Corporate governance

The investment policy is widely defined and includes investments in media assets globally with an initial focus on OECD and OECD-like countries.

The investment policy may be varied from time to time upon giving reasonable notice to security holders.

MMG 2005 prospectus sections 1.3 and 4.4

Trust constitution clause 13

MMHL MSA clauses 1 and 3

Company Manager

The manager under the terms of the MMHL MSA and MMIL MSA is responsible to the companies for:

Investment and divestment evaluation and recommendations

Implementation of investment/divestment instructions given by the board

Asset management

Asset valuations

Capital and financial management recommendations

Financial reporting

Board reporting

Investor communications and meetings

General fund administration including company secretarial services – (subject to outsourcing of registry and trust custodial services to Computershare Investor Services Pty Limited ABN 48 078 279 277 and Trust Company Limited ABN 59 004 027 749 respectively, and company secretarial services in Bermuda to ISIS Fund Services Ltd.)

Monitoring of fund operational risk, insurances and compliance

Litigation management

Designation of suitably qualified personnel to perform the CEO and CFO roles for the fund and, in the case of MMHL, Executive Chairman and Company Secretary

MMHL MSA clauses 3 and 10

MMIL MSA clauses 3 and 10

Responsible Entity

The responsible entity has all the powers of a natural person including contracting, borrowing and investment and carries out all management functions for the trust subject to outsourcing registry and custodial services as described above.

Trust constitution clause 13

No fixed term for both the trust and the companies, or until the manager is removed or retires or security holders vote to wind up the stapled entities as provided for in the trust constitution or by law.

Trust constitution clauses 14 and 22

MMHL MSA clause 11

MMIL MSA clause 11

There are no extension or renewal provisions in the MMHL MSA and MMIL MSA.

The trust and companies may terminate the appointment of the responsible entity/manager, without cause, by security holder vote.
 
For both trust and companies the resolution must be passed by at least 50% of votes cast at a meeting by security holders entitled to vote.  Managers and associates may vote their securities on the resolution.

The manager of the companies can only be removed on a vote if the responsible entity of the trust is also removed.

The manager of the companies can also be removed for cause being where the manager is in liquidation, ceases to carry on business, lacks the appropriate licence or authorisation or commits a material breach of the MSA that cannot be remedied.

In the case of the trust, ASIC or a court may replace the responsible entity where there are solvency issues or members are likely to suffer a loss because the responsible entity has breached the Corporations Act.

Pursuant to the Corporations Act the responsible entity of the trust can retire if it first convenes a unitholders meeting to explain its reason for retirement and to enable unitholders to vote on a resolution to choose a new responsible entity.

The manager of the companies may resign by giving written notice. 

Where removal events have occurred in the case of the companies, its directors retain discretion as to whether to terminate the manager. As the directors must act in the interest of security holders, it is considered unlikely that they would not terminate the MMHL MSA or MMIL MSA in the situation where security holders have voted to remove the responsible entity and the manager.

Base fees and performance fees accrued to the date of termination are payable.  There are no other termination fees payable but, in the case of MSCM, asset advisory fees then become payable to MDAA.

Trust constitution clause 14

Corporations Act s601FL, s601FM, s601FN, s253E, s915B

MMHL MSA clause 11

MMIL MSA clause 11

Trust constitution clause 21
MMHL MSA clauses 8 and 11
MMIL MSA clauses 8 and 11

Base fee

Payable quarterly.

Base fee = 1.5% per annum of the Net Investment Value.

Net Investment Value is the Market Value of MMG securities plus the amount of any external borrowings and the amount firmly committed to future investments less the amount invested in cash or cash equivalents.

Market Value is the volume weighted average market capitalisation over the last 15 ASX trading days of each quarter.

The responsible entity and the manager may, where the non-executive directors of MMML so determine, apply the base fee in subscription for MMG securities. The price of the MMG securities is the VWAP of the MMG stapled securities traded on ASX during the 15 trading days up to and including the quarter end date.

Performance fee

Payable quarterly if earned.

Payable in the event that MMG accumulation index (the Return) outperforms 6% per annum plus the annual Australian consumer price index (CPI) change (the Benchmark Return) in any quarter having made up for underperformance in previous quarters.

Performance fee = 20% of the amount (if any) by which the Return exceeds the Benchmark Return for that period.

Any underperformance deficit from prior periods must be made up before future performance fees can be earned.

The responsible entity and the manager may, where the non-executive directors of MMML so determine, apply the performance fee in subscription for MMG securities. The price of the MMG securities is the VWAP of the MMG securities traded on ASX during the 15 trading days up to and including the quarter end date.

Other services provided by Macquarie companies

Additional fees will be payable for other services such as financial advisory, underwriting, broking and hedging provided on a transactional basis by Macquarie companies and as approved under MMG’s related party policy.

Trust constitution clause 21

MMHL MSA clause 8

The responsible entity and the manager are entitled to be reimbursed for expenses incurred in relation to the proper performance of their duties.

Expense reimbursement does not include manager administration costs such as premises, staff and facilities.

Trust constitution clause 21

Corporations Act s601GA(2)

MMHL MSA clause 9

MMIL MSA clause 9

The manager is engaged by the companies on an exclusive basis, although the manager itself may act for other parties.

The responsible entity may act for other parties and outsource its general management responsibilities to other Macquarie or non-Macquarie managers (but remains liable for their actions).

Macquarie (including the responsible entity and the manager) has no obligation to provide investment opportunities and MMG has no obligation to accept any investment opportunities. 

MMG has no priority over Macquarie companies, any current or future Macquarie-managed funds or any other client of Macquarie with respect to investment opportunities within its mandate identified by Macquarie.  In addition, existing or future funds may be given specific areas of priority within MMG’s mandate.

If MMG does not wish to proceed with an investment opportunity offered under the above arrangements then it may be offered to other funds or clients.

MMHL MSA clause 4

MMIL MSA clause 4

Trust constitution clauses 13 and 18

Corporations Act s601FB

MMG 2005 prospectus sections 1.8 and 7.5

The board of the responsible entity makes all significant investment/divestment and operational decisions in relation to the trust.

The manager mandates for the companies are non discretionary. All significant investment/divestment and operational decisions are made by the company boards based on manager recommendations.

The performance of management generally is oversighted by the independent directors on the responsible entity and company boards.

Trust constitution clause 13

MMHL MSA clause 4

The trust and the companies have adopted a detailed related party protocol covering transactions with and services provided by Macquarie companies and managed vehicles.

All related party transactions or services must be on arms length terms and approved by the MMG independent directors only.
Asset acquisition or sale transactions with related parties for 5% or greater of fund value must be supported by an independent valuation.

Mandates for the provision of services to MMG stapled entities or their controlled businesses 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 enquires, including information requested from Macquarie. For asset sales or acquisitions, the reviewer carries out its own valuation if required.

Swap and foreign exchange transactions with Macquarie companies solely for hedging purposes are given standing approval if certain conditions are met.

Significant volume securities transactions with a Macquarie broker require independent director approval.

MMG Related Party Policy

MMHL MSA clause 7

MMIL MSA clause 7

MMG co-invests from time to time with other Macquarie companies or managed vehicles. Co-investment arrangements may include pre-emption and tag-along or drag-along rights in favour of each other including rights which are triggered on removal of the Macquarie manager typical of those agreed with third party co-investors. Currently there are no such arrangements in place for MMG.

In addition, loan facilities for MMG or its businesses may provide for acceleration of loan payments if MMG is no longer managed by a Macquarie company. Removal of manager trigger events are typically put in place because counterparties (both equity and debt providers) require ongoing Macquarie involvement in the management of the fund or particular businesses.

The MMG independent directors obtain separate legal advice as necessary and the arrangements are approved by the independent directors and disclosed to security holders.

If MMML is removed as responsible entity of the trust, the Asset Advisory Agreement may still remain on foot. Similar fees will then become payable under the Asset Advisory Agreement at the asset level, with the result that there may be an increase in the total management fees payable by the MMG entities and investor returns may be adversely affected.

MMG Related Party Policy

Asset Advisory Agreement clause 8

Any variations adverse to security holders’ rights or in respect of changes to fee structures to increase fees would involve trust constitution amendments and therefore effectively require approval by 75% by value of votes cast at a meeting by security holders entitled to vote.

There are however no specific requirements in the MMHL MSA or MMIL MSA for variations to these agreements to be approved by security holders but given the stapled structure it is unlikely that any changes would result in material inconsistency with the trust provisions particularly as regards investment policy, manager termination or fees.

Trust constitution clause 24

Corporations Act s601GC

MMML (as manager of each company) has director appointment rights for 50% of the board of each company. MMML (as responsible entity of the trust) has director appointment rights for 25% of the board of each company.

Macquarie currently appoints the board of the responsible entity of the trust as it is a Macquarie subsidiary.

MMHL constitution clause 1

MMIL Bye-laws clauses 6 and 7

The investment policy is broadly consistent with the investment policy of MMHL.

Asset Advisory Agreement clauses 1 and 3

The asset adviser is responsible to MSCM for:

Advising on any proposed investment or divestment

Asset valuations

Assisting with financial reporting and budgets

Board reporting in connection with matters on which it provides advice

Assisting with litigation management

Provision of appropriately qualified personnel to perform the CEO, CFO and Company Secretary roles for MSCM

No fixed term or until the adviser is removed or resigns.

Asset Advisory Agreement clause 11

There are no extension or renewal provisions in the Asset Advisory Agreement.

MSCM may terminate the appointment of the asset adviser, following a sustained period of underperformance (failure to meet a specified performance test in any five out of eight consecutive quarters), by security holder vote.
 
The resolution must be passed by more than 50% of votes cast at a meeting by security holders entitled to vote.

The asset adviser can also be removed for cause being where the asset adviser is in liquidation, ceases to carry on business, lacks the appropriate licence or authorisation or commits a material breach which cannot be remedied or which can be remedied but remains unremedied for 90 days after notice of breach is given.

The asset adviser may resign by giving written notice. 

Where removal events have occurred, MSCM’s directors retain discretion as to whether to terminate the asset adviser.

Asset base fees and performance fees accrued to the date of termination are payable.

Asset base fees and performance fees only become payable if Macquarie is no longer involved in the management of the stapled entities or if MMG is no longer listed, i.e. if:

• a Macquarie company ceases to be the responsible entity of the trust (other than through retirement);  
• the MMHL MSA is terminated (other than by the manager); or
• MMHL or the trust is delisted or MMG securities cease to be quoted.

  There is no double counting of fees under the Asset Advisory Agreement while Macquarie is manager of MMG.

Asset base fee

Payable quarterly.

Asset base fee = 1.5% per annum of the Market Value of MSCM.

Market Value is the amount for which all investments in MSCM and its subsidiaries by MMG entities could be exchanged between willing, knowledgeable parties in an arms length transaction at that date, as determined by the asset adviser and reviewed by an independent expert.

The asset adviser may, where the non-executive directors of MMML and MMHL so determine, apply the asset base fee in subscription for MMG securities. The price of the MMG securities is the VWAP of the MMG stapled securities traded on ASX during the 15 trading days up to and including the quarter end date.
   
Asset performance fee

Payable annually if earned.

Payable as 20% of the actual return (if any) generated above a 6% per annum plus the annual Australian consumer price index (CPI) change benchmark (compounded annually) less any asset performance fees previously paid.

The asset adviser may, where the non-executive directors of MMML and MMHL so determine, apply the asset performance fee in subscription for MMG securities. The price of the MMG securities is the VWAP of the MMG stapled securities traded on ASX during the 15 trading days up to and including the calculation date.

Other services provided by Macquarie companies

Additional fees will be payable for other services such as financial advisory, underwriting, broking and hedging provided on a transactional basis by Macquarie companies and as approved under MMG’s related party policy.

Asset Advisory Agreement clauses 1 and 8

MMHL MSA Schedule 3

The asset adviser is entitled to be reimbursed for expenses incurred in relation to the proper performance of its duties.

Expense reimbursement does not include asset adviser administration costs such as premises, staff and facilities.

The asset adviser is not engaged by MSCM on an exclusive basis, and the asset adviser may act for other parties.

Macquarie (including the asset adviser) has no obligation to provide investment opportunities and MSCM has no obligation to accept any investment opportunities. 

If MSCM does not wish to proceed with an investment opportunity offered under the above arrangements then it may be offered to other funds or clients.

The advisory mandate for MSCM is non discretionary. All significant investment/divestment and operational decisions are made by the MSCM board based on advice from the asset adviser.

MMHL has adopted a detailed related party protocol covering transactions with and services provided by Macquarie companies and managed vehicles, which applies to transactions involving MSCM.

Refer to “Related Party Protocols” in Table 1 above for details of the policy.

Change of Control

Any variations in respect of changes to fee structures to increase fees would require security holder approval.

Other variations can be approved between MSCM and the asset adviser subject to MMHL independent director approval where necessary. Significant changes having a financial impact on MMG require clear disclosure to MMG security holders.

Asset Advisory Agreement clause 25

MMG Related Party Policy