Legal framework and management arrangements

• Chicago Skyway
• Indiana Toll Road
• Dulles Greenway¹

MARL derives its income primarily from returns from its investments in the MQA Portfolio

Bermudian exempted mutual fund company

• M6 Toll
• APRR
• Dulles Greenway²
• Warnow Tunnel

MARIL derives its income primarily from returns from its investments in the MQA Portfolio

MARL and MQA Manager to the MARL Management Agreement

MARIL and MQA Manager to the MARIL Advisory Agreement

The investment policy is to invest in infrastructure assets in OECD and OECD equivalent countries; and non-infrastructure assets where ancillary to a major infrastructure investment or acquisitions but with focus on toll road investments, both greenfield and mature.

The investment policy may be varied from time to time on reasonable notice to MQA security holders.

MQA Management Agreements 3.3

Subject to the instruction and supervision of the relevant MQA Board, the MQA Manager is responsible to MARL and MARIL for:

• Advice on any proposed investment or divestment
• If the MARL Board and MARIL Board approve an investment, acquisition and management of the investment on behalf of MARL and MARIL
• Provision of Macquarie executives as nominees of MARL and MARIL to act as directors of subsidiary entities that hold investments, and where appropriate, making recommendations to the MQA Boards to appoint non-Macquarie nominees to these boards
• Capital management and financial management recommendations
• Recommendations to the MQA Boards in respect of various matters (including but not limited to changes to the MARL Constitution and MARIL Bye-Laws, any capital reductions, appointment and dismissal of staff and consultants, and the payment of dividends and interim dividends)
• General fund administration including company secretarial services subject to outsourcing company secretarial services in Bermuda to Butterfield Fulcrum Group Limited
• Asset valuations
• Assistance with financial reporting and budgets
• Board reporting in connection with matters on which it provides advice
• Assistance with litigation management
• Investor communications and meetings
• Provision of suitably qualified personnel to perform the CEO and CFO roles for MQA and the company secretary role for MARL.

MQA Management Agreements 3

No fixed term or until the MQA Manager is removed or resigns.

MQA Management Agreements 11.1

There are no extension or renewal provisions in the MARL Management Agreement and MARIL Advisory Agreement.

MQA Management Agreements 11

The appointment of the MQA Manager will automatically terminate on a MQA security holder vote. The resolution must be passed by at least 50% of votes cast at a meeting by MQA security holders entitled to vote to terminate the MARL Management Agreement and MARIL Advisory Agreement. The MQA Manager and its associates (including Macquarie) may vote their securities on the resolution.

MQA Management Agreements 11.3(b)

The MQA Manager can also be removed for cause being where the MQA Manager is in liquidation, ceases to carry on business, lacks the appropriate licence or authorisation, or commits a material breach which cannot be remedied.

MQA Management Agreements 11.3(a)

The MQA Manager may resign by giving not less than 90 days written notice. 

MQA Management Agreements 11.2

Where the agreement terminates, all directors, executives, employees, representatives, assignees and delegates of the MQA Manager and its associates (including Macquarie) will cease to work under the agreement at the date of termination or at any other time determined by MQA.

MQA Management Agreements 11.3(c)

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

MQA Management Agreements 
8.1(d), 8.2(b)

Base fee

Payable quarterly.

The parties agree that the MQA Manager and MARL may agree from time to time to a base fee which is less than the amount determined below. At the commencement date for the MQA Management Agreement, the MQA Manager and MARL have agreed to a base fee calculated as follows:

• 2.00% per annum of the Market Value of MQA at the end of each Calendar Quarter up to A$1 billion or less; plus
• 1.25% per annum of the Market Value of MQA at the end of each Calendar Quarter in excess of A$1 billion but less than or equal to A$3 billion; plus
• 1.00% per annum of the Market Value of MQA at the end of each Calendar Quarter in excess of A$3 billion.

‘Market Value’ at the end of a calendar quarter means the aggregate of the market value of the MQA securities calculated on the basis of the average number of MQA securities on issue during the last 10 trading days of the ASX in the relevant calendar quarter multiplied by the volume weighted average price (VWAP) of all MQA securities traded on the ASX over those 10 trading days.

The MQA Manager and its associates (including Macquarie) may, where the non-executive directors of MARL and MARIL so determine, use the cash received from base fees to subscribe for MQA securities. The price of the MQA securities is the VWAP of the MQA securities traded on ASX during the last 10 trading days in the relevant calendar quarter.

MQA Management Agreements 8.1

Performance Fee

A performance fee is payable at 30 June each year in the event that MQA securities outperform the Benchmark Return (based on the S&P/ASX 300 Industrials Accumulation Index) in the financial year (being the 12-month period ending on 30 June in each year) having made up for underperformance in previous years. Any underperformance deficit from prior periods must be made up before future performance fees can be earned.

Performance fee = 15% of the dollar amount of outperformance and is payable in three equal annual instalments. The second and third instalments are only paid if MQA continues to outperform the index on a cumulative basis over the two- and three-year period to each respective instalment date. The performance fee to be calculated in respect of any given financial year means:

• Subject to paragraph 3 below, 15% of the amount (if any) by which the Annual Return for the financial year exceeds the Benchmark Return of the financial year or
• Nil if the Annual Return for the financial year does not exceed the Benchmark Return for the financial year, but
• If the Annual Return in any prior financial year is less than the Benchmark Return for that financial year the deficit is to be carried forward on a cumulative basis until offset on a dollar for dollar basis against a surplus or surpluses of the Annual Return over the Benchmark Return in any succeeding financial year or financial years. The MQA Manager must allocate any deficit between MARL and MARIL based on the net assets of the companies (adjusted for the net market value of its assets).

MQA Management Agreements 8.2

Annual Return means:

AR = A × (B − C) / C

Where:

AR = the Annual Return for the financial year

A =  in respect of each financial year is the average number of MQA securities on issue during the last 10 ASX trading days in the previous financial year multiplied by the VWAP of all MQA securities traded on the ASX during that 10 trading days period or in the case of the initial financial year using the 30 trading days following Listing for the calculations

B = the average of the daily closing accumulation indices for the MQA securities over the last 10 trading days of the financial year as calculated by a person reasonably approved or selected by the MQA Manager and reported by Bloomberg

C = the average of the daily closing accumulation indices for the MQA securities over the last 10 trading days of the previous financial year as calculated by a person reasonably approved or selected by the MQA Manager and reported by Bloomberg, or in the case of the initial financial year over the 30 trading days following Listing.

Benchmark Return means:

BR = X × (Y − Z) / Z

Where:

BR = the Benchmark Return for the financial year

X =  in respect of each financial year is the average number of MQA securities (as used in the determination of ‘A’ for the purposes of determining the Annual Return for the financial year) on issue during the last 10 ASX trading days in the previous financial year multiplied by the VWAP of all MQA securities (as used in the determination of ‘A’ for the purposes of determining the Annual Return for the financial year) traded on the ASX during that 10 trading days period or in the case of the initial financial year using the 30 trading days following Listing for the calculations

Y =  the average of the daily closing S&P/ASX 300 Industrials Accumulation Indices over the last 10 trading days of the financial year as reported by Bloomberg

Z =  the average of the daily closing S&P/ASX 300 Industrials Accumulation Indices over the last 10 trading days of the previous financial year or in the case of the initial financial year, the 30 trading days following Listing as reported by Bloomberg.

If the MQA Manager’s appointment is terminated, any future second and third performance fee instalments will be crystallised and paid on termination.

The MQA Manager and its associates (including Macquarie) may, where the non-executive directors of MARL and MARIL so agree, use the cash received from performance fees to subscribe for MQA securities. The price of the MQA securities is the VWAP of the MQA securities traded on ASX during the last 10 trading days of that financial year.

The same base fee and performance fee provisions apply for the MARIL Advisory Agreement.

MQA Management Agreements 1.1

Apportionment of fees

The MQA Manager acknowledges that in respect of the performance fees that are earned under the MQA Management Agreements for the relevant period while stapling applies, the amount calculated under each of the MQA Manager Management Agreements are representative of the aggregate fees payable to the MQA Manager in respect of MQA.

Unless agreed in writing to the contrary by MARL, MARIL and the MQA Manager, the allocation of the base fee and the performance fee between MARL and MARIL is to be at the ratio of that amount of the aggregate net assets (adjusted for the net market value of its investments) of MARL or MARIL as the case may be at the end of the relevant period bears to the amount of the aggregate net assets of the MQA group (adjusted for the net market value of its investments) at the end of the relevant period on the basis that in respect of the performance fee, the allocation will apply for each of the three instalments in the same ratio.

MQA Management Agreements 8.4 and Schedule 2

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

Expense reimbursement does not include administration costs such as premises, staff and facilities or any costs, commissions, charges, fees, expenses and taxes arising as a result of any gross negligence, fraud, wilful misconduct or dishonesty by the MQA Manager or any officer, employee, delegate, agent or contractor of the MQA Manager.

MQA Management Agreements 9

The MQA Manager is not engaged by MQA on an exclusive basis, and MARL and MARIL can appoint additional managers or advisors.

MQA Management Agreements 4.5

The MQA Manager may from time to time perform services for itself and other parties the same as or similar to services performed under the MQA Management Agreements.

MQA Management Agreements  4.7

The MQA Manager, and its associates have no obligation to provide investment opportunities and MARL and MARIL have no obligation to accept any investment opportunities. MARL and MARIL will not have any priority in respect of investment opportunities sourced by the MQA Manager and its associates.

MQA Management Agreements 4.9

The advisory mandate for MARL and MARIL is non-discretionary.  All significant investment/divestment and operational decisions are made by the MARL Board and MARIL Board based on recommendations by the MQA Manager. The MQA Boards are not obliged to accept the recommendations of the MQA Manager.

MQA Management Agreements 4.1

MQA has approved a detailed related party protocol covering transactions with and services provided by Macquarie Group companies and managed vehicles.

All related party transactions or services must be on arm’s length terms and approved by the MQA independent directors only.

Asset acquisition or sale transactions with related parties for 5% or greater of fund value are supported by an independent valuation.

Mandates for the provision of services to MQA or its controlled businesses are subject to third party independent review unless the independent directors determine otherwise on the basis of appropriate market information or practice.

MQA independent directors have available a panel of reviewers (which does not include the MQA auditor), and the reviewer for a particular service or transaction is usually chosen by them on a rotational basis.

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

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

Fees paid or payable by MQA group entities for related party services will be disclosed in the MQA financial statements.

MQA Management Agreements 7.1

A party may not assign any of its rights and obligations under the MQA Management Agreements without the prior written consent of the other party except to an associate the MQA Manager, provided the MQA Manager has demonstrated to the reasonable satisfaction of MARL and MARIL (as the case may be) that the relevant associate has or has access to all necessary expertise, experience and resources for it to perform the MQA Manager's obligations under the MQA Management Agreements. The MQA Manager may also delegate its rights and obligations under the MQA Management Agreements to an associate but remains liable for the actions of the associate.

The MQA Management Agreements are not able to be terminated by either the MQA Manager or MARL and MARIL (as the case may be) in the event of a change of control of MARL or MARIL. However, as noted above under ‘Termination’, the agreement will terminate if MQA security holders so determine by 50% majority resolution. Base fees and performance fees accrued to the date of termination will be payable by MARL and MARIL in those circumstances.

MQA 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.

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.

MQA Management Agreements 19

• The practices necessary to maintain confidence in the company’s integrity
• The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
• The responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

• Consists of only non-executive directors
• Consists of a majority of independent directors
• Is chaired by an independent chair, who is not chair of the Board
• Has at least three members.

• Consists of a majority of independent directors
• Is chaired by an independent chair
• Has at least three members