reference to whether they meet market standards
  • Decisions about transactions between Macquarie managed vehicles and Macquarie or its affiliates should be made by parties independent of Macquarie.
• The boards of both the corporate vehicles and the management company/responsible entity of the Trusts of listed Macquarie managed vehicles which are stapled groups will comprise at least 50% independent directors and at least one of the boards in each stapled group will have a majority of independents.
• The funds management business should be resourced appropriately. In particular:
  • There is a separate Macquarie Capital Funds (MacCap Funds) division and staff in this area should be dedicated to the funds management business
  • All recommendations to the boards of Macquarie managed vehicles should be reviewed or prepared by MacCap Funds staff
  • Each listed Macquarie managed vehicle that invests in operating businesses should have its own managing director or chief executive officer
  • Chinese walls operate to separate Macquarie's investment advisory and equity capital markets businesses from MacCap Funds.

ASX corporate governance principles

The ASX corporate governance council (the Council) has corporate governance principles and 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.

The Principles can be viewed at www.asx.com.au. The Principles are not prescriptive; however listed entities (including MMG) 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.

On 2 August 2007 the Council issued revised Principles. While the revised Principles take effect for financial years commencing after 1 January 2008, MMG has elected to report early against the revised Principles.

MMG's corporate governance statement is in the form of a report against the Principles. MMG's corporate governance policies largely conform to the Principles. Any deviation is because of MMG's externally managed structure and the requirements of the Macquarie Fund Policy. We have noted the differences in our reporting.

• Principle 1: Lay solid foundations for management and oversight
• Principle 2: Structure the board to add value
• Principle 3: Promote ethical and responsible decision making
• Principle 4: Safeguard integrity in financial reporting
• Principle 5: Make timely and balanced disclosure
• Principle 6: Respect the rights of shareholders
• Principle 7: Recognise and manage risk
• Principle 8: Remunerate fairly and responsibly