FUTURE GENERATION AUSTRALIA LIMITED - Annual Report 2012

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 27, 35 Collins Street Melbourne VIC 3000 Australia T +61 3 8650 3600 F +61 3 8650 3701 www.hfm.com.au Melbourne, London, New York, Sydney

ASX Announcement

Australian Infrastructure Fund (AIX)

28 September 2012

AIX 2012 Annual Report

Attached is the AIX 2012 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: [email protected] Website: www.hfm.com.au

Simon Ondaatje Head of Investor Relations Hastings Funds Management Tel: +61 3 8650 3600 Fax: +61 3 8650 3701 Email: [email protected] Website: www.hfm.com.au

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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.

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AIX Australian Infrastructure Fund Annual Report

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 Perth Airport Development Group (Perth)
14 Australia Pacifi c Airports Corporation (APAC)
15 Queensland Airports Limited (QAL)
16 Airport Development Group (NT Airports)
17 HOCHTIEF AirPort Capital (HTAC)
21 Port of Geelong, Metro Transport Sydney and Port of Portland
21 Statewide Roads
22 Australian Infrastructure Fund Limited Board
24 Hastings Funds Management Limited Board
26 Australian Infrastructure Fund Organisational Structure
27 Corporate Governance
28 AIFL Corporate Governance Statement 34 AIFT Corporate Governance Statement 40 Financial Information
86 Investor Details
87 Distribution Information 88 Investor Information IBC Corporate Directory

20 12

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Australian Infrastructure Fund’s (AIX or the Fund) 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 2012, AIX had a market capitalisation of $1,489.8 million.

On 24 August 2012, AIX announced that it had entered into a Memorandum of Understanding in relation to a proposal received from the Future Fund Board of Guardians to acquire all the AIX operating assets, being interests in Perth Airport, Australian Pacifi c Airports Corporation (primarily Melbourne Airport), Queensland Airports, HOCHTIEF AirPort Capital, NT Airports and the residual interest in Statewide Roads.

The price proposed by the Future Fund for the assets is $2.0 billion, which equates to $3.22 per security and is a premium to both the independent value ascribed to the assets at 30 June 2012 and to the then prevailing security price. The proposal is conditional and non-binding, and is subject to confi rmatory due diligence by the Future Fund and fi nal approval by the Future Fund Board of Guardians.

If and when a binding agreement is executed, the independent directors of AIFL and the directors of HFML, who are not confl icted, intend to recommend the transaction to AIX securityholders, in the absence of a superior proposal. A meeting would then be held at which securityholders would vote on the transaction.

Annual General Meeting

The sixteenth Annual General Meeting of Australian Infrastructure Fund (AIX) will be held at the Park Hyatt Melbourne, Fairmont Room, 1 Parliament Square off Parliament Place, Melbourne at 10.00 am on Thursday 13 December 2012.

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 [email protected].

About Hastings Funds Management

Hastings Funds Management Limited (Hastings) is the Manager and Responsible Entity for AIX. Hastings is a specialist manager of infrastructure equity and debt. Established in 1994, Hastings now manages approximately $7.1 billion as at 30 June 2012, providing the investment community with direct access to infrastructure assets such as airports, tollroads, seaports, gas and electricity transmission and water utilities. Hastings is majority owned by Westpac Banking Corporation, with staff being the other shareholders.

QAL Airports

Australian Infrastructure Fund Annual Report 2012 1

AIX Portfolio Composition

The AIX Portfolio comprises transport infrastructure assets, predominantly airports.

Asset Holdings

Airports %

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7.6
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51.9
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36.7
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Perth Airport Development Group Perth Airport

Australia Pacific Airports Corporation Melbourne and Launceston airports

Queensland Airports Limited Gold Coast, Mount Isa and Townsville airports

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10.0
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Airports Development Group (NT Airports) Darwin, Alice Springs and Tennant Creek airports

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

The transfer of ownership interests in all assets, except Statewide Roads, is 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

2 Australian Infrastructure Fund Annual Report 2012 AIX Portfolio Composition/Asset Holdings

Asset Locations

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Düsseldorf Airport
Hamburg Airport
Athens Airport
Townsville Airport
Darwin Airport
Mt Isa Airport
Gold Coast Airport
Tennant Creek Airport
Alice Springs Airport
Sydney Airport
Perth Airport Melbourne Airport
Launceston Airport
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Australian Infrastructure Fund Annual Report 2012 Asset Locations

Performance Summary

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Perth Airport
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Net profi t after tax ($m)($m) Distributions per AIX security price ($ps)
Operating profi t after stapled security (cps)(cps) Security price of $2.40 as
tax of $196.0 million Distributions of 10.5 cents at 30 June 2012 (2011: $1.92)
(2011: $212.3 million) per stapled security paid
for the year to 30 June 2012
(2011: 10.0 cents)
$m cps $ps
250 25 2.5
200 20 2.0
150 15 1.50
100 10 1.0
50 5 0.5
0 0 0
08 09 10 11 12 Year 08 09 10 11 12 Year 08 09 10 11 12 Year
206.5 100.6 191.3 212.3 196.0 16.5 13.0 10.0 10.0 10.5 1.98 1.35 1.70 1.92 2.40
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Net profi t after tax ($m)($m) Distributions per
Operating profi t after stapled security (cps)(cps)
tax of $196.0 million Distributions of 10.5 cents
(2011: $212.3 million) per stapled security paid
for the year to 30 June 2012
(2011: 10.0 cents)
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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.

4 Australian Infrastructure Fund Annual Report 2012 Performance Summary

Asset Returns

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The individual asset returns below are for the 2011 and 2012
fi nancial years. The portfolio achieved a return of 14.0 percent for
the 2012 fi nancial year. The return was in the form of cash fl ow
(38.4 percent), gains from investments (54.8 percent) and franking
credits (6.8 percent). The assets within the AIX portfolio during
the 2012 fi nancial year have generated a return of 18.1 percent
per annum (including franking credits) since inception.
Airports %
Total asset return for 2012: 13.6%
Total asset return for 2011: 16.6%
11 12 Year 11 12 Year 11 12 Year
Perth Airport Australia Pacific Queensland Airports Limited
Development Group Airports Corporation Gold Coast, Townsville
Perth Airport Melbourne and and Mount Isa airports
Launceston airports
11 12 Year 11 12 Year
Airport Development Group HOCHTIEF AirPort Capital
(NT Airports) Athens Airport, Greece;
Darwin, Alice Springs and Düsseldorf and Hamburg
Tennant Creek airports airports, Germany;
Sydney Airport, Australia
24.5 17.0 16.2 11.3 9.7 22.1
31.0 23.7 7.5 0.8
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Australian Infrastructure Fund Annual Report 2012 Asset Returns

Chairman’s Report

Paul Espie, Chairman Australian Infrastructure Fund Limited

The presentation of this year’s Annual Report to securityholders on behalf of the boards of Australian Infrastructure Fund Limited (AIFL), and Hastings Funds Management Limited (HFML) (as Manager of AIFL and Responsible Entity of the Australian Infrastructure Fund Trust (AIFT)), together comprising the Australian Infrastructure Fund (AIX), is a particular pleasure.

−The AIX security price performed strongly during the year, closing at $2.40 on 30 June 2012, up 25.0 percent from its closing price of $1.92 on 30 June 2011, outperforming the S&P/ASX 200 Industrials Index, which decreased 2.3 percent over the same period.
−The net tangible asset value stood at $3.01 per security at 30 June 2012, up 5.4 percent for the year.
−Increased cash fl ow received from portfolio assets enabled an increase in distributions for the 2012 fi nancial year to 10.5 cents per security, representing total shareholder return of 30.5 percent for the year ending 30 June 2012.
−Good progress with strategy, including sale of non-core assets.
−In-principle non-binding agreement reached with Hastings Funds Management to internalise the management of AIX.
−Memorandum of Understanding executed for the sale of AIX’s assets to the Future Fund for $2.0 billion, subject to certain conditions precedent.

Fund performance and strategy

Pursuant to the previously announced strategy of the Fund, AIX successfully sold its non-core interests in Metro Transport Sydney, Port of Geelong and Port of Portland during the 2012 fi nancial year. AIX received total consideration of $100.8 million from these divestments compared to the value of $100.4 million independently attributed to them at 31 December 2011 by KPMG. Airports now represent 99.9 percent of the AIX portfolio by value.

On 29 June 2012, AIX announced that the boards of AIFL and HFML had reached an in-principle non-binding agreement on key terms to internalise the management of AIX. Subsequently, on 24 August 2012, AIX announced that it had entered into a Memorandum of Understanding in relation to a proposal received from the Future Fund Board of Guardians to acquire all the AIX operating assets, being interests in Perth Airport, Australian Pacifi c Airports Corporation (primarily Melbourne Airport), Queensland Airports, NT Airports, HOCHTIEF AirPort Capital and the residual interest in Statewide Roads.

The indicative offer price of $2.0 billion equates to approximately $3.22 per stapled security which, together with any residual cash and net of transaction related expenses, is intended to be distributed to

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securityholders. The proposal is conditional and non-binding presently, with the parties intending to proceed to a binding implementation agreement, subject to securityholder consent, after the Future Fund has completed confi rmatory due diligence and received fi nal approval for the transaction from the Future Fund Board of Guardians.

If and when a binding agreement is executed as proposed, the independent directors of AIFL and the directors of HFML, who are not confl icted, intend to recommend the transaction to AIX securityholders, in the absence of a superior proposal. A meeting would then be held at which securityholders would vote on the transaction.

The boards of AIFL and HFML have meanwhile agreed to continue to progress the implementation agreement and other aspects of the proposed internalisation of AIX management, until such time as an implementation agreement with the Future Fund has been executed. We will continue to keep you updated as these matters progress.

Asset performance

The Australian airports in the AIX portfolio continued to deliver strong fi nancial performance in the 2012 fi nancial year. While passenger number growth was relatively subdued, benefi ts derived from recent investment in terminal and car parking infrastructure in the portfolio was evident, with resultant revenue and earnings growth in the key Australian airports.

At 30 June 2012, Australian airports represented 91.2 percent of the AIX portfolio by value, European airports 8.8 percent. The airports achieved moderate passenger growth for the 2012 fi nancial year. With the exception of Perth Airport, which enjoyed strong growth throughout the year, passenger growth at the Australian airports was relatively fl at in the fi rst half of the 2012 fi nancial year, partially due to the suspension of Tiger Airways, the brief grounding of Qantas and the residual effects of one-off shocks in Australia and overseas. A return to growth was evident in the second half, with the Australian economy supporting growth particularly at Perth and Melbourne airports and the high Australian dollar leading to increased international passenger numbers at Perth, Melbourne and Darwin airports. Overall, passenger numbers at the Australian airports weighted by AIX’s interest, grew by 2.3 percent for the year ended 30 June 2012.

DÜsseldorf and Hamburg airports performed well, with consolidated passenger growth of 3.6 percent for the 2012 fi nancial year, while Athens Airport underperformed as a result of the continued economic uncertainty in Greece. Consolidated passenger numbers through AIX’s European airport investments remained similar to the prior year.

6 Australian Infrastructure Fund Annual Report 2012 Chairman’s Report

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Perth Airport
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Capital investment and funding in key assets

During the year, AIX made equity contributions of $25.0 million and $2.5 million to Perth Airport and Queensland Airports Limited (QAL) respectively to support organic growth of these assets. A number of expansion projects were completed during the year, including the Terminal 3 phase 1 works at Perth, which included an upgrade to the departures lounge and other capacity enhancements; baggage carousels 6 & 7 at Melbourne; a Virgin Lounge facility at Gold Coast; and the Australian Federal Police offi ce building at Darwin International Airport. A number of projects are in progress at our assets which are designed to capitalise on growth in passenger numbers at these airports and ensure capacity for growth into the future.

In the past year, Perth, QAL and NT Airports successfully refi nanced and increased their debt facilities. In August 2011, AIX successfully completed the refi nancing and increase of its fund level debt facility for a two year term. This facility remains undrawn. Also during the year, Perth Airport announced that it had concluded comprehensive aeronautical pricing agreements with airlines carrying 97 percent of passengers. These agreements apply until 30 June 2018 and underpin AIX’s continued investment in Perth Airport’s development, including its current signifi cant expansion program.

Regulatory environment

On 30 March 2012 the Australian Government released the Productivity Commission’s fi nal report following its inquiry into the economic regulation of airport services. This follows the draft report released by the Productivity Commission in December 2011. The fi nal report is broadly as expected and will result in an extension of the current monitoring of airport pricing by the ACCC for another seven years to 2020, including airport car parking prices.

The Government did not support the Productivity Commission’s recommendation for a process whereby airports would be required to ‘show cause’ as to why they should not be subject to a prices inquiry under Section VIIA of the Competition Act. Rather, the Government is ‘encouraging the ACCC to use its existing powers to investigate if it believes there are concerns about airports abusing market power, including being able to recommend a full pricing inquiry to the Minister responsible for competition’. We consider this to signal a ‘business-asusual’ approach with further signifi cant regulatory intervention within the sector unlikely before 2020.

Outlook

AIX is now an airport focused fund, its principal investments being in Australian airports and is well positioned for organic growth, with the diversifi ed nature of the portfolio being a particular strength in the current uncertain global economic environment. Although domestic growth is likely to remain subdued in the short term, except at Perth Airport, which continues to benefi t from the resources sector demands, planned airline capacity increases at AIX core airports will facilitate domestic demand. The continued penetration of the airline market by low-cost carriers and competition in international markets are a further stimulus to growth. Depending on developments in the external environment, we expect this to continue, perhaps at a more subdued level than that experienced in the 2011 and 2012 fi nancial years.

In Europe, with economic conditions remaining diffi cult and with austerity measures still in place in several European countries, our outlook on Athens Airport remains unchanged; we expect passenger traffi c there to remain restricted in the year ahead. The German airports are expected to continue to benefi t from the resilient economic environment in that country. International passenger numbers at Düsseldorf Airport are forecast to grow due to its increasing importance as a transfer hub and strong catchment area. Growth in international traffi c for Hamburg Airport is expected to compensate in-part for weakness in domestic travel.

The AIFL and HFML boards will continue to keep securityholders informed of the progress on the internalisation implementation agreement and the proposal of the Future Fund. Assuming the Future Fund proposal progresses to binding documentation, we anticipate seeking securityholder approval for the proposed transaction, which would be recommended by the independent directors of AIX in the absence of a superior proposal, at an Extraordinary General Meeting, which is planned to be held with the Annual General Meeting in December.

It has been a successful year for AIX and on behalf of the AIFL and HFML boards, I thank Jeff Pollock and his team for their continuing commitment to the Fund and hard work. We also thank you, as securityholders, for your continued support and look forward to seeing you at the Annual General Meeting in December.

Paul Espie, Chairman Australian Infrastructure Fund Limited 17 September 2012

Australian Infrastructure Fund Annual Report 2012 Chairman’s Report 7

Chief Executive Offi cer’s Report

Jeff Pollock, Chief Executive Offi cer Australian Infrastructure Fund

Airports now represent 99.9 percent of the total AIX portfolio by value, and over 136 million passengers passed through AIX’s airports during the year, an increase of 1.9 percent on the prior year when weighted by AIX’s ownership.

Continued portfolio performance

The assets AIX is invested in as at 30 June 2012, represented by AIX’s investment in unlisted securities, increased in value during the year to $1,816.2 million. The value of unlisted securities in the prior year included the value of AIX’s investment in Port of Portland, Port of Geelong and Metro Transport Sydney, which were sold during the year. The value of the unlisted securities held at 30 June 2012 (excluding the assets sold in the year) increased by 9.2 percent on the prior year. This increase in value is predominately related to unrealised gains on the revaluation of the assets by the independent valuer, KPMG. Net tangible assets per security increased by 5.4 percent in the 2012 fi nancial year, from $2.85 to $3.01, refl ecting the increased value of the assets in the portfolio and cash on hand.

Revenue from ordinary activities decreased by 9.2 percent on the prior year, from $238.5 million to $216.5 million, largely driven by a reduction in unrealised gains in the independent valuation of assets in the portfolio compared to the prior year. Net gains for the year to 30 June 2012 were $139.6 million, compared to $168.0 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 unrealised gains was $76.7 million for the period, a 9.0 percent increase on the $70.4 million achieved in the prior year.

The assets comprising the AIX portfolio contributed $86.3 million in cash fl ows to the Fund during the year compared to $80.8[(1)] million in the prior year, an increase of 6.8 percent. The cash was received in the form of distributions, dividends, repayment of shareholder loans and interest on shareholder loans. The increase in cash from assets was largely due to increased cash received from QAL and HOCHTIEF AirPort Capital (HTAC), the vehicle through which AIX owns its interests in DÜsseldorf, Hamburg, Athens and Sydney airports. The increase in cash fl ow received from QAL was partly due to interest cost savings resulting from improved

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debt margins and favourable swap pricing, a litigation settlement and tax refund received. HTAC increased its distribution as a result of an increase in cash fl ows from its portfolio assets. This was a result of the improved operational performance at Hamburg, Düsseldorf and Sydney airports, in addition to a release of profi ts from Athens Airport that were retained in prior years.

AIX airports deliver continued passenger growth

Airports now represent 99.9 percent of the total AIX portfolio by value, and over 136 million passengers passed through these airports during the year, an increase of 0.7 percent on the prior year. When weighted by AIX’s ownership interest in these airports, passenger numbers grew by 1.9 percent, with passenger numbers at the Australian airports, when weighted by AIX’s interests, increasing by 2.3 percent on the prior year.

Perth Airport recorded total passenger growth of 10.3 percent for the year, with domestic and international passengers increasing by 11.7 percent and 6.9 percent respectively on the prior year. The ongoing strength in the airport’s domestic passenger numbers is largely attributable to continued growth in fl y-in, fl y-out volumes related to the oil, gas and mining sectors in the region. In the international terminal, passenger numbers have continued to benefi t from the strong Australian dollar, which has supported leisure travel into Asia, particularly Bali.

Total passengers at Melbourne Airport for the 2012 fi nancial year were in line with the prior year, while domestic volumes declined by 2.0 percent, affected by seat capacity reductions. The airport achieved 7.9 percent growth in international patronage as new international services commenced following the airport’s strategic focus on attracting Asian travellers.

QAL, which owns Gold Coast, Townsville and Mount Isa airports, reported a slight decline in its overall passenger numbers of 1.0 percent for the fi nancial year, which is largely attributed to the strong Australian dollar and subdued global economic conditions having negatively affected leisure travel to the Gold Coast: Gold Coast is a leisure destination.

(1) Excludes dividend of $11.3 million received from QAL in FY11 relating to FY10.

8 Australian Infrastructure Fund Annual Report 2012 Chief Executive Officer’s Report

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Perth Airport
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Passenger numbers for NT Airports, which owns and operates Darwin International (DIA), Alice Springs and Tenant Creek airports, declined by 3.2 percent compared to the prior year. However, the international terminal at DIA performed strongly, with traffi c increasing by 14.3 percent on the prior year, driven by the popularity of low-cost services to South East Asian destinations, particularly Bali. Domestically, DIA was largely consistent with the prior year while Alice Springs Airport traffi c volumes declined by 9.5 percent, largely due to inbound tourism being negatively affected by the strong Australian dollar.

Passengers through AIX’s European airports, on a consolidated basis, were largely consistent with the prior year. While Athens Airport underperformed as a result of the continued economic uncertainty in Greece, each of DÜsseldorf and Hamburg airports performed well, with consolidated passenger growth of 3.6 percent for the fi nancial year to 30 June 2012.

Sydney Airport, which is also part of AIX’s HTAC investment, recorded passenger numbers that were consistent with the prior year.

Prudent debt levels and refi nancing initiatives

The assets in the AIX portfolio continue to maintain prudent levels of debt and healthy coverage ratios. In the past year a number of AIX’s airports have successfully refi nanced their existing facilities and in some instances, obtained additional funding.

In November 2011, Perth Airport secured $915 million of revolving facilities spread across four, six and seven year terms, along with a $300 million bank facility to back stop a future debt capital markets issue. An additional $15 million working capital facility was also put in place at this time. In July 2012, Perth Airport successfully issued $US270 million and $30 million of senior secured notes in a Private Placement issue to US investors. As a consequence the $300 million ‘back stop’ debt facility negotiated in November 2011 is no longer required. The refi nancing provides Perth Airport with additional debt facilities amounting to $225 million, with improved diversifi cation in its debt capital structure. The facilities were achieved on attractive terms and pricing. The additional debt raised will be used primarily towards the funding of Perth Airport’s $750 million expansion plans.

Cash received Asset ($’000)	Franking credits received ($’000)	Revaluation during year to 30 June 2012 ($’000)(1)	Total return for 30 June 2012 (%)(2)
Perth Airport Development Group (Perth Airport) 22,215(3) Australia Pacif c Airports Corporation (APAC) 17,562 Queensland Airports Limited (QAL) 17,753 Airport Development Group (NT Airports) 7,363 HOCHTIEF AirPort Capital (HTAC) 17,822(4) Port of Portland 1,250 Port of Geelong 1,445 Cash and Other 3,494(5)	7,902 7,527 1,833 – – – 104 45	59,420 25,515 41,004 15,703 (606) n/a n/a –	17.0 11.3 22.1 23.7 0.8 n/a n/a –
Total portfolio(4) 88,904	17,411	141,036(6)	13.6(7)

(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 2012 is calculated by reference to the opening asset value as at 1 July 2011, 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) Includes $2.5 million received as a repayment of shareholder loans.

(4) Includes $10.3 million received as a repayment of shareholder loans.

(5) Includes $0.8 million from MTS; $0.1 million from SWR; and $2.6 million of bank interest.

(6) Restated to exclude movements related to Port of Portland, Port of Geelong and Metro Transport Sydney, all of which were divested during the 2012 fi nancial year. Does not include SWR revaluation of $71K.

(7) The total portfolio return for the year ended 30 June 2012 is for airport assets only and does not include cash held on deposit or other assets previously held within the portfolio.

Australian Infrastructure Fund Annual Report 2012 Chief Executive Officer’s Report

continued Chief Executive Offi cer’s Report

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Melbourne Airport
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In December 2011, QAL successfully refi nanced its existing $468 million of debt and secured an additional $64 million to fund further expansion and upgrade works at its airports. The funding is spread across three and fi ve year terms.

NT Airports refi nanced its existing $225 million debt facilities and obtained new capital expenditure facilities of $125 million on competitive terms in October 2011. The facilities will assist in funding NT Airports’ planned aeronautical capital expenditure requirements, which are underpinned by long-term pricing arrangements, and provide fl exibility to invest in accretive car parking and retail opportunities as they arise.

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.

Airport expansion projects continue

With continuing passenger growth at Australian airports, a number of expansion projects have been undertaken or are planned.

Perth Airport is currently undertaking a signifi cant redevelopment involving over $750 million of capital investment. The investment is underpinned by seven year commercial agreements with airlines carrying 97 percent of passengers. Three major terminal projects are at the core of the development with the fi rst being a new $120 million domestic terminal, designed to meet the needs of regional Western Australia. This project is 80 percent complete, on budget and scheduled for completion in mid-December 2012. The second project is the $80 million expansion of the international terminal arrivals area, which commenced construction in May 2012 and is scheduled for completion by the end of 2013. The third and largest project of the redevelopment is the circa $300 million pier being constructed at the international terminal. This new pier will deliver additional international gates, including for the A380 aircraft, and will be the new home for Virgin Australia’s expanding domestic operations. Early works have commenced on this project. The main construction contract is scheduled to be awarded in the very near term and the project is planned for completion in July 2014.

AIX Valuation 30 June 2012 Asset ($m)	AIX Valuation 30 June 2011 ($m)	Discount rate 30 June 2012 (%)	Historical EV/EBITDA(1) (x)
Perth Airport Development Group (Perth Airport) 609.6 Australia Pacif c Airports Corporation (APAC) 477.4 Queensland Airports Limited (QAL) 315.1 Airport Development Group (NT Airports) 115.1 HOCHTIEF AirPort Capital (HTAC)(2) 297.9 Statewide Roads 1.0	525.2 451.8 271.7 99.4(3) 313.5 1.0	13.1 12.0 15.6 16.2 12.9 12.2	13.4 13.1 14.6 11.8 11.5 –
Total/weighted average 1,816.2	1,662.5(4)	13.4	13.0

(1) Based on earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to 30 June 2012 with EV calculated using net external debt at 30 June 2012 and the 30 June 2012 equity valuation.

(2) HOCHTIEF AirPort Capital numbers based on weighted average of results from the individual airport assets using EBITDA calendarised for the year to 30 June 2012 and the 30 June 2012 equity valuation and net external debt.

(3) NT Airports valuation as at 30 June 2011 includes accrued distributions of $1.3 million.

(4) Restated to exclude Port of Portland, Port of Geelong and Metro Transport Sydney.

10 Australian Infrastructure Fund Annual Report 2012 Chief Executive Officer’s Report

Melbourne Airport is undergoing a number of capital works, with the largest being the Southern Precinct Project Stage 1, which has an estimated cost of up to $300 million. The redevelopment which is scheduled to commence in October 2012 and conclude in mid-2014 includes the phased development of a new domestic terminal facility designed to cater for continued growth in low-cost carrier volumes; 35 additional aircraft parking aprons and taxi lanes to accommodate future growth; two new multi-level structures for ground transport services, with additional car parking spaces and access to other services, such as taxis, shuttle buses and public transport, and an upgrading of the airport road network.

Over the next three years, Darwin International Airport plans to expand its terminal to accommodate continued growth in passenger numbers. The circa $60 million expansion project will include improved passenger facilities, airline lounges, retail improvements and security upgrades.

Execution of Fund strategy

AIX successfully completed the divestment of its three non-airport assets for value during the 2012 fi nancial year. Following the divestment of these non-core assets, airports represent 99.9 percent of the total AIX portfolio by value, making it truly an airport focused fund, providing access to strategic Australian assets in the sector.

As Paul noted in his Chairman’s Report, on 29 June 2012, AIX announced that the AIFL and HFML boards had reached an in-principle non-binding agreement on the key terms relating to the internalisation of AIX’s management. Subsequently, the Future Fund made a non-binding offer to acquire all of AIX’s operating assets. Should the proposed transaction with the Future Fund be completed it will address the long-standing objective to close the gap between the published NTA of the Fund and the AIX security price, providing value for securityholders. While a number of stages need to be completed prior to a binding agreement being reached and funds being returned to securityholders, AIX management will continue to manage the Fund with a view to maximising value for AIX securityholders until such time as a binding agreement is reached, if at all.

Outlook

The operating environment is likely to remain challenging in the near term, particularly in Europe. However, we expect the Australian airports to continue to show growth in passenger numbers, particularly at Perth, supported by the relatively stable Australian economic conditions.

AIX management will continue to work towards the potential internalisation of AIX as an alternative should the proposed transaction with Future Fund not complete and, together with the boards of AIFL and HFML, will keep securityholders informed on the progress of the proposed transaction with the Future Fund.

Jeff Pollock, Chief Executive Offi cer Australian Infrastructure Fund 17 September 2012

Asset ownership Asset (%)	Valuation as at 30 June 2012 ($m)	Net Debt/EV(1) (%)	Senior ICR(2) (x)
Perth Airport Development Group (Perth Airport) 29.74 Australia Pacif c Airports Corporation (APAC) 12.39 Queensland Airports Limited (QAL) 49.07 Airport Development Group (NT Airports) 28.23 HOCHTIEF AirPort Capital (HTAC)(3) 40.02 Statewide Roads 6.25	609.6 477.4 315.1 115.1 297.9 1.0	32.5 32.6 41.3 36.4 40.1 n/a	3.6 3.1 2.5 3.5 2.7 n/a
Total/weighted average	1,816.2	35.8	3.1
Fund weighted average		32.7

(1) Net Debt/EV refl ects 30 June 2012 external debt net of cash, divided by enterprise value, comprising net external debt plus 30 June 2012 independent equity valuations.

(2) Senior ICR refl ects EBITDA for the year to 30 June 2012 divided by net interest expense for the year to 30 June 2012.

(3) HOCHTIEF AirPort Capital numbers based on weighted average of results from the individual airport assets using calendarised June 2012 EBITDA, EV, net debt and interest expense.

Australian Infrastructure Fund Annual Report 2012 Chief Executive Officer’s Report

Review of Investment Portfolio

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Airports

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Airport Portfolio Composition
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Perth Airport Development Group Perth Airport

Australia Pacifi c Airports Corporation Melbourne and Launceston airports

Queensland Airports Limited Gold Coast, Townsville and Mount Isa airports

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

Perth Airport Development Group 33.6% Australia Pacific Airports Corporation 26.3% Queensland Airports Limited 17.4% Airport Development Group (NT Airports) 6.3% HOCHTIEF AirPort Capital 16.4%

HOCHTIEF AirPort Capital 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 Development Group (Perth) 29.74 Australia Pacif c Airports Corporation (APAC) 12.39 Queensland Airports Limited (QAL) 49.07 Airport Development Group (NT Airports) 28.23 HOCHTIEF AirPort Capital 40.02	609.6 477.4 315.1 115.1 297.9	17.0 11.3 22.1 23.7 0.8	19.8 22.7 37.4 28.2 7.7
Total Portfolio	1,816.2(1)	13.6	20.4(2)

(1) Includes SWR, valued at $1.0 million as at 30 June 2012.

(2) Restated to include airports only.

Note: Returns for the year ended 30 June 2012 detailed within the asset texts on pages 13 to 17 (inclusive) are calculated by reference to the subject asset’s opening value as at 1 July 2011, 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. The since inception returns detailed within the asset texts on pages 13 to 17 (inclusive) are calculated by reference to the acquisition price of the subject asset, all cash infl ows and outfl ows to/from AIX from the acquisition date up until 30 June 2012, and franking credits and revaluation gains or losses booked during the period.

From left to right: Düsseldorf Airport, QAL Airports, Darwin Airport

Australian Infrastructure Fund Annual Report 2012 Review of Investment Portfolio

Perth Airport Development Group

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Perth Airport

Perth Airport generated a return of 17.0 percent for the year ended 30 June 2012 and 19.8 percent per annum since inception. As at 30 June 2012, Perth Airport represented 33.6 percent of the AIX portfolio by value.

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 revenue and EBITDA for the fi nancial year were $347.4 million and $226.3 million respectively, which represent increases of 15.5 percent and 15.6 percent respectively compared to the prior corresponding period.

Total passenger volumes through Perth Airport for the fi nancial year were 12.6 million, an increase of 10.3 percent and the number of seats available across all routes grew by 11.4 percent. Domestic passenger volumes were up 11.7 percent on the prior year driven by both transcontinental markets and intrastate routes across West Australia’s resource ports, notably Karratha and Port Hedland. International passengers were up 6.9 percent on the prior year, with the strong Australian dollar continuing to stimulate outbound travel whilst non-Australian passengers also contributed to the positive result with increased passengers from key growth markets of China, India and New Zealand.

During the year, Perth Airport completed a major refi nancing, which included securing additional debt and equity funding to support its signifi cant terminal development plans over the next three to four years. The fi nancing includes $915 million of revolving facilities and a United States Private Placement issue of US$270 and $30 million. Shareholders have also committed up to $175 million of new equity, of which $84 million was drawn during the fi nancial year with the balance expected to be committed and drawn over the next two years.

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Outlook

The outlook for Perth Airport for fi nancial year 2013 remains positive with additional new services expected from existing and new airlines. Domestic passenger growth is anticipated to continue, underpinned by activity in the resource sector, while passenger numbers on international routes are expected to stabilise as anniversary dates of additional capacity increases are reached.

Perth Airport is currently undergoing a signifi cant redevelopment involving over $750 million of capital investment. The investment is underpinned by seven year commercial agreements with airlines carrying 97 percent of passengers through the airport.

Financial and Operational Performance

AIX interest in Perth Airport: 29.74%

						CAGR*
30Juneyear end	2008	2009	2010	2011	2012	08/12
AIX Valuation ($m) Passengers (m) Revenue ($m)(2)	353.6 9.2 183.5	372.1 9.7 209.7	454.2(1) 10.5 246.4	525.2 11.5 300.8	609.6 12.6 347.4	14.6% 8.3% 17.3%
EBITDA($m)(3)	115.6	130.3	158.2	195.9	226.3	18.3%

*CAGR. Compounded 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) EBITDA normalised to remove the effect of property revaluations.

Australian Infrastructure Fund Annual Report 2012 Assets

Australia Pacifi c Airports Corporation (APAC)

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Melbourne, Victoria; Launceston, Tasmania

APAC generated a return of 11.3 percent for the year ended 30 June 2012 and 22.7 percent per annum since inception. As at 30 June 2012, APAC represented 26.3 percent of the AIX portfolio by value.

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 and EBITDA (excluding gains in fair value of investment property) for the fi nancial year were $588.5 million and $435.6 million respectively, which represented an increase of 4.9 percent and 3.1 percent compared to the prior corresponding period.

Total passengers (including transits) through Melbourne Airport for the year were 28.4 million, in comparison to 28.3 million the prior year. This comprised 6.8 million international passengers, up 7.9 percent, and 21.5 million domestic passengers, down 2.0 percent. Total passengers through Launceston Airport decreased 1.9 percent to 1.1 million for the year.

International passenger growth was supported by a number of new services during the year, including China Southern’s service to Guangzhou, Jetstar’s increased services to Bali, Garuda’s additional services to Indonesia and increased Qantas A380 services to London and Los Angeles.

The combined number of seats available across all routes at Melbourne Airport fell by 0.7 percent in 2012, whilst the number at Launceston Airport fell by 4.9 percent.

During the past year, Melbourne Airport completed a number of capital projects to support its international traffi c growth, including the expansion of the international terminal and the commissioning of two new baggage reclaim units for international arrivals. The fi rst stage of the terminal forecourt redevelopment and the APAC drive on-ramp were also completed to improve ground access to the airport.

(m)						($m)		. drive on-ramp were also completed to improve	. drive on-ramp were also completed to improve	ground access to the airport.	ground access to the airport.
30						700		Outlook Melbourne Airport expects to continue to see signif cant growth. A new f ve year aeronautical services
								agreement is currently being f nalised with airlines and this agreement will support the Airport’s development
								projects, including improvements to roads, terminal and airf eld infrastructure.
25						600
20						500
15						400
						300
10
						200
5								Financial and Operational Performance
						100		AIX interest in APAC: 12.39%
														CAGR*
0						0		30Juneyear end	2008	2009	2010	2011	2012	08/12
	08	09	10	11	12		Year	AIX Valuation ($m)	296.8	299.4	410.1	451.8	477.4	12.6%
								Passengers (m)	25.3	25.9	27.4	29.5	29.5	3.9%
		Revenue ($m) EBITDA ($m)						Revenue ($m) EBITDA($m)	449.4 334.3	477.0 351.5	517.9 387.5	561.1 422.6	588.5 435.6	7.0% 6.8%
		Domestic Passengers (m)						*CAGR: Compound Annual Growth Rate.
		International Passengers (m)

14 Australian Infrastructure Fund Annual Report 2012 Assets

Queensland Airports Limited (QAL)

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Gold Coast, Townsville and Mount Isa airports

QAL generated a return of 22.1 percent for the year ended 30 June 2012 and 37.4 percent per annum since inception. As at 30 June 2012, QAL represented 17.4 percent of the AIX portfolio by value.

QAL owns and operates three key airport facilities in Queensland: Gold Coast Airport (GCA) 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.

Performance

For the 2012 fi nancial year, total revenue was $123.2 million and EBITDA was $74.7 million, increases of 6.9 percent and 8.5 percent respectively on the prior year. With passenger numbers across the QAL group declining 1.0 percent over the same period, this is a strong result and is attributable to strong trading revenue achieved as QAL continues to benefi t from its recent investment in terminal and car parking infrastructure.

Gold Coast passenger numbers were 2.3 percent below the prior year, with domestic passengers down 2.3 percent and international passengers down 2.2 percent. Gold Coast Airport, which services a tourist destination, was affected by the high Australian dollar, making overseas destinations more attractive, the residual affects of the natural disasters in Queensland, Japan and New Zealand in 2010/2011; and reduced discretionary spending as a result of general economic conditions.

A return to growth was evident in the second half of the fi nancial year, with GCA delivering 4.6 percent growth in passenger numbers for the fi ve months to June 2012 compared to the prior year.

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Domestic capacity increases are expected in the coming months as Tiger resume services suspended in the prior year and Jetstar and Virgin reinstate additional daily services on trunk routes. The introduction of a direct Singapore service by Scoot Airlines out of Gold Coast, which commenced fi ve times weekly from June 2012, is also expected to have a positive affect.

Townsville Airport achieved positive passenger growth on the prior year of 1.2 percent and Mount Isa continues to improve its passenger numbers with growth of 13.7 percent on the prior year, largely driven by the resources sector.

In December 2011 QAL successfully refi nanced its existing debt facilities and secured additional capacity to fund further expansion and upgrade works at its three airports. Other highlights during the 2012 fi nancial year included the approval of the Gold Coast Airport Master Plan and the opening of the Virgin Lounge at Gold Coast Airport on 30 May 2012.

Outlook

The outlook for QAL Group airports is positive with continued growth expected over the long term. Return of seat capacity to Gold Coast in July and August is promising, however challenges remain, including the high Australian dollar and general economic conditions in Australia and overseas.

Financial and Operational Performance AIX interest in QAL: 49.07%

						CAGR*
30Juneyear end	2008	2009(1)	2010(1)	2011(1)	2012	08/12
AIX Valuation ($m)	182.2	219.6	270.8	271.7	315.1	14.7%
Passengers (m)	6.0	6.5	7.0	7.3	7.3	5.0%
Revenue ($m) EBITDA($m)	73.8 42.2	82.7 43.5	105.0 58.0	115.2 68.9	123.2 74.7	13.7% 15.4%

*CAGR: Compound Annual Growth Rate.

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

Australian Infrastructure Fund Annual Report 2012 Assets 15

Airport Development Group (NT Airports)

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Darwin, Alice Springs and Tennant Creek airports

NT Airports generated a return of 23.7 percent for the year ended 30 June 2012 and 28.2 percent per annum since inception. As at 30 June 2012, NT Airports represented 6.3 percent of the AIX portfolio by value.

NT Airports owns and operates Darwin International, Alice Springs and Tennant Creek airports. Darwin International Airport is an important hub for low-cost carriers, as well as being the key entry point into the Northern Territory and providing access for the growing resources sector. 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 continue to be pursued.

Performance

Total revenue and EBITDA for the fi nancial year were $80.7 million and $54.6 million respectively, which represented an increase of 7.9 percent and 15.6 percent compared to the prior corresponding period. The improved earnings were driven by strong aeronautical revenue following revised aeronautical pricing arrangements, which delivered an increase in aeronautical revenue of 4.7 percent on the prior year.

For the year ended 30 June 2012, NT Airports serviced a total of 2.8 million passengers (including transfer and transits). The international terminal at Darwin performed strongly, with passengers increasing 14.3 percent on the prior year, driven by the popularity of low-cost services to South East Asian destinations, particularly Bali. Passenger numbers at the domestic terminal were largely consistent with the prior year. While Darwin has a stable government and business clientele, particularly with the growing resource sector, it is also exposed to the tourism market, which continues to be affected by the strong Australian dollar and soft economic conditions in Melbourne, Sydney and Adelaide.

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Revenue ($m)
EBITDA ($m)
Domestic Passengers (m)
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Passenger numbers through Alice Springs Airport declined 9.5 percent compared to the prior year. With Alice Springs largely being a tourism destination, it has been affected by the strong Australian dollar and poor economic conditions globally.

Stronger aeronautical revenues were supported by growth in car parking and car rental revenues, with trading revenues increasing 3.7 percent above the prior year. Property income also increased 27.0 percent on the prior year, following completion of the Australian Federal Police building and the Lodge accommodation.

Outlook

Management continue to focus on the design and construction of the terminal expansion at Darwin following the successful aeronautical pricing agreement negotiations and refi nancing of debt facilities in October 2011.

Darwin International Airport anticipates continued passenger number growth in the medium to long term, through both its domestic and international terminals. Over this period, patronage is expected to be positively affected by the recent deployment of US troops to Darwin, as well as the commencement of the INPEX gas project. Furthermore, 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%

						CAGR*
30Juneyear end AIX Valuation ($m) Passengers (m)	2008 70.7 2.4	2009 74.3 2.7	2010 83.5 2.8	2011 99.4 2.9	2012 115.1 2.8	08/12 13.0% 3.8%
Revenue ($m)	56.4	62.6	68.2	74.8	80.7	9.4%
EBITDA($m)	35.3	40.1	44.3	47.2	54.6	11.5%

*CAGR: Compound Annual Growth Rate.

16 Australian Infrastructure Fund Annual Report 2012 Assets

HOCHTIEF AirPort Capital (HTAC)

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Sydney Airport

HTAC has holdings in four major international airports: Athens, Greece; Hamburg and Düsseldorf, Germany; and Sydney, Australia. HTAC generated a return of 0.8 percent for the year ended 30 June 2012 and 7.7 percent per annum since inception. As at 30 June 2012, HTAC represented 16.4 percent of the AIX portfolio by value.

Sydney Airport is a major gateway into and out of Australia, servicing approximately 37 international and eight 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

Sydney Airport recorded solid revenue growth of 3.2 percent for the year ended 31 December 2011, increasing total revenue to $972.8 million. Higher utility, service and security costs modestly decreased Sydney’s operating margin, however EBITDA[(2)] still increased by 2.2 percent to $790.7 million.

In its fi nancial year to 31 December 2011, total passenger numbers at Sydney Airport were similar to 2011 levels, growing 0.2 percent to 35.6 million. Moderate international growth during the year of 3.0 percent was offset by a weaker domestic market, down 1.0 percent against the prior corresponding period. Passenger traffi c, particularly domestic, was negatively impacted throughout 2011 by a number of disruptions, including the grounding of Tiger Airways, Qantas industrial disputes, severe weather conditions in Queensland, earthquakes in New Zealand and Japan and the Chilean ash cloud.

Total capital expenditure for the year was $182.7 million, refl ecting the construction of the Central Terrace Building, the commencement of a new multi-storey car park at the international terminal and runway and apron projects.

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In the fi nancial year ended 31 December 2011, Sydney Airport successfully raised approximately $1.1 billion of senior debt facilities and in January 2012 redeemed the entire $650 million issue of Sydney Kingsford Smith Interest Earnings Securities.

Outlook

In the fi rst six months of 2012, Sydney Airport delivered passenger growth of 1.6 percent compared to the prior corresponding period. Growth has been driven by international traffi c, which was 5.3 percent higher as a result of the continued growth of new services to Asia. While domestic traffi c remains subdued, the return of Tiger Airways and a more stable operating environment is expected to help boost growth in domestic passengers in the second half of 2012.

Financial and Operational Performance

AIX indirect interest in Sydney Airport: 2.60%

						CAGR*
31 Decemberyear end	2007	2008(3)	2009(3)	2010(3)	2011(3)	07/11
Passengers (m)(1) Revenue (A$m)	31.9 760.5	32.9 812.7	33.0 853.2	35.6 943.0	35.6 972.8	2.8% 6.3%
EBITDA(A$m)(2)	608.6	653.3	690.2	773.3	790.7	6.8%

*CAGR: Compound Annual Growth Rate.

(1) Total includes domestic-on-carriage.

(2) EBITDA reported excluding specifi c expenses (primarily restructuring and non-recurring legal expenses). In 2011, specifi c expenses amounted to approximately $0.9 million (2010: $0.3 million).

(3) Restated to refl ect December year end.

Australian Infrastructure Fund Annual Report 2012 Assets

continued HOCHTIEF AirPort Capital (HTAC)

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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 2011, AIA offered direct scheduled services to 113 destinations in 49 countries, serviced by 72 airlines. As at 30 June 2012, Athens represented 1.6 percent of the AIX portfolio by value.

Performance

Revenue and EBITDA for the year to 31 December 2011, including subsidies AIA was entitled to under the Greek State’s Airport Development Fund (ADF), were €379.5 million and €249.1 million respectively, a decrease of 6.6 and 10.5 percent compared to the prior corresponding period. The drop in revenue and EBITDA largely refl ects the decrease in passenger movements due to challenging economic conditions. The proportionally larger decrease in EBITDA was driven by higher utility costs, which offset the modest cost reductions achieved elsewhere. In the fi nancial year ended 31 December 2011, AIA recorded total passenger movements of 14.4 million, a decrease of 6.3 percent compared to the prior corresponding period. The main drivers of this performance were the weak macroeconomic situation in Greece, combined with network rationalisation by domestic carriers. Domestic passengers for the year decreased by 11.9 percent, while the international sector experienced a more moderate decline of 3.1 percent.

Outlook

The macroeconomic environment in Greece is expected to remain challenging in the near term as the country continues to implement fi scal austerity measures. For the fi rst six months of 2012, passenger fi gures have reduced by 11.9 percent compared to the prior corresponding period. With a new government recently elected, increased political and social stability may help to encourage international tourism, although a return to passenger growth is not anticipated to occur over the next 12 months.

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Financial and Operational Performance

AIX indirect interest in Athens Airport: 5.34%

						CAGR*
31 Decemberyear end	2007(2)	2008(2)	2009(3)	2010	2011	07/11
Passengers (m)	16.5	16.5	16.2	15.4	14.4	(3.3)%
Revenue (€m)(1)	399.5	420.7	419.5	406.4	379.5	(1.3)%
EBITDA(€m)(1)	278.1	295.8	278.0	278.4	249.1	(2.7)%

*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.

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

18 Australian Infrastructure Fund Annual Report 2012 Assets

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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 largest economic areas, and serves approximately 18.0 million people. Düsseldorf Airport hosts 73 airlines that fl y to 196 destinations worldwide. As at 30 June 2012, Düsseldorf represented 3.0 percent of the AIX portfolio by value.

Performance

Total revenue for the year to 31 December 2011, excluding extraordinary income, was €369.5 million, up 5.4 percent compared to the prior corresponding period. Growth in both aviation and non-aviation revenue was driven by higher passenger volumes, with a strong increase in landing fees, up 7.9 percent on the prior corresponding period, more than offsetting a reduction in ground handling revenue. Overall EBITDA in 2011 was €140.2 million, up 9.3 percent on the prior corresponding period.

Düsseldorf Airport recorded strong traffi c growth for the fi nancial year ended 31 December 2011, reaching a record 20.3 million passengers. This was a 7.1 percent increase on the prior corresponding period and outperformed the average passenger growth at German airports of 4.8 percent. This growth was partially a result of weather disruptions that reduced traffi c in 2010.

However, DÜsseldorf’s above average growth was also a refl ection of its increasing prominence as Germany’s third major hub airport. Accordingly, intercontinental traffi c was the main driver of DÜsseldorf’s traffi c growth, up 10.4 percent on the prior corresponding period. Overall, both domestic and international traffi c saw an increase on the prior corresponding period of 4.4 percent and 7.9 percent respectively.

Outlook

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

Economic conditions have remained resilient in Germany, despite the weak macroeconomic environment that is being experienced across much of the continent of Europe. Traffi c performance for the fi rst six months of 2012 has been positive overall, with passenger numbers up 4.0 percent compared to the prior corresponding period. International traffi c continues to perform solidly, up 5.2 percent, while domestic traffi c has been relatively fl at.

Düsseldorf International is expected to continue to grow based on its increasing importance as a transfer hub for Lufthansa and Air Berlin. In addition, the airport is benefi ting from its large and prosperous catchment area, being the third largest in Europe (just behind London and Paris). With a market share of 60 percent Düsseldorf International is the most important gateway for North Rhine-Westphalia.

Financial and Operational Performance

AIX indirect interest in Düsseldorf Airport: 4.00%

						CAGR*
31 Decemberyear end	2007	2008(2)	2009(2)	2010(2)	2011(2)	07/11
Passengers (m) Total revenue (€m)(1)	17.8 335.4	18.2 349.8	17.8 335.3	19.0 350.6	20.3 369.5	3.3% 2.4%
EBITDA(€m)(1)	134.9	137.0	119.4	128.3	140.2	1.0%

*CAGR: Compound Annual Growth Rate

Note: The commentary above, including fi nancial performance, refl ects the airport company accounts rather than the consolidated accounts and therefore excludes some ancillary businesses. Company EBITDA presented is on average 7.8 percent below consolidated EBITDA for the period 2007 to 2011.

(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 2011, net investment income amounted to approximately negative €3.6 million (2010: negative €7.5 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); 2011 total income and EBITDA normalised to exclude income from write-back of fi re claim provisions after settlement with insurer (€3.4 million) and minor extraordinary operating expenses (€0.4 million).

Australian Infrastructure Fund Annual Report 2012 Assets 19

continued HOCHTIEF AirPort Capital (HTAC)

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Hamburg Airport

Hamburg Airport is Germany’s fi fth busiest airport, servicing 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. As at 30 June 2012, Hamburg represented 4.1 percent of the AIX portfolio by value.

Performance

Total revenue for the year to 31 December 2011 was €257.7[(1)(2)] million, an increase of 1.1 percent compared to the prior year. Aviation revenues increased 4.7 percent to €130.7 million, broadly refl ecting the growth in passengers. Ground handling revenues decreased by 11.8 percent to €44.7 million, which was largely a refl ection of the high de-icing revenues earned in late 2010. This decline in revenue was partially offset by lower maintenance and winter service costs due to the mild winter, with total operating costs down 5.3 percent to €166.4[(1)(2)] million compared to the prior year. Consequently, the growth in total revenue in conjunction with a reduction in operating costs resulted in EBITDA[(1)(2)] increasing by 15.2 percent to €91.3 million compared to 2010.

Hamburg Airport recorded a total of 13.6 million passengers for the fi nancial year ended December 2011, a 4.6 percent increase on the prior corresponding period. This was in line with the average growth rate of German airports of 4.8 percent. Both domestic and international traffi c saw an increase on the prior year of 1.0 percent and 7.3 percent respectively. This refl ects the resilience of Germany as a business location and its strong GDP growth (+3.0 percent in 2011).

Outlook

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(m) (€m)
15 300
250
12
200
9
150
6
100
3
50
0
0
07 08 09 10 11 Year
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Revenue (€m)
EBITDA (€m)
Domestic Passengers (m)
International Passengers (m)
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Economic conditions have remained resilient in Germany, despite the weak macroeconomic environment that is being experienced across much of the continent of Europe. Traffi c performance for the fi rst six months of 2012 has been positive overall, with passenger numbers up 3.3 percent compared to the prior corresponding period. International traffi c continues to perform strongly, up 8.9 percent, while domestic traffi c has contracted, down 3.9 percent, due to the cancellation of some domestic routes.

While domestic travel is expected to decline slightly, passenger numbers at Hamburg Airport are forecast to grow based on strong international traffi c originating and departing outside the EU. Overall Hamburg Airport is aiming to strengthen its position as the most important airport in the north of Germany as well as the fi fth largest airport in the country.

Financial and Operational Performance

AIX indirect interest in Hamburg Airport: 5.69%

						CAGR*
31 Decemberyear end	2007	2008	2009	2010(2)	2011(2)	07/11
Passengers (m)	12.8	12.8	12.2	13.0	13.6	1.5%
Total revenue (€m)(1) EBITDA(€m)(1)	243.6 81.4	235.3 71.7	231.4 64.5	255.0 79.3	257.7 91.3	1.4% 2.9%

*CAGR: Compound Annual Growth Rate

Note: The commentary above, including fi nancial performance, refl ects the airport company accounts rather than the consolidated accounts and therefore excludes some ancillary businesses. Company EBITDA presented is on average 4.9 percent below consolidated EBITDA for the period 2007 to 2011.

(1) Total income and EBITDA includes 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 2011, net investment income amounted to €0.9 million (2010: €2.7 million).

(2) 2011 total income and EBITDA normalised to exclude income falling outside the year under review (€8.0 million) and expenditure falling outside of 2011 (€1.3 million). 2010 total income and EBITDA normalised to exclude income falling outside the year under review (€24.4 million), expenses related to a provision for noise protection measures (€15.3 million) and expenditure falling outside of 2010 (€0.8 million).

20 Australian Infrastructure Fund Annual Report 2012 Assets

Port of Geelong, Metro Transport Sydney and Port of Portland

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Port of Geelong, Metro Transport Sydney and Port of Portland

AIX completed the divestment of its 35.0 percent equity interest in Port of Geelong on 29 February 2012. On 23 March 2012, AIX completed the divestment of its 38.9 percent equity interest in Metro Transport Sydney, being the owner of the light rail and monorail networks in Sydney. On 23 May 2012, AIX completed the divestment of its 50.0 percent interest in Port of Portland.

Taken together, AIX received total gross consideration of $100.8 million from the divestment of these non-core assets, which compares favourably to their combined independent valuation of $100.4 million as at 31 December 2011.

Statewide Roads

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Statewide Roads

AIX holds a 6.25 percent interest in Statewide Roads, which compromised less than 0.1 percent of AIX’s portfolio by value as at 31 December 2011. Statewide Roads held a concession to operate the M4 Motorway in Sydney, which expired on 15 February 2010, resulting in the return of the M4 assets to the NSW Roads and Traffi c Authority. Statewide Roads also has a 25 year service centre concession, which expires in 2017. While AIX remains entitled to a share of any future revenue earned from the service centre concession, this is expected to be negligible.

Australian Infrastructure Fund Annual Report 2012 Assets

Australian Infrastructure Fund Limited Board

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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 established Pacifi c Road Corporate Finance in 1986, an adviser to governments and companies in the resources,

infrastructure and services sectors. Paul was previously Senior Vice President of the Bank of America in Australia, New Zealand and Papua New Guinea. Other corporate and investment banking roles have been in England and the US. Paul founded Pacifi c Road Capital, a manager of private equity funds in the resources and services sectors in 2006. He is a fellow of the Australian Institute of Company Directors.

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

Paul Espie BSc, MBA, FAICD

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: James is a member of the AIFL Remuneration Committee.

Director since March 2010

Non-executive: Yes

Independent: No

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External directorships: Current: Hastings Funds Management Limited, BT Investment Management Limited (and Chair of the Audit and Risk Committee), J O Hambro Capital Management Holdings Limited (and Chair of the Audit Committee), Equigroup Group of Companies (and Chair of the Audit Committee), Investa Wholesale Funds Management Limited (and Chair of the Audit and Risk Committee), Macquarie Generation (and Chair of the Audit Committee), and Suncorp Portfolio Services Limited.

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James Evans BEc, CPA, F FIN, FAICD
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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.

Term of offi ce: Director since July 2004

Non-executive and Independent: Yes

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

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. John is also a member of the AIFL Remuneration Committee.

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John Harvey BJuris, LLB, FCA

22 Australian Infrastructure Fund Annual Report 2012 Australian Infrastructure Fund Limited Board

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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. 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: Mike is a member of the Remuneration Committee.

Mike Hutchinson BSc (Hons), CPEng, MAICD

Term of offi ce: Director since September 2006

Non-executive and Independent: Yes

External directorships: Current: Chairman of Ampcontrol Pty Ltd and director of Leighton Holdings Limited, Leighton Asia Ltd and Leighton Contractors Pty Ltd. 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.

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

Term of offi ce: Director since September 2005

Non-executive and Independent: Yes

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

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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

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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: Robert is a member of the AIFL Remuneration Committee.

as Finance Director until his retirement in 2003. Between 2003 and 2005 he was senior adviser to Lazard plc in London. Robert was CEO and Managing Director of the Centro Properties Group from March 2010 until his retirement in February 2012 following the successful restructuring and recapitalisation of the Centro Group. He has extensive experience in capital markets, corporate fi nance and mergers and acquisitions.

AIFL Board committee membership: Robert was appointed a member of the Audit Committee in December 2005 and is a member of the AIFL Remuneration Committee.

Robert Tsenin BEc, Dip Corp Fin

Australian Infrastructure Fund Annual Report 2012 Australian Infrastructure Fund Limited Board

Hastings Fund Management Limited Board

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Term of offi ce: Chairman since 6 October 2009, Director since April 2009

Non-executive and Independent: Yes

External directorships: Current: AQRB Pty Ltd, ASX Compliance Pty Limited, National e-Conveyancing Development Limited, St George Life 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 Ashurst Australia 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 Ashurst Australia.

HFML Board committee membership: Alan was appointed a member of the Governance Committee in July 2011.

Alan Cameron AO (Chairman) BA, LLM (Syd), FAICD

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Director since October 2011

Non-executive and Independent: No

External directorships: Current: Chairman of New Zealand Yellow Pages Group and director of Hastings Management Pty Ltd. Previous: Chairman of Truvo Intermediate LLC and director of Eircom Holdings Limited.

Skills, experience and expertise: Andrew commenced as Chief Executive of Hastings in October 2011. Andrew is an experienced Chief Executive with a track record of signifi cant achievement, both domestically and internationally. He brings a wealth of expertise gained from leading complex businesses across diverse industry, geography and at various stages of development. Andrew was previously Chief Executive of Eircom Holdings Limited, an investment company. In this role, he managed

interests in the Irish telecommunications business Eircom and the Israeli directories business Golden Pages. Prior to this, he was Chief Executive and then Chairman of Truvo, a private equity owned company based in Europe, which managed a complex portfolio of companies.

Prior to joining Truvo, Andrew held the position of Chief Executive Offi cer at Sensis in Australia, one of Australia’s largest advertising and search businesses. In Andrew’s earlier career with Telstra Corporation, he held a range of senior roles running business units, including that of Managing Director, Commercial and Consumer Sales.

HFML Board committee membership: Andrew was appointed a member of the Governance Committee in October 2011.

Andrew Day (Chief Executive) BEng (Hons), BSc (Hons), MEngSc

Director since October 2009

Non-executive and Independent: Yes

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External directorships: Current: Australian Infrastructure Fund Limited, BT Investment Management Limited (and Chair of the Audit & Risk Committee), J O Hambro Capital Management Holdings Limited (and Chair of the Audit Committee), Equigroup Group of Companies (and Chair of the Audit Committee), Investa Wholesale Funds Management Limited (and Chair of the Audit & Risk Committee), Macquarie Generation (and Chair of the Audit Committee), and Suncorp Portfolio Services Limited.

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Skills, experience and expertise: James has extensive experience as a senior executive in the fi nance industry. James Evans BEc, CPA, F FIN, FAICD

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

24 Australian Infrastructure Fund Annual Report 2012 Hastings Fund Management Limited Board

Term of offi ce: 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 and Chairman of Hastings Funds Management Limited Board from October 2006 to October 2009.

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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.

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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 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 & Compliance Committee from January 2006 to September 2007. He was Chairman from January 2006 to July 2007.

Liam Forde BSc (Econ), MAICD

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.

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. Previous: Director of Boeing Australia Limited and Aerospace Technologies of Australia.

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

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.

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Stephen Gibbs BEcon, MBA
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Skills, experience and expertise: James brings to Hastings 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.

Term of offi ce: Director since July 2007

Non-executive and Independent: Yes

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External directorships: Current: Chairman of Energy Pipelines CRC Limited, and director of WDS Limited, iGas Energy Holdings Limited, Mosaic Technology Developments Pty Ltd and a number of other private Companies. Previous: Chairman of WDS Limited and director of Australian Pipeline Limited, East Australian Pipeline Limited and a number of private Companies.

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

James McDonald FAICD

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.

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Skills, experience and expertise: Victoria brings to Hastings signifi cant expertise and knowledge in both governance and funds management. She is currently General Manager & Corporate Counsel – Institutional & Services at Westpac Banking Corporation, a position she commenced in May 2010.

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Before joining Westpac, Victoria was a partner at Allens Arthur Robinson practising in mergers and acquisitions, capital markets transactions 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: Victoria was appointed a member of the Governance Committee in July 2011.

Victoria Poole LL.B (Hons), LL.M, B.Sc

Australian Infrastructure Fund Annual Report 2012 Hastings Fund Management Limited Board

Australian Infrastructure Fund Organisational Structure

Australian Infrastructure Fund (AIX)

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Hastings Funds Management Limited
Jeff Pollock AIX Chief Executive Officer
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Australian Infrastructure Fund Annual Report 2012 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 26 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 2011/2012, 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 2012 Corporate Governance 27

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 and committees

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

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. Further information about the mix of skills and diversity the Board is looking to achieve in its membership is set out in section 1.3 below. 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 judgements.

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.
(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.

28 Australian Infrastructure Fund Annual Report 2012 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.

No. of scheduled meetings held Director while a director	No. of meetings attended	No. of extraordinary meetings held while a director	No. of meetings attended
Paul Espie 8 Jim Evans 8 John Harvey 8 Bob Humphris 8 Mike Hutchinson 8 Robert Tsenin 8	8 8 8 8 8 7	1 1 1 1 1 1	1 0 1 1 0 1

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.
No. of scheduled meetings held Director while a director	No. of meetings attended
Paul Espie 2 Jim Evans 2 John Harvey 2 Bob Humphris 2 Mike Hutchinson 2 Robert Tsenin 2 Alan Freer (1) 1 Alan Cameron 2 Andrew Day(2) 1 Liam Forde 2 Stephen Gibbs 2 Jim McDonald 2 Victoria Poole 2	2 2 2 2 2 2 1 2 1 1 2 1 2

(1) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011 and resigned effective 18 October 2011.

(2) Andrew Day was appointed to the Hastings Funds Management Limited Board, effective 18 October 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 22 to 25.

1.3 Board Committees

The Board has established the following Committees to assist, advise and make recommendations to the Board on matters falling within their respective responsibilities:

−Audit Committee; and

−Remuneration Committee.

Each Committee is governed by a formal charter approved by the Board setting out its roles and responsibilities. The roles and responsibilities of the Audit Committee and Remuneration Committee are set out below in sections 2.1 and 7 respectively.

1.4 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.

1.5 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.

1.6 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.

1.7 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.

1.8 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.

Australian Infrastructure Fund Annual Report 2012 AIFL Corporate Governance Statement 29

AIFL Corporate Governance Statement

1.9 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.

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 AIX 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.

No. of scheduled meetings held while a member of Director the Committee	No. of meetings attended	No. of non-scheduled meetings held while a member of the Committee	No. of meetings attended
Paul Espie 2 John Harvey 2 Robert Tsenin 2	2 2 2	1 1 1	1 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.

is shown below.
No. of scheduled meetings held Director while a director	No. of meetings attended
Paul Espie 4 Jim Evans 4 John Harvey 4 Robert Tsenin 4 Stephen Gibbs 4 Jim McDonald 4	4 4 4 4 4 2

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.

30 Australian Infrastructure Fund Annual Report 2012 AIFL Corporate Governance Statement

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.

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.

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 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.

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. HFML as Manager and Responsible Entity has an overarching risk management framework that formalises the Hastings Group’s approach to risk oversight and management of material business risks.

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.

Australian Infrastructure Fund Annual Report 2012 AIFL Corporate Governance Statement 31

AIFL Corporate Governance Statement

7. Remuneration

The Board of AIFL has established a Remuneration Committee with a formal charter setting out its roles and responsibilities. The Charter is available on the AIX website at www.hfm.com.au.

To the extent relevant given that the Company does not currently have any employees other than the non-executive directors, the role of the Remuneration Committee is to review and make recommendations

to the Board on the Company’s remuneration policy and practices to:

−Ensure compliance with governance, legislative and constitution requirements.
−Demonstrate a clear relationship between performance and remuneration in the case of executive directors and senior executives (if any).
−Motivate employees (if any) to pursue the long-term growth and success of the Company.
−Clearly distinguish between the structure of non-executive directors’ remuneration from that of executive directors and senior executives (if any).
−Ensure that executive directors’ and senior executives’ remuneration packages (if any) involve a balance between fi xed and incentive pay, refl ecting short and long-term performance objectives appropriate to the Company’s circumstances and goals.
−Ensure that the Company does not enter into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes.
−Ensure that the Board is provided with suffi cient information and external advice to facilitate informed decision-making about the Company’s remuneration policy and practices.

Specifi c responsibilities of the Remuneration Committee include, to the extent relevant, reviewing and making recommendations to the Board about the remuneration report for inclusion in the annual directors’ report as well as the Company’s remuneration framework for directors, remuneration and performance of senior executives, recruitment and retention policies and superannuation and other benefi ts. AIFL’s remuneration policy does not currently deal with the remuneration structure of senior executives or equity-based remuneration schemes given that AIFL does not currently have any employees other than the non-executive directors.

The Remuneration Committee has access to adequate internal and external resources, including access to advice from the Company’s auditors and independent advisers (including external remuneration consultants and specialists) as to any matter pertaining to the powers or duties of the Remuneration Committee, as the Remuneration Committee may require. The Remuneration Committee is also responsible for the engagement of external remuneration consultants and for setting the parameters around the interaction with the consultants.

Membership of the Remuneration Committee and the Chairman of the Remuneration Committee are determined from time to time by the Board, but must consist of a minimum of three members, only non-executive directors of the Company, a majority of independent directors of the Company and an independent director as Chairman. Each non-executive director of AIFL is currently a member of the Remuneration Committee.

Directors who are not members of the Remuneration Committee may attend all or part of a meeting of the Remuneration Committee at the invitation of the Remuneration Committee Chairman and may receive copies of the Remuneration Committee’s papers. Attendees at Remuneration Committee meetings will, subject to the discretion of the Remuneration Committee, ordinarily comprise the Remuneration Committee members, AIFL’s Chief Executive Offi cer and Company Secretary. Other members of management (if any) and advisers may be invited to attend meetings, as the Chairman of the Committee thinks fi t. Where relevant, members of management are not present during, and do not participate in, deliberations of the Remuneration Committee where the matter does or could affect their position or their remuneration.

Details of AIX’s approach to remuneration by gender is described in section 8 below. The Remuneration Committee met during the year and each member of the Committee was in attendance.

Details of the Company’s remuneration policies and the remuneration of, and benefi ts paid to, the directors are set out in the Remuneration Report on pages 44 to 45.

Securityholders will have an opportunity to consider the Remuneration Report at the 2012 Annual General Meeting.

8. Diversity

Hastings, as Manager and Responsible Entity for AIX, recognises the value of individual differences and of appropriately managing them in the workplace. Diversity in this context covers gender, age, ethnicity, cultural background, sexual orientation and religious beliefs.

At Hastings, we recognise diversity in the workplace provides a range of perspectives, knowledge and leadership styles, which will enhance the way we conduct business and assist us to achieve our corporate objectives.

Hastings has in place a Diversity Policy, which is also applied to AIX, and this sets out our diversity initiatives and measurable objectives for achieving gender diversity, consistent with the requirements of the ASX Corporate Governance Principles.

Hastings is required to assess annually the progress in achieving measurable objectives for gender diversity. The following is a summary of the measurable objectives and our progress in achieving them.

Proportion of female representation

As at 30 June 2012, the proportion of women employed by Hastings was follows:

−Board of Directors, HFML: (1 woman) 14 percent.
−Senior leadership positions: (7 women) 19 percent.
−Total Hastings workforce: (40 women) 40 percent.

32 Australian Infrastructure Fund Annual Report 2012 AIFL Corporate Governance Statement

Recruitment practices

Hastings undertakes a recruitment process whereby any recruitment panel has male and female representatives to choose suitable candidates for senior roles within the organisation. In undergoing its recruitment process, Hastings also promotes the need to include diversity in age and cultural background of candidates.

Hastings is committed to supporting gender diversity by attracting appropriately qualifi ed and skilled women through promoting workplace fl exibility, which will assist in retaining women in particular, over time.

Gender diversity is a focus for Hastings at different levels of the business. Decisions for external hiring, internal appointment and promotion, as well as leadership development, are based on merit. A focus on gender diversity in this context is one element of ensuring we attract, retain and reward the best talent and will reinforce the importance Hastings attaches to the value of workplace diversity.

Flexible work arrangements

Hastings enables the use of fl exible working arrangements in relation to when, where and how work is delivered. Hastings adopts a wide range of fl exible working practices that support employees to manage their work and home responsibilities and achieve that appropriate work life balance.

Hastings has introduced fl exible start and fi nish times; part-time work arrangements; and work from home arrangements. Currently fl exible work arrangements have been implemented for nine staff.

Pay equity

Hastings achieves its objectives for pay equity for like roles across the organisation.

A review of the Fixed and Total Remuneration against relative markets in countries Hastings has employees revealed no systemic gender bias.

Parental leave

Hastings offers up to two years’ parental leave to the primary-carer, including 13 weeks of paid leave and up to 40 weeks of employer super contributions. At the conclusion of the parental leave, and following three months return to work an additional sum, equivalent to 11 weeks of the employees’ return hours, is paid to the employee as a retention payment. In the past, 24 months parental leave has been taken up by 10 staff members. Our Parental Leave Policy, together with our fl exible work practices, has meant that all staff who took parental leave returned to work following their leave.

Development of intranet staff communication site

Hastings has created a workplace culture that is supportive of gender diversity. An intranet staff communication forum has been developed where all members of the organisation are provided with a safe and unbiased forum to raise a variety of perspectives, opinions and insights regarding diversity. This forum can be used to contribute ideas, discuss policies and share experiences of diversity within the workplace.

Enhanced training and professional development for staff

Hastings facilitates an enhanced training and professional development program. The Learning and Development Policy allows the business to provide customised development based on an individual’s development plan. We will measure the numbers of men/women undertaking professional development courses and remove gender bias if it occurs.

Hastings encouraged participation by its female staff in the following female specifi c leadership and mentoring programs:

−Women in Banking and Financing mentoring program;
−Participation in Women in Banking and Finance forum; and
−Attendance at workshops and seminars to network and obtain leadership skills. These include ‘Mentor Matching Networking events’; ‘UN Women Speaker series – Leading Leaders’ and other Westpac seminars and panel discussions.

Australian Infrastructure Fund Annual Report 2012 AIFL Corporate Governance Statement

AIFT Corporate Governance Statement

Corporate Governance

Hastings Funds Management Limited (HFML) is the Responsible Entity of 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, committees 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. Hastings Management Pty Ltd and HFML are subsidiaries of Westpac. 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 securityholders;
−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, management delegated authority is clearly documented and covers areas such as investment recommendations and fund expenditure.

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. Further detail about the nomination of HFML's directors and HFML's diversity policy is set out below. 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 judgements.

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.

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.
−Andrew Day, Chief Executive: Andrew was appointed Chief Executive in October 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 considers and has resolved that Mr Liam Forde, a non-executive 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 four 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. To the extent that Mr Forde, or any of the other directors, may be considered to be interested in relation to any particular matter or transaction from time to time, then this is assessed and managed in accordance with the policy on related party transactions described in section 3.2 below.

The number of HFML Board meetings held during the year and the number of meetings attended by each director is shown in the table under section 1.6 on page 35.

34 Australian Infrastructure Fund Annual Report 2012 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 in the table under section 1.6 on page 36.

Individual directors’ details including their skills and experience are set out on pages 22 to 25.

1.3 Board committees

The Board has established the following Committees to assist, advise and make recommendations to the Board on matters falling within their respective responsibilities:

−Audit & Compliance Committee; and

−Governance Committee.

Each Committee is governed by a formal charter approved by the Board setting out its roles and responsibilities.

The roles and responsibilities of the Audit & Compliance Committee are set out in section 2.1 below.

The role of the Governance Committee is to consider and provide advice to the Board on governance arrangements relevant to particular transactions or matters where actual and/or potential confl icts of interest arise. The current members of the Governance Committee are Alan Cameron, Victoria Poole and Andrew Day. The number of Governance Committee meetings held during the year and the number of meetings attended by each member is shown below.

	Governance Committee	Governance Committee
Director	No. of meetings held while a member of the committee	No. of meetings attended
A Cameron A Freer(1) V Poole A Day(2)	4 4 4 0	4 2 4 0

(1) Alan Freer was appointed to the Governance Committee in July 2011 and resigned from the Governance Committee in October 2011.

(2) Andrew Day was appointed to the Governance Committee in October 2011.

1.4 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.

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, since August 2011, the performance of senior executives, both collectively as a Hastings Group business and individually, has 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.

1.6 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.


	Board
No. of scheduled meetings held Director while a director		No. of meetings attended	Extraordinary(1) Meetings eligible to attend while a director	No. of meetings attended
A Cameron 9 J Evans 9 A Freer(2) 3 L Forde 9 S Gibbs 9 J McDonald 9 V Poole 9 A Day(3) 6		9 9 2 7 9 9 9 6	35 35 0 24 30 30 24 23	28 32 0 19 30 27 24 22

(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) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011 and resigned from the Hastings Funds Management Limited Board, effective 18 October 2011.

(3) Andrew Day was appointed to the Hastings Funds Management Limited Board, effective 18 October 2011.

Eligible to attend several extraordinary meetings of independent directors regarding AIFL and HDF.

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

1.5 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 & 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 & Compliance Committee were undertaken in accordance with the processes described above.

Australian Infrastructure Fund Annual Report 2012 AIFT Corporate Governance Statement 35

AIFT Corporate Governance Statement


No. of scheduled meetings held Director while a director	No. of meetings attended
Paul Espie 2 Jim Evans 2 John Harvey 2 Bob Humphris 2 Mike Hutchinson 2 Robert Tsenin 2 Alan Freer(1) 1 Alan Cameron 2 Andrew Day(2) 1 Liam Forde 2 Stephen Gibbs 2 Jim McDonald 2 Victoria Poole 2	2 2 2 2 2 2 1 2 1 1 2 1 2

(1) Alan Freer was appointed to the Hastings Funds Management Limited Board, effective 1 April 2011 and resigned effective 18 October 2011.
(2) Andrew Day was appointed to the Hastings Funds Management Limited Board, effective 18 October 2011.
This table does not include matters dealt with by the Board by way of circular resolution.

1.7 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.

1.8 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.

1.9 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.

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.

shown below.
	Audit Committee
No. of scheduled meetings held while a member of Director the committee		No. of meetings attended	No. of scheduled meetings held while a member of the committee	No. of meetings attended
J Evans 9 S Gibbs 9 JMcDonald 9		9 9 8	4 4 4	4 4 4

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.

is shown below.
No. of scheduled meetings held Director while a director	No. of meetings attended
Paul Espie 4 Jim Evans 4 John Harvey 4 Robert Tsenin 4 Stephen Gibbs 4 Jim McDonald 4	4 4 4 4 4 2

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;
−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

36 Australian Infrastructure Fund Annual Report 2012 AIFT Corporate Governance Statement

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 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;

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 has established a Governance Committee that considers, approves and monitors HFML’s governance arrangements in respect of possible transactions, mindful of the capacities which HFML may be acting in particular transactions or matters. The Board also approves any HFML transaction specifi c confl icts protocols put in place by HFML’s management.

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.

−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.

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 securityholders’ 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.

Australian Infrastructure Fund Annual Report 2012 AIFT Corporate Governance Statement 37

AIFT Corporate Governance Statement

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 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.

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
−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, as Manager and Responsible Entity, has an overarching risk management framework that formalises the Hastings Group approach to risk oversight and management of material business risks.

CEO and CFO assurance

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. Details are set out in the notes to the fi nancial statements. Neither employees of the Hastings Group nor HFML’s directors are remunerated out of the property of the Fund.

8. Diversity

Proportion of female representation

As at 30 June 2012, the proportion of women employed by Hastings was follows:

−Board of Directors, HFML: (1 woman) 14 percent.
−Senior leadership positions: (7 women) 19 percent.
−Total Hastings workforce: (40 women) 40 percent.

Recruitment practices

Hastings undertakes a recruitment process whereby any recruitment panel has male and female representatives to choose suitable candidates for senior roles within the organisation. In undergoing its recruitment process Hastings also promotes the need to include diversity in age and cultural background of candidates.

38 Australian Infrastructure Fund Annual Report 2012 AIFT Corporate Governance Statement

Parental leave

Flexible work arrangements

Hastings has introduced fl exible start and fi nish times; part-time work arrangements; and work from home arrangements. Currently fl exible work arrangements have been implemented for nine staff.

Pay equity

Hastings achieves its objectives for pay equity for like roles across the organisation.

A review of the Fixed and Total Remuneration against relative markets in countries Hastings has employees revealed no systemic gender bias.

Development of intranet staff communication site

Enhanced training and professional development for staff

Hastings encouraged participation by its female staff in the following female specifi c leadership and mentoring programs:

−Women in Banking and Financing mentoring program;
−Participation in Women in Banking and Finance forum; and
−Attendance at workshops and seminars to network and obtain leadership skills. These include ‘Mentor Matching Networking events’; ‘UN Women Speaker series – Leading Leaders’ and other Westpac seminars and panel discussions.

Australian Infrastructure Fund Annual Report 2012 AIFT Corporate Governance Statement

Financial Information

AIX

Australian Infrastructure Fund Limited ABN 97 063 935 553

Australian Infrastructure Fund Trust ARSN 089 889 761

Consolidated Financial Statements

41 AIFL Directors’ Report 44 Remuneration Report 46 AIFL Auditor’s Independence Declaration 47 AIFT Directors’ Report 49 AIFT Auditor’s Independence Declaration 50 Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Financial Position 52 Consolidated Statements of Changes in Equity 53 Consolidated Statements of Cash Flows 54 Notes to the Consolidated Financial Statements 82 Directors’ Declarations 83 Independent Audit Report

40 Australian Infrastructure Fund Annual Report 2012 Financial Information

AIFL Directors’ Report

The directors of Australian Infrastructure Fund Limited present 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 2012.

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 and its controlled entities, 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 names of the directors of the Company in offi ce during the year and up to the date of this report are:

Paul Espie	Chairman
James Evans	Director
John Harvey	Director
Robert Humphris	Director
Michael Hutchinson	Director
Robert Tsenin	Director

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.

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 16 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.

Jefferson Petch

Qualifi cations: LLB (Hons), BCom (Hons), MCom (Hons), SA (Fin) Jefferson Petch has over seven 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.

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 2012 was $195,974,000 (2011: $212,321,000).

Distributions and dividends

Final dividend and distribution

A fi nal dividend and distribution of $34,141,000 (5.50 cents per stapled security) was declared by AIX for the year ended 30 June 2012 (2011: 5.00 cents per stapled security) and will be paid on 30 August 2012.

The fi nal dividend and distribution comprised:

−a fi nal dividend of $4,000,000 (0.64 cents per security) declared by AIFL for the year ended 30 June 2012 (2011: 0.50 cents per stapled security) franked to 100 percent (2011: 100 percent); and
−a fi nal distribution of $30,141,000 (4.86 cents per security) declared by AIFT for the year ended 30 June 2012 (2011: 4.50 cents per stapled security).

Australian Infrastructure Fund Annual Report 2012 AIFL Directors’ Report 41

continued AIFL Directors’ Report

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 2011 and was paid on 27 February 2012 (2010: $31,037,000 and 5.00 cents per stapled security).

The interim dividend and distribution comprised:

−an interim dividend of $4,500,000 (0.72 cents per security) declared by AIFL for the half year ended 31 December 2011 (2010: $5,900,000 and 0.95 cents per stapled security) franked to 100 percent (2010: 100 percent); and
−an interim distribution of $26,537,000 (4.28 cents per security) declared by AIFT for the half year ended 31 December 2011
(2010: $25,137,000 and 4.05 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 and further announcements to the ASX. In the opinion of the directors, further information on AIX’s business strategies and its prospects for future years may, if included in this report, be detrimental to AIX in pursuing these strategies and has accordingly been omitted.

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 2012 or on the results and cash fl ows of AIX for the year ended on that date.

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.

In accordance with its public announcement on 29 June 2012, AIX will also continue to develop a detailed implementation agreement to facilitate the internalisation of AIX’s management, following the in-principle agreement of key terms between the Boards of AIFL and Hastings. Any proposal to internalise the management of AIX will be considered by securityholders before being implemented.

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.

				AIFL/Hastings	AIFL/Hastings
	AIFL/Hastings			Joint Audit Committee						AIFL Audit Committee
	Joint Board	meetings		meetings			AIFL Board	meetings		meetings
	Meetings held while	Meetings		Meetings held while	Meetings		Meetings held while	Meetings		Meetings held while	Meetings
Director name	a director	attended		a member	attended		a director	attended		a member	attended
Paul Espie	2		2	4		4	9		9	3	3
James Evans	2		2	4		4	9		8	n/a	n/a
John Harvey	2		2	4		4	9		9	3	3
Robert Humphris	2		2	n/a		n/a	9		9	n/a	n/a
Michael Hutchinson	2		2	n/a		n/a	9		8	n/a	n/a
Robert Tsenin	2		2	4		4	9		8	3	3

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.

in the table below.
	Number of stapled securities		held in AIX
	Benef cially	Benef cially held in
Director name	held in own name	the name of another	Total holdings
Paul Espie	0	906,668	906,668
John Harvey	9,487	75,000	84,487
Robert Humphris	0	300,000	300,000
Michael Hutchinson	0	122,024	122,024
Robert Tsenin	18,173	138,887	157,060

42 Australian Infrastructure Fund Annual Report 2012 AIFL Directors’ Report

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.

Non-audit services

During the year the following fees were paid or payable for non-audit services provided by the auditor of the Company, its related practices

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 .

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.

Rounding of amounts to the nearest thousand dollars

AIX is an entity of the kind referred to in Class Order 98/100 (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 46.

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

	AIX Consolidated AIFL	AIX Consolidated AIFL	Consolidated AIFT	Consolidated AIFT
	2012 $	2011 $	2012 $	2011 $
Amounts paid and payable excluding GST to PricewaterhouseCoopers for: – Agreed upon procedures – Regulatory Guide 231 – Agreed upon procedures – Annual Report	46,750 6,365	0 6,240	23,375 6,365	0 6,240
Total non-audit services	53,115	6,240	29,740	6,240

Australian Infrastructure Fund Annual Report 2012 AIFL Directors’ Report 43

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 2012. 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 .

Board and Remuneration Committee responsibility

The responsibility for the Company’s remuneration policy rests with the Board. The Remuneration Committee assists the Board in fulfi lling its duties and responsibilities in relation to remuneration. The Remuneration Committee reviews and makes recommendations to the Board on the Company’s remuneration policy. The Remuneration Committee is comprised of AIFL’s non-executive directors, a majority of whom are independent.

Non-executive directors’ remuneration

Remuneration policy

The Board of directors of the Company with the assistance of the Remuneration Committee 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 Remuneration Committee and 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 2012 totalled $936,855 (2011: $826,983).

Non-executive directors’ fees, including committee fees, are set by the Board within the maximum aggregate amount of $1,200,000 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 appointment of the Chairman of the Board predates the retirement benefi t phase out.

The Chairman of the Board is entitled to a fee of $275,000 per annum. Directors are entitled to a fee of $110,000 per annum.

The Chairman of the Audit Committee is entitled to a fee of $23,000 per annum. The ordinary members of the Audit Committee were entitled to a fee of $11,500 per annum. 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 non-executive directors

Details of non-executive directors’ remuneration for the year ended 30 June 2012 are set out in the following table. No bonuses, options or other emoluments are paid to the directors of AIFL.

Keymanagementpersonnel of AIFL	Short-term	Short-term	Post-employment	Post-employment
	Board fees $	Committee fees $	Superannuation $	Retirement benef ts $	Total $
Paul Espie 2012 2011	275,000 227,867	0 0	24,750 20,508	0 0	299,750 248,375
James Evans 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
John Harvey 2012 2011	110,000 99,667	23,000 21,667	11,970 10,920	0 0	144,970 132,253
Robert Humphris 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
Michael Hutchinson 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
Robert Tsenin 2012 2011	110,000 99,667	11,500 10,833	10,935 9,945	0 0	132,435 120,445
Total compensation: Key management personnel of AIFL 2012 2011	825,000 726,200	34,500 32,500	77,355 68,283	0 0	936,855 826,983

44 Australian Infrastructure Fund Annual Report 2012 AIFL Remuneration Report

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, the Hastings Chief Executive Offi cer and the AIFL Company Secretaries. These individuals were remunerated by Hastings or its related entities out of its management fee.

Fees paid to the manager

Base management fees

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 2012, Hastings earned management fees of $12,822,000 (2011: $12,000,000).

Performance fees

Hastings as Responsible Entity of AIFT and manager of the Company is entitled to a performance fee at the conclusion of each year ended 30 June where there is a positive performance position relative to benchmark for the year ended 30 June after taking into account any previous shortfall.

Specifi cally, under the AIFL Management Agreement and the AIFT Consolidated Constitution, at the end of each year Hastings is entitled to a performance fee equal to 10 percent of the out-performance of AIX’s total return (growth in security price plus reinvested distributions) against the ASX 200 Industrials Accumulation Index return (Benchmark Return), after taking into account any carried forward performance defi cit (previous shortfall). If the calculation of the AIX total return for a year is less than the benchmark return for that year, the shortfall is carried forward and taken into account in calculating whether the AIX total return exceeds the benchmark return in subsequent years. The AIFL Management Agreement and the AIFT Consolidated Constitution provides that any performance fee is payable within three months from 30 June.

For the year ended 30 June 2012, the performance fee payable by AIX to Hastings after taking into account all carry forward performance defi cit is $35,475,864 (2011: $nil), comprising $3,780,835 payable by the Company and $31,695,029 payable by AIFT.

The AIFL Board has determined that the performance fee payable by AIX to Hastings be cash settled. As a consequence, the difference of $35,475,864 between the performance fee payable by AIX (inclusive of non-recoverable GST of $865,265) and the fair value of the performance fee obligation as assessed at 1 July 2011 of $Nil, has, in accordance with AASB2 Share Based Payments , been recognised as a charge against the security-based payment reserve, with a corresponding payable in AIX’s Statement of Financial Position.

AIFL and Hastings have agreed that payment of the performance fee for the year ended 30 June 2012 shall be deferred until the proposal to internalise the management of AIX proceeds, subject to that occurring by 31 December 2012.

Reimbursable expenses

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 2012, Hastings was reimbursed $600,000 (2011: $207,000) 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.

==> picture [91 x 33] intentionally omitted <==

Paul Espie Chairman 24 August 2012

The AIFL Management Agreement (section 5) and the AIFT Consolidated Constitution (sections 48 and 71) are silent as to the precise form in which the performance fees are to be settled. However, the AIFT Consolidated Constitution (section 71) does provide AIFL the discretion to determine the form of settlement. At the 2010 AIX Annual General Meeting (AGM) held on 17 November 2010, securityholders approved the resolution that if performance fees are payable to Hastings then the AIFL Board would be entitled to require Hastings to be paid some or all of the performance fee in either cash or AIX securities. This approval is in place for a period of three years from the date of the AGM, that is, until 17 November 2013.

In accordance with AASB 2 Share Based Payments , the fair value of the performance fee obligation was assessed at the beginning of the fi nancial year (1 July 2011). The fair value of the performance fee obligation that was assessed and recognised as an expense in the Income Statement was $Nil (2011: $nil).

Australian Infrastructure Fund Annual Report 2012 AIFL Remuneration Report 45

AIFL Auditor’s Independence Declaration

==> picture [453 x 645] intentionally omitted <==

46 Australian Infrastructure Fund Annual Report 2012 AIFL Auditor’s Independence Declaration

AIFT Directors’ Report

The directors of Hastings Funds Management Limited (Hastings) as the Responsible Entity for Australian Infrastructure Fund Trust present 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 2012.

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).

Responsible Entity

The Responsible Entity of AIFT is Hastings Funds Management Limited (ABN 27 058 693 388). The Responsible Entity’s registered offi ce is located at Level 27, 35 Collins Street, Melbourne, Victoria 3000.

Directors

The names of the directors of the Responsible Entity in offi ce during the year and up to the date of this report are:

Alan Cameron	Chairman
Andrew Day	(appointed on 18 October 2011)
James Evans
William Forde
Alan Freer	(retired on 18 October 2011)
Stephen Gibbs
James McDonald
Victoria Poole

Company Secretaries

The Company Secretaries of the Responsible Entity in offi ce during the year and up to the date of this report are Jane Frawley and Jefferson Petch (appointed 1 July 2011).

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 2012 was $186,254,000 (2011: $194,697,000).

Distributions

A fi nal AIX distribution of $34,141,000 (5.50 cents per stapled security) was declared for the year ended 30 June 2012 and will be paid on 30 August 2012. The Trust distribution represents $30,141,000, (2011: $28,037,000) of the total amount declared. The AIX interim distribution of $31,037,000 (5.00 cents per stapled security) was declared for the half year ended 31 December 2011 and paid on 27 February 2012. The Trust distribution represents $26,537,000 (2011: $25,137,000) of the total amount declared.

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.

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 2012 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.

Fees to and interests held in the Company by the Responsible Entity or its associates

Base management fees

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 one 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 2012, Consolidated AIFT earned Hastings management fees of $11,420,000 (2011: $12,000,000).

Performance fees

AIX performance fees are payable at the conclusion of each year ended 30 June where there is a positive performance position relative to benchmark for the year ended 30 June after taking into account any previous shortfall.

Australian Infrastructure Fund Annual Report 2012 AIFT Directors’ Report 47

continued AIFT Directors’ Report

The AIFL Management Agreement (section 5) and the AIFT Consolidated Constitution (sections 48 and 71) are silent as to the precise form in which the performance fees are to be settled. However, the AIFT Consolidated Constitution (section 71) does provide AIFL the discretion to determine the form of settlement. At the 2010 AIX Annual General Meeting (AGM) held on 17 November 2010 securityholders approved the resolution that if performance fees are payable to Hastings then the AIFL Board would be entitled to require Hastings to be paid some or all of the performance fee in either cash or AIX securities. This approval is in place for a period of three years from the date of the AGM, that is, until 17 November 2013.

For the year ended 30 June 2012, the performance fee payable by Consolidated AIFT to Hastings after taking into account all carry forward performance defi cit is $31,695,029 (2011: $nil).

The AIFL Board has determined that the performance fee payable by Consolidated AIFT to Hastings be cash settled. As a consequence, the difference of $31,695,029 between the performance fee payable by Consolidated AIFT (inclusive of non-recoverable GST of $773,048) and the fair value of the performance fee obligation as assessed at 1 July 2011 of $Nil, has, in accordance with AASB2 Share Based Payments , been recognised as a charge against the security-based payment reserve, with a corresponding payable in Consolidated AIFT’s Statement of Financial Position.

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.

Rounding of amounts to the nearest thousand dollars

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 49.

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

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Alan Cameron Chairman 24 August 2012

Reimbursable expenses

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 2012, Hastings was reimbursed $315,000 (2011: $207,000) for costs incurred on behalf of Consolidated AIFT.

Interests in the Scheme

The movement in AIFT securities during the year is disclosed in Note 20

The value of AIFT’s assets and liabilities is disclosed on the Consolidated Statement of Financial Position and derived using the basis set out in

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.

48 Australian Infrastructure Fund Annual Report 2012 AIFT Directors’ Report

AIFT Auditor’s Independence Declaration

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Australian Infrastructure Fund Annual Report 2012 AIFT Auditor’s Independence Declaration 49

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Comprehensive Income for the year ended 30 June 2012

Note	AIX Consolidated AIFL	AIX Consolidated AIFL	Consolidated AIFT	Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Income Interest income 3 Dividend income 4 Distribution income 5 Net gain/(loss) – securities 6 Net gain/(loss) – cash and cash equivalents Net gain/(loss) – other Other income 7	16,522 58,310 1,404 139,577 145 (16) 506	16,221 52,085 1,623 168,048 0 0 485	15,872 52,542 705 132,256 145 (16) 506	16,221 44,650 542 155,809 0 0 485
Total income	216,448	238,462	202,010	217,707
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 Strategic initiatives 10 Other expenses	12,822 488 128 328 937 59 57 626 183 54 1,710 1,689 143	12,000 491 564 101 841 49 70 633 177 154 974 0 84	11,420 252 128 298 0 (722) 2 360 123 40 2,165 435 78	12,000 491 564 101 841 49 70 633 177 154 2,103 0 84
Total expenses	19,224	16,138	14,579	17,267
Net prof t/(loss) before income tax for the year Income tax expense/(benef t) 12(a)	197,224 1,250	222,324 10,003	187,431 1,177	200,440 5,743
Net prof t/(loss) after income tax for the year	195,974	212,321	186,254	194,697
Other comprehensive income/(loss) for the year, net of tax	0	0	0	0
Total comprehensive income/(loss) for the year	195,974	212,321	186,254	194,697
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
	AIX Consolidated AIFL		Consolidated AIFT
	2012	2011	2012	2011
Earnings per security Basic earnings per security (cents) Weighted average number of securities (000’s) Netprof t after income tax($000’s)	31.57 620,734 195,974	34.20 620,734 212,321	30.01 620,734 186,254	31.37 620,734 194,697

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

	AIX
	Consolidated AIFL		Consolidated AIFT
	2012	2011	2012	2011
Earnings per security
Basic earnings per security (cents)	31.57	34.20	30.01	31.37
Weighted average number of securities (000’s)	620,734	620,734	620,734	620,734
Netprof t after income tax($000’s)	195,974	212,321	186,254	194,697

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

50 Australian Infrastructure Fund Annual Report 2012 Consolidated Statements of Comprehensive Income

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Financial Position for the year ended 30 June 2012

Note	AIX Consolidated AIFL	AIX Consolidated AIFL	Consolidated AIFT	Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Assets Cash and cash equivalents 13 Receivables 14 Other assets 15 Current tax asset 12(d) Securities 16	157,110 507 484 304 1,816,155	79,237 3,913 89 0 1,756,228	100,201 495 428 4 1,667,793	71,158 2,699 89 4 1,565,337
Total assets	1,974,560	1,839,467	1,768,921	1,639,287
Liabilities Payables 17 Current tax liability 12(e) Provisions 18 Borrowings 19 Deferred tax liability 12(c)	71,102 0 780 0 35,627	32,292 347 722 0 34,375	63,105 0 0 11,358 23,725	29,292 0 722 13,873 22,548
Total liabilities	107,509	67,736	98,188	66,435
Net assets	1,867,051	1,771,731	1,670,733	1,572,852
Equity Contributed equity 20 Reserves 21 Retained earnings 22	1,043,575 (35,476) 858,952	1,043,575 0 728,156	883,554 (31,695) 818,874	883,554 0 689,298
Total equity	1,867,051	1,771,731	1,670,733	1,572,852

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

Australian Infrastructure Fund Annual Report 2012 Consolidated Statements of Financial Position

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Changes in Equity for the year ended 30 June 2012


AIX Consolidated AIFL Note	Contributed equity $’000	Reserves $’000	Retained earnings $’000	Total $’000
At 1 July 2010 Net prof t/(loss) after income tax for the year Other comprehensive income/(loss) for the year, net of tax	1,043,602 0 0	0 0 0	577,909 212,321 0	1,621,511 212,321 0
Total comprehensive income/(loss) for the year	0	0	212,321	212,321
Transactions with owners in their capacity as owners: Adjustment to security issue costs pursuant to market placement Dividends and distributions paid and payable to securityholders 23	(27) 0	0 0	0 (62,074)	(27) (62,074)
As at 30 June 2011	1,043,575	0	728,156	1,771,731
At 1 July 2011 Net prof t/(loss) after income tax for the year Other comprehensive income/(loss) for the year, net of tax	1,043,575 0 0	0 0 0	728,156 195,974 0	1,771,731 195,974 0
Total comprehensive income/(loss) for the year	0	0	195,974	195,974
Transactions with owners in their capacity as owners: Dividends and distributions paid and payable to securityholders 23 Security-based payment reserve 21	0 0	0 (35,476)	(65,178) 0	(65,178) (35,476)
As at 30 June 2012	1,043,575	(35,476)	858,952	1,867,051

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

Consolidated AIFT Note	Contributed equity $’000	Reserves $’000	Retained earnings $’000	Total $’000
At 1 July 2010 Net prof t/(loss) after income tax for the year Other comprehensive income/(loss) for the year, net of tax	883,582 0 0	0 0 0	547,775 194,697 0	1,431,357 194,697 0
Total comprehensive income/(loss) for the year	0	0	194,697	194,697
Transactions with owners in their capacity as owners: Adjustment to security issue costs pursuant to market placement Dividends and distributions paid and payable to securityholders 23	(28) 0	0 0	0 (53,174)	(28) (53,174)
As at 30 June 2011	883,554	0	689,298	1,572,852
At 1 July 2011 Net prof t/(loss) after income tax for the year Other comprehensive income/(loss) for the year, net of tax	883,554 0 0	0 0 0	689,298 186,254 0	1,572,852 186,254 0
Total comprehensive income/(loss) for the year	0	0	186,254	186,254
Transactions with owners in their capacity as owners: Dividends and distributions paid and payable to securityholders 23 Security-based payment reserve 21	0 0	0 (31,695)	(56,678) 0	(56,678) (31,695)
As at 30 June 2012	883,554	(31,695)	818,874	1,670,733

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

52 Australian Infrastructure Fund Annual Report 2012 Consolidated Statements of Changes in Equity

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Consolidated Statements of Cash Flows for the year ended 30 June 2012

Note	AIX Consolidated AIFL	AIX Consolidated AIFL	Consolidated AIFT	Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’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	14,118 58,310 3,230 426 (2,111) (17,158) (651)	22,766 63,620 2,282 567 (753) (15,139) (1,120)	13,468 52,542 1,538 426 (2,103) (12,993) 0	22,766 55,936 1,217 567 (753) (15,140) 0
Net cash inf ow/(outf ow) from operating activities 13(a)	56,164	72,223	52,878	64,593
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 sale of unlisted securities Proceeds from repayment of unlisted loan securities Proceeds from unlisted security repayments of capital and buy-backs	(2,498) (24,934) 0 89,575 21,494 0	(5,528) (11,151) 0 0 18,739 5,065	(2,498) (24,934) (2,974) 39,505 21,494 0	(803) (11,151) (15,174) 0 18,739 5,065
Net cash inf ow/(outf ow) from investing activities	83,637	7,125	30,593	(3,324)
Cash f ows from f nancing activities Payment for security issue costs Dividends and distributions paid	0 (62,073)	(27) (62,074)	0 (54,573)	(28) (52,073)
Net cash inf ow/(outf ow) from f nancing activities	(62,073)	(62,101)	(54,573)	(52,101)
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effects of foreign exchange rate movements on cash and cash equivalents	77,728 79,237 145	17,247 61,990 0	28,898 71,158 145	9,168 61,990 0
Cash and cash equivalents at the end of the year 13(b)	157,110	79,237	100,201	71,158

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

Australian Infrastructure Fund Annual Report 2012 Consolidated Statements of Cash Flows

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

1. General information

Australian Infrastructure Fund Limited (AIFL or the Company) was incorporated in 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 the Responsible Entity is located at Level 27, 35 Collins Street, Melbourne, Victoria, 3000.

As at 30 June 2012, AIFL and AIFT had nil employees, apart from the non-executive directors of AIFL (2011: 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 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 and its controlled entities, 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.

As a consequence of revisions to the AIX expense allocation protocol, effective 1 July 2011, fees, security expenses and administration costs in connection with AIFL’s security holdings and operations that were previously borne on AIFL’s behalf by AIFT are borne directly by AIFL. The revisions to the expense allocation protocol have no impact on the expenses incurred by AIX (Consolidated AIFL).

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 controlled entities is Australian dollars.

The consolidated fi nancial statements of AIX (Consolidated AIFL) for the year ended 30 June 2012 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 2012 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

(b) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2012 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 and 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 new standard and amendments from 1 July 2015. AIX is yet to fully assess the impact of adopting the new standard and amendments.

54 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued)

(ii) AASB 10 Consolidated Financial Statements , AASB 11 Joint Arrangements , AASB 12 Disclosure of Interests in Other Entities and AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011–7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of fi ve new and amended standards which address the accounting for joint arrangements,

AASB 10 Consolidated Financial Statements (AASB 10) replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation– Special Purpose Entities . The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single defi nition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that signifi cantly infl uence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. While AIX does not expect the new standard to have a signifi cant impact on how it currently accounts for its investees, it has yet to perform a detailed analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules.

AASB 11 Joint Arrangements (AASB 11) replaces AASB 131 Interests in Joint Ventures and introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classifi ed as either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control. As AIX is not party to any joint arrangements, this standard will not have any impact on its consolidated fi nancial statements.

AASB 12 Disclosure of Interests in Other Entities (AASB 12) sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements found in the superseded AASB 128 Investments in Associates . Application of this standard by AIX will not affect any of the amounts recognised in the consolidated fi nancial statements, but will impact the type of information disclosed in relation to AIX’s investments.

AASB 128 Investments in Associates is renamed AASB 128 Investments in Associates and Joint Ventures (AASB 128). Amendments to AASB 128 provide clarifi cation that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a partial disposal concept. As AIX does not have any associates, this standard does not have any impact on its consolidated fi nancial statements.

AIX will apply the new and revised standards and amendments from 1 July 2013.

(iii) AASB 13 Fair Value Measurement and AASB 2011–8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 Fair Value Measurement (AASB 13) was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. AIX has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the consolidated fi nancial statements. However, application of the new standard and amendments will impact the type of information disclosed in the notes to the consolidated fi nancial statements. AIX will apply the new standard and amendments from 1 July 2013.

(iv) AASB 2011–9 Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

In September 2011, the AASB made an amendment to AASB 101 Presentation of Financial Statements which requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to the profi t or loss in the future. It will not affect the measurement of any of the items recognised in the Consolidated Statements of Financial Position or the profi t or loss in the current reporting period. AIX will apply the amendments from 1 July 2012.

(v) AASB 2011–4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (effective 1 July 2013)

In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent standard and remove a duplication of the requirements with the Corporations Act 2001 . While this will reduce the disclosures that are currently required in the notes to the fi nancial statements, it will not affect any of the amounts recognised in the fi nancial statements. The amendments apply from the reporting period beginning 1 July 2013 and cannot be adopted early. The Corporations Act 2001 requirements in relation to remuneration reports will remain unchanged for now, but these requirements are currently subject to review and may also be revised in the near future.

AASB 127 Consolidated and Separate Financial Statements is renamed AASB 127 Separate Financial Statements (AASB 127) and is now a standard dealing solely with separate fi nancial statements. Application of this standard by AIX will not affect any of the amounts recognised

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 55

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

2. Summary of signifi cant accounting policies (continued)

(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 2012 and the results of all subsidiaries for the year ended 30 June 2012. 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 2012 and the results of all subsidiaries for the year ended 30 June 2012. 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.

(d) Parent entity fi nancial information

The fi nancial information for the parent entities AIFL and AIFT, disclosed in Note 32 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 taxable income of AIFT is fully distributed either by way of cash or reinvestment (i.e. unitholders 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 2012 was $1,816,155,000 (2011: $1,756,228,000).

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 16.

(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

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identifi ed as the Board of Hastings (acting in its capacity as the Responsible Entity for AIFT), which makes strategic decisions.

(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.

56 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Summary of signifi cant accounting policies (continued) (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.

(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:

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.

Purchases and sales of securities that require delivery of securities within the time frame generally established by regulation or convention in the market place 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 2012 (2011: nil).

Derivative securities

AIX did not hold any derivative securities at 30 June 2012 (2011: 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 2012.

Further information relating to unlisted securities is provided in Note 16.

The post-tax risk adjusted discount rates applied by KPMG Corporate Finance in determining the fair value of each unlisted security (inclusive of any declared but unpaid income) as at 30 June 2012 are detailed below:

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

Valuation 30 Jun 12 Unlisted securityname $’000	Post-tax risk adjusted discount rate 30 Jun 12 %	Valuation 30 Jun 11 $’000	Post-tax risk adjusted discount rate 30 Jun 11 %
Perth Airport 609,597 Australia Pacif c Airports Corporation 477,354 HOCHTIEF AirPort Capital Group 297,902 Queensland Airports 315,148 Airport Development Group 115,106 Port of Portland n/a Port of Geelong Unit Trust & Infrastructure Investment Corporation n/a Statewide Roads 1,048 Metro Light Rail and Monorail n/a	13.05 11.95 12.90 15.60 16.20 n/a n/a 12.20 n/a	525,176 451,839 313,463 271,687 99,403 68,563 24,830 976 3,979	13.05 11.60 13.20 15.00 14.80 12.70 12.60 13.10 19.20

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

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.

To the extent that it is probable that some or all of the facility will be drawn down, fees paid on the establishment of the borrowing facilities are deferred and offset against the carrying amounts of borrowings. Upon the draw down of funds from the facility, the fees are amortised over the period of the facility to which they relate.

To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, fees paid on the establishment of the borrowing facilities are initially capitalised as a prepayment for liquidity services and are subsequently amortised over the period of the facility to which the fees relate.

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

Information in relation to manager and Responsible Entity base management 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.

Manager and Responsible Entity performance fees

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

The performance fee arrangement in place with Hastings is required to be accounted for under AASB 2 Share Based Payments as it is a share based payment transaction in which the terms of the arrangement provide AIX and Consolidated AIFT with a choice of settlement in either cash or AIX stapled securities. Applying AASB 2, the fair value of the performance fee obligation is determined at the beginning of the fi nancial year (1 July) and is recognised as a performance fee expense and an increase in a securitybased payment reserve in AIX and Consolidated AIFT’s Statement of Financial Position on a progressive basis throughout the year.

In accordance with AASB 2 at the end of the fi nancial year the following accounting takes place:

−If no performance fee is ultimately levied, no further accounting entries are processed.
−If a performance fee is levied and is to be settled by way of the issue of AIX stapled securities, no further accounting entries are processed, however, upon the issue of the AIX stapled securities, the performance fee entitlement amount that was charged to the security-based payment reserve is reallocated to contributed equity in AIX and Consolidated AIFT’s Statement of Financial Position.
−If a performance fee is levied and is settled in cash, the differential between the cash settlement amount and the amount recognised as the performance fee expense for the year is charged against a security-based payment reserve, with a corresponding payable in AIX and Consolidated AIFT’s Statement of Financial Position.

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.

58 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

2. Summary of signifi cant accounting policies (continued) (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.

(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 period’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 company’s subsidiaries and associates 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 in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated fi nancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profi t or loss or 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 tax asset is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profi t or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The carrying amount of deferred 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 tax asset to be utilised.

Unrecognised deferred 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.

(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 to the nearest thousand dollars AIX is an entity of the kind referred to in Class Order 98/100 (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.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 59

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

3. Interest income

3. Interest income
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Cash and cash equivalents	2,577	2,130	1,927	2,130
Unlisted securities	13,945	14,091	13,945	14,091
Total interest income	16,522	16,221	15,872	16,221

4. Dividend income

4. Dividend income
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Unlisted securities	58,310	52,085	52,542	44,650
Total dividend income	58,310	52,085	52,542	44,650

5. Distribution income

5. Distribution income
	AIX Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Unlisted securities	1,404	1,623	705	542
Total distribution income	1,404	1,623	705	542

6. Net gain/(loss) – securities

6. Net gain/(loss) – securities
	AIX
	Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Net gain/(loss) – unlisted securities
Net gain/(loss) – unrealised	105,752	215,746	120,553	158,007
Net gain/(loss) – realised	33,825	(47,698)	11,703	(2,198)
Total net gain/(loss) – unlisted securities	139,577	168,048	132,256	155,809
Total net gain/(loss) – securities	139,577	168,048	132,256	155,809

On 29 February 2012, AIX sold its interest in Port of Geelong Unit Trust and Infrastructure Investment Corporation. AIX received sale proceeds of $24,788,875 in consideration for its $11,984,267 investment holding. The sale resulted in a holding period gain on sale of $12,630,311 (net of divestment costs).

On 23 March 2012, AIX and Consolidated AIFT sold their interest in Metro Transport Sydney and Sydney Light Rail Company. AIX and Consolidated AIFT received sales proceeds of $7,676,098 in consideration for their $26,813,805 investment holding. The sale resulted in a holding period loss on sale of $19,615,734 (inclusive of divestment costs).

On 23 May 2012, AIX sold its interest in Port of Portland. AIX received sales proceeds of $66,500,000 in consideration for its $20,411,607 investment holding. The sale resulted in a holding period gain on sale of $45,027,011 (net of divestment costs).

On 23 May 2012, Consolidated AIFT sold its interest in Port of Portland. Consolidated AIFT received sales proceeds of $40,449,330 in consideration for its $4,447,575 investment holding. The sale resulted in a holding period gain on sale of $35,535,905 (net of divestment costs).

60 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

7. Other income

7. Other income
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Director fee income	487	485	487	485
Other income	19	0	19	0
Total other income	506	485	506	485

8. Manager and Responsible Entity fees

8. Manager and Responsible Entity fees
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Base management fees	12,822	12,000	11,420	12,000
Performance fees	0	0	0	0
Total manager and Responsible Entity fees	12,822	12,000	11,420	12,000

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 one 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

The AIFL Management Agreement (section 5) and the AIFT Consolidated Constitution (sections 48 and 71) are silent as to the precise form in which the performance fees are to be settled. However, the AIFT Consolidated Constitution (section 71) does provide AIFL the discretion to determine the form of settlement. At the 2010 AIX Annual General Meeting (AGM) held on 17 November 2010 securityholders approved the resolution that if performance fees are payable to Hastings, then the AIFL Board would be entitled to require Hastings to be paid some or all of the performance fee in either cash or AIX securities. This approval is in place for a period of three years from the date of the AGM, that is, until 17 November 2013.

For the year ended 30 June 2012, the performance fee payable by AIX to Hastings after taking into account all carry forward performance defi cit was $35,475,864, comprising $3,780,835 payable by the Company and $31,695,029 payable by AIFT.

The AIFL Board has determined that the performance fee payable to Hastings be cash settled. As a consequence:

−the difference of $35,475,864 between the performance fee payable by AIX (inclusive of non-recoverable GST of $865,265) and the fair value of the performance fee obligation as assessed at 1 July 2011 of $nil has, in accordance with AASB2 Share Based Payments , been recognised as a charge against the security-based payment reserve, with a corresponding payable in AIX’s Statement of Financial Position.
−the difference of $31,695,029 between the performance fee payable by Consolidated AIFT (inclusive of non-recoverable GST of $773,048) and the fair value of the performance fee obligation as assessed at 1 July 2011 of $nil has, in accordance with AASB2 Share Based Payments , been recognised as a charge against the security-based payment reserve, with a corresponding payable in Consolidated AIFT’s Statement of Financial Position.

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 61

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

9. Finance costs

9. Finance costs
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Interest expense – stapled entity – AIFL	0	0	458	1,128
Bank fees	11	11	11	12
Other borrowing costs	1,699	963	1,696	963
Total f nance costs	1,710	974	2,165	2,103

10. Strategic initiatives

10. Strategic initiatives
	AIX
	Consolidated	AIFL		Consolidated	AIFT
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Strategic initiative costs	1,689		0	435		0
Total strategic initiative costs	1,689		0	435		0

In accordance with its public announcement on 29 June 2012, the AIFL and Hastings Boards have reached a non-binding agreement on the key terms upon which the management of AIX could be internalised. It is intended for this in-principle agreement to be developed into a detailed implementation agreement following which, if appropriate terms are agreed, the approval of AIX securityholders will be sought. Prior to seeking this approval, AIX will seek all necessary regulatory approvals, waivers, consents and tax rulings, and an independent expert will have opined upon the terms of the proposed internalisation and concluded it is fair and reasonable and therefore in the best interests of AIX securityholders.

Strategic initiative costs refl ect costs associated with internalisation, which have been incurred by AIFL and AIFT in reaching this non-binding agreement and developing the proposal for internalising the management of AIX in preparation for consideration by AIX securityholders.

11. Audit fees

During the year, the following fees were paid or payable for services provided by the auditor:

11. Audit fees During the year, the following fees were paid or payable for services provided by the	auditor:
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $	2011 $	2012 $	2011 $
(a) Audit services
Amounts paid and payable excluding GST to PricewaterhouseCoopers for:
– Audit and review of f nancial statements	139,906	135,265	87,133	97,617
– Compliance plan audit	16,228	15,910	16,228	15,910
Total audit fees	156,134	151,175	103,361	113,527
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $	2011 $	2012 $	2011 $
(b) Non-audit services
Amounts paid and payable excluding GST to PricewaterhouseCoopers for:
– Agreed upon procedures – Regulatory Guide 231	46,750	0	23,375	0
– Agreed upon procedures – Annual Report	6,365	6,240	6,365	6,240
Total non-audit services	53,115	6,240	29,740	6,240

62 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

12. Income tax

12. Income tax
	AIX Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
(a) Income tax expense/(benef t) Current tax expense/(benef t) Deferred tax expense/(benef t)	0 1,250	663 9,340	0 1,177	0 5,743
Total income tax expense/(benef t)	1,250	10,003	1,177	5,743
(b) Numerical reconciliation of income tax expense to prima facie tax payable Net prof t/(loss) before income tax for the year	197,224	222,324	187,431	200,440
Tax at the applicable Australian tax rate of 30% (2011 – 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 Security-based payment reserve Other Derecognition of prior year temporary difference Rerecognition of prior year capital losses	59,167 (55,052) 742 (2,472) (1,134) 231 (1,573) 1,341	66,697 (54,390) 989 (3,293) 0 0 0 0	56,229 (55,052) 0 0 0 0 0 0	60,133 (54,390) 0 0 0 0 0 0
Income tax expense	1,250	10,003	1,177	5,743
(c) Deferred tax liability Deferred tax liability	35,627	34,375	23,725	22,548
Comprising: Net unrealised gain on unlisted securities Provision for retirement benef t Unutilised imputation credits – available for future offset Other	37,749 (234) (1,576) (312)	34,375 0 0 0	23,725 0 0 0	22,548 0 0 0
	35,627	34,375	23,725	22,548
The movement in the deferred tax liability balance has been charged through prof t or loss. (d) Current tax asset Current tax asset	304	0	4	4
	304	0	4	4
(e) Current tax liability Current tax liability	0	347	0	0
	0	347	0	0
(f) Unrecognised capital losses Unused capital losses for which no deferred income tax asset has been recognised	18,137	45,500	0	0
Potential tax benef t at 30%	5,441	13,650	0	0
(g) Unrecognised income tax losses Unused income tax losses for which no deferred income tax asset has been recognised	5,252	0	0	0
Potential tax benef t at 30%	1,576	0	0	0

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

13. 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
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Net prof t/(loss) after income tax	195,974	212,321	186,254	194,697
Adjustments for non-cash and non-operating items:
Net gain/(loss) – securities	(139,577)	(168,048)	(132,256)	(155,809)
Net gain/(loss) – cash and cash equivalents	(145)	0	(145)	0
Net gain/(loss) – other	16	0	16	0
Interest income	(42)	0	(42)	0
Interest expense – stapled entity	0	0	458	1,128
Changes in operating related assets and liabilities:
(Increase)/decrease in income receivables	1,826	12,193	833	11,959
(Increase)/decrease in other receivables	(21)	20	(10)	20
(Increase)/decrease in prepayments	(395)	236	(340)	236
(Increase)/decrease in accrued income	(2,361)	6,546	(2,361)	6,546
Increase/(decrease) in payables	231	25	15	25
Increase/(decrease) in current tax liability	(651)	(457)	0	0
Increase/(decrease) in deferred tax liability	1,250	9,339	1,178	5,743
Increase/(decrease) in provisions	59	48	(722)	48
Net cash inf ow/(outf ow) from operating activities	56,164	72,223	52,878	64,593

(b) Components of cash and cash equivalents

(b) Components of cash and cash equivalents
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Cash at bank	157,110	79,237	100,201	71,158
Total cash and cash equivalents	157,110	79,237	100,201	71,158

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

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

During the year, $18,406,765 of Queensland Airports Limited loan notes were repaid by way of the issue of $18,406,765 new Queensland Airports Limited loan notes issued under a separate Loan Note Deed Poll.

There were no other signifi cant non-cash investing and fi nancing activities during the year (2011: nil).

14. Receivables

14. Receivables
	AIX Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Income receivable	0	2,388	0	1,174
Security redemption proceeds receivable	0	1,299	0	1,299
Other receivables	507	226	495	226
Total receivables	507	3,913	495	2,699

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

15. Other assets

15. Other assets
	AIX
	Consolidated	AIFL		Consolidated	AIFT
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Prepayments	484		89	428		89
Total other assets	484		89	428		89

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

16. Securities

16. Securities
	AIX
	Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Unlisted securities
Perth Airport (Perth Airport Development Group & PAPT Holdings)	609,597	525,176	609,597	525,176
Australia Pacif c Airports Corporation Limited	477,354	451,839	330,040	312,399
HOCHTIEF AirPort Capital Group	297,902	313,463	297,902	313,463
Queensland Airports Limited	315,148	271,687	315,148	271,687
Airport Development Group Pty Ltd	115,106	98,104	115,106	98,104
Port of Portland	0	66,632	0	40,529
Port of Geelong Unit Trust & Infrastructure Investment Corporation	0	24,372	0	0
Statewide Roads	1,048	976	0	0
Metro Light Rail and Monorail	0	3,979	0	3,979
Total unlisted securities	1,816,155	1,756,228	1,667,793	1,565,337
Total securities	1,816,155	1,756,228	1,667,793	1,565,337

All unlisted securities have been independently valued by KPMG Corporate Finance at 30 June 2012 and 30 June 2011.

	AIX
	Consolidated	AIFL	Consolidated	AIFT
Percentage ownership	2012 %	2011 %	2012 %	2011 %
Unlisted securities
Perth Airport (Perth Airport Development Group & PAPT Holdings)	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	0.00	50.00	0.00	30.41
Port of Geelong Unit Trust & Infrastructure Investment Corporation	0.00	35.00	0.00	0.00
Statewide Roads	6.25	6.25	0.00	0.00
Metro Light Rail and Monorail	0.00	38.89	0.00	38.89

17. Payables

17. Payables
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Payable – the Responsible Entity	36,688	962	32,778	962
Distribution and dividend payable	34,141	31,037	30,140	28,037
Other payables	273	293	187	293
Total payables	71,102	32,292	63,105	29,292

For information regarding the distribution and dividend payable refer to Note 23.

Further details of related party payables are included in Notes 27 and 28.

The Responsible Entity payable balance includes $35,475,864 (inclusive of non-recoverable GST) payable to the Responsible Entity in connection with performance fees for the year ended 30 June 2012. For further information refer to Note 8.

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 65

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

18. Provisions

18. Provisions
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Provision for directors’ retirement benef t	780	722	0	722
Total provisions	780	722	0	722
Movement in the provision for directors’ retirement benef t:
Opening balance	722	673	722	673
Charged/(credited) to the prof t or loss	58	49	(722)	49
Closing balance	780	722	0	722

As a consequence of revisions to the AIX expense allocation protocol, effective 1 July 2011 the directors’ retirement provision that was previously recognised as a liability by AIFT was derecognised by AIFT and recognised as a liability by AIFL.

The revisions to the AIX expense allocation protocol had no impact on the directors’ retirement expense or provision recognised by AIX (Consolidated AIFL), however it has resulted in the recognition of a deferred tax asset by AIX (Consolidated AIFL).

19. Borrowings

19. Borrowings
	AIX
	Consolidated	AIFL		Consolidated	AIFT
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Loan – stapled entity – AIFL	0		0	11,358	13,873
Total borrowings	0		0	11,358	13,873

(a) Financing arrangements

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

	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Facilities available:
Standby debt facility	100,000	30,000	100,000	30,000
	100,000	30,000	100,000	30,000
Facilities drawn:
Standby debt facility	0	0	0	0
	0	0	0	0
Facilities undrawn:
Standby debt facility	100,000	30,000	100,000	30,000
	100,000	30,000	100,000	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 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. This facility replaced the $30 million standby debt facility with Westpac and ANZ as lenders.

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

66 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

20. Contributed equity

20. Contributed equity
	AIX
	Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Issued securities	1,043,575	1,043,575	883,554	883,554
	1,043,575	1,043,575	883,554	883,554
	No. ‘000	No. ‘000	No. ‘000	No. ‘000
(a) Issued securities (number)
Opening balance	620,734	620,734	620,734	620,734
Closing balance	620,734	620,734	620,734	620,734
	$’000	$’000	$’000	$’000
(b) Issued securities (dollars)
Opening balance	1,043,575	1,043,602	883,554	883,582
Less: security issue costs	0	(27)	0	(28)
Closing balance	1,043,575	1,043,575	883,554	883,554

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.

21. Reserves

21. Reserves
	AIX
	Consolidated	AIFL		Consolidated	AIFT
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Security-based payment reserve	(35,476)		0	(31,695)		0
Total reserves	(35,476)		0	(31,695)		0
Movement in the security-based payment reserve:
Opening balance	0		0	0		0
Current period charge(1)	(35,476)		0	(31,695)		0
Closing balance	(35,476)		0	(31,695)		0

(1) Represents difference between the performance fee payable at 30 June 2012 (inclusive of non-recoverable GST) and the fair value of the performance fee obligation assessed at the beginning of the fi nancial year (1 July 2011) and recognised as an expense in the Income Statement. For further details refer to Note 8.

22. Retained earnings

22. Retained earnings
	AIX
	Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Opening balance	728,156	577,909	689,298	547,775
Net prof t/(loss) after income tax	195,974	212,321	186,254	194,697
Dividends and distributions paid and payable to securityholders	(65,178)	(62,074)	(56,678)	(53,174)
Closing balance	858,952	728,156	818,874	689,298

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 67

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

23. Distributions and dividends paid and payable to securityholders

	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Interim distribution and dividend declared and paid	31,037	31,037	26,537	25,137
Final distribution and dividend declared and payable	34,141	31,037	30,141	28,037
Total distributions and dividends paid and payable to securityholders	65,178	62,074	56,678	53,174
Comprising:
Distributions declared during the year	56,678	53,174	56,678	53,174
Dividends declared during the year	8,500	8,900	0	0
	65,178	62,074	56,678	53,174

Final dividend and distribution

The fi nal dividend and distribution comprised:

−a fi nal dividend of $4,000,000 (0.64 cents per security) declared by AIFL for the year ended 30 June 2012 (2011: 0.50 cents per stapled security) franked to 100 percent (2011: 100 percent); and

−a fi nal distribution of $30,141,000 (4.86 cents per security) declared by AIFT for the year ended 30 June 2012 (2011: 4.50 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 2011 which was paid on 27 February 2012 (2010: $31,037,000 and 5.00 cents per stapled security).

The interim dividend and distribution comprised:

−an interim dividend of $4,500,000 (0.72 cents per security) declared by AIFL for the half year ended 31 December 2011 (2010: $5,900,000 and 0.95 cents per stapled security) franked to 100 percent (2010: 100 percent); and

−an interim distribution of $26,537,000 (4.28 cents per security) declared by AIFT for the half year ended 31 December 2011 (2010: $25,137,000 and 4.05 cents per stapled security).

24. Franking credit availability

24. Franking credit availability
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Frankingcredits available for distribution at the end of theyear	5,240	5,331	0	0

25. 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 their 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

68 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26. 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 cash fl 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 cash fl 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 cash fl 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 cash fl ows of the unlisted security. The underlying cash fl 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 cash fl 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 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 cash fl 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 2012 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 2012 Notes to the Consolidated Financial Statements 69

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

26. 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 13), receivables balances (Note 14) as well as the following unlisted security balances:

security balances:
Name Instrument type	AIX Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Perth Airport Shareholder loans HOCHTIEF AirPort Capital Group Shareholder loans Queensland Airports Limited Loan notes Metro Light Rail and Monorail Shareholder loans	43,284 79,429 24,786 0	20,781 98,727 22,332 27,774	43,284 79,429 24,786 0	20,781 98,727 22,332 27,774
	147,499	169,614	147,499	169,614

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 +/- one 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 one 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 +/- one 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 depreciated 2.3 percent against the British Pound Sterling (GBP), appreciated 8.8 percent against the Euro (EUR), depreciated 1.6 percent against the New Zealand Dollar (NZD) and depreciated 5.3 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.

70 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26. Financial instruments (continued)

				Interest	rate risk					Foreign exchange risk	Foreign exchange risk	Foreign exchange risk
		-1.0%				1.0%			-10.0%			10.0%
AIX	Carrying
Consolidated AIFL	value	Prof t		Equity	Prof t			Equity	Prof t		Equity	Prof t		Equity
2012	$’000	$’000		$’000	$’000			$’000	$’000		$’000	$’000		$’000
Financial assets
Cash and cash equivalents	157,110	(1,571)		(1,571)	1,571			1,571	24		24	(19)		(19)
Receivables	0	0		0	0			0	0		0	0		0
Securities	1,816,155	(137,145)	(137,145)		137,145		137,145		33,099	33,099		(27,083)	(27,083)
Financial liabilities
Payables	71,102	0		0	0			0	0		0	0		0
Borrowings	0	0		0	0			0	0		0	0		0
Total increase/(decrease)		(138,716)	(138,716)		138,716		138,716		33,123	33,123		(27,102)	(27,102)

				Interest	rate risk					Foreign exchange risk	Foreign exchange risk	Foreign exchange risk
		-0.5%				0.5%			-10.0%			10.0%
AIX	Carrying
Consolidated AIFL	value	Prof t		Equity	Prof t			Equity	Prof t		Equity	Prof t		Equity
2011	$’000	$’000		$’000	$’000			$’000	$’000		$’000	$’000		$’000
Financial assets
Cash and cash equivalents	79,237	(396)		(396)	396			396	1,140		1,140	(932)		(932)
Receivables	0	0		0	0			0	0		0	0		0
Securities	1,756,228	(67,573)	(67,573)		67,573			67,573	34,831		34,831	(28,496)	(28,496)
Financial liabilities
Payables	32,292	0		0	0			0	0		0	0		0
Borrowings	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	Foreign exchange risk	Foreign exchange risk
		-1.0%				1.0%			-10.0%			10.0%
Consolidated AIFT	Carrying value	Prof t		Equity	Prof t			Equity	Prof t		Equity	Prof t		Equity
2012	$’000	$’000		$’000	$’000			$’000	$’000		$’000	$’000		$’000
Financial assets
Cash and cash equivalents	100,201	(1,002)		(1,002)	1,002			1,002	24		24	(19)		(19)
Receivables	0	0		0	0			0	0		0	0		0
Securities	1,667,793	(124,731)	(124,731)		124,731		124,731		33,099	33,099		(27,083)	(27,083)
Financial liabilities
Payables	63,105	0		0	0			0	0		0	0		0
Borrowings	11,358	114		114	(114)			(114)	0		0	0		0
Total increase/(decrease)		(125,619)	(125,619)		125,619		125,619		33,123	33,123		(27,102)	(27,102)

				Interest	rate risk				Foreign exchange risk	Foreign exchange risk	Foreign exchange risk
		-0.5%				0.5%		-10.0%			10.0%
Consolidated AIFT	Carrying value	Prof t		Equity	Prof t		Equity	Prof t		Equity	Prof t		Equity
2011	$’000	$’000		$’000	$’000		$’000	$’000		$’000	$’000		$’000
Financial assets
Cash and cash equivalents	71,158	(356)		(356)	356		356	1,140		1,140	(932)		(932)
Receivables	0	0		0	0		0	0		0	0		0
Securities	1,565,337	(59,531)	(59,531)		59,531		59,531	34,831		34,831	(28,496)	(28,496)
Financial liabilities
Payables	29,292	0		0	0		0	0		0	0		0
Borrowings	13,873	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)

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 71

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

26. 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 2012 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.

	Level 1		Level 2		Level 3	Level 3		Total	Total
AIX	2012	2011	2012	2011	2012		2011	2012		2011
Consolidated AIFL	$’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	1,816,155	1,756,228		1,816,155	1,756,228
Total assets	0	0	0	0	1,816,155	1,756,228		1,816,155	1,756,228

	Level 1		Level 2		Level 3	Level 3	Level 3		Total	Total
Consolidated AIFT	2012 $’000	2011 $’000	2012 $’000	2011 $’000	2012 $’000			2011 $’000	2012 $’000		2011 $’000
Assets
Financial assets held at fair value through prof t or loss:
Unlisted securities	0	0	0	0	1,667,793		1,565,337		1,667,793	1,565,337
Total assets	0	0	0	0	1,667,793	1,565,337			1,667,793	1,565,337

72 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

26. Financial instruments (continued)

The following table presents the movements in Level 3 instruments.

	Unlisted	securities	Total	Total
AIX	2012	2011	2012		2011
Consolidated AIFL	$’000	$’000	$’000		$’000
Opening balance	1,756,228	1,603,148	1,756,228		1,603,148
Acquisitions	27,522	5,528	27,522		5,528
Loan advances	2,453	11,151	2,453		11,151
Capital reductions and disposals	(75,619)	(79,593)	(75,619)		(79,593)
Net gain/(loss) recognised in prof t or loss	105,752	215,746	105,752		215,746
Movement in accrued loan interest	(181)	248	(181)		248
Closing balance	1,816,155	1,756,228	1,816,155	1,756,228
Total net gain/(loss) recognised in prof t or loss	139,577	168,048	139,577		168,048
Total gain/(loss) for the year included in prof t or loss that relates to assets
held at the end of the reporting period	101,535	215,746	101,535		215,746

	Unlisted	securities	Total	Total
	2012	2011	2012		2011
Consolidated AIFT	$’000	$’000	$’000		$’000
Opening balance	1,565,337	1,429,220	1,565,337	1,429,220
Acquisitions	27,522	803	27,522		803
Loan advances	2,453	11,151	2,453		11,151
Capital reductions and disposals	(47,891)	(34,093)	(47,891)		(34,093)
Net gain/(loss) recognised in prof t or loss	120,553	158,007	120,553		158,007
Movement in accrued loan interest	(181)	249	(181)		249
Closing balance	1,667,793	1,565,337	1,667,793		1,565,337
Total net gain/(loss) recognised in prof t or loss	132,256	155,809	132,256		155,809
Total gain/(loss) for the year included in prof t or loss that relates to assets
held at the end of the reporting period	116,336	158,007	116,336		158,007

(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
	2012 AUD $’000	2011 AUD $’000	2012 AUD $’000	2011 AUD $’000
Financial assets:
Cash and cash equivalents	214	10,257	214	10,257
Securities	297,902	313,463	297,902	313,463
	298,116	323,720	298,116	323,720

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
	2012 AUD $’000	2011 AUD $’000	2012 AUD $’000	2011 AUD $’000
Interest	7,360	8,361	7,360	8,361
Net gain/(loss) – securities	(4,823)	14,235	(4,823)	14,235
	2,537	22,596	2,537	22,596

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 73

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

27. Related party transactions

(a) Associate entities

Names of associate entities

Associate entities and interests in these entities are as follows:

(a) Associate entities Names of associate entities Associate entities and interests in these entities are as follows:
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	Holding %	Holding %	Holding %	Holding %
Perth Airport Development Group & PAPT Holdings (Perth Airport)	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	0.00	50.00	0.00	30.41
Port of Geelong Unit Trust & Infrastructure Investment Corporation	0.00	35.00	0.00	0.00
Metro Light Rail and Monorail	0.00	38.89	0.00	38.89

For further details in relation to holdings in associate entities refer to Note 16 – Securities.

(b) Associate entities

Transactions with associate entities

(a) Associate entities Names of associate entities Associate entities and interests in these entities are as follows:
	AIX Consolidated AIFL		Consolidated AIFT
	2012 Holding %	2011 Holding %	2012 Holding %	2011 Holding %
Perth Airport Development Group & PAPT Holdings (Perth Airport) 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 40.02 49.07 28.23 0.00 0.00 0.00	29.74 40.02 49.07 28.23 50.00 35.00 38.89	29.74 40.02 49.07 28.23 0.00 0.00 0.00	29.74 40.02 49.07 28.23 30.41 0.00 38.89
For further details in relation to holdings in associate entities refer to Note 16 – Securities. (b) Associate entities Transactions with associate entities
	AIX Consolidated AIFL		Consolidated AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Distribution income from: Port of Portland Port of Geelong Unit Trust & Infrastructure Investment Corporation Queensland Airports Limited	(119) 745 778	890 733 0	(72) 0 778	542 0 0
Dividend income from: Perth Airport Development Group & PAPT Holdings (Perth Airport) Airport Development Group Pty Ltd Australia Pacif c Airports Corporation Limited Metro Light Rail and Monorail Port of Portland Queensland Airports Limited Port of Geelong Unit Trust & Infrastructure Investment Corporation Statewide Roads	18,437 7,283 17,562 0 0 14,679 242 106	17,248 2,926 0 0 1,500 12,022 0 1,698	18,437 7,283 12,142 0 0 14,679 0 0	17,248 2,926 0 0 912 12,022 0 0
Interest income from: Perth Airport Development Group & PAPT Holdings (Perth Airport) Queensland Airports Limited HOCHTIEF AirPort Capital Group Metro Light Rail and Monorail	3,531 2,243 7,360 811	3,795 1,937 8,360 0	3,531 2,243 7,360 811	3,795 1,937 8,360 0
Advance/(repayment) of unlisted security shareholder loans/bonds: Perth Airport Development Group & PAPT Holdings (Perth Airport) Queensland Airports Limited HOCHTIEF AirPort Capital Group Metro Light Rail and Monorail	22,504 2,453 (14,771) (27,774)	(11,742) 3,925 (8,763) 0	22,504 2,453 (14,771) (27,774)	(11,742) 3,925 (8,763) 0
Acquisition/(disposal) of interests in: Perth Airport Development Group & PAPT Holdings (Perth Airport) Port of Geelong Unit Trust & Infrastructure Investment Corporation Port of Portland Metro Light Rail and Monorail	2,498 (11,984) (19,850) (19)	803 4,725 0 0	2,498 0 (4,106) (19)	803 0 0 0
Security redemption proceeds receivable from: Airport Development Group Pty Ltd	(1,299)	6,362	(1,299)	6,362

74 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

27. Related party transactions (continued)

Receivable and payable balances with associate entities

27. Related party transactions (continued) Receivable and payable balances with associate entities
	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Income receivable
Port of Portland	0	1,931	0	1,174
Queensland Airports Limited	559	556	559	556
HOCHTIEF AirPort Capital Group	1,784	1,969	1,784	1,969
Port of Geelong Unit Trust & Infrastructure Investment Corporation	0	458	0	0
Security redemption proceeds receivable
Airport Development Group Pty Ltd	0	1,299	0	1,299

Receivable and payable balances are non-interest bearing and generally payable within 30 days.

(c) 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
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Proceeds from loans received from
AIFL	0		0	484	1,419
Loans advanced to
AIFL	0		0	3,000	15,464
Interest expense paid or payable to
AIFL	0		0	458	1,128

In the prior fi nancial year 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
	2012	2011		2012	2011
	$’000	$’000		$’000	$’000
Borrowings payable to
AIFL	0		0	11,358	13,873

The borrowing is at call and incurs interest at the 30 day bank bill rate (BBSW).

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

27. Related party transactions (continued)

(d) 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

	AIX
	Consolidated	AIFL	Consolidated	AIFT
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Base management fees expense
Hastings	12,822	12,000	11,420	12,000
Performance fees expense
Hastings	35,476	0	31,695	0
Reimbursement of expenses paid or payable on behalf of AIX
Hastings	600	207	315	207
Distributions declared to
Westpac	1,891	1,801	1,891	1,801
Interest received from
Westpac	2,577	2,130	1,927	2,130
Finance expenses
Westpac
Loan facilities – line fees	654	357	654	357
Loan facilities – agency fee	25	32	25	32
Loan facilities – establishment fee	337	217	337	217
Bank charges	11	11	10	11

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 manager 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
	2012	2011	2012	2011
	$’000	$’000	$’000	$’000
Cash and cash equivalents
Westpac	157,110	79,237	100,201	71,158
Distribution payable
Westpac	901	901	901	901
Base management fees payable
Hastings	1,211	962	1,083	962
Performance fees payable
Hastings	35,476	0	31,695	0
Loan facility
Westpac
Total facility available	50,000	15,000	50,000	15,000
Less: facility drawn	0	0	0	0
Facility undrawn	50,000	15,000	50,000	15,000

For details in relation to the loan facilities refer Note 19 – 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
	2012 No.		2011 No.	2012 %	2011 %
Westpac entities(excludingHastings)	18,012,204	18,012,204		2.90	2.90

All transactions with related parties were conducted under commercial terms and conditions.

76 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

28. 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 James Evans Director John Harvey Director Robert Humphris Director Michael Hutchinson Director Robert Tsenin Director Jeff Pollock AIX Chief Executive Offi 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: Alan Cameron Chairman Andrew Day Director – Appointed on 18 October 2011 James Evans Director William Forde Director Alan Freer Director – Retired on 18 October 2011 Stephen Gibbs Director James McDonald Director Victoria Poole Director Jeff Pollock AIX Chief Executive Offi cer

Key management personnel related entities

Alan Cameron, Andrew Day, James Evans, William Forde, Alan Freer, Stephen Gibbs, James McDonald and Victoria Poole were directors of various Westpac subsidiary entities during the year.

John Harvey is a director of Australia Pacifi c Airports Corporation Limited.

Jeff Pollock is a director of Airport Development Group and PAPT Holdings (Perth Airport), Perth Airport 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 27 – 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.

The fees paid to Hastings as Responsible Entity of AIFT and manager of AIFL are detailed in Note 27 – Related party disclosures.

(ii) Compensation policy for key management personnel of AIFL

Board and Remuneration Committee responsibility

Non-executive directors’ remuneration

Remuneration Policy

The Board of directors of AIFL (the Board) with the assistance of the Remuneration Committee is responsible for determining and reviewing compensation arrangements for the directors of the Company.

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

Directors’ fees expensed for the year ended 30 June 2012 totalled $936,855 (2011: $826,983).

The Chairman of the Board is entitled to a fee of $275,000 per annum.

Directors are entitled to a fee of $110,000 per annum.

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

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 77

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

28. Key management personnel (continued)

Remuneration paid to non-executive directors

Details of non-executive directors’ remuneration for the year ended 30 June 2012 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 fees $	Committee fees $	Super- annuation $	Retirement benef ts $	Total $
Paul Espie 2012 2011	275,000 227,867	0 0	24,750 20,508	0 0	299,750 248,375
James Evans 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
John Harvey 2012 2011	110,000 99,667	23,000 21,667	11,970 10,920	0 0	144,970 132,253
Robert Humphris 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
Michael Hutchinson 2012 2011	110,000 99,667	0 0	9,900 8,970	0 0	119,900 108,637
Robert Tsenin 2012 2011	110,000 99,667	11,500 10,833	10,935 9,945	0 0	132,435 120,445
Total compensation: Key management personnel of AIFL 2012 2011	825,000 726,200	34,500 32,500	77,355 68,283	0 0	936,855 826,983

Remuneration paid to the AIX Chief Executive Offi cer

Jeff Pollock, the AIX Chief Executive Offi cer was not remunerated out of the property of AIFL or AIFT. This individual was remunerated by Hastings or its related entities out of its management fee.

78 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

28. 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:


Opening Holding 1 July Name No.	Acquisitions No.		DRP Issue No.	Disposals No.	Closing Holding 30 June No.
Paul Espie 2012 906,668 2011 906,668	0 0		0 0	0 0	906,668 906,668
Alan Freer(1) 2012 40,913 2011 40,913	0 0		0 0	0 0	40,913 40,913
Stephen Gibbs 2012 139 2011 139	0 0		0 0	0 0	139 139
John Harvey 2012 84,487 2011 75,000	0 9,487		0 0	0 0	84,487 84,487
Robert Humphris 2012 300,000 2011 300,000	0 0		0 0	0 0	300,000 300,000
Michael Hutchinson 2012 122,024 2011 122,024	0 0		0 0	0 0	122,024 122,024
James McDonald 2012 15,000 2011 0	0 15,000		0 0	0 0	15,000 15,000
Robert Tsenin 2012 157,060 2011 137,060	0 20,000		0 0	0 0	157,060 157,060
(1)Closing holding ref ects holding as at the date of retirement from the Hastings Board, being 18 October 2011. (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:
Name		Distributions declared		Distributions payable
		2012 $	2011 $	2012 $	2011 $
Paul Espie Alan Freer(1) Stephen Gibbs John Harvey Robert Humphris Michael Hutchinson Jim McDonald Robert Tsenin		95,200 0 15 8,871 31,500 12,813 1,575 16,491	90,667 2,046 14 8,449 30,000 12,202 1,500 15,706	49,867 0 8 4,647 16,500 6,711 825 8,638	45,333 2,046 7 4,224 15,000 6,101 750 7,853

(1) Closing holding refl ects holding as at the date of retirement from the Hastings Board, being 18 October 2011.

(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
Name	2012 $	2011 $	2012 $		2011 $
Paul Espie	95,200	90,667	49,867	45,333
Alan Freer(1)	0	2,046	0	2,046
Stephen Gibbs	15	14	8		7
John Harvey	8,871	8,449	4,647	4,224
Robert Humphris	31,500	30,000	16,500	15,000
Michael Hutchinson	12,813	12,202	6,711		6,101
Jim McDonald	1,575	1,500	825		750
Robert Tsenin	16,491	15,706	8,638		7,853

(1) Refl ects distributions up until the date of retirement from the Hastings Boards, being 18 October 2011.

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 79

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Notes to the Consolidated Financial Statements for the year ended 30 June 2012

29. Earnings per security

29. Earnings per security
	AIX Consolidated AIFL		Consolidated AIFT
	2012	2011	2012	2011
Basic earnings per security (cents) Weighted average number of securities (000’s) Netprof t after income tax($000’s)	31.57 620,734 195,974	34.20 620,734 212,321	30.01 620,734 186,254	31.37 620,734 194,697

Diluted earnings per security equates to basic earnings per security.

30. Contingent assets and liabilities and commitments

Investment commitments

Undrawn investment commitments at balance date comprise the following:

Investment commitments Undrawn investment commitments at balance date comprise the following:
At call Unlisted securityname $’000	Less than 1 year $’000	Between 1 to 5 years $’000	More than 5 years $’000	Total $’000
2012 Perth Airport Development Group & PAPT Holdings (Perth Airport) 0	0	0	0	0
Total undrawn investment commitments 0	0	0	0	0

On 2 December 2011, undrawn Perth Airport investment commitments of $15,760,268 were cancelled and a new investment commitment of $24,978,541 was made. This entire committed amount had been drawn to 30 June 2012.

At call Unlisted securityname $’000	Less than 1 year $’000	Between 1 to 5 years $’000	More than 5 years $’000	Total $’000
2011 Perth Airport Development Group & PAPT Holdings (Perth Airport) 5,055	10,705	0	0	15,760
Total undrawn investment commitments 5,055	10,705	0	0	15,760

There are no other outstanding contingent assets, contingent liabilities or commitments at 30 June 2012.

31. Events after the end of reporting period

80 Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

32. Parent entity fi nancial information

(a) Summary of fi nancial information

(a) Summary of f nancial information
	AIFL		AIFT
	2012 $’000	2011 $’000	2012 $’000	2011 $’000
Statements of Financial Position Total assets Total liabilities	216,998 20,679	214,056 15,178	1,768,903 74,463	1,639,298 43,887
Equity Contributed equity Reserves Retained earnings	160,021 (3,781) 40,079	160,021 0 38,857	883,554 (31,695) 842,581	883,554 0 711,857
Statements of Comprehensive Income Net prof t/(loss) after income tax for the year Total Comprehensive Income/(loss) for the year	9,723 9,723	17,623 17,623	187,402 187,402	200,458 200,458

(b) Contingent assets and liabilities and commitments

AIFL

There are no outstanding contingent assets, contingent liabilities or commitments at 30 June 2012 and at 30 June 2011.

AIFT

Investment commitments

Undrawn investment commitments at balance date comprise the following:

AIFT Investment commitments Undrawn investment commitments at balance date comprise the following:
At call Unlisted securityname $’000	Less than 1 year $’000	Between 1 to 5 years $’000	More than 5 years $’000	Total $’000
2012 Perth Airport Development Group & PAPT Holdings (Perth Airport) 0	0	0	0	0
Total undrawn investment commitments 0	0	0	0	0

On 2 December 2011 undrawn Perth Airport investment commitments of $15,760,268 were cancelled and a new investment commitment of $24,978,541 was made. This entire committed amount had been drawn to 30 June 2012.

At call Unlisted securityname $’000	Less than 1 year $’000	Between 1 to 5 years $’000	More than 5 years $’000	Total $’000
2011 Perth Airport Development Group & PAPT Holdings (Perth Airport) 5,055	10,705	0	0	15,760
Total undrawn investment commitments 5,055	10,705	0	0	15,760

There are no other outstanding contingent assets, contingent liabilities or commitments at 30 June 2012 and at 30 June 2011.

Australian Infrastructure Fund Annual Report 2012 Notes to the Consolidated Financial Statements 81

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Directors’ Declaration

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 50 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 2012 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 [91 x 33] intentionally omitted <==

Paul Espie Chairman

24 August 2012

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 50 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 AIFT’s Constitution; and
(ii) giving a true and fair view of AIFT and Consolidated AIFT’s fi nancial position as at 30 June 2012 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.

==> picture [72 x 52] intentionally omitted <==

Alan Cameron Chairman 24 August 2012

82 Australian Infrastructure Fund Annual Report 2012 Directors’ Declaration

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Independent Audit Report

==> picture [455 x 645] intentionally omitted <==

Australian Infrastructure Fund Annual Report 2012 Independent Audit Report 83

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Independent Audit Report

==> picture [454 x 643] intentionally omitted <==

84 Australian Infrastructure Fund Annual Report 2012 Independent Audit Report

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

==> picture [455 x 643] intentionally omitted <==

Australian Infrastructure Fund Annual Report 2012 Independent Audit Report

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Investor Details

The securityholder information set out below was applicable as at 20 August 2012.

Each stapled security consists of one share issued in the Company and one unit issued in the Trust.
The voting rights are one vote per stapled security.
The number of securityholders holding less than a marketable parcel of 194 securities was 505.
The percentage of the total holdings held by or on behalf of the 20 largest holders of these securities was 60.02 percent.

Twentylargest holders of securities
Number held

% of total

National Nominees Limited
80,447,960
JP Morgan Nominees Australia Limited
59,943,351
HSBC Custody Nominees (Australia) Limited
59,717,511
Australian Foundation Investment Company Limited
35,564,326
Citicorp Nominees Pty Limited
19,041,296
Westpac Banking Corporation
18,012,204
AMP Life Limited
15,887,391
BNP Paribas Noms Pty Ltd
13,092 540
JP Morgan Nominees Australia Limited
11,065,305
AMP Capital Core Infrastructure Pty Ltd
10,233,273
BNP Paribas Noms Pty Ltd
9,559,134
RBC Investor Services Australia Nominees Pty Limited
8,104,244
Citicorp Nominees Pty Limited
5,679,143
Mirrabooka Investments Limited
5,264,098
HSBC Custody Nominees (Australia) Limited
4,951,347
Djerriwarrh Investments Limited
4,649,319
UBS Wealth Management Australia Nominees Pty Ltd
3,143,373
Argo Investments Limited
3,048,884
Invia Custodian Pty Limited
2,672,414
Diversif ed United Investments Limited
2,500,000

12.96
9.66
9.62
5.73
3.07
2.9
2.56
2.11
1.78
1.65
1.54
1.31
0.91
0.85
0.8
0.75
0.51
0.49
0.43
0.4

Total
372,577,113

60.02

The distribution of holders was as follows:

The distribution of holders was as follows:
Number Stapled SecurityGrouping of holders	% of total	Stapled securities	% of total
1–1,000 1,320 1,001–5,000 4,539 5,001–10,000 3,885 10,001–100,000 5,252 100,001–over 265	8.65 29.74 25.46 34.41 1.74	548,979 14,335,461 28,971,352 126,136,681 450,741,471	0.09 2.31 4.67 20.32 72.61
Total 15,261	100.00	620,733,944	100.00

Substantial holder notices received as at 20 August 2012:

Substantial holder notices received as at 20 August 2012:
Number of stapled Name securities	% of total
AMP Limited and its related bodies corporate 47,915,179	7.72

86 Australian Infrastructure Fund Annual Report 2012 Investor Details

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

Distribution Information

The following table details the distributions paid to investors relating to the year ended 30 June 2012.

The following table details the distributions paid to investors relating to the year ended 30 June 2012.	The following table details the distributions paid to investors relating to the year ended 30 June 2012.
Distribution(centsper stapled security)
Distribution for six months to 31 December 2011 5.0 cents
Distribution for six months to 30 June 2012 5.5 cents
Total distributions for the year 10.5 cents
Yield on market value of security at 30 June 2012 ($2.40) 4.4%
The distribution components during the year ended 30 June 2012 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 1.9235 – Dividends – unfranked 0.9759 – Interest 0.4950 – Other 0.0000 Foreign source income 0.1835 Tax-deferred Amount 0.0000 Return of Capital 96.4221	26.3577 Nil Nil Nil Nil Nil Nil
Total Trust Distribution 100.00	26.3577

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 2012 are as follows:

30 June 2012 are as follows:
Fund payment amount Date (dollarsper unit)	Units held
31 December 2011 0.00041 30 June 2012 0.00000	– –
0.00041

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.

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 2012 Distribution Information 87

Australian Infrastructure Fund Limited and Australian Infrastructure Fund Trust

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 Enter your SRN or HIN

Step 3 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 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/ contact 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 27 35 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.

88 Australian Infrastructure Fund Annual Report 2012 Investor Information

Corporate Directory

Australian Infrastructure Fund Limited

Security Register

Registered Offi ce

Other Offi ces Sydney

London

AIFL Board of Directors

New York

Hastings Board of Directors

Company Secretaries

Responsible Entity

www.hfm.com.au

Company Secretaries

Disclaimer This report has been prepared by Hastings Funds Management Limited (ABN 27 058 693 388), holder of Australian Financial Services Licence number 238309, as responsible entity of the Australian Infrastructure Fund Trust (Trust or AIFT) and as Manager of Australian Infrastructure Fund Limited (Company or AIFL). Together, the Company and the Trust comprise the Australian Infrastructure Fund (AIX). Hastings is a subsidiary of Westpac Banking Corporation (Westpac).

The information contained in this report is for informational purposes only and does not constitute an offer to issue or arrange to issue, fi nancial products. The information contained in this report is not fi nancial product advice. This report has been prepared without taking into account the investment objectives, fi nancial situation or particular needs of any particular person. Before making an investment decision, you should read the publicly available information carefully and consider, with or without the assistance of a fi nancial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and fi nancial circumstances. Past performance is no guarantee of future performance.

Neither Hastings, Westpac nor any other member of the Westpac Group gives any guarantee or assurance as to the performance of AIX or the repayment of capital. Investments in AIX are not investments, deposits or other liabilities of Hastings, Westpac or other members of the Westpac Group. Members of the Westpac Group may invest in or lend or provide other services to AIX and may be paid fees, and expenses in relation to Hastings’ role as Responsible Entity or Manager.

All data in this report has been calculated using the most accurate sources available and are in Australian dollars unless otherwise stated. Any rates or totals may differ from those provided due to rounding. Asset results for the fi nancial year ended 30 June 2012 refl ect the most current available and may be unaudited, and therefore subject to further adjustment following the publication of this report. Figures may also differ from those previously disclosed due to adjustments made following year end.

Hastings Funds Management is a subsidiary of the Westpac Banking Corporation. Hastings is a specialist manager of infrastructure equity and debt investments. As at 30 June 2012, Hastings had approximately $7.1 billion in funds under management.

AI assistant

FUTURE GENERATION AUSTRALIA LIMITED — Annual Report 2012

64916_rns_2012-09-27_4fb01f65-7c42-47ce-b7f4-1e87111e467f.pdf

ASX Announcement

Australian Infrastructure Fund (AIX)

28 September 2012

For further enquiries, please contact:

Annual General Meeting

About this report

About Hastings Funds Management

The AIX Portfolio comprises transport infrastructure assets, predominantly airports.

Asset Holdings

Airports %

Asset Locations

Performance Summary

Asset Returns

Fund performance and strategy

Asset performance

Capital investment and funding in key assets

Regulatory environment

Outlook

Chief Executive Offi cer’s Report

Continued portfolio performance

AIX airports deliver continued passenger growth

Prudent debt levels and refi nancing initiatives

continued Chief Executive Offi cer’s Report

Airport expansion projects continue

Execution of Fund strategy

Outlook

Review of Investment Portfolio

Airports

Perth Airport Development Group

Performance

Outlook

Financial and Operational Performance

Australia Pacifi c Airports Corporation (APAC)

Performance

Queensland Airports Limited (QAL)

Performance

Outlook

Airport Development Group (NT Airports)

Performance

Outlook

HOCHTIEF AirPort Capital (HTAC)

Sydney Airport

Performance

Outlook

Financial and Operational Performance

continued HOCHTIEF AirPort Capital (HTAC)

Athens Airport

Performance

Outlook

Financial and Operational Performance

Performance

Outlook

Financial and Operational Performance

continued HOCHTIEF AirPort Capital (HTAC)

Hamburg Airport

Performance

Outlook

Financial and Operational Performance

Port of Geelong, Metro Transport Sydney and Port of Portland

Statewide Roads

Statewide Roads

Australian Infrastructure Fund Limited Board

Non-executive: Yes

Mike Hutchinson BSc (Hons), CPEng, MAICD

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

Robert Tsenin BEc, Dip Corp Fin

Hastings Fund Management Limited Board

Alan Cameron AO (Chairman) BA, LLM (Syd), FAICD

Non-executive and Independent: Yes

Australian Infrastructure Fund Organisational Structure

Australian Infrastructure Fund (AIX)

Corporate Governance

AIX’s framework and approach to corporate governance

AIFL Corporate Governance Statement

1. Board and committees

1.1 Board’s role and responsibilities

1.2 Board composition and independence

FUTURE GENERATION AUSTRALIA LIMITED Annual Report 2012