FUTURE GENERATION AUSTRALIA LIMITED — Annual Report 2011

Sep 25, 2011

Total pages: 93

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Hastings Funds Management Limited ABN 27 058 693 388 AFSL No. 238309 Australian Infrastructure Fund Limited ABN 97 063 935 553

Level 16, 90 Collins Street Melbourne VIC 3000 Australia T +61 3 8650 3600 F +61 3 8650 3701 www.hfm.com.au Melbourne, London, San Antonio, Sydney

ASX Announcement

Australian Infrastructure Fund (AIX)

26 September 2011

AIX 2011 Annual Report

Attached is the AIX 2011 Annual Report.

For further enquiries, please contact:

Jeff Pollock Chief Executive Officer Australian Infrastructure Fund Tel: +61 3 8650 3600 Fax: +61 3 8650 3701 Email: investor_relations@hfm.com.au Website: www.hfm.com.au/aix

Simon Ondaatje Head of Investor Relations Hastings Funds Management Tel: +61 3 8650 3600 Fax: +61 3 8650 3701 Email: investor_relations@hfm.com.au Website: www.hfm.com.au/aix

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Jefferson Petch

Company Secretary Australian Infrastructure Fund

Unless otherwise stated, the information contained in this document is for informational purposes only. It does not constitute an offer of securities and should not be relied upon as financial advice. The information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person or entity. Before making an investment decision you should consider, with or without the assistance of a financial adviser, whether any investments are appropriate in light of your particular investment needs, objectives and financial circumstances. Neither Hastings, nor any of its related parties including Westpac Banking Corporation ABN 33 007 457 141, guarantees the repayment of capital or performance of any of the entities referred to in this document and past performance is no guarantee of future performance. Hastings, as the Manager or Trustee of various funds, is entitled to receive management and performance fees.

Australian Infrastructure Fund Annual Report 2011

2 AIX Portfolio Composition

• 3 Asset Locations

• 4 Performance Summary 5 Asset Returns

• 6 Chairman’s Report 8 Chief Executive Offi cer’s Report

• 12 Review of Investment Portfolio

• 13 Airstralia Development Group (Perth Airport)

• 14 Australia Pacifi c Airports Corporation (APAC)

• 15 Queensland Airports Limited (QAL)

• 16 Airport Development Group (NT Airports)

17 HOCHTIEF AirPort Capital (HTAC)

• 22 Port of Portland

23 Port of Geelong

• 24 Statewide Roads

25 Metro Transport Sydney 26 Australian Infrastructure Fund Limited Board 28 Hastings Funds Management Limited Board 30 Australian Infrastructure Fund Organisational Structure 31 Corporate Governance 32 AIFL Corporate Governance Statement 36 AIFT Corporate Governance Statement 40 AIFL Directors’ Report 43 AIFL Remuneration Report 45 AIFL Auditor’s Independence Declaration 46 AIFT Directors’ Report 48 AIFT Auditor’s Independence Declaration 49 Financial Information 82 Directors’ Declarations 83 Independent Audit Report 86 Investor Details 87 Distribution Information 88 Investor Information IBC Corporate Directory

AIX 2011 Australian Infrastructure Fund’s (AIX) primary objective is to offer investors returns, through cash yield and capital growth, by actively managing a portfolio of transport infrastructure assets for the medium to long term.

AIX’s strategy is to:

• focus on transport infrastructure, in particular, airports;

• actively manage the asset portfolio and pursue value accretive organic growth opportunities;

• seek quality investments to add value for securityholders, maintaining a disciplined acquisition approach;

• work closely with technical partners;

• fund distributions from cash fl ows, having regard to expansionary capital opportunities; and

• continue to maintain sustainable asset and portfolio gearing.

AIX listed on the Australian Securities Exchange (ASX) in 1997. At 30 June 2011, AIX had a market capitalisation of $1,191.8 million.

Annual General Meeting

The fi fteenth Annual General Meeting of Australian Infrastructure Fund (AIX) will be held at the Radisson Blu Hotel, Marble Room, 27 O’Connell Street, Sydney, at 2.30 pm, Tuesday 8 November 2011.

About this report

AIX aims to make this Annual Report an accurate and easy-to-read document for investors and other key stakeholders. The report provides information about AIX’s activities and performance during the year. Your feedback and suggestions for improvement are welcomed. If you have any comments on the report, please contact the Company Secretary of AIX on + 61 3 8650 3600 or investor_relations@hfm.com.au.

About Hastings Funds Management

Hastings Funds Management Limited (Hastings) is the Manager and Responsible Entity for AIX. Hastings specialises in managed funds that provide the investment community with access to alternative assets. Hastings’ suite of funds includes infrastructure investments and alternative debt.

Front and Inside Front Cover: Perth Airport

Australian Infrastructure Fund Annual Report 2011

Page 1

AIX Portfolio Composition

The AIX Portfolio comprises transport infrastructure assets, predominantly airports.

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94.4 [%] Airports
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Asset Holdings

Airports

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Airstralia Development Group Airport Development Group
Perth Airport (NT Airports)
Darwin, Alice Springs and
Tennant Creek airports
29.7% 28.2%
51.8%
Australia Pacific Airports HOCHTIEF AirPort Capital
Corporation Athens Airport, Greece; Düsseldorf
Melbourne and and Hamburg airports, Germany;
Launceston airports Sydney Airport, Australia
12.4% 40.0%
7.6% 10.0%
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Seaports

Port of Portland

Port of Geelong

Tollroads and Rail

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Statewide Roads
M4 Motorway, NSW
6.2%
15.2%
Metro Transport Sydney
Metro Light Rail and Monorail, NSW
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50.0%
50.0%
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35.0% 38.9%
38.9%
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Queensland Airports Limited
Gold Coast, Mount Isa and Townsville airports
49.1%
36.7%
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The transfer of ownership interests in all assets, except Statewide Roads, are subject to pre-emptive rights in favour of AIX and other co-investors. Pre-emptive rights in favour of other co-investors may be triggered by a change in the Responsible Entity of AIX.

• AIX holding

• Holding by other Hastings funds

Australian Infrastructure Fund Annual Report 2011 AIX Portfolio Composition/Asset Holdings

Page 2

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Asset Locations
Hamburg Airport
Düsseldorf Airport
Athens Airport
Darwin Airport
Mount Isa Airport
Tennant Creek Airport Townsville Airport
Alice Springs Airport
Perth Airport
Gold Coast Airport
Metro Transport Sydney
Statewide Roads
Sydney Airport
Melbourne Airport
Launceston Airport
Port of Geelong
Port of Portland
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Australian Infrastructure Fund Annual Report 2011 Asset Locations Page 3

Performance Summary

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Net profit after tax ($m)
Operating profit after tax of $212.3 million (2010: $191.3 million)
0 50 100 150 200 250
11 212.3
10 191.3
09 100.6
08 206.5
07 168.2
Distributions per stapled security (cps)
Distributions of 10.0 cents per stapled security paid
for the year to 30 June 2011 (2010: 10.0 cents)
0 5 10 15 20 25
11 10.0
10 10.0
09 13.0
08 16.5
07 15.5
AIX security price ($ps)
Security price of $1.92 as at 30 June 2011 (2010: $1.70)
0 1 2 3
11 1.92
10 1.70
09 1.35
08 1.98
07 2.94
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NOTE: Stapled security prices shown above represent closing prices for 30 June of the year shown. For the 2008 year and earlier, prices have been restated for consistency with security prices subsequent to the AIX rights issue (announced on 18 June 2009) and in accordance with their quotation on Bloomberg.

Page 4 Australian Infrastructure Fund Annual Report 2011 Performance Summary

Asset Returns

The individual asset returns below are for the 2010 and 2011 fi nancial years. The portfolio achieved a return of 16.0 percent for the year. The return was in the form of cash fl ow (33.4 percent), gains from investments (59.6 percent) and franking credits (7.0 percent). The assets currently in the AIX portfolio have generated a return of 18.5 percent per annum (including franking credits) since inception.

Airports Seaports Tollroads and Rail Total asset return for 2011: 16.6% Total asset return for 2011: 5.6% Total asset return for 2011: 45.1% Total asset return for 2010: 17.5% Total asset return for 2010: 10.2% Total asset return for 2010: 15.0% Airstralia Development Group Port of Portland Statewide Roads Perth Airport 24.5% 6.4% 100.2%[(1)] 24.3% 8.1% 18.2% Australia Pacific Airports Corporation Port of Geelong Metro Transport Sydney Melbourne and Launceston airports 16.2% 3.1% 20.9% 18.6% 17.8% 9.7%

Queensland Airports Limited Gold Coast, Townsville and Mount Isa airports

9.7% 30.5%

Airport Development Group (NT Airports) Darwin, Alice Springs and Tennant Creek airports

31.0% 21.0%

HOCHTIEF AirPort Capital

Athens Airport, Greece; Düsseldorf and Hamburg airports, Germany; Sydney Airport, Australia

7.5%

(1.1)%

• 2011 • 2010

(1) The concession for Statewide Roads expired in the year ended 30 June 2010. The return was generated from the subsequent release of funds held in reserve as security in the event that the condition of the road upon return to the State did not satisfy the requirements of the concession.

Australian Infrastructure Fund Annual Report 2011 Asset Returns

Page 5

Chairman’s Report

Strong performance in a challenging environment.

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The Australian Infrastructure Fund’s portfolio of transport infrastructure assets has reported a strong performance for the year ended 30 June 2011 against a backdrop of challenging global circumstances. Passenger numbers from the AIX airport portfolio, weighted by our interest, grew by 6 percent on the previous year. Revenue, including unrealised gains on the value of AIX assets, increased by 12 percent, refl ecting this performance. At year end, the value of the AIX portfolio stood at over $1.75 billion, an increase of 10 percent over the previous year.

Paul Espie, Chairman Australian Infrastructure Fund Limited

I am pleased to present this year’s Annual Report to securityholders on behalf of the Boards of Australian Infrastructure Fund Limited (AIFL), and Hastings Funds Management Limited (as Manager of AIFL and Responsible Entity of the Australian Infrastructure Fund Trust (AIFT)), which together comprise Australian Infrastructure Fund (AIX).

AIX strives for long-term value by actively managing its interests in high-quality assets, supporting accretive growth opportunities to deliver superior returns for securityholders. Over the economic cycle AIX has continued to produce strong results and is well positioned to continue to perform through current uncertain global economic conditions.

At 30 June 2011, Australian airports represented 83.2 percent of the AIX portfolio by value, and European airports 11.2 percent. The Australian airport entities in which AIX is invested all experienced growth in passenger traffi c, with Perth and Melbourne airports being the stand out performers, recording growth of 9.4 percent and 7.8 percent respectively. The growth in passenger numbers at the Australian airports was achieved despite several external shocks, including natural disasters in Queensland, New Zealand and Japan and record cancellations due to the Chilean ash cloud, all of which contributed to a more subdued second half. International traffi c through Australian airports was very strong, with outbound passenger numbers were buoyed by Australia’s relatively strong economy and the high Australian dollar.

In Europe, Greece continues to face a diffi cult economic environment, which was refl ected in the performance of Athens Airport, which recorded an 8.3 percent fall in passenger numbers for the 12 months ended 30 June 2011. Our German airports, however, displayed strong growth, bouncing back from the subdued growth recorded in the 12 months to 30 June 2010. DÜsseldorf and Hamburg showed growth in passenger numbers of 9.8 percent and 7.8 percent respectively for the 12 months ended 30 June 2011.

Fund performance and strategy

The AIX security price performed strongly during the year, closing at $1.92 on 30 June 2011, up 12.9 percent from its closing price of $1.70 on 30 June 2010 and outperforming the S&P/ASX 200 Industrials Index, which increased 3.6 percent over the same period. The net tangible asset value of the Fund stood at $2.85 per security at 30 June 2011, up 9.3 percent for the year. This performance demonstrates the value of AIX’s diversifi ed airport portfolio and the resilient characteristics of the Fund in a world of economic uncertainty.

Our primary focus continues to be airports, and in particular, the Australian airport assets. These assets have a history of strong performance and growth and we expect this to continue over the long term, with further opportunity to invest in value adding organic growth projects.

The Manager and Directors of AIX continue to evaluate opportunities for realisation of greater value from non-core assets. In the past year strong revenue and earnings growth was achieved at Port of Portland and a long-term operating agreement was negotiated with Asciano at the Port of Geelong. The Port of Geelong’s debt facilities were also refi nanced during the year. AIX will consider divesting these assets for appropriate value, but whilst acceptable returns are generated, we are in no hurry.

The market is aware that HOCHTIEF AG (HOCHTIEF) is, at the time of writing, currently conducting a sale process of its wholly owned subsidiary, HOCHTIEF AirPort GmbH (HTA). HTA is the manager of HOCHTIEF AirPort Capital (HTAC), the vehicle through which AIX invests in DÜsseldorf, Hamburg, Athens and Sydney airports. HTA also directly invests in these airports alongside HTAC. AIX is in active dialogue with its fellow HTAC shareholders and HOCHTIEF over potential opportunities that may arise from a HOCHTIEF sale to enhance value for AIX. The timetable for completion of the HOCHTIEF sale process has not been made public but we expect this to occur within the next few months.

Page 6 Australian Infrastructure Fund Annual Report 2011 Chairman’s Report

Further Investment in key assets

During the year, AIX made equity contributions of $8.0 million and $3.9 million to Perth Airport and Queensland Airports Limited (QAL) respectively to support organic growth through capital expenditure at these assets. AIX also contributed $4.7 million to support the Port of Geelong’s successful debt refi nancing. Perth Airport redeemed its convertible notes in March 2011, with proceeds of $18.7 million paid to AIX.

Key expansion projects completed or in progress to capitalise on growth in passenger numbers at Australian airports and to ensure capacity exists for projected growth include:

• The $120 million terminal redevelopment at Gold Coast Airport, which has now completed its fi rst full year of operation. The new facilities have been well received by airlines and passengers. The terminal redevelopment demonstrates the value creation potential of a well planned and executed growth project, as refl ected in the earnings growth at Gold Coast Airport of 8.6 percent on the previous year;

• The $330 million international terminal expansion at Melbourne Airport, progressing on schedule for completion in the fi nal quarter of the 2011 calendar year, supporting Melbourne Airport’s push to attract additional international carriers and passengers;

• The planned $500 million three-year redevelopment of Perth Airport, featuring several expansion projects designed to boost Perth Airport’s capacity, improve its functionality and optimise the long-term value of the asset. On 23 August, AIX announced that Perth Airport had entered into a seven year Prices and Services Agreement (PSA) with the Qantas Group, effective from 1 July 2011. This agreement, together with similar agreements reached with other airlines representing approximately 83 percent of passenger movements at Perth Airport, provides a clear commercial framework within which Perth Airport can proceed with its signifi cant redevelopment. This has been supported by the WA State Government, who are planning related infrastructure improvements.

These projects are outlined in more detail in the Chief Executive’s report.

Regulatory environment

In March 2010, the Minister for Infrastructure, Transport, Regional Development and Local Government announced that he had requested the Productivity Commission bring forward its review of Price Regulation of Airport Services (Review) scheduled for 2012. The issues paper for the Review was released by the Productivity Commission in January 2011, with submissions being sought from interested parties by 8 April 2011.

The Australian airports in which AIX is invested have taken an active part in the Productivity Commission process, making submissions in support of the current light-handed price monitoring regime, with some improvements being suggested. Airport representatives have also met with the Commissioners. Hastings, on behalf of AIX and other funds it manages, has liaised closely with the various airport management teams and made a detailed submission from an owner’s perspective.

Board changes

Steve Boulton retired as Hastings Chief Executive Offi cer in March this year and, as a consequence, stepped down from the AIFL Board. I thank Steve for his contribution and wish him success in his future endeavours.

Outlook

The AIX portfolio is well placed looking ahead, with a diversifi ed portfolio showing strength in a continuing global economic environment of uncertainty. Overall passenger growth slowed in the second half of the fi nancial year, due in part to external shocks, and we anticipate that domestic growth will remain relatively subdued in the short term, except at Perth Airport which continues to benefi t from the strong resources sector. International growth remains strong at Perth, Melbourne and Darwin airports, supported by the strong Australian dollar, the continued penetration by low cost carriers and airline competition in international markets. We expect this to continue, but to be more subdued than the growth rates experienced in the 2011 fi nancial year. In the medium to long term, we expect continued growth in value of our airport assets, as has historically been the case.

In Europe, however, economic conditions remain diffi cult, with austerity measures in place in many European states. Our German airports did experience strong growth in the 12 months to 30 June 2011, after the low growth of the previous period. History has shown that periods of depressed growth in passenger numbers are followed by a return to longer-term growth trends, and we remain confi dent of the value of these high-quality airports.

AIX will continue to encourage its asset managers to focus on deriving the maximum value from the organic growth opportunities that exist within the portfolio. In the absence of a compelling and value accretive acquisition opportunity, it is unlikely that AIX will substantially add to its portfolio of assets in the near term.

Over the year ahead, the Manager and your Boards will continue to work towards improving the value of the AIX security price against the independently assessed net asset value of the Fund. Our diverse investments in Australian airports are expected to continue to demonstrate value through sound performance. We are anticipating progress in several respects with our core strategies, in the balance of this year and beyond.

Thank you for your continued support and I look forward to seeing you at the Annual General Meeting in November.

Paul Espie

Australian Infrastructure Fund Limited 15 September 2011

The Productivity Commission released its draft report on 22 August. On balance, the draft report found fi rmly in favour of the current ‘light-handed’ regulatory regime, noting: ‘there has been a marked increase in investment in Australian airports since the removal of price caps, without the bottleneck problems that have beset other infrastructure areas’, and that aeronautical charges do not indicate misuse of market power, quality outcomes are generally satisfactory, and airport profi ts and charges look reasonable compared with outcomes at airports overseas.

Australian Infrastructure Fund Annual Report 2011 Chairman’s Report Page 7

Chief Executive Offi cer’s Report

Sustained growth delivered by a diversifi ed portfolio of airport assets.

Over 135 million passengers passed through AIX’s airports during the year, an increase of 5 percent on the prior year. When weighted by AIX’s ownership interest in these airports, passenger numbers grew by 6 percent.

Jeff Pollock, Chief Executive Offi cer Australian Infrastructure Fund

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Portfolio performance remains strong

The value of the AIX portfolio increased by $161.3 million during the year to $1,759.9 million, an increase of 10.1 percent on the prior year, predominantly relating to increases in the value of assets in the portfolio (largely comprising unrealised gains). Net tangible assets per security increased by 9.3 percent, from $2.61 to $2.85, refl ecting the increased value of portfolio assets.

Revenue from ordinary activities increased 11.8 percent on the prior year from $213.3 million to $238.5 million, largely driven by unrealised gains in the independent valuation of the assets in the portfolio. Net gains for the year were $168.0 million, compared to $141.2 million in the prior year. The value of the assets in the portfolio is determined by discounting the projected future cash fl ows of the assets, with assumptions made about the future operations and development of each asset.

Revenue from ordinary activities excluding gains/losses was $70.4 million for the year, largely in line with the $72.1 million achieved in the prior year.

The assets comprising the AIX portfolio contributed $92.1 million in cash fl ows to the Fund during the year compared to $61.7 million in the prior year, an increase of 49.3 percent on the prior year. The cash was in the form of distributions, dividends, interest on shareholder loans and capital returns. The signifi cant increase in cash received from assets was partly due to an increase in cash received from HOCHTIEF AirPort Capital (HTAC), the vehicle through which AIX owns its interests in DÜsseldorf, Hamburg, Athens and Sydney airports. HTAC contributed $14.4 million to AIX cash fl ows in the year to 30 June 2011 compared with $6.0 million in the prior year, when HTAC utilised returns received from underlying investments to repay in full its debt facilities, rather than pay a distribution. Additional amounts were also received from Perth Airport, QAL and NT Airports compared to the prior year refl ecting distribution growth from these assets and from APAC refl ecting a small increase in AIX’s ownership interest. As in prior years, there were also timing differences, the most signifi cant of which was the receipt of $11.3 million in dividends in the year to 30 June 2011 from Queensland Airports Limited (QAL) relating to the prior fi nancial year, as well as $13.9 million in dividends and loan interest received in and relating to the current fi nancial year, that is the fi nancial year ended 30 June 2011. In effect, AIX received an additional dividend from QAL in the 2011 fi nancial year as the result of this timing difference.

Airport passenger growth up 6 percent

Airports represent 94.4 percent of the total AIX portfolio by value, and over 135 million passengers passed through AIX’s airports during the year, an increase of 4.9 percent on the prior year. When weighted by AIX’s ownership interest in these airports, passenger numbers grew by 6.0 percent.

Passenger growth was exceptionally strong in the fi rst half of the 2011 fi nancial year but was more subdued in the second half, as Australian airports were affected by a number of external shocks including the Queensland fl oods and cyclones, the earthquakes in Christchurch, the earthquake and subsequent tsunami in Japan and the Chilean ash cloud.

Perth Airport and Melbourne Airport were again stand out performers and reinforced their status as strategically important infrastructure assets for Australia, and for the AIX portfolio.

Perth Airport recorded passenger growth of 9.4 percent for the year, representing a compound annual growth rate of 9.9 percent over the past fi ve years. Passenger growth at Perth Airport continued to refl ect its strategic importance to the strong Western Australian resource based economy and the continuing penetration of low-cost carriers into the market, particularly the international market. The strong Australian dollar and the relative strength of the Australian economy further stimulated Australian outbound travel resulting in an increase in international passenger numbers at Perth of 9.1 percent.

Melbourne Airport experienced passenger growth of 7.8 percent for the year, giving a compound annual growth rate of 5.7 percent over the past fi ve years. Melbourne is a major Australian city with its growing population and industry driving increases in airport traffi c. Melbourne Airport also benefi ted from continuing low-cost carrier penetration, business demand and strong international passenger growth aided by new Asian routes and supported by the strong Australian dollar. International passenger numbers grew by 13.5 percent at Melbourne Airport.

QAL, which owns Gold Coast, Townsville and Mount Isa airports, experienced strong growth in the fi rst half of the fi nancial year but was signifi cantly affected by the external shocks referred to earlier in the second half. However, QAL still recorded passenger growth of 4.8 percent for the year, giving a compound annual growth rate of 8.1 percent over the past fi ve years.

Page 8 Australian Infrastructure Fund Annual Report 2011 Chief Executive Officer’s Report

Passenger numbers for NT Airports, which owns and operates Darwin International Airport (DIA), increased by 3.7 percent for the year. DIA passenger numbers grew by 6.9 percent but this growth was partially offset by a decline in passenger numbers of 6.4 percent through Alice Springs Airport, refl ecting weak tourist demand. DIA’s importance as a vital link between Australia and Asia was again illustrated, with international passenger numbers growing by 19.4 percent.

The European airports continued to be affected by the complex economic conditions in Europe. Greece faces a diffi cult economic environment, with austerity measures remaining in place and this was refl ected in the performance of Athens Airport, which recorded an 8.3 percent fall in passenger numbers for the 12 months ended 30 June 2011. Our German airports, however, provided strong growth with Düsseldorf and Hamburg recording growth in passenger numbers of 9.8 percent and 7.8 percent respectively for the 12 months ended 30 June 2011. The German airports appear to confi rm the historical precedent of airports strongly reverting to growth trends after periods of low or negative growth.

Sydney Airport, which is also part of AIX’s HTAC investment, recorded passenger growth of 4.1 percent for the year.

Major airport expansions to capitalise on growth

A number of expansion projects are underway to capitalise on the growth being experienced at AIX’s Australian airports and to cater for future capacity requirements.

In October 2010, AIX announced that DIA’s new aviation pricing agreement with Qantas Group would allow it to confi dently invest more than $100 million in aviation facilities over the next 10 years, including a $33.5 million terminal expansion for which detailed planning is underway.

In November 2010, AIX welcomed the release of Perth Airport’s $500 million three-year redevelopment plan, which forms part of its broader long-term growth plans and evolved from its Vision for the Future released in 2008. The planned redevelopment will comprise: a $270 million expansion of the international terminal, including a shared domestic/international pier to cater for larger twin aisled aircraft; the $120 million construction of a new terminal, Terminal WA, to cater for the increasing demand for intrastate services; a $50 million development of airfi eld aprons, taxiways and aircraft parking areas; and improved retail facilities, roads and car parking.

Perth Airport has entered into long-term pricing agreements with the Qantas Group and other airlines, which will help underpin the planned development.

Following completion of Stage 1 of the international terminal expansion at Melbourne Airport in the 2009 fi nancial year, work continued on the new outbound passenger processing and lounge facilities, with retail stores in the new T2 retail area progressively opened during December 2010. Completion of the $330 million international terminal expansion remains on time and on budget.

Prudent debt levels and refi nancing initiatives

The assets in the AIX portfolio have maintained prudent levels of debt and healthy coverage ratios. The assets have a track record of successfully refi nancing debt facilities as needed, including during the Global Financial Crisis (GFC).

In the past year, Melbourne Airport successfully completed a refi nancing program, which commenced in August 2010 with $1.25 billion in bank debt and bonds, and was completed in June 2011 with the successful issue of US$600 million in the US Private Placement market. Perth Airport refi nanced and drew down $120 million of existing facilities during the year, with the proceeds used to fully redeem convertible notes and the remainder applied towards funding capital requirements. The convertible note redemption occurred on 24 March 2011, with AIX receiving its $18.4 million share of the principal amount. The Port of Geelong also successfully completed its refi nancing in March 2011, supported by a pro-rata equity contribution from AIX of $4.7 million.

For AIX airports that have upcoming maturities requiring refi nancing, QAL is in discussions with banks to refi nance debt facilities prior to their April 2012 maturity and NT Airports expects to successfully refi nance existing facilities and establish a new capital expenditure facility by January 2012. Perth Airport is also in discussion with banks and expects to refi nance and extend its debt facilities in the near term.

In August 2011, AIX successfully completed the refi nancing of its fund level debt facility for a two-year term. The revised terms of the facility include an increase in its size from $30 million to $100 million, greater fl exibility in the purposes to which the facility can be applied and a reduction in fees and margins consistent with current market levels. The facility remains undrawn.

		Franking	Revaluation	Total
	Cash	credits	during year to	return for
	received	received	30 June 2011	30 June 2011
Asset	($’000)	($’000)	($’000)(1)	(%)(2)
Airstralia Development Group (Perth Airport)	21,961(3)	7,392	82,496	24.5
Australia Pacif c Airports Corporation	16,684	7,150	41,699	16.2
Queensland Airports Limited	25,205	2,789	8,138	9.7
Airport Development Group (NT Airports)	8,080	803	20,991	31.0
HOCHTIEF AirPort Capital	14,421	–	16,205	7.5
Port of Portland	3,500	643	1,272	6.4
Port of Geelong	532	107	(203)	3.1
Statewide Roads	1,698	728	44,459	100.2
Metro Transport Sydney	–	–	689	20.9
Cash and Other	2,219	n/a	–	n/a
Total portfolio(4)	94,299	19,611	215,746	16.0

(1) The revaluation amount during the period for each asset refl ects the underlying change in the asset’s value taking into account movements in accrued interest, distributions and dividends and realised/unrealised foreign exchange gains/(losses).

(2) The return for the year ended 30 June 2011 is calculated by reference to the opening asset value as at 1 July 2010, all cash infl ows and outfl ows to/from AIX during the period and franking credits and revaluation gains or losses booked during the period.

(3) Excludes $18.7 million in net proceeds received following redemption of Perth Airport convertible notes in March 2011, treated as repayment of principal.

(4) The total portfolio return for the year ended 30 June 2011 is for assets currently in the portfolio and does not include cash held on deposit or other assets previously held within the portfolio.

Australian Infrastructure Fund Annual Report 2011 Chief Executive Officer’s Report Page 9

Chief Executive Offi cer’s Report

continued

	AIX	AIX	Discount
	Valuation	Valuation	rate	Historical
	30 June 2011	30 June 2010	30 June 2011	EV/EBITDA(1)
Asset	($m)	($m)	(%)	(x)
Airstralia Development Group (Perth Airport)	525.2	435.1(2)	13.1	13.6
Australia Pacif c Airports Corporation	451.8	410.1	11.6	12.9
Queensland Airports Limited	271.7	270.8	15.0	14.2
Airport Development Group (NT Airports)	99.4(6)	83.5	14.8	11.7
HOCHTIEF AirPort Capital(3)	313.5	305.3	13.2	9.9
Port of Portland	68.6(6)	68.4	12.7	9.0
Port of Geelong	24.8(6)	20.1	12.6	11.4(4)
Statewide Roads	1.0	2.0	13.1	n/a
Metro Transport Sydney	4.0	3.3	19.2	12.7(5)
Total/weighted average	1,759.9	1,598.6	13.1	12.3

(1) Based on earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to 30 June 2011 with EV calculated using net external debt at 30 June 2011 and the 30 June 2011 equity valuation.

(2) Perth Airport valuation as at 30 June 2010 has been restated for comparative purposes to exclude $19.1m of convertible notes as these were redeemed in March 2011.

(3) HOCHTIEF AirPort Capital numbers based on weighted average of results from the individual airport assets using EBITDA calendarised for the year to 30 June 2011 and the 30 June 2011 equity valuation and net external debt.

(4) Comprises the EBITDA of Ports Pty Limited, normalised to exclude the effect of non-cash unrealised gains/losses on interest rate hedging.

(5) EBITDA fi gure adjusted to normalise for once-off revenue and expense items related to the ABB dispute.

(6) NT Airports, Port of Portland and Port of Geelong valuations as at 30 June 2011 include accrued distributions of $1.3 million, $1.9 million and $0.5 million respectively.

		Valuation
	Asset	as at	Net	Senior
	ownership	30 June 2011	Debt/EV(1)	ICR(2)
Asset	(%)	($m)	(%)	(x)
Airstralia Development Group (Perth Airport)	29.74	525.2	33.5	2.8
Australia Pacif c Airports Corporation	12.39	451.8	33.0	3.3
Queensland Airports Limited	49.07	271.7	44.6	2.4
Airport Development Group (NT Airports)	28.23	99.4	37.4	3.2
HOCHTIEF AirPort Capital(3)	40.02	313.5	40.5	3.2
Port of Portland	50.00	68.6	30.6	3.8
Port of Geelong(4)	35.00	24.8	45.9	2.0
Statewide Roads	6.25	1.0	n/a	n/a
Metro Transport Sydney	38.89	4.0	n/a	n/a
Total/weighted average		1,759.9	36.9	3.0
Fund weighted average			35.2

(1) Net Debt/EV refl ects 30 June 2011 external debt net of cash, divided by Enterprise Value, comprising net external debt plus 30 June 2011 independent valuations.

(2) Senior ICR refl ects EBITDA for the year to 30 June 2011 divided by net interest expense for the year to 30 June 2011.

(3) HOCHTIEF AirPort Capital numbers based on weighted average of results from the individual airport assets using calendarised June 2011 EBITDA, EV, Net Debt and interest expense.

(4) Comprises the EBITDA of Ports Pty Limited, normalised to exclude the effect of non-cash unrealised gains/losses on interest rate hedging.

Page 10 Australian Infrastructure Fund Annual Report 2011 Chief Executive Officer’s Report

Gold Coast Airport

Seaport performance

AIX’s investments in the Port of Portland and the Port of Geelong represent 5.3 percent of the AIX portfolio by value.

Throughput at the Port of Portland was up 33.7 percent on the previous year, with easing drought conditions resulting in strong grain and fertiliser volumes. Woodchip volumes were marginally above prior year and, in November 2011, the Gunns hardwood chip facility was commissioned and received its fi rst delivery of woodchips. The improved volumes through the Port resulted in an increase in revenue of 43.5 percent compared to the prior year and an increase in Earnings Before Interest, Depreciation and Amortisation (EBITDA) of 65.0 percent.

Volumes at the Port of Geelong grew by 16.6 percent on the prior fi nancial year. EBITDA generated by the Port of Geelong Unit Trust (the entity through which AIX holds its investment) increased by 27.7 percent on the prior fi nancial year. The strong performance was driven by increased fertiliser volumes, with tonnage almost twice that of the prior year, as a result of high levels of rainfall in South-east Australia and the re-opening of Incitec Pivot’s superphosphate plant in Geelong. While crude oil volumes were also approximately 31.9 percent above the prior year, this was offset by petroleum volumes, which were approximately 19.2 percent below the prior year as the strong Australian dollar caused a greater proportion of the petroleum volumes to be consumed domestically rather than being exported.

Contrasting operating environments for AIX assets

The portfolio continues to perform well in a broader uncertain economic environment. Perth Airport in particular continues to benefi t from the strength of the Australian economy generally and in particular the mining and resources sector. The strong Australian dollar is also providing stimulus for international passenger numbers at Perth, Melbourne and Darwin airports. Airport redevelopment projects to cater for future growth are progressing well.

Gold Coast Airport has experienced a tough operating environment resulting from the natural disasters that have struck the region as well as the markets it serves. It is likely that passenger numbers through Gold Coast Airport will remain subdued in the short term. Airports however have historically bounced back relatively quickly from event driven shocks and we are confi dent of a return to growth at this high-quality asset.

The European economic environment continues to be a diffi cult one in which to operate. Whilst we do not expect signifi cant near-term growth at Athens Airport, the German airports have recovered and are generating strong passenger numbers. As previously announced, we are in active dialogue with HTAC partners and our strategic adviser on options to realise greater value for AIX securityholders on these assets and non-core assets in the portfolio.

We are pleased with the sustained growth in passenger numbers for our Australian airport portfolio and the related earnings growth being achieved. Strong growth at Melbourne and particularly at Perth Airport, is more than compensating for the short-term softness at Gold Coast Airport and ongoing economic challenges in Greece and we remain confi dent of the long-term value of our assets.

Jeff Pollock

Australian Infrastructure Fund 15 September 2011

Australian Infrastructure Fund Annual Report 2011 Chief Executive Officer’s Report Page 11

Review of Investment Portfolio

Airports

Airstralia Development Group Perth Airport

Australia Pacifi c Airports Corporation (APAC) Melbourne and Launceston airports

Queensland Airports Limited (QAL) Gold Coast, Townsville and Mount Isa airports

Airport Development Group (NT Airports) Darwin, Alice Springs and Tennant Creek airports

HOCHTIEF AirPort Capital (HTAC)

Sydney Airport, Australia; Athens Airport, Greece; Düsseldorf and Hamburg airports, Germany

Holding % Valuation $m Gross return for year % p.a.	Return since inception % p.a.
Perth Airport APAC QAL NT Airports HTAC 29.74 12.39 49.07 28.23 40.02 525.2 451.8 271.7 99.4 313.5 24.5 16.2 9.7 31.0 7.5	20.0 23.7 39.0 28.5 8.8
Total Airport Portfolio 1,661.6 16.6	21.0

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Airport Portfolio
Composition
HTAC 17.8% Perth Airport 29.8%
NT Airports 5.7%
QAL 15.4% APAC 25.7%
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Page 12 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Airstralia Development Group

Perth Airport

Perth Airport generated a return of 24.5 percent for the year ended 30 June 2011 and 20.0 percent since inception.

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Perth Airport is strategically located as one of Australia’s closest airports to South East Asia, Europe and Africa. It is Australia’s fourth largest airport in terms of passenger traffi c, and is the principal gateway to Western Australia and its signifi cant resources sector.

Performance

Total normalised revenue and EBITDA adjusted for unrealised property revaluation gains or losses for the fi nancial year were $302.0 million and $196.1 million respectively, representing an increase of 22.6 percent and 24.0 percent over the prior year.

Perth Airport achieved record passenger numbers for the year to 30 June 2011 and outperformed prior year volumes by 9.4 percent, driven by strong international and domestic passenger growth. Domestic passenger growth was driven by inter and intrastate markets, with intrastate routes benefi ting from renewed activity across many of Western Australia’s resource ports including Paraburdoo and Karratha. International passenger numbers recorded a 9.1 percent increase due to strong growth in capacity on the Malaysia and Thailand routes and the addition of new capacity from airlines. The strong Australian dollar also stimulated outbound travel among Australian travellers. The number of seats available across all routes grew by 7.7 percent in the 2011 fi nancial year.

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As part of the recently released Federal Budget, the Government has committed new funding of $180 million to extensively upgrade the road network around Perth Airport and nearby industrial estates. This funding represents the fi rst part of a $480 million dedicated allocation from the Regional Infrastructure Fund. Concurrently the State Government has committed an additional $185 million specifi cally for the Tonkin Highway upgrade (the entrance into Perth Airport). This is particularly pleasing as Perth Airport has worked closely with both state and federal governments on the development plans for upgrading major arterial roads in the vicinity of Perth Airport to relieve congestion around the airport and support Phases 2 and 3 of the airport expansion. Perth Airport also opened a new internal public road connecting the international and domestic terminals. Outlook

Following the release of its Master Plan last year, Perth Airport recently announced an investment of up to $500 million over the next three years to deliver new and expanded passenger terminals, expanded aircraft parking areas and public access infrastructure. The fi rst phase of the redevelopment is scheduled to commence in mid 2011 with signifi cant expansion of the international terminal. The expansion is a key focus for management over the short to medium term, and will include facilities for the A380, adding a domestic pier to the current international terminal and a new terminal designed for the growing Western Australia regional market. This signifi cant terminal redevelopment will be underpinned by seven-year aeronautical pricing agreements recently reached with airlines representing approximately 83 percent of passenger movements, including Qantas and international airlines.

The outlook for Perth Airport for FY2012 remains positive given additional new services expected from existing and new airlines and supported by activity in the resources sector and the strong overall Australian economy.

Financial and Operational Performance

AIX Interest in Perth Airport: 29.74%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	233.4	353.6	372.1	454.2(1)	525.2
Passengers (m)	8.1	9.2	9.7	10.5	11.5	9.1%
Revenue ($m)(2)	173.4	183.5	209.7	246.4	302.0	14.9%
EBITDA($m)(3)	112.6	115.6	130.3	158.2	196.1	14.9%

• CAGR: Compound Annual Growth Rate

(1) Includes $19.1 million of convertible notes which were redeemed in March 2011.

(2) Excluding unrealised valuation gains or losses on investment properties.

(3) Normalised EBITDA.

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio Page 13

Australia Pacifi c Airports Corporation (APAC)

Melbourne and Launceston Airports

APAC generated a return of 16.2 percent for the year ended 30 June 2011 and 23.7 percent per annum since inception.

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Australia Pacifi c Airports Corporation (APAC) owns and operates Melbourne Airport, a key access point to Victoria and Australia for domestic and international travellers, as well as Launceston Airport, a gateway for travel between Tasmania and mainland Australia.

Performance

Total revenue was $561.1 million and EBITDA (excluding change in fair value of investment property) was $422.6 million, an increase of 8.4 percent and 9.1 percent respectively on the previous year.

Total passengers through Melbourne Airport for the fi nancial year were 28.3 million, an increase of 7.8 percent over the previous year. This comprised 6.3 million international passengers, up 13.5 percent, and 22.0 million domestic and transit passengers, up 6.2 percent. Total passengers through Launceston Airport increased 2.2 percent to 1.1 million for the year. The number of seats available on all routes at Melbourne Airport grew by 8.6 percent in the 2011 fi nancial year, whilst the number at Launceston Airport grew by 2.0 percent. Melbourne Airport welcomed the commencement of services by Royal Brunei and Strategic Airlines and the introduction by a number of existing airlines of new routes as well as increased services on existing routes, particularly into Asia.

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Work on Melbourne Airport’s $330 million international terminal expansion project progressed further during the year. Following completion of the new 7,000m[2] passenger concourse in December 2009, and the provision of additional outbound passenger security and screening facilities in March 2010 (including additional customs desks and x-ray stations), new passenger lounge and retail facilities were unveiled in November 2010 offering more café, lounge and speciality retail opportunities. Work also commenced during the year on the $45 million runway overlay project which involves the resurfacing of both runways and upgrading the runway lighting system.

One of Melbourne Airport’s environmental initiatives during the year was the installation of KyotoCooling at its new data centre to signifi cantly reduce IT power consumption and carbon emissions.

Melbourne Airport recently successfully issued US$600 million in the US Private Placement market, spread evenly over 10, 12 and 15 year tenors, and earlier in the year raised $900 million in new bank facilities and $350 million in domestic notes. These capital raisings provide the Airport with suffi cient funds to refi nance maturing debt and fund the Airport’s planned investment in new and improved facilities.

Outlook

Melbourne Airport is currently working with airline operators to renegotiate the Airport’s Aeronautical Services Agreement which determines the pricing and conditions under which airlines access the Airport for the next fi ve-year period. The agreement will be an important factor in the future performance of the Airport. The outlook for Melbourne Airport remains positive. Recent announcements, such as Jetstar’s new daily service to Beijing, China (commencing late November 2011), support the continued growth expected for 2012. The coming year will also see Melbourne Airport deliver the remainder of the International terminal expansion project and runway overlay project.

Financial and Operational Performance

AIX Interest in APAC: 12.39%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	197.4	296.8	299.4	410.1	451.8
Passengers (m)	23.5	25.3	25.9	27.4	29.5	5.9%
Revenue ($m)	384.4	449.4	477.0	517.9	561.1	9.9%
EBITDA($m)	269.8	334.3	351.5	387.5	422.6	11.9%

• CAGR: Compound Annual Growth Rate.

Page 14 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Queensland Airports Limited (QAL)

Gold Coast, Townsville and Mount Isa Airports

QAL generated a return of 9.7 percent for the year ended 30 June 2011 and 39.0 percent per annum since inception.

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QAL owns and operates three key airport facilities in Queensland, Australia: Gold Coast Airport provides access to a major tourist destination and is the sixth busiest airport in Australia; Townsville Airport serves as North Queensland’s regional hub, supported by local military, government and industrial activity; and Mount Isa Airport is the hub for the North West Queensland Mineral Province, servicing the local mining and commercial sectors.

Performance

For the 2011 fi nancial year, total revenue was $112.1 million and EBITDA was $70.2 million, increases of 11.9 percent and 15.9 percent respectively on the prior year. This refl ected solid passenger growth across the QAL Group of 4.8 percent compared with the prior year, supported by a 5.2 percent increase in seat capacity, as well as higher passenger yields following redevelopment of the Gold Coast Airport terminal.

Gold Coast Airport experienced a strong start to the fi nancial year, with record numbers passing through the airport in January 2011. However, the second half of the year saw a series of natural disasters in Queensland, Japan and New Zealand which disrupted the strong growth momentum, and demand was further dampened by the continued strength of the Australian dollar decreasing the relative attractiveness of the Gold Coast as a holiday destination compared to offshore destinations. For the full year, Gold Coast Airport achieved domestic passenger growth of 5.6 percent on the prior year, benefi ting from the introduction of daily Jetstar services to Hobart and Perth in December 2010 and April 2011 respectively, with Gold Coast Airport now connected to every capital city across Australia outside of Queensland.

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International passengers through Gold Coast Airport (excluding transits) increased 4.0 percent on the prior year, supported by Jetstar’s new Queenstown service from December 2010. Townsville Airport observed steady passenger growth and fi nished 4.6 percent ahead of the prior year, while Mount Isa Airport exceeded expectations with double digit growth of 19.4 percent on the prior year refl ecting increased mining activity.

In August 2010, Gold Coast Airport unveiled a new 950-space car park and was also awarded both Best Regional Airport and Staff Service Excellence for the Australia-Pacifi c region at the Skytrax World Airport Awards in March 2011. Townsville Airport gained approval for its Master Plan during the year, while Gold Coast Airport‘s Master Plan will soon be made available for public comment.

QAL has also recently commenced managing operations at Longreach Airport and will acquire a 99-year airport lease from the Longreach Regional Council in July 2012. The airport is currently undergoing a redevelopment, with investments in the terminal building, car park and other associated works to be funded largely by the Federal Government.

Outlook

The outlook for QAL Group airports is positive with continued growth expected over the long term. This growth may be tempered in the short term by challenges that currently exist, such as the high Australian dollar and as affected regions recover from natural disasters. However, the return of seat capacity to Gold Coast scheduled for July and August is promising.

QAL is currently in discussions with banks to refi nance its debt facilities, ahead of the facilities maturing in April 2012.

Financial and Operational Performance

AIX Interest in QAL: 49.07%

30Juneyear end	2007	2008	2009(1)	2010(1)	2011(1)	CAGR*
AIX Valuation ($m)	161.7	182.2	219.6	270.8	271.7
Passengers (m)	5.3	6.0	6.5	7.0	7.3	8.5%
Revenue ($m)	64.2	73.8	82.7	100.1	112.1	14.9%
EBITDA($m)	43.8	42.2	43.5	60.6	70.2	12.5%

• CAGR: Compound Annual Growth Rate.

(1) Revenue and EBITDA normalised to exclude non-recurring income from Technical Services Agreement.

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio Page 15

Airport Development Group (NT Airports)

Darwin, Alice Springs and Tennant Creek Airports

NT Airports generated a return of 31.0 percent for the year ended 30 June 2011 and 28.5 percent per annum since inception.

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NT Airports owns and operates Darwin International Airport, Alice Springs Airport and Tennant Creek Airport. Darwin Airport forms an important hub for low-cost carriers, creating a vital link between Australia and Asia, as well as being the key entry point into the Northern Territory. Alice Springs Airport similarly forms an essential gateway to Central Australia for both domestic and international travellers. NT Airports also has a substantial land holding, for which development opportunities are currently being pursued.

Performance

NT Airports generated total revenue of $75.1 million and EBITDA of $48.2 million for the 12 months to 30 June 2011, representing increases of 10.0 percent and 8.7 percent, respectively, on the prior year. The improved earnings were driven by growth in passenger numbers, with a total (including transfer and transits) of 2.9 million passengers having been serviced by NT Airports over the fi nancial year, an increase of 3.7 percent on the prior year. The growth in passenger numbers was particularly strong through the international terminal at Darwin Airport, with a 19.4 percent increase over the prior year, driven by the popularity of low-cost services to South-East Asian destinations, particularly Bali. The domestic terminal at Darwin Airport also performed well, with passengers increasing 5.4 percent on the prior year, supported by the continued strength of Australia’s resources sector. In contrast, passengers through Alice Springs Airport declined 6.4 percent compared to the prior year. The strong Australian dollar has resulted in Alice Springs experiencing a reduction in popularity for both domestic and international tourism. The recent natural disasters in Japan have also adversely affected Alice Springs, with Japan being a major market for tourists to the area.

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Passenger growth was a driver for the increased trading revenues from duty free, car rental and car parking, which were 13.5 percent above the prior year. Trading revenues also benefi ted from development of further car parking facilities, as well as the high-quality services provided by NT Airports’ retail partners, including JR Duty Free. This was further supported by strong non-aeronautical revenues, with property income increasing 10.3 percent on the prior year, largely due to the increase in rental yields following a market review of the leases.

As well as aeronautical development, NT Airports is pursuing opportunities to develop its considerable land reserves. At Darwin Airport, construction will shortly be completed on purpose-built accommodation for the Australian Federal Police, while negotiations continue for the design and construction of canine facilities. At Alice Springs, a solar power station was completed in September 2010, and agreement was reached for the development of Australia’s fi rst aircraft storage facilities.

Outlook

In October 2010, NT Airports reached a long-term agreement with its key airline partners, which provides certainty on aviation pricing to support the investment of more than $100 million into airport facilities over the next 10 years, including $33.5 million into the terminal expansion at Darwin Airport. Darwin Airport expects continued growth in the medium term, through both its domestic and international terminals. While the airport forms an important hub for low-cost carriers servicing destinations into South East Asia, Darwin continues to increase in popularity as an end destination, supported by both the tourism and resources industries.

Financial and Operational Performance

AIX Interest in NT Airports: 28.23%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	46.0	70.7	74.3	83.5	99.4
Passengers (m)	2.3	2.4	2.7	2.8	2.9	6.4%
Revenue ($m)	50.6	57.2	62.2	68.2	75.1	10.4%
EBITDA($m)	31.2	36.2	40.0	44.3	48.2	11.5%

• CAGR: Compound Annual Growth Rate.

Page 16 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

HOCHTIEF AirPort Capital (HTAC)

Sydney Airport

HTAC has holdings in four major international airports: Athens, Greece; Hamburg and Düsseldorf, Germany; and Sydney, Australia. HTAC generated a return of 7.5 percent for the year ended 31 December 2011 and 8.8 percent per annum since inception.

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Sydney Airport

Sydney Airport is the major gateway into and out of Australia, servicing about forty international and nine domestic and regional passenger airlines. The airport is located eight kilometres south of Sydney’s central business district, and has high-quality road and rail links to the population and business centres of Sydney.

Performance

In its fi nancial year to 31 December 2010, total passenger numbers at Sydney Airport increased by 7.8 percent to 35.6 million. Both international (excluding domestic on carriage) and domestic traffi c (including domestic on carriage) saw solid growth of 6.9 percent and 8.2 percent respectively compared to the previous corresponding period.

Sydney Airport delivered pleasing fi nancial performance with total revenues exhibiting strong growth while operating costs remained tightly controlled. Revenue for the year to December 2010 increased 10.5 percent to $943.0 million and EBITDA[(1)] increased 12.0 percent to $773.3 million. The fi nancial performance refl ects the strength of Sydney Airport’s position as Australia’s national gateway.

Total capital expenditure for the year was $136.4 million, refl ecting the completion of two major projects including the redevelopment of the International Terminal and runway safety works. The International Terminal redevelopment has increased terminal capacity and passenger processing facilities, and has improved passenger experience.

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In the fi nancial year ended 31 December 2010, Sydney Airport successfully completed the refi nancing of approximately $1.9 billion of senior debt facilities due to mature in 2011 and 2012. The airport now has no term debt maturing until October 2013.

During the year, Sydney Airport continued to welcome new airlines and services including Air Mauritius and Brindabella Airlines.

Outlook

In the fi rst six months of 2011, Sydney Airport delivered passenger growth of 1.9 percent and EBITDA growth of 4.0 percent compared to the previous corresponding period. This solid performance was delivered despite the negative impact of a number of one-off disruptions during the fi rst half of 2011 including severe weather conditions in Queensland, earthquakes in New Zealand and Japan and the Chilean ash cloud.

Sydney Airport is well-positioned to increase passenger traffi c and develop new markets in the medium term with relatively strong Australasian economies and a solid pipeline of announced new routes and services providing a platform for continued growth.

Financial and Operational Performance

AIX Indirect Interest in Sydney Airport: 2.60%

						CAGR*
31 Decemberyear end	2006	2007	2008(2)	2009(2)	2010(2)	06/10
Passengers (m)	30.0	31.9	32.9	33.0	35.6	4.4%
Revenue ($m)	691.4	760.5	812.7	853.2	943.0	8.1%
EBITDA($m)(1)	558.3	608.6	653.3	690.2	773.3	8.5%

• CAGR: Compound Annual Growth Rate.

(1) EBITDA reported excluding specifi c expenses (primarily restructuring and non-recurring legal expenses). In 2010, specifi c expenses amounted to approximately $0.3 million (2009: $0.8 million).

(2) Restated to refl ect December year end.

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio Page 17

HOCHTIEF AirPort continued Capital (HTAC)

Athens Airport

Athens International Airport (AIA) is Greece’s major airport, located 33 kilometres from central Athens in a catchment area of more than six million residents. The airport was opened in 2001 and is operated under an Airport Development Agreement with the Greek State, which expires on 11 June 2026.

During its fi nancial year ended 31 December 2010 AIA offered direct scheduled services to 113 destinations in 49 countries, serviced by 72 airlines.

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Performance

In its fi nancial year to 31 December 2010, AIA recorded total passenger movements of 15.4 million, a decrease of 5.0 percent compared to the previous corresponding period. The macroeconomic situation in Greece, combined with fl eet and network consolidation of domestic carriers, is the main driver of this traffi c outcome. Irregular natural events, such as the volcanic ash during April 2010 from Iceland and heavy snowfall during December 2010, also had an adverse impact on traffi c. Domestic passenger movements for the year decreased by 9.4 percent while the international sector witnessed a more moderate decline of 2.4 percent compared to 2009. Despite the overall challenging environment, AIA added six new destinations to the airport’s network and welcomed eight new airline partners.

Revenue and EBITDA for the year to 31 December 2010, including subsidies AIA was entitled to under the Greek State’s Airport Development Fund (ADF), were €406.4 million and €278.4 million respectively, a decrease of 3.1 percent and an increase of 0.1 percent compared to the previous corresponding period. The drop in revenue largely refl ects the decrease in passenger movements due to challenging market conditions. The solid EBITDA performance was driven by the favourable impact of cost savings that offset the negative variance on revenues. AIA successfully implemented cost reduction actions in all areas while still maintaining quality levels and service standards. These efforts fully absorbed the impact of infl ation and incremental costs related to the implementation of a new EU ‘Critical Parts’ security regulation.

Overall, AIA has performed well in a diffi cult economic environment.

Outlook

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The Greek economy is expected to remain in a state of recession throughout 2011 while the Greek Government implements structural changes to improve its fi scal position. The macroeconomic situation is expected to impact AIA’s short-term outlook, particularly with regard to Greek residents’ travel demand. However, growth in the rest of Europe is likely to have a positive effect on international traffi c segments. In its annual report for the year ended 31 December 2010, AIA projected annual passenger throughput of 14.8 million for 2011, down from 15.4 million in 2010. The fi rst six months of 2011 saw passenger traffi c decrease by 7.2 percent compared to the previous corresponding period as economic conditions in Greece remain diffi cult and the rationalisation of the domestic carriers’ networks continues. Despite the uncertain short-term outlook, AIA anticipates a gradual market recovery towards the second half of 2011, which should result in sustainable growth and healthy fi nancial projections.

As part of its privatisation plans, the Greek Government has expressed its intention to explore the option of extending the concession agreement period with AIA, and also investigate sell-down options for the Government’s shareholding in AIA. AIA is currently in negotiations with the Greek Government in respect of this opportunity.

Financial and Operational Performance AIX Indirect Interest in Athens Airport: 5.34%

						CAGR*
31 Decemberyear end	2006	2007(2)	2008(2)	2009(3)	2010	06/10
Passengers (m)	15.1	16.5	16.5	16.2	15.4	0.5%
Revenue (€m)(1)	357.5	399.5	420.7	419.5	406.4	3.3%
EBITDA(€m)(1)	232.7	278.1	295.8	278.0	278.4	4.6%

• CAGR: Compound Annual Growth Rate.

(1) Revenue and EBITDA include Airport Development Fund subsidy.

(2) EBITDA normalised for Olympic debt provision.

(3) 2009 Revenue and EBITDA normalised to exclude favourable one-off impact of Olympic Airlines debt arbitration.

Page 18 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

HOCHTIEF AirPort continued Capital (HTAC)

Düsseldorf Airport

Düsseldorf Airport is Germany’s third busiest airport, after Frankfurt and Munich. The airport is located in the heart of the densely populated Rhine-Ruhr region, one of Europe’s biggest economic areas, and serves approximately 18.0 million people. Düsseldorf Airport hosts over 72 airlines that fl y to 184 destinations worldwide.

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Performance

Passenger traffi c for the year ended 31 December 2010 reached a record 19.0 million, a 6.7 percent increase against the previous corresponding period and outperforming the average passenger growth at German airports of 4.7 percent for 2010. Despite the severe winter weather and the volcanic ash cloud in April 2010 from Iceland, Düsseldorf Airport continues to grow.

Both domestic and international traffi c saw an increase on the previous corresponding period of 3.7 percent and 7.7 percent respectively. This growth was driven by the strong recovery and solid growth of the German economy.

Total income for the year to 31 December 2010, excluding extraordinary income, was €350.6 million[(1)(2)] , up 4.6 percent compared to the previous corresponding period. EBITDA on the same basis was €128.3 million[(1)(2)] , up 7.5 percent on the previous corresponding period. Aviation revenues, which refl ect the development of traffi c increased 4.0 percent compared to the previous corresponding period, while non-aviation revenues increased 6.1 percent. This can be explained by the increased volume of air traffi c leading to higher concessions and parking revenue. The increase in EBITDA against the previous corresponding period refl ects increased operating revenues at the airport company level although partially offset due to an increase in energy consumption and energy costs resulting from the severe winter weather and the impact of the Renewable Energy Law (EEG). The EEG requires all consumers of electricity to subsidise the price of energy produced by renewable sources.

Outlook

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(m) (€m)
20 400
15 300
10 200
5 100
0 0
06 07 08 09 10
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Economic conditions continue to improve in Germany providing optimism for the near-term performance of the Düsseldorf Airport. In the fi rst six months of 2011, Düsseldorf Airport reported an increase in passenger numbers of 10.8 percent compared to the previous corresponding period, with both domestic and especially international passenger numbers increasing.

Financial and Operational Performance

AIX Indirect Interest in Düsseldorf Airport: 4.00%

						CAGR*
31 Decemberyear end	2006	2007	2008(2)	2009(2)	2010(2)	06/10
Passengers (m)	16.6	17.8	18.2	17.8	19.0	3.4%
Total income (€m)(1)	333.0	335.4	349.8	335.3	350.6	1.3%
EBITDA(€m)(1)	131.1	134.9	137.0	119.4	128.3	(0.5)%

• CAGR: Compound Annual Growth Rate.

Note: The commentary above, including fi nancial performance, refl ect the airport company accounts rather than the consolidated accounts and therefore exclude some ancillary businesses. Company EBITDA presented is on average

7.6 percent below consolidated EBITDA for the period 2006 to 2010.

(1) Total income and EBITDA includes net investment income, which is comprised of investment income and income from profi t transfer agreements, net of loss absorption expenses and other taxes. In 2010, net investment income amounted to approximately negative €7.5 million (2009: negative €1.8 million).

(2) 2008 total income and EBITDA normalised to exclude proceeds from sale of assets (€35.9 million), 2009 total income and EBITDA normalised to exclude income from write back of fi re claim provisions after settlement with insurer (€20.3 million), 2010 total income and EBITDA normalised to exclude income from write back of fi re claim provisions after settlement with insurer (€47.5 million). 2010 total expenses and EBITDA normalised to exclude one-off set up of provisions for remaining lost property obligations (€4.9 million) and to cover the risk of contaminated ground water (€5.1 million).

Revenue (€m) EBITDA (€m) Domestic Passengers (m) International Passengers (m)

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio Page 19

HOCHTIEF AirPort continued Capital (HTAC)

Hamburg Airport

Hamburg Airport is Germany’s fi fth busiest airport, servicing over 60 airlines that operate direct fl ights to 115 destinations. The airport is located nine kilometres northwest of Hamburg, Germany’s second largest city with 1.7 million residents. The airport has the capacity to process up to 15.0 million passengers per annum.

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Performance

Overall 2010 was a satisfying year for Hamburg Airport, benefi ting from the strong recovery and solid growth of the German economy. The commercial success enjoyed by the airport was despite some extraordinary events occurring throughout the year including the volcanic ash cloud in April 2010 from Iceland and severe winter weather. Hamburg Airport recorded a total of 13.0 million passengers in its fi nancial year to December 2010. This record performance, a 6.0 percent increase from the prior year, was well above the average growth rate of German airports of 4.7 percent.

Both domestic and international traffi c saw an increase on the prior year of 4.2 percent and 7.4 percent respectively.

Total income for the year to 31 December 2010 was €255.0[(1)(2)] million an increase of 10.2 percent compared to the prior year. Aviation revenues, which account for 50.2 percent of total sales revenue, increased 5.4 percent to €124.8 million broadly refl ecting the growth in passenger numbers. The acquisition of a major customer in January 2010 combined with the increased de-icing revenues due to the severe winter has led to a signifi cant increase in ground handling revenues to €50.6 million, a 44.0 percent increase on 2009. Operating costs in 2010 were €175.7[(1)(2)] million, an increase of 5.3 percent compared to the prior year. This increase refl ects the growth in passenger numbers and the increased purchase of de-icing agents. EBITDA of €79.3[(1)(2)] million, an increase of 22.9 percent compared to 2009, refl ects the positive development of both aviation and non-aviation revenues that outweigh the increase in operating costs.

Outlook

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15 300
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6
100
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Economic conditions continue to improve in Germany. Hamburg Airport forecasts moderate growth in passenger numbers for 2011. Traffi c performance for the fi rst six months of 2011 has been positive, with passenger numbers up 7.3 percent compared to the previous corresponding period. Both domestic and international traffi c rose, by 4.6 percent and 9.5 percent respectively.

Financial and Operational Performance

AIX Indirect Interest in Hamburg Airport: 5.69%

						CAGR*
31 Decemberyear end	2006	2007	2008	2009(2)	2010(2)	06/10
Passengers (m)	12.0	12.8	12.8	12.2	13.0	2.0%
Total income (€m)(1)	236.2	243.6	235.3	231.4	255.0	1.9%
EBITDA(€m)(1)	75.6	81.4	71.7	64.5	79.3	1.2%

• CAGR: Compound Annual Growth Rate.

Note: The commentary above, including fi nancial performance, refl ect the airport company accounts rather than the consolidated accounts and therefore exclude some ancillary businesses. Company EBITDA presented is on average 3.9 percent below consolidated EBITDA for the period 2006 to 2010.

(1) Total income and EBITDA include net investment income, which is comprised of income from participatory investments, and income from profi t and loss transfer agreements, net of expenses arising from transfer of losses and other taxes. In 2010, net investment income amounted €2.7 million (2008: less than €0.1 million).

(2) 2010 total income and EBITDA normalised to exclude income from liquidation of security charges provision (€24.4 million), expenses related to a provision for noise protection measures (€15.3 million) and expenditure falling outside of 2010 (€0.8 million). 2009 total income and EBITDA normalised to exclude income from revaluation of existing properties (€3.8 million) and proceeds from sale of fi re engines (€1.0 million).

Revenue (€m) EBITDA (€m) Domestic Passengers (m) International Passengers (m)

Page 20 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Review of Investment Portfolio

continued

Seaports Port of Portland Port of Geelong	Tollroads and Rail
	Statewide Roads
	Metro Transport Sydney

Holding % Valuation $m Gross return for year % p.a.	Return since inception % p.a.
Port of Portland Port of Geelong 50.00 35.00 68.6 24.8 6.4 3.1	25.0 23.5
Total Seaport Portfolio 93.4 5.6	24.6
Statewide Roads Metro Transport Sydney 6.25 38.89 1.0 4.0 100.2 20.9	10.6 (16.1)
Total Tollroads and Rail 5.0 45.1	3.0

Seaports, Tollroads and Rail Composition

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Port of Portland 3.9% Port of Geelong 1.4% Statewide Roads 0.1% Metro Transport Sydney 0.2%

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Page 21

Port of Portland

Port of Portland (the Port) generated a return of 6.4 percent for the year ended 30 June 2011 and 25.0 percent per annum since inception.

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Port of Portland (the Port) is a deep-water seaport located in Portland in south-western Victoria. The Port handles diversifi ed bulk commodities, including mineral sands, forestry products, aluminium, grain, fertiliser and livestock.

Performance

Throughput at the Port was up 33.7 percent on the previous year, with easing drought conditions resulting in strong grain and fertiliser volumes. Woodchip volumes were also marginally above the prior year. Log exports performed strongly during the year with volumes approximately 60 percent higher compared to the prior year.

Revenue exceeded the prior corresponding period by 43.5 percent due to higher volumes, lease payment arrangements with Gunns, which commissioned its hardwood chip facility in November 2011 and a favourable shipping mix, with high-value commodities such as mineral sands and grain outperforming expectations. The strong performance of a number of trades other than woodchips during the year demonstrates the benefi ts of the strategy to diversify the Port’s commodity base.

As well as the Gunns hardwood chip facility, the GrainCorp hardwood chip facility upgrade was commissioned during the year. Both facilities have begun to receive woodchip deliveries. These facilities will provide the infrastructure required to store and handle the increasing hardwood chip volumes expected to fl ow from the Green Triangle region in the short to medium term.

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Tonnes (m) ($m)
4 35
30
3
25
20
2
15
10
1
5
0 0
07 08 09 10 11
Grain Livestock
Fertiliser Smelter
Forestry Other
Revenue ($m)
EBITDA ($m)
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Scott Paterson departed the Port as CEO on 30 September 2010, after successfully leading the Port for nearly four years through a challenging period including the global fi nancial crisis. Jim Cooper was appointed as the new CEO from 1 October 2010 and brings signifi cant commercial expertise and knowledge of the Port to the role. Jim has been with the Port for over fi ve years as General Manager – Commercial.

Outlook

The trade outlook remains positive for the Port over the medium term. With the new hardwood chip facilities now in operation, the Port is well positioned to benefi t from the signifi cant ramp up in hardwood chip volumes expected over the medium term. Although demand for hardwood chips from the Japanese market is likely to remain subdued in the near term, due in part to the recent earthquake and tsunami, rising demand from the Chinese market is expected to increase competition for woodchips from the Green Triangle region and drive export volumes for the Port.

The outlook for mineral sands remains positive with strong volumes expected to continue as Iluka Resources seeks to meet rising global demand for its products. Grain volumes are also expected to improve as drought conditions continue to ease coupled with strong global demand for grain with Asia and the Middle East being the primary export markets for the Port. The Port is also well-positioned to benefi t from new wind farm developments scheduled for development in the south-western region of Victoria.

Financial and Operational Performance

AIX Interest in Port of Portland: 50.00%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	47.0	46.2	60.6	68.4	68.6
Throughput (tonnes m)	3.0	3.3	2.9	3.0	4.0	7.0%
Revenue ($m)	17.6	23.6	22.0	23.3	33.5	17.5%
EBITDA($m)	8.9	11.2	10.5(1)	13.3	21.9	25.3%

• CAGR: Compound Annual Growth Rate.

(1) 2009 EBITDA normalised to remove $2.9 million of one-off non-cash expenses.

Page 22 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Port of Geelong

Port of Geelong generated a return of 3.1 percent for the year ended 30 June 2011 and 23.5 percent per annum since inception.

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The Port of Geelong (the Port) is a bulk and break bulk seaport located in western Victoria. The Port predominantly handles petroleum and oil products, as well as fertiliser, steel, timber and forestry products. The Port is the second largest in Victoria, and is well-located for access by the Shell oil refi nery and the timber industry.

The Port is wholly owned by the Port of Geelong Unit Trust (the Unit Trust), the vehicle through which AIX and its co-investors hold their equity interests. The Port is operated by a subsidiary of Asciano Limited, with Asciano also holding a minority ownership interest in the Unit Trust. The Port remits a monthly base rental fee, turnover fee and profi t share to the Unit Trust. The rental fee, which makes up over half of the Unit Trust’s revenue, is not dependent on either the throughput or profi tability of the Port.

Performance

In the 12 months to 30 June 2011, the Port handled a total of 9.8 million tonnes of cargo, an increase of 16.6 percent on the prior fi nancial year, generating revenue of $26.9[(1)] million, an increase of 58.5 percent on the prior fi nancial year. The Unit Trust received total fees, net of the operating fee paid to the operator, of $12.0 million, an increase of 27.3 percent on the prior fi nancial year.

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Tonnes (m) ($m)
12 14
12
10
10
8
8
6
6
4
4
2
2
0 0
07 08 09 10 11
Grain Smelter
Fertiliser Petroleum
Forestry Other
Revenue ($m)
EBITDA ($m)
----- End of picture text -----

The strong performance of the Port in the year to 30 June 2011 was underpinned by strong fertiliser volumes, with tonnage almost twice that of the prior year, driven by the high levels of precipitation in South-East Australia and the re-opening of Incitec Pivot’s superphosphate plant in Geelong. While crude oil volumes were also approximately 31.9 percent above the prior year, this was offset by petroleum volumes, which were approximately 19.2 percent below the prior year as the strong Australian dollar caused a greater proportion of the petroleum volumes to be consumed domestically rather than being exported.

Woodchip volumes continued to be negatively affected by the uncertain global economic conditions as well as the recent earthquakes in Japan, which caused a fall in demand from pulp mills in this key export market. While volumes for the year to 30 June 2011 were approximately 9.6 percent below the prior year, the take-or-pay arrangements with Midway Pty Limited have ensured that the Port has not been disadvantaged by the poor market conditions.

Steel, sulphuric acid and other general cargo were all above the volumes achieved in the prior year.

Outlook

In February 2011, the Minister for Ports for the State of Victoria (the State) announced a feasibility study into relocating the export and import of cars to the Port. While cars are currently imported and exported through the Port of Melbourne, there is increasingly pressure on land availability in and around the Port of Melbourne and transport congestion in Melbourne’s western suburbs. The Port is an attractive alternative, with secure berths, back-up land capacity and strong road and rail links. The study is being undertaken in close consultation with the Port, and is expected to be completed in December 2011.

Financial and Operational Performance

AIX Interest in Port of Geelong: 35.0%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	19.8	19.6	18	20.1	24.8
Throughput (tonnes m)	10.3	9.9	9.1	8.4	9.8	(1.3)%
Port Revenue ($m)	24.5	28.2	26.6	26.3	38.5	11.9%
Trust Revenue ($m)(2)	8.4	10.1	9.7	9.4	12.0	9.5%
Trust EBITDA($m)(3)	8.0	9.4	9.2	9.0	11.5	9.5%

• CAGR: Compound Annual Growth Rate.

(1) Total Cargo revenue only.

(2) Trust Revenue comprises fee income received by Ports Pty Limited (the vehicle through which AIX holds its interest in Geelong), net of fees paid to the operator of Port of Geelong.

(3) Trust EBITDA comprises the EBITDA of Ports Pty Limited normalised to exclude the effect of non-cash unrealised gains/losses on interest rate hedging.

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Page 23

Statewide Roads

M4 Motorway, New South Wales

Statewide Roads generated a return of 100.2 percent for the year ended 30 June 2011 and 10.6 percent per annum since inception.

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The M4 Motorway (M4) is an established tollroad servicing Parramatta and the western suburbs of Sydney. Statewide Roads operated the M4 until 15 February 2010 when the concession agreement with the NSW Government expired resulting in the return of the M4 motorway assets to the NSW Roads and Traffi c Authority (RTA). Statewide Roads was also granted a 25 year concession to lease, operate and maintain a service centre which is tenanted to Caltex, and a number of fast food restaurants (the service centres) located on the M4. The service centre concession expires in 2017.

Performance

The return generated for the year ended 30 June 2011 was due to the release of funds held in a reserve in the event that the condition of the road when it returned to the NSW Government proved not to have met requirements of the concession deed.

For the past 12 months since expiry of the M4 concession, management have been engaged in wind-down activities for the M4 Motorway business. Statewide Roads’ tollroad operations staff have now departed with only residual revenues from the M4 service centre concession remaining. The service centres are administered by a facilities manager reporting to the Statewide Roads Board.

Statewide Roads’ total revenue for the year was $5.4 million. Comparatives to prior year are not meaningful given the tollroad business ceased last fi nancial year. This revenue was predominantly earned through rental revenues from service centre tenants together with a one-off revenue of $1.5 million from the sale of the M4 depot building. On a normalised basis for the service centre business, revenue was 6.0 percent above prior year due to resolution of a rental calculation dispute with the RTA.

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Vehicles (’000) ($m)
120 120
100 100
80 80
60 60
40 40
20 20
0 0
07 08 09 10 11
Toll Revenue ($m)
EBITDA ($m)
Average Daily Traffic (’000)
----- End of picture text -----

For the full year EBITDA was $2.6 million.

Outlook

AIX’s share of any future revenue earned from the service centre concession will be negligible.

Financial and Operational Performance

AIX Interest in Statewide Roads: 6.25%

30Juneyear end	2007	2008	2009	2010	2011
AIX Valuation ($m)	20.7	18.1	8.7	2.0	1.0
Average Daily Traff c (‘000)	107.0	110.9	111.9	113.8	n/a
Toll Revenue ($m)	84.8	88.5	106.2	70.8	n/a
EBITDA($m)	65.8	67.9	92.2	56.1	2.6

Note: 2010 year refl ects 7.5 months of operation due to expiry of the tollroad concession on 15 February 2010. No tollroad concession revenue was received in 2011.

Page 24 Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio

Metro Transport Sydney

Metro Light Rail and Monorail, New South Wales

Metro Transport Sydney generated a return of 20.9 percent for the year ended 30 June 2011 and (16.1) percent per annum since inception.

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Metro Transport Sydney (MTS) comprises the Metro Light Rail (Light Rail) and the Metro Monorail (Monorail). The Light Rail operates from Central Station to Sydney’s inner west, under a concession that expires in 2028. The Monorail operates through Darling Harbour, linking Sydney Harbour with the central business district, under a concession that expires in 2038.

Performance

MTS achieved a substantial increase in earnings in the 12 months to 30 June 2011, with EBITDA of $4.1 million compared to $0.6 million in the prior fi nancial year. This was partially due to the fi nal settlement of the long-running legal claim against ABB Service Pty Ltd, with costs being awarded in April 2011. In addition to the $2.0 million of damages and interest awarded to MTS in September 2009, MTS received a further $3.8 million in costs. When normalised for the revenue and expenses related to this claim, MTS generated EBITDA of $0.8 million for the year to 30 June 2011, compared with $0.3 million in the prior fi nancial year.

The Light Rail performed in line with expectations, with patronage marginally below the prior year. For the Monorail, patronage continued to contract due to the softening domestic and international tourism in Sydney, which has been adversely affected by global economic uncertainty and the strong Australian dollar. However, the Monorail showed early signs of recovering, with patronage for the 12 months to 30 June 2011 declining only 4.7 percent on the prior year, compared with a fall of 7.8 percent in the 12 months to 30 June 2010. Despite the lower patronage on the Monorail, MTS achieved strong advertising revenues which, combined with strict cost management, delivered positive earnings for the year.

Outlook

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In February 2010, the NSW Government announced its Metropolitan Transport Plan, proposing signifi cant upgrades to the public transport network in Sydney. This included extending the Light Rail network from the existing terminus at Lilyfi eld through inner-west Sydney to Dulwich Hill (the ‘Inner West Extension’), and from the existing terminus at Circular Quay through Barangaroo to Haymarket (the ‘CBD Extension’).

In December 2010, MTS entered into an agreement in principle (AIP) with the NSW Government. The AIP establishes a framework to enable MTS to provide the NSW Government with a binding proposal for the construction and operation of the Inner West Extension, as well as providing indicative terms for the CBD Extension. The NSW Government is not obliged to accept any proposal MTS may submit.

Financial and Operational Performance

AIX Interest in Metro Transport Sydney: 38.89%

30Juneyear end	2007	2008	2009	2010	2011	CAGR*
AIX Valuation ($m)	2.7	2.6	3.0	3.3	4.0
Passengers (m)	6.3	6.5	6.3	6.0	5.8	(1.9)%
Revenue ($m)	15.8	16.7	16.1	16.6(1)	19.3(1)	5.2%
EBITDA ($m)	0.9	0.0	(0.2)	0.6	4.1	48.2%
Adjusted EBITDA($m)(2)	1.2	1.9	0.7	0.3	0.8	(8.6)

(1) Includes once-off payment of damages from ABB dispute of $1.025 million in 2010 and $3.754 million in 2011.

(2) Adjusted to normalise for once-off revenue and expense items related to the ABB dispute.

Revenue ($m) Adjusted EBITDA ($m) Passengers (m)

Australian Infrastructure Fund Annual Report 2011 Review of Investment Portfolio Page 25

Australian Infrastructure Fund Limited Board

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Paul Espie BSc, MBA, FAICD Term of offi ce: Chairman since 13 August 2004, Director since June 1994

Non-executive and Independent: Yes

External directorships: Current: Director of Pacifi c Road Group companies and The Menzies Research Centre Ltd. Previous: Director of Utilities of Australia Pty Limited, Hastings Funds Management Limited, Adelaide Brighton Ltd, Bank of America Australia Ltd, State Rail Authority, Chairman of Freight Rail Corporation and Oxiana Limited.

Skills, experience and expertise: Paul was the founder in 1986 of Pacifi c Road Corporate Finance and has been an adviser to governments and companies in the resources, infrastructure and services sectors since 1987. Paul was previously Senior Vice President of the Bank of America responsible for Australia, New Zealand and Papua New Guinea. He held corporate and investment banking appointments in England and the US from 1974. He was founder and is Managing Director of Pacifi c Road Capital and has been a manager and advisor of the Pacifi c Road Resources Funds since 2006.

AIFL Board committee membership: Paul was appointed a member of the Audit Committee in August 2004.

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James Evans BEc, CPA, F FIN, FAICD Term of offi ce: Director since March 2010 Non-executive: Yes Independent: No

External directorships: Current: Hastings Funds Management Limited, BT Investment Management Limited (and Chair of the Audit and Risk Committee), Equigroup Group of companies, Investa Funds Management Limited (and Chair of the Audit and Risk Committee), Macquarie Generation, Solarwinds Software Australia Pty Ltd and Suncorp Portfolio Services Limited.

Skills, experience and expertise: James has extensive experience as a senior executive in the fi nance industry. James was previously the Chief Risk Offi cer, Wealth Management at the Commonwealth Bank of Australia (CBA), a position he held from 2003 to 2008. His work included directorships in the CBA Group’s funds management and insurance businesses. Previously, James held a number of senior roles at CBA in the areas of fi nance and accounting, as well as at Lend Lease, which included directorships in funds management and senior positions in fi nance. He also had senior roles at GEC Australia and Grace Bros. AIFL Board committee membership: No.

Page 26 Australian Infrastructure Fund Annual Report 2011 Australian Infrastructure Fund Limited Board

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John Harvey BJuris, LLB, FCA

Term of offi ce: Director since July 2004

Non-executive and Independent: Yes

External directorships: Current: Director of Australia Pacifi c Airports Corporation Limited, David Jones Limited and Chairman of the Audit Committee, Director of Templeton Global Growth Fund Limited, Chairman of APN Funds Management Limited and Chairman of Federation Square Pty Ltd. Previous: Opera Australia, Board of Taxation, MCG Trust, Docklands Authority, Freehills and Racing Victoria Ltd.

Skills, experience and expertise: John had a 25-year career with PricewaterhouseCoopers culminating in the Chief Executive role from 1996 to 2000. During his career with the fi rm John advised many national and multinational companies on taxation and accounting matters. John was Chief Executive of the Mt Eliza Business School from 2001 to 2004.

AIFL Board committee membership: John was appointed a member of the Audit Committee in July 2004 and has been Chairman of the Audit Committee since August 2004.

Robert Humphris OAM ARSM, BSc (Eng) Hons, CEng, FIMMM, FAIMM

Director since September 2006 Non-executive and Independent: Yes

External directorships: Current: Chairman of Ampcontrol Pty Ltd. Director of Leighton Holdings Limited and Leighton International Limited. Previous: Managing Director of Peabody Resources Pty Ltd (previously Costain Australia Limited). Chairman of New South Wales Mineral Council, Australian Coal Association and Newcastle Coal Shippers Limited. Director of Australian Coal Research Limited, Port Waratah Coal Services Limited and ASX listed company AurionGold Limited.

Skills, experience and expertise: Robert brings to the AIFL Board a wealth of experience and knowledge developed over a career spanning more than

40 years. Robert has extensive Australian and international experience working in the mining and construction industries.

AIFL Board committee membership: No.

Mike Hutchinson

BSc (Hons), CPEng, MAICD Term of offi ce: Director since September 2005 Non-executive and Independent: Yes

External directorships: Current: Non-executive Chairman Infi gen Energy Group. Previous: Hastings Funds Management Ltd, Westpac Funds Management Ltd, Epic Energy Limited, Pacifi c Hydro Ltd, OTC Ltd, the Australian Postal Corporation and the Australian Graduate School of Management Ltd. Chairman of HiTech Group Australia Ltd.

Skills, experience and expertise: Mike is a qualifi ed civil engineer, educated at the University of Newcastle upon Tyne, UK and Harvard Business School. Since 1999 he has practiced as a consultant and as a professional non-executive director. His consultancy clients have included governments, regulated industries and investment banks in Australia, US, Asia, and the Pacifi c.

From 1980 to 1999, Mike was a Senior Executive in the Australian Federal Public Service in the Transport, Communications, and Finance portfolios, serving as Deputy Secretary from 1989 to 1996. He led national telecommunications and broadcasting policy development from 1988 to 1995 and reform of selected state-owned enterprises in 1988 to 1990. From 1996 to 1999 he was Chief Executive of the Federal Government’s Offi ce of Asset Sales directing a major program of privatisations.

Robert Tsenin BEc, Dip Corp Fin Term of offi ce: Director since September 2005 Non-executive and Independent: Yes

External directorships: Current: Centro Properties Limited, CPT Manager Limited and Tsenin Holdings Pty Ltd. Previous: Director of Goldman Sachs (Australia and New Zealand), Telstra Corporation, Sistema Hals JSC, MEREIT plc National Mutual Limited and various subsidiaries, SAGASCO Limited, WACO International, Lend Lease Corporation Limited and various subsidiaries.

Skills, experience and expertise: Robert joined Goldman Sachs in 1987 in New York and was Managing Director of its Australasian operations when he retired from Goldman Sachs in 1997. He joined Lend Lease Corporation in 1997 as Finance Director until his retirement in 2003. Between 2003 and 2005 he was senior advisor to Lazard plc in London. He has extensive experience in capital markets, corporate fi nance and mergers and acquisitions. Robert is currently CEO and Managing Director of the Centro Properties Group. AIFL Board committee membership: Robert was appointed a member of the Audit Committee in December 2005.

Prior to his government service he was engaged as an international transport consultant, specialising in the assessment and planning of public sector infrastructure projects in Europe, Asia, Africa and Australia. AIFL Board committee membership: No.

Australian Infrastructure Fund Annual Report 2011 Australian Infrastructure Fund Limited Board Page 27

Hastings Funds Management Limited Board

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Alan Cameron AO BA, LLM (Syd), FAICD, SF Fin Non-executive and Independent: Yes

External Directorships: Current: AQRB Pty Ltd, ASX Compliance Pty Limited, BT Life Limited, Cameron Ralph Pty Ltd, National e-Conveyancing Development Limited, St George Life Limited, St George Insurance Australia Pty Limited, WBC Life Insurance Services Limited, Westpac General Insurance Limited and Westpac Lenders Mortgage Insurance Limited.

Skills, experience and expertise: Alan is a lawyer and was a partner of the fi rm now known as Blake Dawson from 1979 to 1991 and managing partner from 1982 to 1985 and 1989 to 1991. He was Commonwealth Ombudsman from April 1991 until the end of 1992 and Chairman of the ASC and its successor, ASIC, from January 1993 to November 2000. Since 2000 Alan has been involved in regulatory projects and governance reviews of various kinds and is a consultant and a company director. He is currently Deputy Chancellor of the University of Sydney and a consultant to Blake Dawson. HFML Board committee membership: No.

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James Evans BEc, CPA, F FIN, FAICD

Director since 6 October 2009

Non-executive and Independent: Yes

External directorships: Current: Australian Infrastructure Fund Limited, BT Investment Management Limited (and Chair of the Audit and Risk Committee), Equigroup Group of companies, Investa Funds Management Limited (and Chair of the Audit and Risk Committee), Macquarie Generation, Solarwinds Software Australia Pty Ltd and Suncorp Portfolio Services Limited.

Skills, experience and expertise: James has extensive experience as a senior executive in the fi nance industry. James was previously the Chief Risk Offi cer, Wealth Management at the Commonwealth Bank of Australia (CBA), a position he held from 2003 to 2008. His work included directorships in the CBA Group’s funds management and insurance businesses. Previously, James held a number of senior roles at CBA in the areas of fi nance and accounting, as well as at Lend Lease, which included directorships in funds management and senior positions in fi nance. He also had senior roles at GEC Australia and Grace Bros.

HFML Board committee membership: James was

appointed a member of the Audit and Compliance Committee in October 2009 and appointed as Chair of the Audit and Compliance Committee in January 2010.

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Liam Forde

BSc (Econ), MAICD

Director since January 2006

Non-executive and Independent: Yes

External directorships: Current: Director and Secretary of Colostar Pty Ltd, Chairman of Hastings Management Pty Ltd, Hastings Private Equity Fund IIA Pty Ltd, Lynas Corporation Limited and Mater Health Sydney & St Vincents. Previous: Director of Baulderstone Hornibrook Pty Ltd, Chairman of Hastings Funds Management Limited Board from October 2006 to October 2009.

Skills, experience and expertise: Liam brings to the HFML Board a wealth of experience and knowledge developed over a career spanning more than 30 years. He has held senior executive positions in a variety of industries, including Ford Motor Company in the UK, Simpson Holdings Limited and Baulderstone Hornibrook in Australia. His industry experience covers retailing, domestic appliance manufacture and distribution, electronics, automotive and the development, fi nancing and construction of major infrastructure. He is an experienced executive who has operated as Chief Executive Offi cer (CEO) and in cross-functional roles across a diverse range of industries operating in both domestic and international markets, including Europe, Indonesia, China, India, Vietnam, Panama and Thailand. He was formerly Chief Executive of Baulderstone Hornibrook, one of Australia’s leading construction and engineering companies.

HFML Board committee membership: Liam was a member of the Audit and Compliance Committee from January 2006 to September 2007. He was Chairman from January 2006 to July 2007.

Page 28 Australian Infrastructure Fund Annual Report 2011 Hastings Funds Management Limited Board

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Alan Freer

BEc, CPA, FAICD Term of offi ce: Director since April 2011

Non-executive and Independent: No

External Directorships: Current: ElectraNet Pty Ltd, ElectraNet Transmission Investments Pty Ltd, ElectraNet Transmission Services Pty Ltd, Epic Energy Holdings Pty Ltd, Hastings Investments GP, LLC, Hastings Management Pty Ltd, Hastings Private Equity Fund IIB Pty Ltd, Stadium Operations Limited, Stadium Management Limited, Melbourne Stadiums Limited, Medallion Club (Melbourne) Pty Ltd, TD Goal Properties Pty Ltd, TD Goal Pty Ltd, TD Goal Stadiums Pty Ltd, A&S Consulting Pty Ltd and Suealan Pty Ltd. Previous: AirportLink Company Pty Ltd, Ausdoc Group Ltd, Australian Pipeline Industry Association Ltd, Electricity Services Victoria and Treasury Corporation of Victoria.

Skills, experience and expertise: Alan was appointed Interim Chief Executive of HFML in March 2011. Alan’s career spans over 40 years in both the public and private sectors. He has a broad background with extensive experience in the energy and logistics industries and expertise in managing multi-divisional and geographically dispersed businesses. From July 2004 to July 2007, Alan was Managing Director of Epic Energy and made a valuable contribution by transforming Epic Energy into one of Australia’s best performing gas pipeline organisations. Previously, Alan was Managing Director of Ausdoc Group Ltd and held senior executive positions with Email Limited and the State Electricity Commission of Victoria. Alan is also Chairman of Stadium Operations Limited (Etihad Stadium), Member of the Victorian Police, Finance and Investment Committee and the Zachry Hastings Governance Committee. Alan holds a Bachelor of Economics from Monash University and has practised as a Certifi ed Practising Accountant. HFML Board committee membership: No.

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Stephen Gibbs BEcon, MBA

Term of offi ce: Director since December 2008 Non-executive and Independent: Yes

External directorships: Current: Director of Centre for Australian Ethical Research, Ecosystems Investment Management Australia Pty Ltd, Director and Secretary of Steve Gibbs Kate Wood & Associates Pty Ltd and Chair of Responsible Investment Academy. Previous: Director of Boeing Australia Limited and Aerospace Technologies of Australia.

Skills experience and expertise: Stephen joined the HFML Board following an extensive and successful career which included senior roles in industry, superannuation and investment management. Stephen was Chief Executive Offi cer of Australian Reward Investment Alliance (ARIA), a position he held from January 2000 until January 2008. During his eight year tenure, Stephen managed ARIA’s signifi cant growth from approximately $10 billion in funds under management to nearly $20 billion. Prior to his role at ARIA, Stephen was the Executive Offi cer of the Australian Institute of Superannuation Trustees. Stephen brings a deep knowledge of the issues facing investors, the management of asset portfolios and a range of other skills to the HFML Board.

HFML Board committee membership: Stephen was appointed a member of the Audit and Compliance Committee in May 2009.

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James McDonald FAICD

Term of offi ce: Director since July 2007

Non-executive and Independent: Yes

External directorships: Current: Chairman of WDS Limited and Energy Pipelines CRC Limited, Director of iGas Energy Holdings Limited and Mosaic Technology Developments Pty Ltd. Previous: Chairman of Vortex Pipes Limited, Director of Pearlstreet Limited, Australian Pipeline Limited and East Australian Pipeline Limited.

Skills, experience and expertise: James brings to HFML signifi cant expertise and knowledge, with over 30 years’ experience in the oil and gas production and gas transmission industries. James was Managing Director and CEO of Australian Pipeline Trust (now APA Group) from 2000 to 2005. Prior to that, he was General Manager Pipeline Division of Australian Gas Light Company from 1996 to 2000. He is a Past President and Honorary Life Member of the Australian Pipeline Industry Association and served on the Board of the Australian Gas Association.

HFML Board committee membership: James was appointed a member of the Audit and Compliance Committee in July 2007.

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Victoria Poole LLB (Hons), LLM, B.Sc Term of offi ce: Director since April 2011

Non-executive: Yes Independent: No

External Directorships: Current: Hastings Funds Management Limited. Previous: BT Funds Management Limited, BT Funds Management No 2 Limited, Advance Asset Management Limited, Asgard Capital Management Limited, Westpac Securities Administration Limited and Westpac Financial Services Limited.

Skills, experience and expertise: Victoria brings to the HFML Board signifi cant expertise and knowledge in both governance and funds management. She is currently Corporate Counsel – Customers at Westpac Banking Corporation, a position she commenced in May 2010. Before joining Westpac, Victoria was a partner at Allens Arthur Robinson practising in mergers & acquisitions, capital markets transaction and funds management. Victoria’s major transactions included the take private of Macquarie Capital Alliance Group, the internalisation of Macquarie Airports, the merger of Hutchison Telecommunications (Australia) Limited and Vodafone Australia Limited, the merger of St. George Bank and Westpac Banking Corporation and the initial public offerings of Galileo Japan Trust and BT Investment Management Limited. Victoria is a member of the Law Council Corporations Committee. HFML Board committee membership: No.

Australian Infrastructure Fund Annual Report 2011 Hastings Funds Management Limited Board

Page 29

Australian Infrastructure Fund Organisational Structure

AUSTRALIAN INFRASTRUCTURE FUND (AIX)

Australian Infrastructure Fund Limited AIFL Board:

• Paul Espie Chairman

• James Evans

• John Harvey

• Robert Humphris OAM

• Mike Hutchinson

• Robert Tsenin

• Australian Infrastructure Fund Trust Hastings Board: • Alan Cameron AO Chairman • Alan Freer Interim Chief Executive • James Evans • Liam Forde • Stephen Gibbs • James McDonald • Victoria Poole

Manager Responsible Entity and Manager

HASTINGS FUNDS MANAGEMENT LIMITED Jeff Pollock AIX Chief Executive Officer

Page 30 Australian Infrastructure Fund Annual Report 2011 Australian Infrastructure Fund Organisational Structure

Corporate Governance

AIX’s framework and approach to corporate governance

Australian Infrastructure Fund (AIX) comprises Australian Infrastructure Fund Limited (AIFL or Company) and Australian Infrastructure Fund Trust (AIFT or Trust) on the basis that they are one operation bound together by the stapling process. Hastings Funds Management Limited (Hastings or HFML) is the Responsible Entity of the Trust and the Manager of the Company. The organisational structure appearing on page 30 diagrammatically explains the relationship between the Company, the Trust and Hastings as Manager and Responsible Entity.

The Board of AIFL is responsible for the corporate governance of the Company and the Board of Hastings is responsible for the corporate governance of the Trust. The Boards guide and monitor the business and affairs of AIX on behalf of the securityholders.

Both AIFL and Hastings are committed to maintaining high standards of corporate governance.

In December 2005, AIFL and Hastings entered into a formal Governance Protocol to record the governance arrangements for AIX. The Protocol deals with a number of issues, including:

• that AIFL and Hastings use reasonable endeavours to ensure that at least one non-executive director of Hastings is also appointed a director of AIFL. In March 2010, James Evans was appointed to the Board of AIFL as the common Director representing both AIFL and Hastings;

• that the audit committees of AIFL and Hastings meet jointly to review the fi nancial statements of AIX and to review other risk and compliance issues of mutual interest to AIX. During 2010/2011, the joint audit committee met regularly through the year;

In summary, the delineation of responsibilities between AIFL and Hastings is as follows:

• The Board of AIFL is responsible for the conduct of the Company;

• The Company has entered into an agreement with Hastings to perform certain management and administrative functions for the Company. Accordingly, references to management are to management by Hastings. Hastings has responsibility for the management of the assets of AIX as well as having responsibility for the day-to-day operation and administration of both the Company and the Trust;

• Hastings, as contracted Manager of the Company, is required to both report and obtain the AIFL Board’s approval before undertaking certain actions, including investment and divestment activities;

• For the duration of the AIX stapling, the Company is required to review investments and to advise Hastings whether it approves each proposal. In the absence of approval, Hastings must not enter into the investment or divestment unless it would breach the Trust Deed or its duty to securityholders by not undertaking the proposal;

• The Board of AIFL is entitled to decline to approve a proposal if it considers that it would be contrary to the Constitution of the Company or the Stapling Agreement or it forms the view that there are reasonable grounds for suspecting that the Company is insolvent or that to carry out the transaction would not be in the best interests of the Company; and

• Hastings has responsibility for the conduct and governance of the Trust.

• that AIFL and Hastings jointly approve the auditor of the Company and the Trust;

• that AIFL and Hastings jointly prepare the fi nancial statements and Annual Report;

• that AIFL and Hastings jointly disclose and manage any potential confl icts of interest of Hastings and manage dealings with related parties, including Westpac Banking Corporation; and

• the appointment and removal of representatives to the boards of investee companies owned by AIX.

Australian Infrastructure Fund Annual Report 2011 Corporate Governance Page 31

AIFL Corporate Governance Statement

As a listed entity, the Australian Infrastructure Fund (AIX or Fund) complies with the ASX Listing Rules, which require Australian Infrastructure Fund Limited (AIFL or Company) to provide a statement in the Annual Report disclosing the extent to which the Company has complied with the ASX Corporate Governance Council’s Principles and Recommendations (ASXCGC’s Recommendations). This Corporate Governance Statement addresses the Company’s compliance with each of the ASXCGC’s Recommendations. Further information regarding the Company’s corporate governance practices, including copies of key policies and charters, can be found on the AIX website at www.hfm.com.au.

1. Board

1.1 Board’s role and responsibilities

The AIFL Board has the responsibility of managing and administering the Company for the benefi t of securityholders and is accountable to securityholders for the performance of the Company.

The Board of AIFL has adopted a formal Charter. A copy of the Charter is available at www.hfm.com.au. The Board has the following overall responsibilities for:

• (a) the governance of AIFL;

• (b) planning the business and affairs of AIX;

• (c) the strategic direction and control of AIX, delegating certain responsibilities for the operation and administration of AIFL to Hastings Funds Management Limited (Hastings or HFML) as Manager;

• (d) monitoring the performance of Hastings in discharging its responsibilities and reviewing the method and appropriateness of the remuneration paid to Hastings;

• (e) reviewing the Board structure and membership, including:

• (i) establishing processes for the review of the performance of individual directors and the Board as a whole;

• (ii) from time to time assessing the extent to which the required skills are represented on the Board and the necessary and desirable competencies of Board members; and

• (iii) formulating succession plans for the Board;

• (f) has the following specifi c responsibilities and functions:

• (i) reviewing and approving corporate strategies, budgets, plans and policies;

• (ii) evaluating performance of AIX against strategies and business plans in order to:

  • monitor the performance of Hastings; and

  • assess the suitability of the overall strategies, business plans and resource allocation of AIX;

• (iii) monitoring the fi nancial position and business results (including the audit process) of AIFL;

• (iv) considering Hastings’ recommendations on investments and strategic commitments;

The Board has adopted a formal Delegation of Authority in favour of the Hastings’ Chief Executive, AIX’s Chief Executive Offi cer, Hastings’ Chief Financial Offi cer, the Company Secretary and senior members of Hastings’ management in order to allow Hastings to carry on the business of the Company. The scope of, and limitations to, the delegation of authority is clearly documented and covers areas such as subscriptions and the payment of distributions and expenses.

1.2 Board composition and independence

The Board consists of six directors, fi ve of whom are independent. Paul Espie is the independent Chairman and is not an executive of either AIFL or Hastings. The Chairman has been a director of AIFL since June 1994 and is the longest serving director. The Board values and respects the continuity that the Chairman provides and is also committed to renewal and diversity.

The composition of the Board of AIFL is designed to ensure that it achieves a balance of skills and experience to allow the directors to discharge their duties and responsibilities and to position the Company for future growth. The Board acknowledges that it is critical that its membership continue to comprise a majority of independent directors in accordance with Principle 2 of the ASXCGC’s Recommendations. Accordingly, the Board undertakes an annual review of director independence to ensure that it is able to effectively discharge its responsibilities and duties with the benefi t of a range of independent perspectives and judgments.

The AIFL Board has adopted the defi nition of independence set out in the ASXCGC’s Recommendations. Directors are considered independent if they are non-executive and not a member of management and are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement. The Board may determine the level of materiality to be applied when applying Principle 2.1 of the ASXCGC’s Recommendations.

The current directors of AIFL are:

• Paul Espie, Chairman: Paul was appointed to the Board in June 1994 and in August 2004 was appointed Chairman. He is an independent director.

• James Evans: James was appointed to the Board in March 2010. James is the common director representing both AIFL and Hastings under the formal Governance Protocol entered into by AIFL and Hastings in December 2005. As the common director, James is not considered an independent director of AIFL.

• John Harvey: John was appointed to the Board in July 2004 and is an independent director.

• Robert Humphris: Robert was appointed to the Board in September 2006 and is an independent director.

• Mike Hutchinson: Mike was appointed to the Board in September 2005 and is an independent director.

• Robert Tsenin: Robert was appointed to the Board in September 2005 and is an independent director.

• (v) ensuring regulatory compliance and appropriate risk management processes;

• (vi) reviewing and approving policies in relation to the management of business risks, legal risks, corporate governance, privacy, environmental risks and other issues; and

• (vii) ensuring a high level of transparency in reporting to securityholders and compliance with the highest ethical standards and business practices.

Page 32 Australian Infrastructure Fund Annual Report 2011 AIFL Corporate Governance Statement

The number of AIFL Board meetings held during the year and the number of meetings attended by each director is shown below.

		Board
	No. of
	scheduled	No. of
	meetings held	meetings
Director	while a director	attended
P Espie	11	11
S Boulton(1)	9	6
J Evans	11	10
J Harvey	11	11
R Humphris	11	10
M Hutchinson	11	10
R Tsenin	11	8

• (1) Steven Boulton resigned from the Australian Infrastructure Fund Limited Board, effective 1 April 2011.

• This table does not include matters dealt with by the Board by way of circular resolution.

The number of joint AIFL and Hastings Board meetings held during the year and the number of meetings attended by each director is shown below.

is shown below.
		Board
	No. of
	scheduled	No. of
	meetings held	meetings
Director	while a director	attended
P Espie	2	2
J Harvey	2	2
R Humphris	2	2
M Hutchinson	2	2
R Tsenin	2	2
A Cameron	2	1
S Boulton(1)	2	1
J Evans	2	2
A Freer(2)	0	0
L Forde	2	1
S Gibbs	2	1
J McDonald	2	2
L Vance(3)	2	1
V Poole(4)	0	0

(1) Steven Boulton resigned from both the Australian Infrastructure Fund Limited and Hastings Funds Management Limited Boards, effective 1 April 2011.

• (2) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011.

(3) Les Vance resigned from the Hastings Funds Management Limited Board, effective 1 April 2011.

(4) Victoria Poole was appointed to the Hastings Funds Management Limited Board, effective 20 April 2011.

• This table does not include matters dealt with by the Board by way of circular resolution.

Individual directors’ details including their skills and experience are set out on pages 26 to 27.

1.3 Nomination of directors

Having regard to its size and the role and functions of the directors, the Board of AIFL has determined that it is more appropriate for the full Board to consider and address the selection and appointment of directors, rather than establish a Nomination Committee. The Board has adopted a Nomination Policy that is available at www.hfm.com.au. The Board prepares a shortlist of potential candidates and may appoint consultants to assist with the identifi cation of suitable candidates. In considering the membership of the Board, the directors consider the required competencies of directors for the present and future needs of the Company, having regard to the mix of skills, experience and other qualities of existing directors.

In considering potential candidates, the Board seeks a mix of skills and competencies which may include:

• senior executive or director with funds management experience, particularly in wholesale and/or unlisted funds;

• strong fi nancial, commercial and business acumen;

• strong communication and interpersonal skills and an ability to effectively engage and build strong working relationships with key stakeholder groups such as unitholders, industry and the Manager; and

• qualifi cations in business management, fi nance, accounting or related disciplines relevant to investment management, including originations and transactions.

The Board encourages Board membership from appropriately qualifi ed directors of diverse backgrounds.

1.4 Review of Board and committee performance

The Board reviews its own performance annually, including the performance of each director. The general management and oversight of the process of review, together with development of appropriate Board member performance assessment measures, is the responsibility of the Chairman. The Audit Committee assesses its effectiveness annually, with a view to ensuring that its performance accords with best practice. AIFL does not have any employees apart from the directors. During AIX’s fi nancial year, reviews of the performance of the Board, its directors and the Audit Committee were undertaken in accordance with the processes described above.

1.5 Board meetings

The Board meets regularly and is provided with all necessary information to participate in an informed discussion of all agenda items. The Board also meets from time to time in the absence of Hastings’ management to discuss the operations of the Board and a range of other matters.

1.6 Education

The Board has an induction process for new directors and directors are encouraged to update and enhance their skills and knowledge by appropriate training programs on director responsibilities.

1.7 Independent professional advice

After consultation with the Chairman, directors may seek independent professional advice at the Company’s expense. Following its receipt, such advice would normally be made available to all directors.

1.8 Company Secretaries

The directors have unfettered access to the Company Secretaries, who are accountable to the Board on governance matters. The Board is responsible for the appointment and removal of the Company Secretaries.

Australian Infrastructure Fund Annual Report 2011 AIFL Corporate Governance Statement Page 33

AIFL Corporate Governance Statement

2. Financial Reporting

2.1 Audit Committee

The AIFL Board has established an Audit Committee with a formal Charter setting out its roles and responsibilities. The HFML and AIFL Boards have also established a Joint Audit Committee with a formal Charter. The Charters are available on the website at www.hfm.com.au.

The duties of the Audit Committee and Joint Audit Committee include:

• reviewing the fi nancial management and internal controls, including reviewing the fi nancial statements and the adequacy of the scope and quality of the annual and half-year statutory audits;

• monitoring the internal audit function;

• monitoring and reviewing the external audit process, including recommending the appointment of the external auditor to the Board;

• monitoring and reviewing risk management processes and procedures; and

• monitoring and reviewing compliance procedures.

The AIFL Audit Committee comprises only independent non-executive directors. The Chairman of the AIFL Audit Committee is John Harvey; Robert Tsenin and the Board Chairman, Paul Espie, are members. They are also members of the Joint Audit Committee. Each member is expected to be fi nancially literate (be able to read and understand fi nancial statements).

All directors of the Board are entitled to attend the Audit Committee meetings, including the Joint Audit Committee, and are provided with copies of the Committee papers and all minutes. The Chairman of the Committee provides the Board with a verbal report following each Committee meeting. The internal and external auditor, the AIX Chief Executive Offi cer, the Chief Financial Offi cer, the Company Secretary and the Head of Risk and Compliance attend by invitation.

The number of Audit Committee meetings held during the year and the number of meetings attended by each member is shown below:

		Board
	No. of
	scheduled
	meetings held	No. of
	while a member	meetings
Director	of the comittee	attended
J Harvey	1	1
P Espie	1	1
R Tsenin	1	1

The number of Joint AIFL/Hastings Audit Committee meetings held during the year and the number of meetings attended by each member is shown below:

			Audit	Committee
	No. of		No. of
	scheduled		non-scheduled
	meetings held	No. of	meetings held	No. of
	while a member	meetings	while a member	meetings
Director	of the comittee	attended	of the comittee	attended
J Harvey	4	4	1	1
P Espie	4	4	1	1
R Tsenin	4	4	1	1
S Gibbs	4	3	1	1
J Evans	4	4	1	1
JMcDonald	4	2	1	1

2.2. External auditor

PricewaterhouseCoopers is the external auditor of the Company. The audit partner is invited to attend Audit Committee meetings and is required to attend the Annual General Meeting to be available to answer securityholders’ questions about the conduct of the audit and the preparation and content of the Auditor’s Report.

PricewaterhouseCoopers is required to confi rm to AIX their independence and compliance with independence standards. The Board has adopted a policy in relation to the provision of non-audit services by its auditor that might detract from the auditor’s independence and impartiality or be perceived as doing so. Specifi cally, it has been determined that the external auditor should not provide the following services to AIX:

• independent valuations of assets for the purpose of determining the value of assets owned by AIX;

• taxation services related to development of a new product for AIX where fees are success based; or

• bookkeeping or other services related to accounting records

In accordance with the Audit Committee Charter, the Audit Committee reviews the performance and value of the external auditor’s services at least once every three years and re-tenders the external audit contract no less than every fi ve years. In making its recommendation to the Board for the appointment of an external auditor of AIX, the Audit Committee calls for tenders from suitably qualifi ed fi rms of auditors and in assessing the tenders, the Audit Committee may interview the fi rms and seek additional information in support of the tender. The Audit Committee ensures that the lead external audit partner does not perform more than fi ve consecutive years’ audits.

2.3 Internal auditor

Hastings as Manager of the Company and Responsible Entity of the Trust has also appointed Ernst & Young as internal auditor to monitor AIFT’s compliance plan. In addition, Westpac Group Assurance undertakes regular reviews of Hastings’ operations.

3. Ethical and responsible decision making

3.1 Code of Conduct

AIFL is committed to high standards of ethical conduct and has adopted a Code of Conduct setting out acceptable standards of behaviour that we believe will maintain confi dence in the Company’s integrity. The Code of Conduct is designed to promote ethical and responsible decision making and to take into account the Company’s legal obligations. This Code applies without exception to all AIFL directors, Hastings’ directors, executives and employees; it is everyone’s responsibility to abide by the Code and report breaches.

The Code sets out seven foundation principles that govern our conduct and the behaviours that stakeholders can expect from us, namely:

• act with honesty and integrity;

• respect the law and act accordingly;

• respect confi dentiality and do not misuse information;

• value and maintain professionalism;

• act as a team;

• manage confl icts of interest responsibly; and

• strive to be a good corporate citizen and achieve community respect. A copy of the Code of Conduct is available at www.hfm.com.au.

Page 34 Australian Infrastructure Fund Annual Report 2011 AIFL Corporate Governance Statement

The directors disclose any actual or potential confl icts of interest and abstain from participating in any discussion or voting on any matter in which they have a material personal interest, except with the prior approval of the Board. Directors also inform the Chairman of any proposed Board or executive appointments they are considering to determine whether there is any actual or perceived confl ict with the director’s duties to the Company.

All related party transactions or potential confl icts of interest involving any director or any related parties of the directors or AIFL are disclosed.

3.3 Trading policy

The Board has adopted a policy on trading in securities to ensure compliance with the ASX Listing Rules. The policy specifi es the periods during which directors of the Company and employees of Hastings can purchase and sell securities in AIX and the authorisation procedure. A copy of the Trading Policy is available at www.hfm.com.au.

4. Market disclosure

AIFL has adopted a Continuous Disclosure Policy designed to ensure accountability and compliance with AIX’s continuous disclosure obligations set out in the ASX Listing Rules and the Corporations Act. A copy of the Continuous Disclosure Policy is available at www.hfm.com.au. As part of the policy, all employees at Hastings respond to a fortnightly email from the Company Secretary confi rming whether they are aware of any matters that should be considered for continuous disclosure. The Company Secretary has responsibility for reviewing these responses and determining what action (if any) is taken, and where appropriate, will liaise with the AIX Chief Executive Offi cer, the Chairman or the Board prior to making any disclosure to the ASX.

5. Securityholder communication

The Board is committed to communicating effectively with securityholders to ensure that they are kept fully informed of all information necessary to assess the performance of AIX. Information is communicated via:

• the Annual Report;

• the Annual General Meeting and any other general meetings at which Hastings’ management and the external auditor are available to respond to securityholders’ questions; and any other general meetings;

• ASX announcements;

• AIX’s website at www.hfm.com.au; and

• direct communication with securityholders via mail and email.

The risk assessment plan is reviewed annually by the Audit Committee and adopted by the Board of AIFL. In addition, each year Hastings’ prepares and provides a representation letter to the AIFL Board. This representation letter addresses AIX’s compliance, legal and accounting requirements; risks (both fi nancial and business); the nature, extent and effectiveness of risk management processes, internal compliance, accounting and internal control systems; and corporate conduct generally.

The Company believes that a risk management framework should pervade the Company’s culture and be embedded in its values and behaviours. AIFL is in the process of documenting an overarching risk management framework that formalises the Company’s approach to risk oversight and management of material business risks. A summary of this policy will be made available on the AIX website once it has been approved by the Board of AIFL.

CEO and CFO assurance

The AIX Chief Executive and Chief Financial Offi cer of Hastings annually certify to the Board, and have certifi ed to the Board of AIFL during AIX’s fi nancial year, that the declaration provided in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to fi nancial reporting risks.

7. Remuneration

Having regard to its size and the role and functions of the directors, the Board of AIFL has determined that it is more appropriate for the full Board to consider and address the remuneration of directors rather than establish a Remuneration Committee. The Company has no employees other than the directors. Details of the Company’s remuneration policies and the remuneration of the directors are set out in the Remuneration Report on pages 43 to 44. Securityholders will have an opportunity to consider the Remuneration Report at the 2011 Annual General Meeting.

8. Diversity

The Board of AIFL is in the process of developing a diversity policy appropriate for AIX’s structure and circumstances. The policy will require the Board to establish measurable objectives in relation to gender diversity, and to assess annually both the objectives and progress in achieving them. The policy or a summary of the diversity policy will be made available on AIX’s website once it has been approved by the Board of AIFL. Details of the measurable objectives and progress towards achieving the measurable objectives will be included in future annual reports.

Investors are given the option to receive AIX information in print or electronic format. In addition, contact details are available on the internet site should any further information be required.

6. Risk management

The Board of AIFL is responsible for reviewing and approving the Company’s overall risk management strategy. The Board has delegated to the Audit Committee responsibility for ensuring that a risk management framework is in place with regular reporting to the Board. The Audit Committee monitors and reviews the risk and compliance processes in place annually for the identifi cation, management and reporting of business and fi nancial risk. The Company has a comprehensive risk assessment process to identify and manage its material business risks and document how it manages and mitigates those risks. Hastings as Manager of the Company has developed and implemented a risk assessment plan for AIX.

Australian Infrastructure Fund Annual Report 2011 AIFL Corporate Governance Statement Page 35

AIFT Corporate Governance Statement

Hastings Funds Management Limited (HFML) is the Responsible Entity of the Australian Infrastructure Fund Trust (AIFT). As a listed entity, the Australian Infrastructure Fund (AIX or Fund) complies with the ASX Listing Rules, which require HFML to provide a statement in the Annual Report disclosing the extent to which HFML has complied with the ASX Corporate Governance Council’s Principles and Recommendations (ASXCGC’s Recommendations). This Corporate Governance Statement addresses HFML’s compliance with each of the ASXCGC’s Recommendations. Further information regarding HFML’s corporate governance practices, including copies of key policies and charters, can be found on the HFML website at www.hfm.com.au.

1. Board and oversight of management

1.1 Board’s role and responsibilities

HFML is the Responsible Entity, Trustee and Manager of a number of funds. The Board of HFML has the responsibility of managing and administering AIX for the benefi t of unitholders. HFML is part of a broader corporate group (Hastings Group). The corporate operations of the Hastings Group are controlled by Hastings Management Pty Ltd, the owner of HFML. The HFML Board has the responsibility for the investment activities and performance of the funds, including AIX. The governance arrangements for HFML recognise that the duties of the HFML directors to fund investors take priority over the duties of the directors to HFML, its parent company and others in the corporate group.

The Board of HFML has adopted a formal Charter that details the roles and responsibilities of the Board. A copy of the Charter is available at www.hfm.com.au. Key responsibilities of the Board in summary are:

• to act in the best interests of unitholders;

• to monitor and oversee the control and compliance framework relating to the obligations and requirements under the Constitution, Australian Financial Services Licence, the Corporations Act and other relevant regulatory requirements;

• to approve AIFT’s strategic plan;

• to review and monitor AIFT’s investment performance;

• to monitor the fi nancial position of AIFT; and

• to monitor and review the risk management framework of AIFT.

The Board has adopted a formal Delegation of Authority in favour of the Chief Executive, Company Secretary and senior members of management in order to allow management to carry on the business of the Fund. The scope of, and limitations to, the delegation of authority is clearly documented and covers areas such as subscriptions and the payment of distributions and expenses.

1.2 Board composition and independence

The Board of HFML currently consists of seven directors, fi ve of whom are independent. The composition of the Board of HFML is designed to ensure that it achieves a balance of skills, experience and diversity to focus on increasing investor value. The Board acknowledges that it is critical that its membership continue to comprise a majority of independent directors in accordance with Principle 2 of the ASXCGC’s Recommendations. Accordingly, the Board undertakes an annual review of director independence to ensure that it is able to effectively discharge its responsibilities and duties with the benefi t of a range of independent perspectives and judgments.

The current directors of HFML are:

• Alan Cameron, Chairman: Alan was appointed to the Board in April 2009 and in October 2009 was appointed Chairman. He is an independent Director.

• Alan Freer, Interim Chief Executive: Alan was appointed Interim Chief Executive in March 2011 and as an executive director is not independent.

• Liam Forde: Liam was appointed to the Board in January 2006 and is an independent director.

• James Evans: James was appointed to the Board in October 2009 and is an independent director.

• Stephen Gibbs: Stephen was appointed to the Board in December 2008 and is an independent director.

• James McDonald: James was appointed to the Board in June 2007 and is an independent director.

• Victoria Poole: Victoria was appointed to the Board in April 2011. Victoria is an employee of Westpac and is not independent.

The Board considered and has resolved that Mr Liam Forde, a nonexecutive Director, is an independent director, even though Mr Forde acted as interim CEO of HFML from 15 June 2007 to 3 September 2007 and is currently the Chairman of Hastings Management Pty Ltd, which is the parent company of HFML. The Board has come to this decision for the following reasons: it is over three years since Mr Forde acted as interim CEO; he is not a shareholder in Hastings Management Pty Ltd; he was appointed to the Board of Hastings Management Pty Ltd as an independent director; he does not receive remuneration from Hastings Management Pty Ltd other than in the form of director’s fees; and he makes his own decision on how to vote on decisions made by the Board.

The number of HFML Board meetings held during the year and the number of meetings attended by each director is shown below.

Director	Board
	No. of scheduled No. of Extraordinary(1) No. of meetings held meetings meetings held meetings while a director attended while a director attended
A Cameron S Boulton(2) J Evans A Freer(3) L Forde S Gibbs J McDonald L Vance(4) V Poole(5)	10 10 5 5 8 7 4 4 10 10 5 5 2 2 1 1 10 9 5 4 10 10 5 4 10 8 5 5 8 7 4 2 2 2 1 1

(1) Extraordinary meetings may be called at short notice. Even though every effort is made to schedule a meeting for all directors to attend, sometimes this is not possible.

• (2) Steven Boulton resigned from the Hastings Funds Management Limited Board, effective 1 April 2011.

• (3) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011.

• (4) Les Vance resigned from the Hastings Funds Management Limited Board, effective 1 April 2011.

• (5) Victoria Poole was appointed to the Hastings Funds Management Limited Board, effective 20 April 2011.

• This table does not include matters dealt with by the Board by way of circular resolution.

The HFML Board has adopted the defi nition of independence set out in the ASXCGC’s Recommendations. Directors are considered independent if they are non-executive and not a member of management and are free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement. The Board may determine the level of materiality to be applied when applying Principle 2.1 of the ASXCGC’s Recommendations.

Page 36 Australian Infrastructure Fund Annual Report 2011 AIFT Corporate Governance Statement

The number of joint AIFL and HFML Board meetings held during the year and the number of meetings attended by each director is shown below.

is shown below.
Director	Board
	No. of scheduled No. of meetings held meetings while a director attended
P Espie J Harvey R Humphris M Hutchinson R Tsenin A Cameron S Boulton(1) J Evans A Freer(2) L Forde S Gibbs J McDonald L Vance(3) V Poole(4)	2 2 2 2 2 2 2 2 2 2 2 1 2 1 2 2 0 0 2 1 2 1 2 2 2 1 0 0

(1) Steven Boulton resigned from both the Australian Infrastructure Fund Limited and Hastings Funds Management Limited Boards, effective 1 April 2011.

• (2) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011.

(3) Les Vance resigned from the Hastings Funds Management Limited Board, effective 1 April 2011.

• (4) Victoria Poole was appointed to the Hastings Funds Management Limited Board, effective 20 April 2011.

• This table does not include matters dealt with by the Board by way of circular resolution.

Individual directors’ details including their skills and experience are set out on pages 28 to 29.

1.3 Nomination and remuneration of directors

HFML has not established a Nomination Committee because the nomination, appointment and remuneration of its directors are determined by Westpac. Westpac’s Nomination Committee approves the appointment of the non-executive directors and the remuneration of the non-executive directors is also determined by Westpac’s Remuneration Committee. The appointment and remuneration of executive directors are determined by Hastings Management Pty Ltd in consultation with Westpac. Neither employees of the Hastings Group nor HFML’s directors are remunerated out of the property of the Fund. For the reasons above, HFML has not established a Remuneration Committee.

1.4 Review of performance

Board, committees and directors

The Board reviews its own performance annually, including the performance of each director. The general management and oversight of the process of review, together with development of appropriate Board member performance assessment measures, is the responsibility of the Chairman. The Audit and Compliance Committee assesses its effectiveness annually, with a view to ensuring that its performance accords with best practice. During the Fund’s fi nancial year, reviews of the performance of the Board, its directors and the Audit and Compliance Committee were undertaken in accordance with the processes described above.

Management

The performance of all Hastings Group employees, including the Chief Executive and senior management, is reviewed annually as part of the process for setting business plans and objectives and to assist in clarifying roles and responsibilities. The Hastings Group Performance Management System is designed to ensure that individual and team performance is consistent with the strategic objectives of the Hastings Group, while ensuring that the interests of investors in HFML’s funds remain paramount and that the performance expectations, measures and targets are clearly defi ned, agreed and reviewed throughout the year. The management performance evaluations are conducted each year following the end of the Hastings Group’s fi nancial year, which is 30 September. The performance of senior executives impacts their individual variable reward outcomes. In addition, from August 2011, the performance of senior executives, both collectively as a Hastings Group business and individually, will have a direct impact on their individual holdings of Hastings Group securities which have been granted under the Hastings Long Term Incentive Plan (LTIP). A review of the performance of senior executives was conducted in the Fund’s fi nancial year and was in accordance with the process described above.

1.5 Board meetings

The Board meets regularly and is provided with all necessary information to participate in an informed discussion of all agenda items. The Board also meets from time to time in the absence of management to discuss the operations of the Board and a range of other matters.

1.6 Education

HFML has an induction process for new directors and directors are encouraged to update and enhance their skills and knowledge by appropriate training programs funded by HFML. There is also an induction process for all employees to ensure that they understand their responsibilities.

1.7 Independent professional advice

After consultation with the Chairman of HFML, directors may seek independent professional advice at the expense of HFML. Following its receipt, such advice would normally be made available to all directors.

1.8 Company Secretaries

The directors have unfettered access to the appointed Company Secretaries, who are accountable to the Board on governance matters. The Board is responsible for the appointment and removal of the Company Secretaries.

2. Financial Reporting

2.1 Audit & Compliance Committee

The Board of HFML has established an Audit & Compliance Committee with a formal Charter setting out its roles and responsibilities. The HFML and AIFL Boards have also established a Joint Audit Committee with a formal Charter. The Charters are available for inspection on the website at www.hfm.com.au.

The duties of the Audit & Compliance Committee and Joint Audit Committee include:

• reviewing the fi nancial management and internal controls, including reviewing the fi nancial statements and the adequacy of the scope and quality of the annual and half-year statutory audits;

• monitoring the internal audit function;

• monitoring and reviewing the external audit process, including recommending the appointment of the external auditor to the Board;

• monitoring and reviewing risk management processes and procedures; and

• monitoring compliance, including Fund compliance and reviewing the Compliance Plan to ensure it continues to cover the risks and compliance issues relevant to the Fund.

Australian Infrastructure Fund Annual Report 2011 AIFT Corporate Governance Statement

Page 37

AIFT Corporate Governance Statement

The Audit & Compliance Committee consists of three members, all non-executive and independent. The Chairman of the committee is James Evans; Stephen Gibbs and James McDonald are members. They are also members of the Joint Audit Committee. Each member is expected to be fi nancially literate (be able to read and understand fi nancial statements).

All directors of the HFML Board are entitled to attend the Committee meetings including the Joint Audit Committee and are provided copies of the Committee papers and all minutes. The Chairman of the Committee provides the Board with a verbal report following each Audit & Compliance Committee meeting.

The internal and external auditors, Chief Executive, Chief Financial Offi cer, Company Secretary and Head of Risk and Compliance attend by invitation.

The number of Audit & Compliance Committee meetings held during the year and the number of meetings attended by each member is shown below.

			Audit	Committee
	No. of		No. of
	scheduled		non-scheduled
	meetings held	No. of	meetings held	No. of
	while a member	meetings	while a member	meetings
Director	of the Comittee	attended	of the Comittee	attended
J Evans	7	7	2	2
S Gibbs	7	7	2	2
J McDonald	7	7	2	2

The number of Joint AIFL/HFML Audit Committee meetings held during the year and the number of meetings attended by each member is shown below.

			Audit	Committee
	No. of		No. of
	scheduled		non-scheduled
	meetings held	No. of	meetings held	No. of
	while a member	meetings	while a member	meetings
Director	of the Comittee	attended	of the Comittee	attended
J Harvey	4	4	1	1
P Espie	4	4	1	1
R Tsenin	4	4	1	1
S Gibbs	4	3	1	1
J Evans	4	4	1	1
JMcDonald	4	2	1	1

2.2. External auditor

PricewaterhouseCoopers is the external auditor of the Fund. The audit partner is invited to attend Audit & Compliance Committee meetings and is required to attend the Fund’s Annual General Meeting to be able to answer any questions about the conduct of the audit and the preparation and content of the Auditor’s Report.

PricewaterhouseCoopers is required to confi rm to the Fund their independence and compliance with independence standards. The Board has adopted a policy in relation to the provision of non-audit services by the external auditor that might detract from the auditor’s independence and impartiality or be perceived as doing so. Specifi cally, it has been determined that the auditor should not provide the following services to the Fund:

• independent valuations of assets for the purpose of determining the value of assets owned by the Fund;

In accordance with the Audit & Compliance Committee Charter, the Committee reviews the performance and value of the external auditor’s services at least once every three years and re-tenders the external audit contract no less than every fi ve years. In making its recommendation to the Board for the appointment of an external auditor of the Fund, the Committee calls for tenders from suitably qualifi ed fi rms of auditors and in assessing the tenders, the Committee may interview the fi rms and seek additional information in support of the tender. The Committee ensures that the lead external audit partner does not perform more than fi ve consecutive years’ audits.

2.3 Internal auditor

HFML has appointed Ernst & Young as internal auditor to audit the Compliance Plan of the Fund and all other schemes of which it is Responsible Entity. In addition, Westpac Group Assurance undertakes regular reviews of the Hastings Group’s operations.

3. Ethical and responsible decision making

3.1 Code of Conduct

The Hastings Group is committed to high standards of ethical conduct and has adopted a Code of Conduct setting out acceptable standards of behaviour that we believe will maintain confi dence in the Hasting Group’s integrity. The Code of Conduct is designed to promote ethical and responsible decision making and to take into account the Hasting Group’s legal obligations. This Code applies without exception to all directors, executives, management and employees; it is everyone’s responsibility to abide by the Code and report breaches. The Code is aligned with the Hastings Group’s core values of teamwork, integrity, achievement, leadership, accountability and alignment.

The Code sets out seven foundation principles that govern our conduct and the behaviours which stakeholders can expect from us, namely:

• act with honesty and integrity;

• respect the law and act accordingly;

• respect confi dentiality and do not misuse information;

• value and maintain professionalism;

• act as a team;

• manage confl icts of interest responsibly; and

• strive to be a good corporate citizen and achieve community respect.

A copy of the Code of Conduct is available at www.hfm.com.au.

The directors disclose any actual or potential confl icts of interest and abstain from participating in any discussion or voting on any matter in which they have a material personal interest, except with the prior approval of the Board. Directors also inform the Chairman of any proposed board or executive appointments they are considering to determine whether there is any actual or perceived confl ict with the director’s duties to the Fund or HFML.

All related party transactions or potential confl icts of interest involving any director or any related parties of either the directors or HFML, such as Westpac, are disclosed. HFML has established a related party sub-committee that considers all related party transactions. The sub-committee comprises any two directors, excluding any Westpac or Hastings Group employee, and subject to those directors not having a material personal interest in the matter being considered. The sub-committee, inter alia, reviews all Westpac banking relationships with HFML’s funds. The Board also approves any HFML transaction specifi c confl icts protocols put in place by HFML’s management.

• taxation services related to development of a new product for the Fund where fees are success-based; and

• bookkeeping or other services related to accounting records

Page 38 Australian Infrastructure Fund Annual Report 2011 AIFT Corporate Governance Statement

3.3 Trading policy

The Board has adopted a policy on trading in securities issued by HFML’s funds to ensure compliance with the ASX Listing Rules. The policy specifi es the periods during which directors of HFML and employees of the Hastings Group can purchase and sell units in the Fund and the authorisation procedure. A copy of the Trading Policy is available at www.hfm.com.au.

4. Market disclosure

The Board has adopted a Continuous Disclosure Policy designed to ensure accountability and compliance with the Fund’s continuous disclosure obligations set out in the ASX Listing Rules and the Corporations Act. A copy of the Continuous Disclosure Policy is available at www.hfm.com.au. As part of the policy, all employees at Hastings respond to a fortnightly email from the Company Secretary confi rming whether they are aware of any matters that should be considered for continuous disclosure. The Company Secretary has responsibility for reviewing these responses and determining what action (if any) is taken, and where appropriate, will liaise with the Chief Operating Offi cer, the Chief Executive Offi cer, the Chairman or the Board prior to making any disclosure to the ASX.

HFML has adopted a range of risk policies to address both compliance and operational risks. Key risk management policies include:

• Confl icts of Interest Policy;

• Code of Conduct;

• Complaints Policy;

• Continuous Disclosure Policy;

• Outsourcing Policy;

• Trading Policy; and

• Whistleblower Protection Policy.

Copies of some of the key risk management policies above are available on the website at www.hfm.com.au. The Hastings Group believes that a risk management framework should pervade the Hastings Group’s culture and be embedded in its values and behaviours. HFML is in the process of documenting an overarching risk management framework that formalises the Hastings Group’s approach to risk oversight and management of material business risks. A summary of this policy will be made available on HFML’s website once it has been approved by the Board of HFML.

CEO and CFO assurance

5. Unitholder communication

The Board is committed to communicating effectively with unitholders to ensure that they are kept fully informed of all information necessary to assess the performance of the Fund. Information is communicated via:

• (a) ASX announcements;

• (b) the Annual General Meeting and any other general meetings at which HFML management and the external auditor are available to respond to unitholders’ questions; and any other general meetings;

• (c) the Annual Report;

• (d) HFML’s website at www.hfm.com.au; and

• (e) direct communication with unitholders via mail and email.

Investors are given the option to receive Fund information in print or electronic format. In addition, HFML’s contact details are available on the internet site should any further information be required.

6. Risk management

The Board of HFML is responsible for reviewing and approving AIFT’s overall risk management strategy. The Board has delegated to the Audit & Compliance Committee responsibility for ensuring that a risk management framework is in place with regular reporting to the Board. The Audit & Compliance Committee monitors and reviews the risk and compliance processes in place annually for the identifi cation, management and reporting of business and fi nancial risk.

The Hastings Group has a comprehensive risk assessment process to identify and manage its material business risks and document how it manages and mitigates those risks. Management has developed and implemented a risk assessment plan for the Fund and separately for the Hastings Group. The risk assessment plans are reviewed annually by the Audit & Compliance Committee and adopted by the Board of HFML. In addition, each year management prepares and provides a representation letter to the Board. This representation letter addresses the Fund’s compliance, legal and accounting requirements; risks (both fi nancial and business); the nature, extent and effectiveness of risk management processes, internal compliance, accounting and internal control systems; and corporate conduct generally. Another important risk management process is the vetting of all new investment proposals by an investment committee comprised of senior executive managers.

The Chief Executive and Chief Financial Offi cer annually certify to the Board, and have certifi ed to the Board during the Fund’s fi nancial year, that the declaration provided in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to fi nancial reporting risks.

7. Remuneration

Details of amounts paid to HFML as Responsible Entity of the Fund are disclosed in the related party note contained in the fi nancial statements. HFML is paid a management fee in accordance with the terms of the Fund’s Trust Deed. HFML is also entitled to a Responsible Entity incentive fee that is calculated in accordance with the Trust Deed. There was no Responsible Entity incentive fee provision for the 30 June 2011 fi nancial year (2010: $Nil). Neither employees of the Hastings Group nor HFML’s directors are remunerated out of the property of the Fund.

8. Diversity

HFML is in the process of developing a diversity policy appropriate for HFML’s structure and circumstances. The policy will require the Board to establish measurable objectives in relation to gender diversity, and to assess annually both the objectives and progress in achieving them. The policy or a summary of the diversity policy will be made available on HFML’s website once it has been approved by the Board of HFML. Details of the measurable objectives and progress towards achieving the measurable objectives will be included in future annual reports.

Australian Infrastructure Fund Annual Report 2011 AIFT Corporate Governance Statement Page 39

AIFL Directors’ Report

The directors of Australian Infrastructure Fund Limited submit their report together with the consolidated fi nancial statements of Australian Infrastructure Fund Limited (AIFL or the Company) consisting of the Company and the entities it controlled at the end of, or during the year ended 30 June 2011.

The ordinary shares issued by the Company are stapled to the securities issued by Australian Infrastructure Fund Trust (AIFT or the Trust). The combined entity of AIFL and AIFT and its controlled entities is known as the Australian Infrastructure Fund (AIX). On 6 March 1997, the stapled securities were listed on the Australian Stock Exchange (ASX) and have the ASX code of AIX.

The units and shares will only be unstapled in accordance with the determination of the Responsible Entity for AIFT and the Board of AIFL if:

• the unitholders of AIFT have approved the unstapling by special resolution;

• the members of AIFL have approved the unstapling by special resolution; and

• the unstapling period commences within three months after the later of the dates on which the approval of unitholders and members is obtained.

Hastings Funds Management Limited (Hastings) is the Manager of AIFL and the Responsible Entity of AIFT.

For the purpose of preparing consolidated fi nancial statements that combine the assets and liabilities of AIFL and AIFT, AIFL is identifi ed as the parent entity.

The consolidated fi nancial statements presented therefore comprise:

• Consolidated AIFL (AIX): Represents the entire AIX group, consisting of the Company and Consolidated AIFT; and

• Consolidated AIFT: Represents AIFT and its controlled entities.

The above consolidated fi nancial statements are presented in adjacent columns in single fi nancial statements in accordance with the option available under ASIC Class Order 05/642.

Directors

The following persons held offi ce as directors of the Company during the year and up to the date of this report unless otherwise stated:

Paul Espie	Chairman
Steve Boulton	Director (retired 1 April 2011)
James Evans	Director
John Harvey	Director
Robert Humphris	Director
Michael Hutchinson	Director
Robert Tsenin	Director

Company Secretaries

The names and details of the Company Secretaries of the Company in offi ce during the year and until the date of this report are set out below.

Jane Frawley

Qualifi cations: BA, LLB, ACM

Jane Frawley has over 15 years of company secretarial and fi nancial services legal experience and joined Hastings in May 2010. Jane was appointed Company Secretary of Hastings and the Company on 28 May 2010.

Kim Rowe

Qualifi cations: BCom, ACA

Kim Rowe is a Chartered Accountant and has over 15 years’ experience in the fi nancial services industry, initially with audit experience. On joining Hastings in 1999, she assumed compliance and company secretarial responsibilities. Kim resigned on 31 December 2010.

Nick Burrell

Nick Burrell had over 10 years of fund and corporate law experience and was appointed Company Secretary of Hastings and the Company on 1 January 2011. Nick resigned on 1 April 2011.

Jefferson Petch

Qualifi cations: LLB(Hons), BCom(Hons), MCom(Hons), SA(Fin) Jefferson Petch has over six years of legal and fi nancial services experience and joined Hastings in June 2011. Jefferson was appointed Company Secretary of Hastings and the Company on 1 July 2011.

Principal activities

The principal activity of AIX during the year was to invest in infrastructure investments so as to optimise total shareholder return. There has been no change in the principal activity of AIX during the year.

Company information

The Company is incorporated and domiciled in Australia. The registered offi ce of the Company is located at Level 16, 90 Collins Street, Melbourne, Victoria, 3000.

As at 30 June 2011 the Company had no employees, apart from the non-executive directors of the Company (2010: nil).

Review and results of operations

The Company has continued to invest funds in accordance with its investment objectives and guidelines as set out in the current prospectus and in accordance with the provisions of the Company’s Constitution.

Results

The profi t after income tax attributable to securityholders of AIX for the year ended 30 June 2011 was $212,321,000 (2010: $191,253,000).

Particulars of the skills, experience, expertise and responsibilities of the directors at the date of this report, including directorships of other ASX listed companies held at any time in the past three years, are set out in the AIX Annual Report.

Page 40 Australian Infrastructure Fund Annual Report 2011 AIFL Directors’ Report

Distributions and dividends

Final dividend and distribution

A fi nal dividend and distribution of $31,037,000 (5.00 cents per stapled security) was declared by AIX for the year ended 30 June 2011 (2010: 5.00 cents per stapled security) and will be paid on 30 August 2011.

The fi nal dividend and distribution comprised:

• a fi nal dividend of $3,000,000 (0.5 cents per security) declared by AIFL for the year ended 30 June 2011 (2010: 0.7 cents per stapled security) franked to 100 percent (2010: 100 percent); and

• a fi nal distribution of $28,037,000 (4.5 cents per security) declared by AIFT for the year ended 30 June 2011 (2010: 4.3 cents per stapled security).

Interim dividend and distribution

An interim dividend and distribution of $31,037,000 (5.00 cents per stapled security) was declared by AIX for the half year ended 31 December 2010 which was paid on 25 February 2011 (2009: $28,839,000 and 5.00 cents per stapled security).

Signifi cant changes in state of affairs

In the opinion of the directors, there were no signifi cant changes in the state of affairs of AIX that occurred during the year.

Matters subsequent to the end of the year

No signifi cant events have occurred since the end of the reporting period which would impact on the fi nancial position of AIX disclosed in the Consolidated Statements of Financial Position as at 30 June 2011 or on the results and cash fl ows of AIX for the year ended on that date.

Rounding

AIX is an entity of the kind referred to in Class Order 98/0100 (as amended), issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the fi nancial report. Amounts in the Directors’ Report and consolidated fi nancial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

Likely developments and expected results

AIX will continue to encourage and support the growth of the airports in the portfolio, focusing on the signifi cant organic growth opportunities within these assets.

The interim dividend and distribution comprised:

• an interim dividend of $5,900,000 (0.95 cents per security) declared by AIFL for the half year ended 31 December 2010 (2009: $7,300,000 and 1.27 cents per stapled security) franked to 100 percent (2009: 100 percent); and

• an interim distribution of $25,137,000 (4.05 cents per security) declared by AIFT for the half year ended 31 December 2010 (2009: $21,539,000 and 3.73 cents per stapled security).

Business strategies and prospects

Information on AIX’s business strategies and its prospects for future years is included in the AIX Annual Report. In the opinion of the directors, further information on AIX’s business strategies and its prospects for future years would, if included in this report, be likely to result in unreasonable prejudice to AIX and has accordingly been omitted.

Directors’ meetings

The number of directors’ meetings (including meetings of committees of directors) held during the year and the number of meetings attended by each director is shown in the table below:

Director Name	AIFL/Hastings Joint AIFL/Hastings Joint Audit AIFL Audit Committee Board Meetings Committee Meetings AIFL Board Meetings Meetings
	Meetings Meetings Meetings Meetings held while Meetings held while Meetings held while Meetings held while Meetings a director attended a director attended a director attended a director attended
Paul Espie Steven Boulton(1) James Evans John Harvey Robert Humphris Michael Hutchinson Robert Tsenin	2 2 5 5 11 11 1 1 2 1 n/a n/a 9 6 n/a n/a 2 2 5 5 11 10 n/a n/a 2 2 5 5 11 11 1 1 2 2 n/a n/a 11 10 n/a 1 2 2 n/a n/a 11 10 n/a n/a 2 2 5 5 11 8 1 1

(1) Steven Boulton retired as a director of AIFL on 1 April 2011.

Australian Infrastructure Fund Annual Report 2011 AIFL Directors’ Report Page 41

AIFL Directors’ Report

Directors’ interests

At the date of this report, the interests of each director in the shares of the Company and therefore the stapled securities of AIX is shown in the table below:

table below:
Director Name	Number of stapled securities held in AIX
	Benef cially Benef cially held in the held in name of Total own name another Holdings
Paul Espie Steven Boulton(1) James Evans John Harvey Robert Humphris Michael Hutchinson Robert Tsenin	0 906,668 906,668 262,500 0 262,500 0 0 0 9,487 75,000 84,487 0 300,000 300,000 0 122,024 122,024 18,173 138,887 157,060

(1) Holding as at 1 April 2011, being the date of retirement as a director of AIFL.

Environmental regulation

The operations of AIX are not subject to any particular signifi cant environmental regulation under a law of the Commonwealth or of a state or territory. There have been no known signifi cant breaches of any other environmental requirements applicable to AIX. However, there may be environmental regulations that relate to each of the assets owned by AIX. Compliance with these regulations is the responsibility of the board and management of the investee rather than AIX.

During or since the year, the Company has paid premiums in respect of a contract insuring all the directors and executive offi cers of the Company. The terms of the policy prohibit disclosure of the details of the insurance cover and premium paid.

An indemnity agreement has been entered into between the Company and each of its directors named earlier in this report. Under this agreement, the Company has agreed:

• (a) to indemnify the directors against any claim or for any expense or costs which may arise as a result of work performed in their role as directors;

• (b) to provide continued access to Board papers; and

• (c) to provide continued access to directors’ and offi cers’ liability insurance.

The auditor of the Company is in no way indemnifi ed out of the assets of the Company and AIX.

Proceedings on behalf of the Company

No proceedings have been brought on behalf of the Company, nor has any application been made in respect of the Company under section 237 of the Corporations Act 2001 .

Non audit services

PricewaterhouseCoopers is the auditor of the Company. The Company may decide to employ the auditor on assignments in addition to their statutory audit duties, where the auditor’s expertise and experience are important and there is no confl ict compromising its independence.

Amounts received or due and receivable by the auditor, PricewaterhouseCoopers

	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $ $ $ $
Amounts paid and payable to the auditor, PricewaterhouseCoopers, excluding GST for: – Audit and review of the f nancial statements – Compliance plan audit – Other assurance services	135,265 132,070 97,617 70,070 15,910 15,300 15,910 15,300 6,240 6,000 6,240 6,000
Total audit fees	157,415 153,370 119,767 91,370

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 45.

The directors are satisfi ed the assurance services that were provided did not impair the independence of the auditor.

Page 42 Australian Infrastructure Fund Annual Report 2011 AIFL Directors’ Report

AIFL Remuneration Report

The directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the year ended 30 June 2011. This remuneration report forms part of the Directors’ Report.

The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001.

Non-executive directors’ remuneration

Board policy on remuneration

The Board of directors of the Company is responsible for determining and reviewing compensation arrangements for the directors of the Company.

The fees paid to directors are set at levels that refl ect both the responsibilities of, and the time commitments required from, the directors to discharge their duties. In order to maintain their independence and impartiality, the remuneration of the non-executive directors is not linked to the performance of either the Company or the Trust.

In setting fee levels, the Board, takes into account:

• independent professional advice;

• fees paid by comparable companies;

• the general time commitment required from directors and the risks associated with discharging the duties attaching to the role of director; and

• the level of remuneration necessary to attract and retain directors of a suitable calibre.

The Board will continue to review its approach to non-executive director remuneration to ensure it remains in line with general industry practice and best practice principles of corporate governance.

Remuneration structure

• Directors’ fees expensed for the year ended 30 June 2011 totalled $826,983 (2010: $785,372) and comprised:

• Fees paid or payable in respect of the current year of $826,983 (2010: $760,847); and

• Fees paid in respect of prior years of $0 (2010: $24,525).

Non-executive directors’ fees, including committee fees, are set by the Board within the maximum aggregate amount of $1,200,000 per annum (effective from 1 January 2010 and previously $800,000 per annum) approved by securityholders in 2010. Committee fees also include ad hoc committees such as Due Diligence committees which may be required from time to time. The remuneration of directors was last revised on 1 March 2011.

The Board elected in April 2003 to phase out the retirement benefi t and directors who joined the Board after that date are not entitled to a retirement benefi t. The retirement benefi t, where applicable, is determined by a consulting actuary. The Chairman of the Board predates the retirement benefi t phase out. No other directors are

The Chairman of the Board was entitled to a fee of $236,250 per annum until 28 February 2011 and $275,000 per annum from 1 March 2011. As the current Chairman continues to accrue retirement benefi ts in accordance with a resolution of the Board passed in 2003, he receives a lower fee than this to refl ect this benefi t. An appropriate deduction from his fees is made to take into account his retirement benefi t under the plan as calculated by a consulting actuary.

Directors were entitled to a fee of $94,500 per annum until 28 February 2011 and $110,000 per annum from 1 March 2011.

The Chairman of the Audit Committee was entitled to a fee of $21,000 per annum until 28 February 2011 and $23,000 per annum from 1 March 2011. The ordinary members of the Audit Committee were entitled to a fee of $10,500 per annum until 28 February 2011 and $11,500 per annum from 1 March 2011. The Chairman of the Board declined his fee for membership of the Audit Committee.

In addition, superannuation contributions are paid on behalf of the non-executive directors in accordance with the Company’s statutory superannuation obligations.

Remuneration paid to other offi ceholders

Steven Boulton, Hastings’ Chief Executive Offi cer and Executive Director of AIFL (retired 1 April 2011), Alan Freer, Hastings’ Chief Executive Offi cer (appointed 1 April 2011), Jeff Pollock, the AIX Chief Executive Offi cer and the Company Secretaries were not remunerated out of the property of AIFL or AIFT. These individuals were remunerated by Hastings or its related entities out of its management fee.

Australian Infrastructure Fund Annual Report 2011 AIFL Remuneration Report Page 43

AIFL Remuneration Report

Remuneration paid to non-executive directors

Details of non-executive directors’ remuneration for the year ended 30 June 2011 are set out in the following table. No bonuses, options or other emoluments are paid to the directors of AIFL.

emoluments are paid to the directors of AIFL.
Keymanagementpersonnel of AIFL	Short-term Post employment Board Committee fees fees Superannuation Retirement Total $ $ $ $ $
Paul Espie 2011 2010	227,867 0 20,508 0 248,375 236,250 0 23,470 0 259,720
James Evans 2011 2010	99,667 0 8,970 0 108,637 31,500 0 2,835 0 34,335
John Harvey 2011 2010	99,667 21,667 10,920 0 132,253 94,500 39,750* 12,083 0 146,333
Robert Humphris 2011 2010	99,667 0 8,970 0 108,637 94,500 0 8,505 0 103,005
Michael Hutchinson 2011 2010	99,667 0 8,970 0 108,637 94,500 0 8,505 0 103,005
Robert Tsenin 2011 2010	99,667 10,833 9,945 0 120,445 94,500 10,500 9,450 0 114,450
Total compensation: Key management personnel of AIFL 2011 2010	726,200 32,500 68,283 0 826,983 645,750 50,250 64,847 0 760,847

• Includes an $18,750 due diligence committee fee.

Relationship with the Manager – Hastings Funds Management Limited

As the Company has contracted Hastings to manage its administration and investments, the Company employs no staff.

Hastings is paid a fee to provide a range of services and as part of that arrangement Hastings is required to provide appropriately qualifi ed employees and resources to undertake those services, including the AIX Chief Executive Offi cer and company secretarial service.

Fees to the Responsible Entity

Hastings as Responsible Entity of AIFT and Manager of the Company is entitled to a management fee. The management fee is calculated at the rate of 1 percent per annum of AIX’s market capitalisation, based on the volume weighted average traded price over the 20 business days prior to the calculation date multiplied by the stapled securities outstanding.

For the year ended 30 June 2011, Hastings was paid management fees of $12,000,000 by AIX (2010: $10,179,000).

In accordance with the AIFL management agreement and the AIFT Constitution, Hastings as Manager and Responsible Entity is also entitled to a performance fee. The performance fee is calculated as 10 percent of any positive performance position. The net performance position is the amount by which the AIX total securityholder returns exceeds the benchmark return, being the S&P ASX 200 Industrials Accumulation Index, at the end of each year. If the calculation of the AIX total securityholder returns for a year is less than the benchmark return for that year, the defi cit is carried forward and taken into account in calculating whether the AIX total securityholder returns exceeds the benchmark return in subsequent years.

At 30 June 2011 the net performance position stands at a carry forward shortfall (defi cit) of $25,328,910 (2010: $114,284,752).

As a consequence no performance fee has been paid or is payable to Hastings for the year ended 30 June 2011 (2010: $nil).

Hastings is entitled under the AIFT Constitution and the AIFL management agreement to be reimbursed for certain expenses incurred in administering AIX. The basis on which the expenses are reimbursed is defi ned in the AIFT Constitution and AIFL management agreement.

For the year ended 30 June 2011, Hastings was reimbursed $207,000 (2010: $230,000) for costs incurred on behalf of AIX. These amounts were paid by the Trust.

Corporate governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors support and have adhered to the principles of corporate governance as set out in the Corporate Governance Statement of the Annual Report.

This report is made in accordance with a resolution of the directors.

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Paul Espie Chairman 24 August 2011

Page 44 Australian Infrastructure Fund Annual Report 2011 AIFL Remuneration Report

AIFL Auditor’s Independence Declaration

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Australian Infrastructure Fund Annual Report 2011 AIFL Auditor’s Independence Declaration Page 45

AIFT Directors’ Report

The directors of Hastings Funds Management Limited (Hastings) as Responsible Entity for Australian Infrastructure Fund Trust submit their report together with the consolidated fi nancial statements of AIFT (the Trust) and the entities it controlled at the end of, or during, the year ended 30 June 2011.

The ordinary shares issued by Australian Infrastructure Fund Limited (AIFL or the Company) are stapled to the units issued by the Trust. The combined entity of the Company and the Trust is known as the Australian Infrastructure Fund (AIX).

Directors

The following persons held offi ce as directors of the Responsible Entity during the year and up to the date of this report unless otherwise stated:

Alan Cameron Chairman Steve Boulton Retired on 1 April 2011 James Evans William Forde Alan Freer Appointed on 1 April 2011 Stephen Gibbs James McDonald Victoria Poole Appointed on 20 April 2011 Leslie Vance Retired on 1 April 2011

Responsible Entity

The registered offi ce of the Responsible Entity is located at Level 16, 90 Collins Street, Melbourne, Victoria, 3000.

Company Secretaries

The Company Secretaries of the Responsible Entity in offi ce during the year and up to the date of this report are Nick Burrell (appointed 1 January 2011 and resigned 1 April 2011), Jane Frawley, Jefferson Petch (appointed 1 July 2011) and Kim Rowe (resigned 31 December 2010).

Principal activities

The principal activity of the Trust during the year was to invest in infrastructure investments so as to optimise total investor return. During the year the Trust has continued to invest in infrastructure investments in accordance with the Constitution. There has been no change in the principal activity of the Trust during the year.

Review and results of operations

The Trust has continued to invest funds in accordance with its investment objectives and guidelines as set out in the current prospectus and in accordance with the provisions of the Trust’s Constitution.

Results

The profi t after income tax attributable to securityholders of the Trust for the year ended 30 June 2011 was $194,697,000 (2010: $173,660,000).

Distributions

A fi nal AIX distribution of $31,037,000 (5.00 cents per stapled security) was declared for the six months ended 30 June 2011 and is payable on 30 August 2011. The Trust distribution represents $28,037,000 (2010: $26,937,000) of the total amount payable. The AIX interim distribution of $31,037,000 (5.00 cents per stapled security) for the six months ended 31 December 2010 was paid on 25 February 2011. The Trust distribution represents $25,137,000 (2009: $21,539,000) of the total amount paid.

Signifi cant changes in state of affairs

In the opinion of the directors, there were no signifi cant changes in the state of affairs of AIX that occurred during the year.

Matters subsequent to the end of the year

No signifi cant events have occurred since the end of the reporting period which would impact on the fi nancial position of Consolidated AIFT disclosed in the Consolidated Statements of Financial Position as at 30 June 2011 or on the results and cash fl ows of Consolidated AIFT for the year ended on that date.

Likely developments and expected results

The Trust will continue to encourage and support the growth of the airports in the portfolio, focusing on the signifi cant organic growth opportunities within these assets.

Environmental regulation

The operations of the Trust are not subject to any particular signifi cant environmental regulation under a law of the Commonwealth or of a state or territory. There have been no known signifi cant breaches of any other environmental requirements applicable to the Trust. However, there may be environmental regulations that relate to each of the assets owned by the Trust. Compliance with these regulations is the responsibility of the investee Company Boards rather than the Trust.

Interests in the units of the Trust

As at 30 June 2011, the Responsible Entity and its related entities held 18,012,204 units in the Trust (2010: 18,012,204).

The interests in the stapled securities issued by AIX held by the directors of the Responsible Entity and their director related entities at 30 June 2011 are set out below:

at 30 June 2011 are set	out below:
Director Name	Number of stapled securities held in AIX
	Benef cially Benef cially held in the held in name of Total own name another Holdings
Alan Cameron William Forde Steven Boulton(1) James Evans Alan Freer Stephen Gibbs James McDonald	0 0 0 0 0 0 262,500 0 262,500 0 0 0 0 40,913 40,913 139 0 139 0 15,000 15,000

(1) Holding as at 1 April 2011, being the date of retirement as a director of AIFL.

Page 46 Australian Infrastructure Fund Annual Report 2011 AIFT Directors’ Report

Fees to the Responsible Entity

The Responsible Entity is entitled to a management fee for providing services as manager of AIX. The management fee is calculated at the rate of 1 percent per annum of AIX’s market capitalisation, based on the volume weighted average traded price over the 20 business days prior to the calculation date multiplied by the stapled securities outstanding.

For the year ended 30 June 2011, AIX paid Hastings management fees of $12,000,000 (2010: $10,179,000).

In accordance with the AIFT Constitution and the AIFL management agreement, Hastings as Responsible Entity and Manager is also entitled to a performance fee. The performance fee is calculated as 10 percent of any positive performance position. The net performance position is the amount by which the AIX total securityholder returns exceeds the benchmark return, being the S&P ASX 200 Industrials Accumulation Index, at the end of each year. If the calculation of the AIX total securityholder returns for a year is less than the benchmark return for that year, the defi cit is carried forward and taken into account in calculating whether the AIX total securityholder returns exceeds the benchmark return in subsequent years.

At 30 June 2011 the net performance position stands at a carry forward shortfall (defi cit) of $25,328,910 (2010: $114,284,752).

As a consequence no performance fee has been paid or is payable to Hastings for the year ended 30 June 2011 (2010: $nil).

The Responsible Entity is entitled under the AIFT Constitution and the AIFL management agreement to be reimbursed for certain expenses incurred in administering AIX. The basis on which the expenses are reimbursed is defi ned in AIFT Constitution and the AIFL management agreement.

For the year ended 30 June 2011, Hastings was reimbursed $207,000 (2010: $230,000) for costs incurred on behalf of AIX. These amounts were paid by the Trust.

Units on issue

As at 30 June 2011, 620,733,944 units of the Trust were on issue (2010: 620,733,944). During the year ended 30 June 2011, no new units were issued by the Trust (2010: 236,216,683).

No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to the Responsible Entity or Auditor of the Trust. So long as the Offi cers of the Responsible Entity act in accordance with the constitution and the Corporations Act 2001 , both parties remain fully indemnifi ed out of the assets of the Trust against any losses incurred while acting on behalf of the Trust. The Auditor of the Trust is in no way indemnifi ed out of the assets of the Trust.

Rounding

The Trust is an entity of the kind referred to in Class Order 98/0100 (as amended), issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the fi nancial report. Amounts in the Directors’ Report and consolidated fi nancial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 48.

This report is made in accordance with a resolution of the directors.

Alan Cameron, Chairman 24 August 2011

Trust assets

As at 30 June 2011, the Trust held assets to a total value of $1,639,283,000 (2010: $1,504,916,000). The basis for valuation of the assets is disclosed in Note 2(j) of the consolidated fi nancial statements.

Australian Infrastructure Fund Annual Report 2011 AIFT Directors’ Report Page 47

AIFT Auditor’s Independence Declaration

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Australian Infrastructure Fund Annual Report 2011 AIFL Auditor’s Independence Declaration

Page 48

Australian Infrastructure Fund Annual Report 2011 Financial Statements Page 49

Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Comprehensive Income

for the year ended 30 June 2011

Consolidated Statements of Comprehensive Income for the year ended 30 June 2011
Note	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Income Interest income 3 Dividend income 4 Distribution income 5 Net gain/(loss) – securities 6 Net gain/(loss) – cash and cash equivalents Other income 7	16,221 15,782 16,221 15,782 52,085 53,945 44,650 43,198 1,623 1,854 542 531 168,048 141,217 155,809 134,617 0 (2) 0 (2) 485 470 485 470
Total income	238,462 213,266 217,707 194,596
Expenses Manager and Responsible Entity fees 8 Securityholder and investor relations expenses Investment bid costs Investment costs Director fees Director retirement expense Board administration expenses Other prudential expenses Audit fees (internal and external) Taxation fees Finance costs 9 Other expenses	12,000 10,179 12,000 10,179 491 480 491 480 564 312 564 312 101 172 101 172 841 785 841 785 49 66 49 66 70 43 70 43 633 531 633 531 177 176 177 176 154 124 154 124 974 1,831 2,103 3,788 84 44 84 45
Total expenses	16,138 14,743 17,267 16,701
Net prof t/(loss) before income tax for the year Income tax expense 11(a)	222,324 198,523 200,440 177,895 10,003 7,270 5,743 4,235
Net prof t/(loss) after income tax for the year Other comprehensive income/(loss) for the year, net of tax	212,321 191,253 194,697 173,660 0 0 0 0
Total comprehensive income/(loss) for the year	212,321 191,253 194,697 173,660
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010
Earnings per security Basic earnings per security (cents) Weighted average number of securities (000s) Netprof t after income tax($000’s)	34.20 33.22 31.37 30.16 620,734 575,764 620,734 575,764 212,321 191,253 194,697 173,660

The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes.

		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
Earnings per security
Basic earnings per security (cents)	34.20	33.22	31.37	30.16
Weighted average number of securities (000s)	620,734	575,764	620,734	575,764
Netprof t after income tax($000’s)	212,321	191,253	194,697	173,660

Diluted earning per security are no different from basic earning per security.

Page 50 Australian Infrastructure Fund Annual Report 2011 Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Financial Position

for the year ended 30 June 2011

Consolidated Statements of Financial Position for the year ended 30 June 2011
Note	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Assets Cash and cash equivalents 12 Receivables 13 Other assets 14 Securities 15	79,237 61,990 71,158 61,990 3,913 14,828 2,699 13,381 89 324 89 325 1,756,228 1,603,148 1,565,3371,429,220
Total assets	1,839,4671,680,290 1,639,2831,504,916
Liabilities Payables 16 Current income tax liability 11(d) Provisions 17 Borrowings 18 Deferred income tax liability 11(c)	32,292 32,267 29,292 28,167 347 803 (4) (4) 722 673 722 673 0 0 13,873 27,919 34,375 25,036 22,548 16,805
Total liabilities	67,736 58,779 66,431 73,560
Net assets	1,771,731 1,621,511 1,572,8521,431,356
Equity Contributed equity 19 Retained earnings 20	1,043,5751,043,602 883,554 883,582 728,156 577,909 689,298 547,774
Total equity	1,771,731 1,621,511 1,572,8521,431,356

The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes.

Australian Infrastructure Fund Annual Report 2011 Financial Statements Page 51

Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Changes in Equity

for the year ended 30 June 2011

Consolidated Statements of Changes in Equity for the year ended 30 June 2011
		Contributed	Retained
AIX		equity	earnings	Total
Consolidated AIFL	Note	$’000	$’000	$’000
At 1 July 2009		761,520	446,532	1,208,052
Net prof t/(loss) after income tax for the year		0	191,253	191,253
Other comprehensive income/(loss) for the year, net of tax		0	0	0
Total comprehensive income/(loss) for the year		0	191,253	191,253
Transactions with owners in their capacity as owners:
Ordinary stapled securities issued during the year:
– pursuant to market placement		291,486	0	291,486
Adjustment to security issue costs pursuant to market placement		(9,404)	0	(9,404)
Dividends and distributions paid and payable to securityholders	21	0	(59,876)	(59,876)
As at 30 June 2010		1,043,602	577,909	1,621,511
At 1 July 2010		1,043,602	577,909	1,621,511
Net prof t/(loss) after income tax for the year		0	212,321	212,321
Other comprehensive income/(loss) for the year, net of tax		0	0	0
Total comprehensive income/(loss) for the year		0	212,321	212,321
Transactions with owners in their capacity as owners:
Adjustment to security issue costs pursuant to market placement		(27)	0	(27)
Dividends and distributions paid and payable to securityholders	21	0	(62,074)	(62,074)
As at 30 June 2011		1,043,575	728,156	1,771,731

The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.

		Contributed	Retained
		equity	earnings	Total
Consolidated AIFT	Note	$’000	$’000	$’000
At 1 July 2009		644,261	422,590	1,066,851
Net prof t/(loss) after income tax for the year		0	173,660	173,660
Other comprehensive income/(loss) for the year, net of tax		0	0	0
Total comprehensive income/(loss) for the year		0	173,660	173,660
Transactions with owners in their capacity as owners:
Ordinary stapled securities issued during the year:
– pursuant to market placement		248,725	0	248,725
Adjustment to security issue costs pursuant to market placement		(9,404)	0	(9,404)
Dividends and distributions paid and payable to securityholders	21	0	(48,476)	(48,476)
As at 30 June 2010		883,582	547,774	1,431,356
At 1 July 2010		883,582	547,774	1,431,356
Net prof t/(loss) after income tax for the year		0	194,697	194,697
Other comprehensive income/(loss) for the year, net of tax		0	0	0
Total comprehensive income/(loss) for the year		0	194,697	194,697
Transactions with owners in their capacity as owners:
Adjustment to security issue costs pursuant to market placement		(28)	0	(28)
Dividends and distributions paid and payable to securityholders	21	0	(53,173)	(53,173)
As at 30 June 2011		883,554	689,298	1,572,852

The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.

Page 52 Australian Infrastructure Fund Annual Report 2011 Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Cash Flows

for the year ended 30 June 2011

Consolidated Statements of Cash Flows for the year ended 30 June 2011
Note	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Cash f ows from operating activities Interest received Dividends received Distributions received Other income received Finance costs paid Other expenses paid Income tax paid	22,766 12,377 22,766 12,377 63,620 50,040 55,936 39,518 2,282 1,038 1,217 0 567 470 567 470 (753) (1,877) (753) (1,877) (15,139) (12,443) (15,140) (12,442) (1,120) (471) 0 (5)
Net cash inf ow/(outf ow) from operating activities 12(a)	72,223 49,134 64,593 38,041
Cash f ows from investing activities Payments for purchase of unlisted securities Payments for unlisted security loan advances Payments for stapled entity loan advances Proceeds from repayment of unlisted loan securities Proceeds from unlisted security repayments of capital and buy-backs	(5,528) (90,826) (803) (65,324) (11,151) (7,226) (11,151) (7,226) 0 0 (15,174) 12,353 18,739 41 18,739 41 5,065 0 5,065 0
Net cash inf ow/(outf ow) from investing activities	7,125 (98,011) (3,324) (60,156)
Cash f ows from f nancing activities Repayment of bank facilities Proceeds from issue of securities Payment for security issue costs Dividends and distributions paid	0 (159,500) 0 (159,500) 0 291,487 0 248,725 (27) (9,404) (28) (9,404) (62,074) (48,065) (52,073) (32,065)
Net cash inf ow/(outf ow) from f nancing activities	(62,101) 74,518 (52,101) 47,756
Net increase/(decrease) in cash and cash equivalents	17,247 25,641 9,168 25,641
Cash and cash equivalents at the beginning of the year Effects of foreign exchange rate movements on cash and cash equivalents	61,990 36,351 61,990 36,351 0 (2) 0 (2)
Cash and cash equivalents at the end of the year 12(b)	79,237 61,990 71,158 61,990

The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes.

Australian Infrastructure Fund Annual Report 2011 Financial Statements Page 53

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

1. General information

Australian Infrastructure Fund Limited (AIFL or the Company) was incorporated Australia under the Constitution dated 14 November 2007.

Australian Infrastructure Fund Trust (AIFT or the Trust) was established in Australia under the Constitution dated 24 January 1997 (as amended). AIFT was registered as a managed investment scheme with ASIC on 4 November 1999.

Hastings Funds Management Limited (Hastings) is the manager of AIFL and the Responsible Entity of AIFT.

The registered offi ce of AIFL and Responsible Entity is located at Level 16, 90 Collins Street, Melbourne, Victoria, 3000.

As at 30 June 2011 AIFL and AIFT had nil employees, apart from the non-executive directors of AIFL (2010: nil employees).

The ordinary shares issued by AIFL are stapled to the securities issued by AIFT. The combined entity of AIFL and AIFT and its subsidiaries is known as the Australian Infrastructure Fund (AIX). On 6 March 1997, the stapled securities were listed on the Australian Stock Exchange (ASX) and have the ASX code of AIX.

The units and shares will only be unstapled in accordance with the determination of the Responsible Entity for AIFT and the Board of AIFL if:

• the unitholders of AIFT have approved the unstapling by special resolution;

• the members of AIFL have approved the unstapling by special resolution; and

• the unstapling period commences within three months after the later of the dates on which the approval of unitholders and members is obtained.

2. Summary of signifi cant accounting policies

The principal accounting policies applied in the preparation of these consolidated fi nancial statements are set out below. These have been consistently applied to all years presented, unless otherwise stated.

(a) Basis of preparation

The consolidated fi nancial statements are general purpose fi nancial statements which have been prepared in accordance with the Australian Accounting Standards (including Interpretations) the Corporations Act 2001 and AIFL’s and AIFT’s Constitutions.

The consolidated fi nancial statements comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The consolidated fi nancial statements have been prepared on a historical cost basis, except where otherwise stated.

The Consolidated Statements of Financial Position are presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and are not distinguished between current and non-current.

The functional and presentation currency of AIFL and AIFT and its subsidiaries is Australian dollars.

The consolidated fi nancial statements of AIX (Consolidated AIFL) for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of directors of AIFL. The directors of AIFL have the power to amend and reissue the consolidated fi nancial statements.

The consolidated fi nancial statements of Consolidated AIFT for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of directors of the Responsible Entity. The directors of the Responsible Entity have the power to amend and reissue the

Hastings Funds Management Limited (Hastings) is the manager of AIFL and the Responsible Entity of AIFT.

For the purpose of preparing consolidated fi nancial statements that combine the assets and liabilities of AIFL and AIFT and its subsidiaries, AIFL is identifi ed as the parent entity.

The consolidated fi nancial statements presented therefore comprise:

• Consolidated AIFL (AIX): Represents the entire AIX group, consisting of the Company and Consolidated AIFT; and

• Consolidated AIFT: Represents AIFT and its controlled entities.

Page 54 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(b) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting period. The directors’ assessment of the impact of these new standards (to the extent relevant to AIX) and interpretations is set out below:

(i) AASB 9 Financial Instruments , AASB 2009-11 Amendments

to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2015)

AASB 9 Financial Instruments (AASB 9) addresses the classifi cation

AASB 9 Financial Instruments requires all fi nancial assets to be:

• classifi ed on the basis of the entity’s business model for managing its fi nancial assets and the contractual cash fl ow characteristics of the fi nancial asset;

• initially measured at fair value plus, in the case of a fi nancial asset not at fair value through profi t or loss, particular transaction costs; and

• subsequently measured at amortised cost or fair value.

The requirements for derecognition of fi nancial assets and fi nancial liabilities under AASB 9 remain the same as those of AASB 139 Financial Instruments: Recognition and Measurement.

AIX will apply the revised standard from 1 July 2015. AIX has yet to fully assess the impact of adopting the revised standard.

(ii) AASB 1053 Application of Tiers of Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)

On 30 June 2010 the AASB offi cially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose fi nancial statements. AIX is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure requirements. The two standards will therefore have no impact on the consolidated fi nancial statements of AIX.

(c) Basis of consolidation

In accordance with AASB 3 Business Combinations , for the purpose of preparing consolidated fi nancial statements that combines the assets and liabilities of AIFL and AIFT and its subsidiaries, AIFL is identifi ed as the parent entity.

The consolidated fi nancial statements of AIFL incorporate the assets and liabilities of all subsidiaries of AIFL (or parent entity), being AIFT and its subsidiaries, as at 30 June 2011 and the results of all subsidiaries for the year ended 30 June 2011. AIFL and its subsidiaries together are referred to in these consolidated fi nancial statements as Consolidated AIFL or AIX.

The consolidated fi nancial statements of AIFT incorporate the assets and liabilities of all subsidiaries of AIFT, being Australian Infrastructure Fund International 1 Trust and its subsidiaries, as at 30 June 2011 and the results of all subsidiaries for the year ended 30 June 2011. AIFT and its subsidiaries together are referred to in these consolidated fi nancial statements as Consolidated AIFT.

Subsidiaries are those entities (including special purpose entities) over which AIFL or AIFT has the power to govern the fi nancial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether AIFL or AIFT controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to AIFL or AIFT. They are de-consolidated from the date the control ceases.

All transactions (including gains and losses) and balances between entities in AIX and Consolidated AIFT are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.

The fi nancial statements of subsidiaries are prepared for the same reporting period as AIFT, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 55

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(d) Parent entity fi nancial information

The fi nancial information for the parent entities AIFL and AIFT, disclosed in Note 30 has been prepared on the same basis as the consolidated fi nancial statements, except as set out below:

Investments in subsidiaries

Investments in subsidiaries are recorded at fair value through profi t or loss in the individual fi nancial statements of the parent entities.

Income tax

Under current legislation, AIFT is not subject to income tax provided the securityholders are presently entitled to the income of AIFT.

(e) Signifi cant accounting judgements, estimates and assumptions In applying AIX’s accounting policies management continually evaluates estimates, judgements and assumptions based on experience and other factors, including expectations of future events that may have an impact on the entity. All estimates, judgements and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the estimates, judgements and assumptions. Signifi cant estimates, judgements and assumptions are outlined below:

Valuation of unlisted securities

The fair values of unlisted securities are determined by an appropriately qualifi ed independent valuer, KPMG Corporate Finance, by projecting future cash fl ows and then discounting these cash fl ows back to their present value using a post-tax, risk adjusted discount rate.

The carrying amount of unlisted securities held by AIX as at 30 June 2011 was $1,756,228,000 (2010: $1,603,148,000).

Global capital markets continue to be volatile. The fair values of unlisted securities have been adjusted to refl ect market conditions at the end of the reporting period. While this represents the best estimate of fair value at the end of the reporting period, if the unlisted securities were to be sold, the price achieved may differ from the fair value recorded at the end of the reporting period.

Further information in relation to unlisted securities is provided in Note 15.

(f) Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profi t or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined.

(g) Segment reporting

From 1 July 2009, AIX has adopted the revised AASB 8 Operating Segments (AASB 8) which became operative for the annual reporting period commencing on 1 January 2009.

AASB 8 requires a ‘management approach’ to reporting on the fi nancial performance.

Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. In the case of AIX, two chief operating decision makers, being the Board of AIFL and the Board of Hastings have been identifi ed for the purposes of AASB 8.

AIX has one reportable operating segment being the investment in unlisted infrastructure securities.

(h) Cash and cash equivalents

For Consolidated Statements of Cash Flows presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with fi nancial institutions, other short term, high liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings on the Consolidated Statements of Financial Position.

(i) Receivables

Receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Receivables may include interest, dividends and trust distributions. Interest, dividends and trust distributions are accrued in accordance with the policy note set out in Note 2(n).

All receivables, unless otherwise stated, are non-interest bearing, unsecured and generally received within 30 days of being recorded as receivables.

Impairment allowance

Collectability of receivables is reviewed on an ongoing basis. Receivables which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of receivables) is used when there is objective evidence that AIX will not be able to collect all amounts due according to the original terms of the receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the receivable is impaired.

The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the original effective interest rate. Cash fl ows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised as expense in the profi t or loss. When a receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are written back against the impairment allowance in the profi t or loss.

Page 56 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(j) Securities

Securities comprise listed securities, unlisted securities and derivative securities.

Securities are recorded at fair value through the profi t or loss upon initial recognition. Costs incidental to the acquisition of securities and subsidiaries are recognised in the profi t or loss when incurred.

After initial recognition, securities are measured at fair value as they are managed and their performance evaluated on a fair value basis in accordance with AIX’s investment strategy.

Unrealised gains or losses on securities are recognised through profi t or loss and represent:

• Movements in the fair value of securities which are held as at the end of the reporting period.

Unrealised gains or losses on securities which are held as at the end of the reporting period are calculated as the difference between the fair value at the end of current reporting period and the fair value at the end of previous reporting period or the date the securities are acquired.

• Reversal of any life-to-date unrealised gains or losses as at the previous reporting period in connection with any securities that have been sold, restructured, settled or terminated in the current reporting period.

Realised gains and losses on securities are recognised through profi t or loss upon the sale, restructure, settlement or termination of securities and are calculated as the difference between the settlement amount and the fair value upon initial recognition.

In the prior year:

• Unrealised gains or losses arising from movements in the fair value of securities were calculated as the difference between the fair value at the end of current reporting period and the fair value at the end of previous reporting period.

• Realised gains or losses were calculated as the difference between the settlement and the fair value at the end of the previous reporting period.

Purchases and sales of securities that require delivery of securities within the timeframe generally established by regulation or convention in the marketplace are recognised on the trade date, i.e. the date that AIX commits to purchase or sell the securities.

Listed securities

AIX did not hold any listed securities at 30 June 2011 (2010: nil).

Derivative securities

AIX did not hold any derivative securities at 30 June 2011 (2010: nil).

Unlisted securities

Unlisted securities comprise ordinary shares, ordinary units, preference shares, shareholder loans and accrued interest income.

The fair value of unlisted securities is determined by an appropriately qualifi ed independent valuer, KPMG Corporate Finance (KPMG), primarily by projecting future cash fl ows and then discounting these cash fl ows back to their present value using a post-tax, risk adjusted discount rate. The independent valuations assume investments are not being sold and if they were to be realised then there may be potential capital gains tax implications for AIX or securityholders depending on the structure of any disposal. Discount rates used are developed on an individual unlisted security basis as determined by the independent valuer. KPMG calculates the relevant discount rate applied to the cash fl ows of each asset using the Capital Asset Pricing Model method, whereby a premium is added to the risk free rate. The premium takes into account the risk of comparable companies and also incorporates fi rm specifi c risk. KPMG uses a 10 year government bond rate in the relevant country as a proxy for the risk free rate. The Responsible Entity and the Company adopted KPMG’s valuations as at 30 June 2011.

Further information relating to unlisted securities is provided in Note 15.

The post-tax risk adjusted discount rates applied by KPMG Corporate Finance in determining the fair value of each unlisted security as at 30 June 2011 are detailed below:

		Post-tax		Post-tax
		risk adjusted		risk adjusted
	Valuation	discount rate	Valuation	discount rate
	30-Jun-11	30-Jun-11	30-Jun-10	30-Jun-10
Unlisted SecurityName	$’000	%	$’000	%
Perth Airport	525,176	13.05	435,100	13.15
Australia Pacif c Airports Corporation	451,839	11.60	410,140	11.20
HOCHTIEF AirPort Capital Group	313,463	13.20	305,288	12.80
Queensland Airports	271,687	15.00	270,812	15.10
Airport Development Group	99,403	14.80	83,476	14.90
Port of Portland	68,563	12.70	68,400	12.80
Port of Geelong Unit Trust & Infrastructure Investment Corporation	24,830	12.60	20,107	12.80
Statewide Roads	976	13.10	2,017	8.30
Metro Light Rail and Monorail	3,979	19.20	3,290	20.30

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 57

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(k) Payables

Payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Payables include liabilities and accrued expenses owing by AIX which are unpaid as at the end of the reporting period.

The distribution amount payable to securityholders as at the end of each reporting period is recognised separately when securityholders are presently entitled to the distributable income under AIX’s Constitution.

All payables, unless otherwise stated, are non-interest bearing, unsecured and generally settled on 30 day terms.

(l) Borrowings

All borrowings are initially recognised at fair value being the consideration received.

After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs or fees in relation to the establishment of borrowing facilities, and any discount or premium on settlement.

Fees paid on the establishment of borrowing facilities are initially capitalised as a prepayment for liquidity services and are subsequently amortised over the period of the facility to which it relates upon a draw down of funds.

Other borrowing costs are expensed through profi t or loss.

Borrowings are derecognised when the obligation specifi ed in the contract is discharged, cancelled or expired. The difference between the carrying amount of a fi nancial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised

(m) Issued fi nancial instruments

Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accordance with the substance of the contractual arrangement. Any transaction costs arising on the issue of such fi nancial instruments are recognised as a reduction of the proceeds received.

(n) Income and expense recognition

Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to AIX and the income can be reliably measured.

Expenses are recognised in the Consolidated Statements of Comprehensive Income when AIX has a present obligation (legal or constructive) as a result of a past event that can be reliably measured and where the expenses do not produce future economic benefi ts that qualify for recognition in the Consolidated Statements of Financial Position.

The following specifi c recognition criteria must also be met before income and expenses are recognised:

Interest income

Interest income is recognised as the interest accrues (using the effective interest method, which is the rate that discounts estimated future cash receipts through the expected life of the fi nancial instrument) to the net carrying amount of the fi nancial asset.

Dividend and distribution income

Dividend and distribution income is recognised when there is control over the right to receive the dividend or distribution payment.

Manager and Responsible Entity base management fees and performance fees

Information in relation to Manager and Responsible Entity base management fees and performance fees payable to Hastings is provided in Note 8.

Hastings is also entitled under the AIFT Constitution and the AIFL management agreement to be reimbursed for certain expenses incurred in administering AIX. The basis on which the expenses are reimbursed is defi ned in the AIFT Constitution and the AIFL management agreement.

Finance and borrowing costs

Refer to Note 2(l) for the recognition and measurement of borrowing costs. Other fi nance costs and borrowing costs are recognised as an expense when incurred.

(o) Distributions

AIFT’s Constitution requires the Responsible Entity to distribute to each securityholder an amount representing the distributable income entitlement of each securityholder in respect of a distribution period at the Responsible Entity’s discretion. Distributable income is defi ned under AIFT’s constitution as the net income of AIFT as defi ned under section 95(1) of the Tax Act, less any amounts the Responsible Entity may in its absolute discretion determine to deduct.

The net income of AIFT includes capital gains arising from the disposal of unlisted securities. Unrealised net gains or losses on unlisted securities are not included in the determination of net income. Capital losses are not included in the determination of net income but are retained to be offset against any future realised capital gains.

The AIFT Constitution also allows the Responsible Entity, as it may determine, to distribute to each securityholder any part of the corpus of AIFT in the proportion to which the securityholder would have been entitled in a distribution of that sum, were it distributable income.

Page 58 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(p) Income tax

AIFL and certain entities that are part of Consolidated AIFT are subject to income tax.

The income tax expense or revenue for the year is the tax payable or receivable on the current year’s taxable income based on the applicable income tax for each entity’s jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the entities operate and generate taxable income. Hastings periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the Consolidated Statements of Comprehensive Income.

(q) Goods and Services Tax (GST)

Income, expenses and assets are recognised net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated Statements of Financial Position. Reduced input tax credits recoverable by AIFL or AIFT from the Australian Taxation Offi ce are recognised as receivables in the Consolidated Statements of Financial Position.

Cash fl ows are included in the Consolidated Statements of Cash Flows on a gross basis and the GST component of cash fl ows arising from investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority, are classifi ed as operating cash fl ows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(r) Rounding of amounts

AIX is an entity of the kind referred to in Class Order 98/0100 (as amended), issued by the Australian Securities and Investments Commission, relating to the “rounding off’’ of amounts in the fi nancial report. Amounts in the consolidated fi nancial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

(s) Comparatives

Where necessary, comparatives have been reclassifi ed and repositioned for consistency with current year disclosures.

The carrying amount of deferred income tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 59

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

3. Interest income

3. Interest income
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Cash and cash equivalents Unlisted securities	2,130 2,281 2,130 2,281 14,091 13,501 14,091 13,501
Total interest income	16,221 15,782 16,221 15,782

4. Dividend income

4. Dividend income
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Unlisted securities	52,085	53,945	44,650	43,198
Total dividend income	52,085	53,945	44,650	43,198

5. Distribution income

5. Distribution income
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Unlisted securities	1,623	1,854	542	531
Total distribution income	1,623	1,854	542	531

6. Net gain/(loss): securities

6. Net gain/(loss): securities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Net gain/(loss) – unlisted securities
Net gain/(loss) – unrealised	215,746	141,318	158,007	134,718
Net gain/(loss) – realised	(47,698)	(101)	(2,198)	(101)
Total net gain/(loss) – unlisted securities	168,048	141,217	155,809	134,617
Total net gain/(loss) – securities	168,048	141,217	155,809	134,617

Incorporated in the current year net realised loss is a $45,499,999 loss upon the redemption of the Class A redeemable preference share held by AIX in Statewide Roads. This loss had been fully recognised in prior fi nancial years on an unrealised loss basis and has no impact on the 2011 income statements.

Page 60 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

7. Other income

7. Other income
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Director fee income	485	372	485	372
Consent fees	0	98	0	98
Total other income	485	470	485	470

8. Manager and Responsible Entity fees

8. Manager and Responsible Entity fees
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Base management fees	12,000	10,179	12,000	10,179
Performance fees	0	0	0	0
Total Manager and Responsible Entity fees	12,000	10,179	12,000	10,179

Base Management Fees

In accordance with the AIFL management agreement and the AIFT Constitution, Hastings as Manager and Responsible Entity is entitled to a base management fee.

The management fee is calculated at the rate of 1 percent per annum of AIX’s market capitalisation, based on the volume weighted average traded price over the 20 business days prior to the calculation date multiplied by the stapled securities outstanding. The management fee accrues daily and is payable monthly in arrears.

Performance Fees

In accordance with the AIFL management agreement and the AIFT Constitution, Hastings as Manager and Responsible Entity is also entitled to a performance fee. The performance fee is calculated as 10 percent of any positive performance position. The net performance position is the amount by which the AIX total securityholder returns exceeds the benchmark return, being the S&P ASX 200 Industrials Accumulation Index, at the end of each year. If the calculation of the AIX total securityholder returns for a year is less than the benchmark return for that year, the defi cit is carried forward and taken into account in calculating whether the AIX total securityholder returns exceeds the benchmark return in subsequent years.

At 30 June 2011 the net performance position stands at a carry forward shortfall (defi cit) of $25,328,910 (2010: $114,284,752).

As a consequence no performance fee has been paid or is payable to Hastings for the year ended 30 June 2011 (2010: $nil).

9. Finance costs

9. Finance costs
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Interest expense – stapled entity – AIFL	0	0	1,128	1,958
Interest expense – multi-option facility	0	474	0	474
Bank fees	11	6	12	5
Other borrowing costs	963	1,351	963	1,351
Total f nance costs	974	1,831	2,103	3,788

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 61

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

10. Audit fees

10. Audit fees
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $ $ $ $
Amounts paid and payable to the auditor, PricewaterhouseCoopers, excluding GST for: – Audit and review of the f nancial statements – Compliance plan audit – Other assurance services	135,265 132,070 97,617 70,070 15,910 15,300 15,910 15,300 6,240 6,000 6,240 6,000
Total audit fees	157,415 153,370 119,767 91,370

11. Income tax

11. Income tax
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
(a) Income tax expense Current tax expense Deferred income tax expense/(benef t)	663 988 0 0 9,340 6,282 5,743 4,235
Total income tax expense	10,003 7,270 5,743 4,235
(b) Numerical reconciliation of income tax expense to prima facie tax payable Net prof t/(loss) before income tax	222,324 198,523 200,440 177,895
Prima facie tax at the Australian tax rate of 30% (2010 – 30%) Tax effect of amounts which are not deductible/(assessable) in calculating taxable income: Prof t not assessable in hands of the Trust Franked dividend gross up Tax offset for franked dividend	66,697 59,557 60,133 53,368 (54,390) (49,134) (54,390) (49,133) 989 1,351 0 0 (3,293) (4,504) 0 0
Income tax expense	10,003 7,270 5,743 4,235
(c) Deferred income tax liability Deferred income tax liability	34,375 25,036 22,548 16,805
Comprising: Net unrealised gain on unlisted securities Dividend receivable	34,375 24,961 22,548 16,805 0 75 0 0
	34,375 25,036 22,548 16,805
The movement in the deferred income tax liability balance has been charged through prof t or loss. (d) Current income tax liability Current income tax liability	347 803 (4) (4)
	347 803 (4) (4)

All deferred income tax balances are not expected to be realised within the next 12 months.

Page 62 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

12. Cash and cash equivalents

(a) Reconciliation of net profi t/(loss) after income tax to the net cash fl ows from operating activities

	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Net prof t/(loss) after income tax Adjustments for non-cash and non-operating items: Net gain/(loss) – securities Net gain/(loss) – cash and cash equivalents Interest expense – stapled entity Changes in operating related assets and liabilities: (Increase)/decrease in income receivables (Increase)/decrease in other receivables (Increase)/decrease in prepayments (Increase)/decrease in accrued income Increase/(decrease) in payables Increase/(decrease) in accrued interest expense Increase/(decrease) in current income tax liability Increase/(decrease) in deferred income tax liability Increase/(decrease) in provisions	212,321 191,253 194,697 173,660 (168,048) (141,217) (155,809) (134,617) 0 2 0 2 0 0 1,128 1,958 12,193 (4,722) 11,959 (4,211) 20 (3,581) 20 (3,581) 236 324 236 324 6,546 113 6,546 113 25 270 25 270 0 (174) 0 (173) (457) 514 0 (8) 9,339 6,286 5,743 4,238 48 66 48 66
Net cash inf ow/(outf ow) from operating activities	72,223 49,134 64,593 38,041
(b) Components of cash and cash equivalents
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Cash at bank	79,237 61,990 71,158 61,990
Total cash and cash equivalents	79,237 61,990 71,158 61,990

(b) Components of cash and cash equivalents

(b) Components of cash and cash equivalents
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Cash at bank	79,237	61,990	71,158	61,990
Total cash and cash equivalents	79,237	61,990	71,158	61,990

Cash at bank earns interest at fl oating rates based on daily deposit rates.

(c) Signifi cant non-cash investing and fi nancing activities

There were no signifi cant non-cash investing and fi nancing activities during the year (2010: nil).

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 63

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

13. Receivables

13. Receivables
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Income receivable Security redemption proceeds receivable Other receivables	2,388 14,582 1,174 13,135 1,299 0 1,299 0 226 246 226 246
Total receivables	3,913 14,828 2,699 13,381

None of the receivables are impaired or past due but not impaired.

14. Other assets

14. Other assets
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Prepayments	89 324 89 325
Total other assets	89 324 89 325

Page 64 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

15. Securities

15. Securities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Unlisted securities
Perth Airport	525,176	454,200	525,176	454,200
Australia Pacif c Airports Corporation Limited	451,839	410,140	312,399	283,688
HOCHTIEF AirPort Capital Group	313,463	305,288	313,463	305,288
Queensland Airports Limited	271,687	259,526	271,687	259,526
Airport Development Group Pty Ltd	98,104	83,476	98,104	83,476
Port of Portland	66,632	65,360	40,529	39,752
Port of Geelong Unit Trust & Infrastructure Investment Corporation	24,372	19,851	0	0
Statewide Roads	976	2,017	0	0
Metro Light Rail and Monorail	3,979	3,290	3,979	3,290
Total unlisted securities	1,756,228	1,603,148	1,565,337	1,429,220
Total securities	1,756,228	1,603,148	1,565,337	1,429,220

All unlisted securities have been independently valued by KPMG Corporate Finance at 30 June 2011 and 30 June 2010.

		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
Percentage Ownership	%	%	%	%
Unlisted securities
Perth Airport	29.74%	29.74%	29.74%	29.74%
Australia Pacif c Airports Corporation Limited	12.39%	12.39%	8.57%	8.57%
HOCHTIEF AirPort Capital Group	40.02%	40.02%	40.02%	40.02%
Queensland Airports Limited	49.07%	49.07%	49.07%	49.07%
Airport Development Group Pty Ltd	28.23%	28.23%	28.23%	28.23%
Port of Portland	50.00%	50.00%	30.41%	30.41%
Port of Geelong Unit Trust & Infrastructure Investment Corporation	35.00%	35.00%	0.00%	0.00%
Statewide Roads	6.25%	6.25%	0.00%	0.00%
Metro Light Rail and Monorail	38.89%	38.89%	38.89%	38.89%

16. Payables

16. Payables
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Payable – the Responsible Entity	962	905	962	905
Distribution and dividend payable	31,037	31,037	28,037	26,937
Other payables	293	325	293	325
Total payables	32,292	32,267	29,292	28,167

For information regarding the distribution and dividend payable refer to Note 21. Further details of related party payables are included in Notes 25 and 26.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 65

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

17. Provisions

17. Provisions
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Provision for directors’ retirement benef t	722	673	722	673
Total provisions	722	673	722	673
Movement in the provision for directors’ retirement benef t:
Opening balance	673	608	673	608
Charged/(credited) to the prof t or loss	49	65	49	65
Closing balance	722	673	722	673

The directors’ retirement benefi t is available to non-executive directors of AIFL who were appointed prior to 16 April 2003.

The directors’ retirement benefi t is provided and paid on behalf of AIFL by AIFT.

18. Borrowings

18. Borrowings
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Loan – stapled entity – AIFL	0	0	13,873	27,919
Total borrowings	0	0	13,873	27,919

(a) Financing Arrangements

At the end of each reporting period the following fi nancing facilities were available:

		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Facilities available:
Standby debt facility	30,000	30,000	30,000	30,000
	30,000	30,000	30,000	30,000
Facilities drawn:
Standby debt facility	0	0	0	0
	0	0	0	0
Facilities undrawn:
Standby debt facility	30,000	30,000	30,000	30,000
	30,000	30,000	30,000	30,000

(b) Loan – stapled entity – AIFL

The loan from AIFL is unsecured, at call and interest bearing. Interest is charged at the 30 day bank bill rate.

(c) Standby debt facility

On 21 August 2009 AIX established a $30 million standby debt facility with Westpac and ANZ as lenders with an expiry date of 21 August 2011.

Interest on cash advances drawn under the facility is charged at a base rate plus a margin.

On 11 August 2011 AIX entered into a $100 million standby debt facility with Westpac and ANZ as lenders with an expiry date of 21 August 2013.

Page 66 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

19. Contributed equity

19. Contributed equity
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 No. ’000 No. ’000 No. ’000 No. ’000
(a) Issued securities (number) Opening balance Ordinary stapled securities issued: – pursuant to market placement	620,734 384,517 620,734 384,517 0 236,217 0 236,217
Closing balance	620,734 620,734 620,734 620,734
	$’000 $’000 $’000 $’000
(b) Issued securities (dollars) Opening balance Ordinary stapled securities issued: – pursuant to market placement Less: security issue costs	1,043,602 761,519 883,582 644,261 0 291,487 0 248,725 (27) (9,404) (28) (9,404)
Closing balance	1,043,5751,043,602 883,554 883,582

(c) Security issues

2011

There are no movements in the issued securities during the year.

2010

On 6 July 2009 AIX issued 100,662,039 stapled securities at a price of $1.10 per stapled security for a total consideration of $110,728,243 pursuant to a fully underwritten institutional placement. On 20 July 2009 AIX issued a further 91,598,600 stapled securities at a price of $1.10 per stapled security for a total consideration of $100,758,460 pursuant to a fully underwritten retail placement. Part of the proceeds of these offers was used to repay the multi-option facility which was drawn to $159.5 million.

On 14 May 2010 AIX issued 43,956,044 stapled securities at a price of $1.82 per stapled security for a total consideration of $80 million pursuant to a fully underwritten institutional placement. $75.1 million of the proceeds raised were used to fund a further acquisition of Australia Pacifi c Airports Corporation Limited with the balance of the proceeds used for transaction costs and general purposes.

(d) Terms and conditions of issued securities

The securities are stapled securities being shares in AIFL and units in AIFT.

Stapled securityholders have various rights under AIFL’s and AIFT’s Constitutions, including the right to:

• receive dividends and income distributions;

• attend and vote at meetings of stapled securityholders; and

• participate in the termination and winding up of AIFL and AIFT.

The rights, obligations and restrictions attached to each stapled security are identical in all respects.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 67

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

20. Retained earnings

20. Retained earnings
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Opening balance	577,909	446,532	547,774	422,590
Net prof t after income tax for the year	212,321	191,253	194,697	173,660
Dividends and distributions paid and payable to securityholders	(62,074)	(59,876)	(53,174)	(48,476)
Closing balance	728,156	577,909	689,298	547,774

21. Distributions and dividends paid and payable to securityholders

21. Distributions and dividends paid and payable to securityholders
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Interim distribution and dividend declared and paid	31,037	28,839	25,137	21,539
Final distribution and dividend declared and payable	31,037	31,037	28,037	26,937
Total distributions and dividends paid and payable to securityholders	62,074	59,876	53,174	48,476
Comprising:
Distributions declared during the year	53,174	48,476	53,174	48,476
Dividends declared during the year	8,900	11,400	0	0
	62,074	59,876	53,174	48,476

Final dividend and distribution

A fi nal dividend and distribution of $31,037,000 (5.00 cents per stapled security) was declared by AIX for the year ended 30 June 2011 (2010: 5.00 cents per stapled security) and will be paid on 30 August 2011.

The fi nal dividend and distribution comprised:

• a fi nal dividend of $3,000,000 (0.5 cents per security) declared by AIFL for the year ended 30 June 2011 (2010: 0.7 cents per stapled security) franked to 100 percent (2010: 100 percent); and

• a fi nal distribution of $28,037,000 (4.5 cents per security) declared by AIFT for the year ended 30 June 2011 (2010: 4.3 cents per stapled security).

Interim dividend and distribution

An interim dividend and distribution of $31,037,000 (5.00 cents per stapled security) was declared by AIX for the half year ended 31 December 2010 which was paid on 25 February 2011 (2009: $28,839,000 and 5.00 cents per stapled security).

The interim dividend and distribution comprised:

• an interim dividend of $5,900,000 (0.95 cents per security) declared by AIFL for the half year ended 31 December 2010 (2009: $7,300,000 and 1.27 cents per stapled security) franked to 100 percent (2009: 100 percent); and

• an interim distribution of $25,137,000 (4.05 cents per security) declared by AIFT for the half year ended 31 December 2010 (2009: $21,539,000 and 3.73 cents per stapled security).

22. Franking credit availability

22. Franking credit availability
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Frankingcredits available for distribution at the end of theyear	5,331	5,203	0	0

23. Segment information

Operating segments are based on the reports reviewed by the Board of AIFL and the Board of Hastings that are, in conjunction with the input and guidance of the chief executive offi cer of AIX, used to make strategic decisions for AIX. The operating segments are aligned with the investment objectives and guidelines set out in AIX’s PDS and in accordance with the provisions of AIX’s Constitutions.

AIX has one reportable operating segment being the investment in unlisted infrastructure securities.

The AIFL and Hastings Boards take a broad portfolio construction approach to the investment and divestment activities of infrastructure securities and to the management of AIX. Accordingly, all operating decisions are based upon analysis of AIX as one operating segment.

The segment information reported to the Boards is consistent with the Accounting Standards and therefore consistent with the information

Page 68 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

24. Financial instruments

(a) Financial risk management objectives and policies

AIX and Consolidated AIFT’s principal fi nancial instruments comprise cash and short-term deposits, investments in unlisted securities and interest-bearing loans and borrowings. The main purpose of these fi nancial instruments is to generate a return on the investment made by securityholders. AIX and Consolidated AIFT have various other fi nancial instruments such as trade receivables and trade payables, which arise directly from their operations.

AIX and Consolidated AIFT do not enter into or trade fi nancial instruments for speculative purposes.

The main risks arising from AIX’s and Consolidated AIFT’s fi nancial instruments are credit risk, interest rate risk, price risk, foreign currency risk, and liquidity risk.

The directors of AIFL and the directors of the Responsible Entity of AIFT review and agree policies for managing each of these risks.

Credit risk

Credit risk represents the risk that a counterparty will be unable to pay amounts in full when they fall due and AIX and Consolidated AIFT

The main concentration of credit risk to which AIX and Consolidated AIFT are exposed arises from their exposure to unlisted securities that are debt securities such as shareholder loans. AIX and Consolidated AIFT are also exposed to counterparty credit risk on cash and cash equivalents and other receivables.

To manage credit risk, AIX and Consolidated AIFT deal only with high credit quality fi nancial institutions for their cash transactions. At an asset level, AIX and Consolidated AIFT aim to achieve an appropriate risk adjusted return for each of their investments. This is achieved through appropriate investment due diligence on an asset by asset basis. With regard to credit risk at the portfolio level, AIX and Consolidated AIFT are diversifi ed by sector, geography and stage of development.

Interest rate risk

Interest rate risk is the risk that a fi nancial instrument’s value or the value of its cash fl ows may fl uctuate as a result of changes in market interest rates. Financial instruments whose cashfl ows are determined by reference to variable interest rates include cash and cash equivalents, interest bearing receivables, interest bearing unlisted securities and interest bearing borrowings.

Movements in interest rates directly affect the value of AIX and Consolidated AIFT’s unlisted securities. As discussed in Note 2(j), the value of the unlisted securities is determined by discounting the projected future cashfl ows of the underlying entity. The discount rate utilised incorporates a risk free rate component as well as a market risk premium factor that refl ects the excess return that a market portfolio of assets generates over the risk free rate. The market risk premium is generally determined with reference to market observations over a long period of time and therefore remains relatively stable.

Movements in interest rates directly affect cashfl ows generated by AIX and Consolidated AIFT’s cash and cash equivalents, interest bearing receivables, interest bearing unlisted securities and interest bearing borrowings.

Price risk

Price risk is the risk that a fi nancial instruments value may fl uctuate as a result of changes in its price.

AIX and Consolidated AIFT are exposed to price risk on their unlisted security holdings.

AIX and Consolidated AIFT mitigate price risk by a thorough due diligence process and careful selection of investments. On an ongoing basis, investee companies are monitored throughout the year via board representation, management reporting and detailed discussions with the underlying investee company. The results of the monitoring completed by management are reported to the AIFL and Hastings Boards on a regular basis.

Unlisted security prices are affected by the underlying cashfl ows of the unlisted security. The underlying cashfl ows used in valuing unlisted securities are provided by investee management in the form of a fi nancial model, which is reviewed at least annually during the budgeting process and approved by representatives on the investee’s board. The key drivers of the fi nancial model include expected volumes, agreed pricing and the cost and timing of capital expenditure projects at each asset. Forecast volumes and pricing negotiations are performed by investee management with the assistance of, as appropriate, external consultants who provide specialist advice and a further layer of objectivity. In pricing negotiations, the investee boards are often consulted on key issues and provided with regular updates throughout the process. Capital expenditure is planned by investee management and also requires investee board approval prior to project commencement.

Due to the long term view that is taken, AIX and Consolidated AIFT do not hedge against these short-term fl uctuations.

Foreign exchange rate risk

Foreign exchange rate risk is the risk that a fi nancial instrument’s value or the value of its cash fl ows may fl uctuate as a result of changes in foreign exchange rates.

AIX and Consolidated AIFT invest in one offshore unlisted security, whose value and cashfl ows are denominated in Euro. As a result, AIX and Consolidated AIFT are exposed to movements in the Australian dollar/Euro foreign exchange rate.

It is AIX’s and Consolidated AIFT’s policy not to hedge the carrying value of foreign currency denominated unlisted securities or any foreign currency cash fl ows that these foreign currency denominated unlisted securities generate.

Liquidity risk

Liquidity risk is the risk that AIX and Consolidated AIFT may not be able to generate suffi cient cash resources to settle their obligations in full as and when they fall due or can do so in forms that are materially disadvantageous.

To manage liquidity risk, AIX and Consolidated AIFT actively monitor cash balances and forecast operational cashfl ows and liabilities on a regular basis. In addition to available cash on hand, AIX and Consolidated AIFT have short term funding lines.

All AIX and Consolidated AIFT’s fi nancial liabilities as at 30 June 2011 are at call and due within 12 months.

As AIX’s investment strategy is long term, AIX and Consolidated AIFT do not hedge these interest rate exposures.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 69

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

24. Financial instruments (continued)

(b) Credit risk

There are no material amounts receivable past due or impaired.

Concentration of credit risk

Credit exposures at balance date are cash and cash equivalent balances (Note 12), receivables balances (Note 13) as well as the following unlisted security balances:

security balances:
Name Instrument Type	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Perth Airport Shareholder Loans Perth Airport Convertible Loan Notes HOCHTIEF AirPort Capital Group Shareholder Loans Queensland Airports Limited Loan Notes Metro Light Rail and Monorail Shareholder Loans	20,781 13,780 20,781 13,780 0 18,773 0 18,773 98,727 135,837 98,727 135,837 22,332 18,865 22,332 18,865 27,774 27,774 27,774 27,774
	169,614 215,029 169,614 215,029

The maximum exposure to credit risk of cash and cash equivalents, receivables and all securities aside from Metro Light Rail and Monorail, approximates their carrying amounts.

No collateral is held against receivables.

(c) Summarised sensitivity analysis

The following tables summarise the sensitivity of material fi nancial assets and fi nancial liabilities to movements in interest rates and foreign exchange rates.

Interest Rate Sensitivity

The effect of a +/- 0.5 percent shift in interest rates has been selected for interest rate sensitivity as it represents the approximate historic 12 month average movement in the yield of the 10 year Australian Government Bond Rate (the risk free rate). In any 12 month period the shift in interest rates could be more or less than 0.5 percent.

A change in interest rates affects the interest revenue and interest expense of AIX, affecting cash and cash equivalents, interest bearing receivables, unlisted securities and borrowings respectively.

The interest rate sensitivity assumes the discount rate used to determine the fair value of unlisted securities is changed by the stated amount, whilst holding all other variables constant. The effect of a +/- 0.5 percent shift in interest rates on unlisted securities has been approximated through valuation sensitivities performed at discount rates refl ecting the selected range while all other valuation variables are held constant.

Foreign Exchange Rate Sensitivity

The effect of a +/- 10 percent movement in foreign exchange rates has been selected for foreign exchange rate sensitivity.

In the current year, the Australian Dollar (AUD) had appreciated 17.52 percent against the British Pound Sterling (GBP), appreciated 6.35 percent against the Euro (EUR), appreciated 4.81 percent against the New Zealand Dollar (NZD) and appreciated 25.61 percent against the US Dollar (USD).

The 10 percent sensitivity was selected as it represents foreign exchange movements over a 12 month period in the context of the longer term historical volatility.

Page 70 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

24. Financial instruments (continued)

24. Financial instruments(continued)
AIX Carrying Consolidated AIFL Value 2011 $’000	Interest rate risk Foreign exchange risk
	–0.5% 0.5% –10.0% 10.0%
	Prof t Equity Prof t Equity Prof t Equity Prof t Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 79,237 Receivables 0 Securities 1,756,228 Financial liabilities Payables 32,292 Borrowings 0	(396) (396) 396 396 1,140 1,140 (932) (932) 0 0 0 0 0 0 0 0 (67,573) (67,573) 67,573 67,573 34,831 34,831 (28,496) (28,496) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total increase/(decrease)	(67,969) (67,969) 67,969 67,969 35,971 35,971 (29,428) (29,428)
	Interest rate risk Foreign exchange risk
	–0.5% 0.5% –10.0% 10.0%
AIX Carrying Consolidated AIFL Value 2010 $’000	Prof t Equity Prof t Equity Prof t Equity Prof t Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 61,990 Receivables 0 Securities 1,603,148 Financial liabilities Payables 32,267 Borrowings 0	(310) (310) 310 310 1 1 (1) (1) 0 0 0 0 0 0 0 0 (62,859) (62,859) 62,859 62,859 39,931 39,931 (22,836) (22,836) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total increase/(decrease)	(63,169) (63,169) 63,169 63,169 39,932 39,932 (22,837) (22,837)
	Interest rate risk Foreign exchange risk
	–0.5% 0.5% –10.0% 10.0%
Carrying Consolidated AIFT Value 2011 $’000	Prof t Equity Prof t Equity Prof t Equity Prof t Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 71,158 Receivables 0 Securities 1,565,337 Financial liabilities Payables 29,292 Borrowings 13,873	(356) (356) 356 356 1,140 1,140 (932) (932) 0 0 0 0 0 0 0 0 (59,531) (59,531) 59,531 59,531 34,831 34,831 (28,496) (28,496) 0 0 0 0 0 0 0 0 69 69 (69) (69) 0 0 0 0
Total increase/(decrease)	(59,818) (59,818) 59,818 59,818 35,971 35,971 (29,428) (29,428)
	Interest rate risk Foreign exchange risk
	–0.5% 0.5% –10.0% 10.0%
Carrying Consolidated AIFT Value 2010 $’000	Prof t Equity Prof t Equity Prof t Equity Prof t Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 61,990 Receivables 0 Securities 1,429,220 Financial liabilities Payables 28,167 Borrowings 27,919	(310) (310) 310 310 1 1 (1) (1) 0 0 0 0 0 0 0 0 (55,135) (55,135) 55,135 55,135 39,931 39,931 (22,836) (22,836) 0 0 0 0 0 0 0 0 140 140 (140) (140) 0 0 0 0
Total increase/(decrease)	(55,305) (55,305) 55,305 55,305 39,932 39,932 (22,837) (22,837)

			Interest rate risk	Interest rate risk			Foreign	exchange risk
		–0.5%			0.5%	–10.0%		10.0%
	Carrying
Consolidated AIFT	Value	Prof t	Equity	Prof t	Equity	Prof t	Equity	Prof t	Equity
2010	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	61,990	(310)	(310)	310	310	1	1	(1)	(1)
Receivables	0	0	0	0	0	0	0	0	0
Securities	1,429,220	(55,135)	(55,135)	55,135	55,135	39,931	39,931	(22,836)	(22,836)
Financial liabilities
Payables	28,167	0	0	0	0	0	0	0	0
Borrowings	27,919	140	140	(140)	(140)	0	0	0	0
Total increase/(decrease)		(55,305)	(55,305)	55,305	55,305	39,932	39,932	(22,837)	(22,837)

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 71

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

24. Financial instruments (continued)

(d) Fair values of fi nancial instruments

The carrying amounts of AIX’s and Consolidated AIFT’s fi nancial instruments and the methods and assumptions used to determine the fair values of instruments are summarised below.

Cash and cash equivalents

The carrying amounts of cash and cash equivalents approximate their fair values because of their short term to maturity.

Receivables and payables

The carrying amounts of receivables and payables approximate their fair values because of their short term to settlement.

Securities

Unlisted securities are measured at fair value through profi t or loss.

The determination of the fair values of the unlisted securities is outlined in Note 2(j).

Borrowings

The carrying amount of borrowings approximates their fair value on the basis that the borrowings in place are fl oating rate borrowings.

The fair value of borrowings is determined by projecting future cash fl ows and then discounting these cash fl ows back to their present value using a post-tax, risk adjusted discount rate. Where appropriate, fair value is calibrated to relevant market developments.

Fair value hierarchy of fi nancial instruments measured at fair value through profi t or loss

AASB 7 Financial Instruments: Disclosure requires fi nancial instruments measured at fair value to be classifi ed in the following fair value hierarchy:

• (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

• (b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

• (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The only fi nancial instruments that are fair valued as at 30 June 2011 are unlisted securities.

Unlisted securities are included in Level 3 on the basis that the valuation techniques adopted are based on signifi cant unobservable inputs.

The following table presents assets and liabilities measured and recognised at fair value.

AIX Consolidated AIFL	Level 1 Level 2 Level 3 Total
	2011 2010 2011 2010 2011 2010 2011 2010 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Assets Financial assets held at fair value through prof t or loss Unlisted securities	0 0 0 0 1,756,228 1,603,148 1,756,228 1,603,148
Total assets	0 0 0 0 1,756,228 1,603,148 1,756,228 1,603,148
	Level 1 Level 2 Level 3 Total
Consolidated AIFT	2011 2010 2011 2010 2011 2010 2011 2010 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Assets Financial assets held at fair value through prof t or loss Unlisted securities	0 0 0 0 1,565,337 1,429,220 1,565,337 1,429,220
Total assets	0 0 0 0 1,565,337 1,429,220 1,565,337 1,429,220

Page 72 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

24. Financial instruments (continued)

The following table presents the movements in Level 3 instruments.

24. Financial instruments(continued) The following table presents the movements in Level 3 instruments.
	Unlisted securities			Total
AIX	2011	2010	2011	2010
Consolidated AIFL	$’000	$’000	$’000	$’000
Opening balance	1,603,148	1,360,516	1,603,148	1,360,516
Acquisitions	5,528	94,203	5,528	94,203
Loan advances	11,151	7,226	11,151	7,226
Capital reductions and disposals	(79,593)	0	(79,593)	0
Net gain/(loss) recognised in prof t or loss	215,746	141,318	215,746	141,318
Movement in accrued loan interest	248	(115)	248	(115)
Closing balance	1,756,228	1,603,148	1,756,228	1,603,148
Total net gain/(loss) recognised in prof t or loss	168,048	141,217	168,048	141,217
Total gain/(loss) for the year included in prof t or loss that relates to assets
held at the end of the reporting period	215,746	141,318	215,746	141,318
	Unlisted securities			Total
	2011	2010	2011	2010
Consolidated AIFT	$’000	$’000	$’000	$’000
Opening balance	1,429,220	1,218,691	1,429,220	1,218,691
Acquisitions	803	68,698	803	68,698
Loan advances	11,151	7,226	11,151	7,226
Capital reductions and disposals	(34,093)	0	(34,093)	0
Net gain/(loss) recognised in prof t or loss	158,007	134,718	158,007	134,718
Movement in accrued loan interest	249	(113)	249	(113)
Closing balance	1,565,337	1,429,220	1,565,337	1,429,220
Total net gain/(loss) recognised in prof t or loss	155,809	134,617	155,809	134,617
Total gain/(loss) for the year included in prof t or loss that relates to assets
held at the end of the reporting period	158,007	134,718	158,007	134,718

(e) Foreign currency risk

AIX and Consolidated AIFT have unlisted securities denominated in Euro. As a result, the Consolidated Statements of Financial Position and Consolidated Statements of Comprehensive Income can be materially affected by movements in the respective Euro/AUD foreign exchange rate. Foreign currency exposures are summarised below:

Foreign currency exposures are summarised below:
		AIX
	Consolidated AIFL		Consolidated AIFT
	Financial assets		Financial assets
	in	EURO	in	EURO
	2011	2010	2011	2010
	AUD $’000	AUD $’000	AUD $’000	AUD $’000
Financial assets:
Cash and cash equivalents	10,257	7	10,257	7
Securities	313,463	305,288	313,463	305,288
	323,720	305,295	323,720	305,295

Operating income generated from unlisted securities denominated in foreign currencies is summarised below:

		AIX
	Consolidated AIFL		Consolidated AIFT
	Financial assets		Financial assets
	in	EURO	in EURO
	2011	2010	2011 2010
	AUD $’000	AUD $’000	AUD $’000AUD $’000
Interest	8,361	9,001	8,361 9,001
Net gain/(loss) – securities	14,235	(12,573)	14,235 (12,573)
	22,596	(3,572)	22,596 (3,572)

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 73

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

25. Related party transactions

(a) Associate entities

Names of associate entities

Associate entities and interests in these entities are as follows:

Names of associate entities Associate entities and interests in these entities are as follows:
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	Holding	Holding	Holding	Holding
Perth Airport (Airstralia Development Group & PAPT Holdings Pty Ltd)	29.74%	29.74%	29.74%	29.74%
HOCHTIEF AirPort Capital Group	40.02%	40.02%	40.02%	40.02%
Queensland Airports Limited	49.07%	49.07%	49.07%	49.07%
Airport Development Group Pty Ltd	28.23%	28.23%	28.23%	28.23%
Port of Portland	50.00%	50.00%	30.41%	30.41%
Port of Geelong Unit Trust & Infrastructure Investment Corporation	35.00%	35.00%	0.00%	0.00%
Metro Light Rail and Monorail	38.89%	38.89%	38.89%	38.89%

For further details in relation to holdings in associate entities refer to Note 15 – Securities.

Transactions with associate entities

Names of associate entities Associate entities and interests in these entities are as follows:
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 Holding Holding Holding Holding
Perth Airport (Airstralia Development Group & PAPT Holdings Pty Ltd) HOCHTIEF AirPort Capital Group Queensland Airports Limited Airport Development Group Pty Ltd Port of Portland Port of Geelong Unit Trust & Infrastructure Investment Corporation Metro Light Rail and Monorail	29.74% 29.74% 29.74% 29.74% 40.02% 40.02% 40.02% 40.02% 49.07% 49.07% 49.07% 49.07% 28.23% 28.23% 28.23% 28.23% 50.00% 50.00% 30.41% 30.41% 35.00% 35.00% 0.00% 0.00% 38.89% 38.89% 38.89% 38.89%
For further details in relation to holdings in associate entities refer to Note 15 – Securities. Transactions with associate entities
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Distribution income from Port of Portland Port of Geelong Unit Trust & Infrastructure Investment Corporation	890 872 542 531 733 982 0 0
Dividend income from Perth Airport (Airstralia Development Group & PAPT Holdings Pty Ltd) Airport Development Group Pty Ltd Port of Portland Queensland Airports Limited Port of Geelong Unit Trust & Infrastructure Investment Corporation Statewide Roads	17,248 16,474 17,248 16,474 2,926 4,040 2,926 4,040 1,500 1,500 912 912 12,022 11,286 12,022 11,286 0 250 0 0 1,698 5,229 0 0
Interest income from Perth Airport (Airstralia Development Group & PAPT Holdings Pty Ltd) Queensland Airports Limited HOCHTIEF AirPort Capital Group	3,795 2,659 3,795 2,659 1,937 1,841 1,937 1,841 8,360 9,001 8,360 9,001
Advance/(repayment) of unlisted security shareholder loans Perth Airport Queensland Airports Limited HOCHTIEF AirPort Capital Group	7,226 7,226 7,226 7,226 3,925 0 3,925 0 (8,763) 3,376 (8,763) 3,376
Acquisition/(disposal) of shares or units in Perth Airport Port of Portland Port of Geelong Unit Trust & Infrastructure Investment Corporation Queensland Airports Limited	803 803 803 803 0 4,750 0 2,889 4,725 0 0 0 0 0 0 0
Acquisition/(disposal) of convertible notes in Perth Airport	(18,968) 8,667 (18,968) 8,667
Security redemption proceeds from Airport Development Group Pty Ltd	6,362 0 6,362 0

Page 74 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

25. Related party transactions (continued)

Receivable and payable balances with associate entities

25. Related party transactions(continued) Receivable and payable balances with associate entities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Income receivable
Perth Airport	0	509	0	509
Port of Portland	1,931	3,040	1,174	1,849
Queensland Airports Limited	556	11,744	556	11,744
HOCHTIEF AirPort Capital Group	1,969	2,058	1,969	2,058
Port of Geelong Unit Trust & Infrastructure Investment Corporation	458	257	0	0
Security redemption proceeds receivable
Airport Development Group Pty Ltd	1,299	0	1,299	0

Receivable and payable balances are non-interest bearing and generally payable within 30 days.

Other related parties – the stapled group

Name of the stapled entity

The shares in AIFL are stapled to units in AIFT with the stapled securities listed on the Australian Stock Exchange. The stapled group is known as AIX. Transactions between stapled entities

Transactions between stapled entities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Proceeds from loans received from
AIFL	0	0	1,419	56,280
Loans advanced to
AIFL	0	0	15,464	41,968
Interest expense paid or payable to
AIFL	0	0	1,128	1,958

All expenses incurred by AIFL are paid on its behalf by AIFT.

Outstanding balances between stapled entities

Outstanding balances between stapled entities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Borrowings payable to
AIFL	0	0	13,873	27,919

The borrowing is at call and incurs interest at the 30 day bank bill rate (BBSW).

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 75

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

25. Related party transactions (continued)

Other related parties – the Manager and Responsible Entity

Name of the Manager and Responsible Entity

The Manager of AIFL and the Responsible Entity of AIFT is Hastings Funds Management Limited (Hastings) and the immediate parent entity of Hastings is Hastings Management Pty Limited (formerly Westpac Institutional Holdings Pty Limited).

The ultimate parent entity of Hastings Management Pty Limited is Westpac Banking Corporation (Westpac) which throughout the year held 100 percent of the ordinary issued capital of Hastings Management Pty Limited.

Transactions with the Manager and Responsible Entity and its related entities

Transactions with the Manager and Responsible Entity and its related entities
		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Cash and cash equivalents
Westpac	79,237	61,946	71,158	61,946
Base management fees paid or payable
Hastings	12,000	10,179	12,000	10,179
Reimbursement of expenses paid or payable on behalf of AIX
Hastings	207	230	207	230
Distributions paid or payable to
Westpac	1,801	1,737	1,801	1,737
Interest received or receivable
Westpac	2,130	2,277	2,130	2,277
Finance costs paid or payable
Westpac
Loan facilities – interest expense	0	237	0	237
Loan facilities – line fees	357	78	357	78
Loan facilities – agency fee	32	37	32	37
Loan facilities – establishment fee	217	435	217	435
Bank guarantee fees	0	2	0	2
Bank charges	11	3	11	3

For further details in relation to base management fees and performance fees paid to Hastings refer to Note 8 – Manager and Responsible Entity fees. For further details in relation to expense reimbursements paid to the Manger refer Note 2(n) – Income and expense recognition.

Outstanding balances with the Manager and Responsible Entity and its related entities

		AIX
	Consolidated AIFL		Consolidated AIFT
	2011	2010	2011	2010
	$’000	$’000	$’000	$’000
Distribution payable
Westpac	901	901	901	901
Management fees payable
Hastings	962	905	962	905
Loan facility
Westpac
Total facility available	15,000	15,000	15,000	15,000
Less: facility drawn	0	0	0	0
Facility undrawn	15,000	15,000	15,000	15,000

For details in relation to the loan facilities refer Note 18 – Borrowings.

The Manager and Responsible Entity and its related entities’ interests in the fi nancial instruments issued by AIX

The number of stapled securities and the percentage ownership interest held by Hastings and its related entities in the fi nancial instruments issued by AIX is detailed below:

by AIX is detailed below:
	Securities		Ownership	interest
	2011	2010	2011	2010
	No.	No.	%	%
Hastings	0	0	0.00%	0.00%
Westpac entities (excluding Hastings)	18,012,204	18,012,204	2.90%	2.90%

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Page 76

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26. Key management personnel

(a) Names of key management personnel

The key management personnel of AIFL and AIFT include persons who are directors of AIFL and directors and employees of the Responsible Entity of AIFT.

AIFL

The names of the key management personnel of AIFL during the year and up to the date of this report are:

Paul Espie	Chairman
Steven Boulton	Director – Retired on 1 April 2011
James Evans	Director
John Harvey	Director
Robert Humphris	Director
Michael Hutchinson	Director
Robert Tsenin	Director
Jeff Pollock	AIX Chief Executive Off cer

Responsible Entity of AIFT and Manager of AIFL

The names of the key management personnel of the Responsible Entity of AIFT and manager of AIFL during the year and until the date of this report are:

of AIFT and manager report are:	of AIFL during the year and until the date
Alan Cameron	Chairman
Steven Boulton	Director – Retired on 1 April 2011
William Forde	Director
James Evans	Director
Alan Freer	Director – Appointed on 1 April 2011
Stephen Gibbs	Director
James McDonald	Director
Victoria Poole	Director – Appointed on 20 April 2011
Leslie Vance	Director – Retired on 1 April 2011
Jeff Pollock	AIX Chief Executive Off cer

Key management personnel related entities

Steven Boulton, Alan Cameron, William Forde, James Evans, Alan Freer, Stephen Gibbs, James McDonald, Victoria Poole and Leslie Vance were directors of various Westpac subsidiary entities during the year.

John Harvey is a Director of Australia Pacifi c Airports Corporation (appointed 2 May 2011).

Jeff Pollock is a Director of Airport Development Group Pty Ltd and PAPT Holdings Ltd (Perth Airport), Airstralia Development Group Pty Limited and Queensland Airport Limited.

Transactions and outstanding balances with key management personnel related entities

For details of transactions and outstanding balances between key management personnel related entities and AIFL and AIFT refer to Note 25 – Related Party Transactions.

(b) Compensation policy for key management personnel

(i) Compensation policy for key management personnel of the Manager and Responsible Entity

Key management personnel of the Responsible Entity are paid by Hastings or its related entities in their roles as key management personnel of the Responsible Entity, not of AIX.

Key management personnel of the Responsible Entity are not remunerated by AIX. As such, disclosure of compensation paid to key management personnel of the Responsible Entity is not required.

(ii) Compensation policy for key management personnel of AIFL

Non-executive directors’ remuneration

Board policy on remuneration

The Board of directors of AIFL (the Board) is responsible for determining and reviewing compensation arrangements for the directors of the Company.

The fees paid to directors are set at levels that refl ect both the responsibilities of, and the time commitments required from, the directors to discharge their duties. In order to maintain their independence and impartiality, the remuneration of the non-executive directors is not linked to the performance of either the Company or the Trust.

In setting fee levels, the Board takes into account:

• independent professional advice;

• fees paid by comparable companies;

• the general time commitment required from directors and the risks associated with discharging the duties attaching to the role of director; and

• the level of remuneration necessary to attract and retain directors of a suitable calibre.

The Board will continue to review its approach to non-executive director remuneration to ensure it remains in line with general industry practice and best practice principles of corporate governance.

Remuneration structure

• Directors’ fees expensed for the year ended 30 June 2011 totalled $826,983 (2010: $785,372) and comprised:

• Fees paid or payable in respect of the current year of $826,983 (2010: $760,847); and

• Fees paid in respect of prior years of $0 (2010: $24,525).

Non-executive directors’ fees, including committee fees, are set by the Board within the maximum aggregate amount of $1,200,000 per annum (effective from 1 January 2010 and previously $800,000 per annum) approved by securityholders in 2010. Committee fees also include ad hoc committees such as Due Diligence committees which may be required from time to time. The remuneration of directors was last revised on 1 March 2011.

The Board elected in April 2003 to phase out the retirement benefi t and directors who joined the Board after that date are not entitled to a retirement benefi t. The retirement benefi t, where applicable, is determined by a consulting actuary. The Chairman of the Board predates the retirement benefi t phase out. No other directors are

The Chairman of the Board was entitled to a fee of $236,250 per annum until 28 February 2011 and $275,000 per annum from 1 March 2011. As the current Chairman continues to accrue retirement benefi ts in accordance with a resolution of the Board passed in 2003, he receives a lower fee than this to refl ect this benefi t. An appropriate deduction from his fees is made to take into account his retirement benefi t under the plan as calculated by a consulting actuary.

Directors were entitled to a fee of $94,500 per annum until 28 February 2011 and $110,000 per annum from 1 March 2011.

The fees paid to Hastings as Responsible Entity of AIFT and manager of AIFL are detailed in Note 25 – Related Party Disclosures.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 77

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26. Key management personnel (continued)

The Chairman of the Audit Committee was entitled to a fee of $21,000 per annum until 28 February 2011 and $23,000 per annum from 1 March 2011. The ordinary members of the Audit Committee were entitled to a fee of $10,500 per annum until 28 February 2011 and $11,500 per annum from 1 March 2011. The Chairman of the Board declined his fee for membership of the Audit Committee.

In addition, superannuation contributions are paid on behalf of the non-executive directors in accordance with the Company’s statutory superannuation obligations.

Remuneration paid to other offi ceholders

Steven Boulton, Hastings’ Chief Executive Offi cer until 1 April 2011 and Executive Director of AIFL until 1 April 2011, Alan Freer, Hastings’ Chief Executive Offi cer from 1 April 2011, Jeff Pollock, the AIX Chief Executive Offi cer and the Company Secretaries were not remunerated out of the property of AIFL or AIFT. These individuals were remunerated by Hastings or its related entities out of its management fee.

Remuneration paid to non-executive directors

Details of non-executive directors’ remuneration for the year ended 30 June 2011 are set out in the following table. No bonuses, options or other emoluments are paid to the directors of AIFL.

or other emoluments are paid to the directors of AIFL.
Keymanagementpersonnel of AIFL	Short-term Post employment
	Board Committee Super- fees fees annuation Retirement Total $ $ $ $ $
Paul Espie 2011 2010	227,867 0 20,508 0 248,375 236,250 0 23,470 0 259,720
James Evans 2011 2010	99,667 0 8,970 0 108,637 31,500 0 2,835 0 34,335
John Harvey 2011 2010	99,667 21,667 10,920 0 132,253 94,500 39,750* 12,083 0 146,333
Robert Humphris 2011 2010	99,667 0 8,970 0 108,637 94,500 0 8,505 0 103,005
Michael Hutchinson 2011 2010	99,667 0 8,970 0 108,637 94,500 0 8,505 0 103,005
Robert Tsenin 2011 2010	99,667 10,833 9,945 0 120,445 94,500 10,500 9,450 0 114,450
Total compensation: Key management personnel of AIFL 2011 2010	726,200 32,500 68,283 0 826,983 645,750 50,250 64,847 0 760,847

• Includes $18,750 due diligence committee fee.

Page 78 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26 Key management personnel (continued)

(c) Key management personnel interests in fi nancial instruments issued by AIX

Interests acquired or disposed of in the fi nancial instruments issued by AIX were within the allowable trading periods determined by the Board of Directors of Hastings and AIFL. No securities were granted to key management personnel during the year as compensation. Interests in the securities issued by AIX held by key management personnel and their related entities at the end of the reporting period were as follows:

Interests in the securities issued by AIX held by key management personnel and their related entities at the end of the reporting period were as follows:	Interests in the securities issued by AIX held by key management personnel and their related entities at the end of the reporting period were as follows:
Opening Closing Holding DRP Holding 1 July Acquisitions Issue Disposals 30 June Name No. No. No. No. No.
Paul Espie 2011 906,668 0 0 0 906,668 2010 604,445 302,223 0 0 906,668
Steven Boulton(1) 2011 262,500 0 0 0 262,500 2010 175,000 87,500 0 0 262,500
Alan Freer(2)(3) 2011 40,913 0 0 0 40,913 2010 27,275 13,638 0 0 40,913
Stephen Gibbs 2011 139 0 0 0 139 2010 139 0 0 0 139
John Harvey 2011 75,000 9,487 0 0 84,487 2010 50,000 25,000 0 0 75,000
Robert Humphris 2011 300,000 0 0 0 300,000 2010 200,000 100,000 0 0 300,000
Michael Hutchinson 2011 122,024 0 0 0 122,024 2010 81,349 40,675 0 0 122,024
James McDonald 2011 0 15,000 0 0 15,000 2010 0 0 0 0 0
Robert Tsenin 2011 137,060 20,000 0 0 157,060 2010 84,706 52,354 0 0 137,060
(1) Closing holding ref ects holding as at the date of retirement from the AIFL and Hastings Boards, being 1 April 2011. (2) Opening holding ref ects holding from the date of appointment to the Hastings Board, being 1 April 2011. (3) Prior year closing holding ref ects holding as at the date of retirement from the Hastings Board, being 6 October 2009. (d) Distributions declared and payable by AIX to key management personnel and their related entities Distributions declared and payable by AIX to key management personnel and their related entities during the year were as follows:
	Distributions Distributions Declared Payable
Name	2011 2010 2011 2010 $ $ $ $
Paul Espie Steven Boulton(1) Alan Freer(2)(3) Stephen Gibbs John Harvey Robert Humphris Michael Hutchinson Robert Tsenin	90,667 93,119 45,333 45,333 26,250 27,125 13,125 13,125 2,046 0 2,046 0 14 18 7 7 8,449 7,750 4,224 3,750 30,000 31,000 15,000 15,000 12,202 12,609 6,101 6,101 15,706 13,328 7,853 6,853

(1) Closing holding refl ects holding as at the date of retirement from the AIFL and Hastings Boards, being 1 April 2011.

(2) Opening holding refl ects holding from the date of appointment to the Hastings Board, being 1 April 2011.

(3) Prior year closing holding refl ects holding as at the date of retirement from the Hastings Board, being 6 October 2009.

(d) Distributions declared and payable by AIX to key management personnel and their related entities

Distributions declared and payable by AIX to key management personnel and their related entities during the year were as follows:

	Distributions	Distributions	Distributions	Distributions
	Declared		Payable
	2011	2010	2011	2010
Name	$	$	$	$
Paul Espie	90,667	93,119	45,333	45,333
Steven Boulton(1)	26,250	27,125	13,125	13,125
Alan Freer(2)(3)	2,046	0	2,046	0
Stephen Gibbs	14	18	7	7
John Harvey	8,449	7,750	4,224	3,750
Robert Humphris	30,000	31,000	15,000	15,000
Michael Hutchinson	12,202	12,609	6,101	6,101
Robert Tsenin	15,706	13,328	7,853	6,853

(1) Refl ects distributions up until the date of retirement from the AIFL and Hastings Boards, being 1 April 2011.

(2) Refl ects distributions from the date of appointment to the Hastings Board, being 1 April 2011.

(3) Prior year disclosures refl ect distributions up until the date of retirement from the Hastings Board, being 6 October 2009.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 79

Notes to the Financial Statements

for the year ended 30 June 2011

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

27. Earnings per security

27. Earnings per security
	AIX Consolidated AIFL Consolidated AIFT
	2011 2010 2011 2010
Basic earnings per security (cents) Weighted average number of securities (000’s) Netprof t after income tax($000’s)	34.20 33.22 31.37 30.16 620,734 575,764 620,734 575,764 212,321 191,253 194,697 173,660

Diluted earnings per security equates to basic earnings per security.

28. Contingent assets and liabilities and commitments

Investment commitments

Undrawn investment commitments at balance date comprise the following:

		Less	Between	More
		than	1 to 5	than
	At call	1 year	years	5 years	Total
Unlisted securityname	$’000	$’000	$’000	$’000	$’000
2011
Airstralia Development Group and PAPT Holdings (Perth Airport)	5,055	10,705	0	0	15,760
Total undrawn investment commitments	5,055	10,705	0	0	15,760
2010
Airstralia Development Group and PAPT Holdings (Perth Airport)	13,084	10,705	0	0	23,789
Total undrawn investment commitments	13,084	10,705	0	0	23,789

There are no other outstanding contingent assets, contingent liabilities or commitments at 30 June 2011.

29. Events after the end of reporting period

On 11 August 2011 AIX entered into a new $100 million standby debt facility with Westpac and ANZ as lenders with an expiry date of 21 August 2013.

No other signifi cant events have occurred since the end of the reporting period which would impact on the fi nancial position of AIX disclosed in the Consolidated Statements of Financial Position as at 30 June 2011 or on the results and cash fl ows of AIX for the year ended on that date.

Page 80 Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

30. Parent entity fi nancial information

(a) Summary of fi nancial information

30. Parent entity f nancial information (a) Summary of f nancial information
	AIFL AIFT
	2011 2010 2011 2010 $’000 $’000 $’000 $’000
Statements of Financial Position Total assets Total liabilities	214,056 203,294 1,639,298 1,504,915 15,178 13,139 43,887 56,759
Equity Contributed equity Retained earnings	160,021 160,021 883,554 883,582 38,857 30,134 711,857 564,574
Statements of Comprehensive Income Net prof t/(loss) after income tax for the year Total comprehensive income/(loss) for the year	17,623 17,593 200,458 177,934 17,623 17,593 200,458 177,934

(b) Contingent assets and liabilities and commitments

AIFL

There are no outstanding contingent assets, contingent liabilities or commitments at 30 June 2011 and at 30 June 2010.

AIFT

Investment commitments

Undrawn investment commitments at balance date comprise the following:

		Less	Between	More
		than	1 to 5	than
	At call	1 year	years	5 years	Total
Unlisted securityname	$’000	$’000	$’000	$’000	$’000
2011
Airstralia Development Group and PAPT Holdings (Perth Airport)	5,055	10,705	0	0	15,760
Total undrawn investment commitments	5,055	10,705	0	0	15,760
2010
Airstralia Development Group and PAPT Holdings (Perth Airport)	13,084	10,705	0	0	23,789
Total undrawn investment commitments	13,084	10,705	0	0	23,789

There are no other outstanding contingent assets, contingent liabilities or commitments at 30 June 2011 and at 30 June 2010.

Australian Infrastructure Fund Annual Report 2011 Notes to the Financial Statements Page 81

Directors’ Declarations

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

AIFL Directors’ Declaration

In the opinion of the directors of Australian Infrastructure Fund Limited (AIFL):

• (a) the consolidated fi nancial statements and notes set out on pages 49 to 81 are in accordance with the Corporations Act 2001 , including:

• (i) complying with the Australian Accounting Standards (including Interpretations) and other mandatory professional reporting requirements, the Corporations Regulations 2001 and are in accordance with AIFL’s Constitution; and

• (ii) giving a true and fair view of AIFL and Consolidated AIFL’s (AIX’s) fi nancial position as at 30 June 2011 and of their performance for the year ended on that date; and

• (b) there are reasonable grounds to believe that AIFL will be able to pay its debts as and when they become due and payable.

Note 2(a) confi rms that the fi nancial statements do comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

This declaration is made after receiving the declarations requested to be made to the directors in accordance with section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the directors of AIFL.

==> picture [92 x 33] intentionally omitted <==

Paul Espie Chairman

24 August 2011

AIFT Directors’ Declaration

In the opinion of the directors of the Responsible Entity:

• (a) the consolidated fi nancial statements and notes set out on pages 14 to 54 are in accordance with the Corporations Act 2001 , including:

• (i) complying with the Australian Accounting Standards (including Interpretations) and other mandatory professional reporting requirements, the Corporations Regulations 2001 and are in accordance with AIFT’s Constitution; and

• (ii) giving a true and fair view of AIFT and Consolidated AIFT’s fi nancial position as at 30 June 2011 and of their performance for the year ended on that date; and

(b) there are reasonable grounds to believe that AIFT will be able to pay its debts as and when they become due and payable.

Note 2(a) confi rms that the fi nancial statements do comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

This declaration is made after receiving the declarations requested to be made to the directors in accordance with section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors of the Responsible Entity.

Alan Cameron, Chairman

24 August 2011

Page 82 Australian Infrastructure Fund Annual Report 2011 Directors’ Declaration

Independent Audit Report

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

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Australian Infrastructure Fund Annual Report 2011 Independent Audit Report

Page 83

Independent Audit Report

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

==> picture [461 x 639] intentionally omitted <==

Australian Infrastructure Fund Annual Report 2011 Independent Audit Report

Page 84

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

==> picture [462 x 639] intentionally omitted <==

Australian Infrastructure Fund Annual Report 2011 Independent Audit Report

Page 85

Investor Details

The securityholder information set out below was applicable as at 15 August 2011.

1. Each stapled security consists of one share issued in the Company and one unit issued in the Trust.

2. The voting rights are one vote per stapled security.

3. The number of securityholders holding less than a marketable parcel of 261 securities was 589.

4. The percentage of the total holdings held by or on behalf of the 20 largest holders of these securities was 58.15 percent.

Twentylargest holders of securities	Number held % of total	Number held % of total
National Nominees Limited	80,664.631	13.00
JP Morgan Nominees Australia Limited	55,740,102	8.98
HSBC Custody Nominees (Australia) Limited	51,671,882	8.32
Citicorp Nominees Pty Limited	34,247,304	5.52
Australian Foundation Investment Company Limited	33,877,437	5.46
Westpac Banking Corporation	18,012,204	2.90
AMP Life Limited	14,825,855	2.39
JP Morgan Nominees Australia Limited	13,003,061	2.09
Cogent Nominees Pty Limited	11,519,708	1.86
RBC Dexia Investor Services Australia Pty Limited	8,066,989	1.30
Cogent Nominees Pty Limited	7,324,076	1.18
Mirrabooka Investments Limited	5,074,800	0.82
Djerriwarrh Investments Limited	4,649,319	0.75
Diversif ed United Investment Limited	4,500,000	0.72
Citicorp Nominees Pty Limited	3,674,282	0.59
Argo Investments Limited	3,185,735	0.51
Invia Custodian Pty Limited	2,938,745	0.47
Private Nominees Limited	2,727,846	0.44
UBS Nominees Pty Ltd	2,714,711	0.44
Australian Reward Investment Alliance	2,566,179	0.41
Total	360,984,866	58.15

1. The distribution of holders was as follows:

The distribution of holders was as follows:
	Number	% of	Stapled	% of
Stapled SecurityGrouping	of Holders	Total	Securities	Total
1–1,000	1,397	8.56	587,868	0.09
1,001–5,000	4,763	29.16	15,040,127	2.42
5,001–10,000	4,108	25.15	30,637,537	4.94
10,001–100,000	5,809	35.56	140,934,020	22.70
100,001–over	260	1.60	433,534,392	69.84
Total	16,337	100.00	620,733,944	100.00

1. Substantial holder notices received as at 15 August 2011:

Substantial holder notices received as at 15 August 2011:
	Number of
	stapled	% of
Name	securities	total
AMP Limited and its related bodies corporate	31,383,819	5.06
IOOF Holdings Limited	35,565,797	5.73

Page 86 Australian Infrastructure Fund Annual Report 2011 Investor Details

Distribution Information

The following table details the distributions paid to investors relating to the year ended 30 June 2011.

Distribution(centsper stapled security)
Distribution for six months to 31 December 2009	5.0 cents
Distribution for six months to 30 June 2010	5.0 cents
Total distributions for the year	10.0 cents
Yield on market value of security at 30 June 2011 ($1.92)	5.2%

The distribution components during the year ended 30 June 2011 were as follows:

Payment components	Amount(%)	Tax credit(%)
Company Dividend
Australian income
• Dividends – franked	100.00	100.00
Total Company Dividend	100.00	100.00
Trust Distribution
Australian income
• Dividends – franked	53.0666	30.6881
• Dividends – unfranked	24.8931	Nil
• Interest	11.5261	Nil
• Other	1.0371	Nil
Foreign income
• Passive income (interest)	9.0348	Nil
Tax-deferred Amount	0.4423	Nil
Total Trust Distribution	100.00	30.6881

Fund Payment Amount

In accordance with the requirements of the Managed Investment Trust rules, the total of the Fund Payment Amounts made for the year ended 30 June 2011 is:

	Fund
	Payment	No. of
	Amount	securities
Date	(CPS)	held
31/12/10	0.028	00,000
30/06/11	0.060	00,000
	0.088

To assist investors in their understanding of distributions and in completing their tax returns, an Annual Tax Guide and Annual Distribution Statement has been sent to investors. Information on determining the Cost Base of securities held in AIX is provided at www.hfm.com.au/aix

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For further information about AIX and Hastings please view our website www.hfm.com.au

Manage your investment (including change of address, banking and TFN details) and view statements by visiting www.hfm.com.au/investors and following the link to log into the Computershare Investor Centre with your SRN/HIN and postcode (or country of residence if outside Australia).

Subscribe to Updates: Receive announcements as they are released to the market by registering at www.hfm.com.au/subscribe

Australian Infrastructure Fund Annual Report 2011 Distribution Information Page 87

Investor Information

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Enquiries

You can access your securityholding information in a number of ways. The details are managed via the AIX registrar, Computershare Investor Services Pty Limited, and can be accessed as detailed below.

Please note, your Securityholder Reference Number (SRN) or Holder Identifi cation Number (HIN) is required for access.

InvestorPhone

InvestorPhone provides telephone access 24 hours a day, seven days a week. Step 1 Call 1300 132 288

Step 2 Follow the prompts to gain secure, immediate access to your:

• holding details

• registration details

• payment information.

Internet account access

Details of individual shareholdings can be checked or amended by visiting www.computershare.com.au/investors. For security reasons, you are required to key in your Securityholder Reference Number (SRN) or Holder Identifi cation Number (HIN) plus company name or ASX code and your postcode, choose a User ID and password, enter the Security code (shown in the box) and agree to the Terms and Conditions to enable access to personal information.

Please address enquiries to:

Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Australia GPO Box 2975 Melbourne VIC 3001 Australia Telephone (within Australia) 1300 132 288 Telephone (outside Australia) +61 3 9415 4054 Website www.computershare.com.au Email www.investorcentre.com/contact

Australian Securities Exchange listing

The stapled securities are listed on the ASX under the name Australian Infrastructure Fund and under the code ‘AIX’. The stapled securities participate in the Clearing House Electronic Subregister System (CHESS). For a current trading price you can refer to the ASX website (www.asx.com.au).

Distribution payment instruction

AIX only pays distributions by direct credit to a nominated bank account for Australian and New Zealand residents. Residents in other countries will receive payments by way of cheque drawn in Australian dollars. Alternatively, you may prefer to receive all or part of your distribution as additional securities by electing to participate in AIX’s Distribution Reinvestment Plan, if operational.

Tax File Number (TFN) or Australian Business Number (ABN) information

Whilst it is not compulsory for securityholders to provide a TFN, ABN or exemption notifi cation, Hastings is normally obliged to withhold tax from most payments to Australian resident securityholders who have not supplied such information. The rate at which the tax is withheld is generally 46.5 percent which represents the current highest personal marginal tax rate (plus Medicare levy). Any amount withheld is remitted to the Australian Taxation Offi ce and unitholders may be able to claim a credit or refund for it by including it in your income tax return. This type of withholding generally does not affect a non-resident securityholder.

Securityholders are entitled to quote an ABN instead of a TFN where the investment is made in the course or furtherance of an enterprise that is carried on by the securityholder. Securityholders who have not supplied their TFN, ABN or exemption notifi cation may do so by either going online to www.computershare. com.au/investors or writing to:

The Registrar, Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia.

Change of address

Unitholders who change their registered address should immediately notify our Share Registry either online at www.computershare. com.au/investors or in writing to:

The Registrar Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia.

Address changes for CHESS or broker sponsored holdings must be done through your sponsoring broker.

Privacy

We understand the importance you place on your privacy and are committed to protecting and maintaining the confi dentiality of the personal information you provide to us. AIX adopted the privacy policy of Hastings Funds Management Limited, which is available on the Hastings website (www.hfm.com.au).

Annual Report

To receive further copies of the AIX Annual Report, please go to www.computershare.com.au/investors or telephone Computershare Investor Services on 1300 132 288 (within Australia) or +61 3 9415 4054 (outside Australia).

Complaints handling

You can lodge your Complaint online at www.investorcentre.com.au/conact or by contacting one of the customer service representatives at Computershare who are available between 8.30am and 6.00pm, weekdays, from anywhere in Australia, by calling the Registrar on 1300 132 288 (within Australia) or on +61 3 9415 4054 (outside of Australia).

If you have a concern, please write to Hastings at the address set out below or call the Complaints Manager to register your complaint by telephone on +61 3 8650 3600. Hastings will acknowledge your concern, investigate it and report back to you.

Complaints Manager

Hastings Funds Management Limited Level 16 90 Collins Street Melbourne VIC 3000 Australia.

If you are dissatisfi ed with Hastings’ response, you may raise the matter directly with the Financial Ombudsman Service (FOS). Its contact details are:

Financial Ombudsman Service

GPO Box 3 Melbourne VIC 3001 Australia Telephone (within Australia) 1300 780 808 Telephone (outside Australia) +61 3 9613 7366

Before you contact FOS, fi rst try to resolve your concern with Hastings by calling +61 3 8650 3600.

Page 88 Australian Infrastructure Fund Annual Report 2011 Investor Information

Corporate Directory

Hastings Funds Management is a subsidiary of the Westpac Banking Corporation. Hastings is a specialist manager of infrastructure equity and alternative debt investments. As at 30 June 2011 Hastings had approximately $6.5 billion in funds under management.