Melbourne, London, New York, Sydney, Singapore www.hastingsinfra.com

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Hastings Funds Management Limited Level 27, 35 Collins Street Melbourne VIC 3000 Australia

T +61 3 8650 3600 F +61 3 8650 3701

ASX Announcement

ABN 27 058 693 388 AFSL No. 238309

Australian Infrastructure Fund Limited ABN 97 063 935 553

Australian Infrastructure Fund (AIX)

Total pages: 69

AIX 2013 Annual Report

Attached is the AIX 2013 Annual Report.

For further enquiries, please contact:

Simon Ondaatje Head of Investor Relations

Hastings Funds Management Tel: +61 3 8650 3600 Fax: +61 3 8650 3701 Email: [email protected] Website: www.hastingsinfra.com

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Jane Frawley 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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2013 Australian Infrastructure Fund Annual Report

Chairman’s Report 06 Australian Infrastructure Fund Limited Board 08 Hastings Funds Management Limited Board 09 AIFL Corporate Governance Statement 10 AIFT Corporate Governance Statement 14 Joint AIFL and AIFT Corporate Governance Statements 18 Financial Information 20 Investor Details 62 Distribution Information 64 Investor Information 65 Corporate Directory 66

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04 Australian Infrastructure Fund Annual Report 2013
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AIX listed on the Australian Securities Exchange (ASX) in 1997. At 30 June 2013, AIX had a market capitalisation of $6.8 million.

About this report

AIX aims to make this Annual Report an accurate and easyto-read document for investors and other key stakeholders. The report provides information about AIX’s activities and performance during the year.

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 $7.2 billion in funds under management (includes invested capital at market valuation and committed but not invested capital) 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.

Chairman’s Report

I am pleased to present this year’s Annual Report to securityholders on behalf of the boards of Australian Infrastructure Fund Limited (AIFL), and Hastings Funds Management Limited (HFML) (as Manager of AIFL and Responsible Entity of the Australian Infrastructure Fund Trust (AIFT)), together comprising the Australian Infrastructure Fund (AIX). This is likely to be my final presentation of the AIX Annual Report with plans now in place for completion of the strategy approved by AIX securityholders on 15 January 2013.

During the financial year ending 30 June 2013, AIX experienced significant changes to its business and undertakings, with an agreement being entered into with the Future Fund Board of Guardians (Future Fund) to realise value through the sale of its infrastructure assets. This resulted in a large proportion of the proceeds from the sale of the infrastructure assets being distributed to AIX securityholders in May 2013, and a further amount in July 2013.

The profit after income tax attributable to securityholders of AIX for the year ended 30 June 2013 was $168,320,000 (2012: $195,974,000).

On 24 August 2012, AIFL and Hastings as Responsible Entity for AIFT announced that AIX had entered into a memorandum of understanding in relation to a proposal received from the Future Fund to acquire all of AIX’s infrastructure assets, being AIX’s interests in Perth Airport, Australian Pacific Airport Corporation (primarily Melbourne Airport), Queensland Airports, HOCHTIEF Airport Capital Group, Airport Development Group (primarily Darwin Airport) and Statewide Roads (the Assets). The indicative price proposed by the Future Fund for the Assets was $2 billion.

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At an Extraordinary General Meeting on 15 January 2013, AIX securityholders passed several resolutions approving the proposed sale of the Assets. Shortly thereafter, AIX entered into individual sale and purchase deeds with the Future Fund or its nominee for the sale of each of AIX’s assets. These arrangements triggered pre-emptive rights in favour of assetlevel co-investors at most of the AIX assets such that coinvestors at these assets had the right to purchase the assets at the price offered by the Future Fund.

The asset sales were completed on 15 April 2013. The Main Return of $1,873,732,585 ($3.018576 per AIX stapled security) was paid to securityholders on 30 May 2013 following:

the de-stapling of AIFL shares and AIFT ordinary units on 23 May 2013;
the cancellation of all AIFT ordinary units on 28 May 2013; and
AIFT becoming a subsidiary of AIFL.

At a general meeting of AIFL shareholders held on 21 June 2013, the AIFL shareholders approved a resolution to reduce the share capital of AIFL. This resulted in a Residual Return of $107,960,530 ($0.173924 per AIFL ordinary share) to each AIFL shareholder being made on 8 July 2013.

On 26 November 2012, AIX announced that it had entered into a binding implementation agreement with the Future Fund for the proposed sales of the Assets, subject to a number of conditions precedent, including AIX securityholders approving the sale and the return of substantially all of AIX’s cash reserves to AIX securityholders.

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On 27 August 2013, AIFL announced that it resolved to pay a fully franked dividend of $1,868,545, being 0.30 cents per share. AIFL Shareholders also have an opportunity to approve a further proposed capital return of $5,021,602, or 0.81 cents per share at a meeting of shareholders on 8 October 2013. It is anticipated that the dividend and capital return (if approved), and any further distribution will be paid on or around 22 October 2013. This would substantially complete the return of cash to AIFL shareholders and if approved by shareholders on 8 October 2013, this will bring the total amount returned to AIFL shareholders in 2013, to $3.2036 per share.

At the general meeting on 8 October 2013, AIFL shareholders will also be asked to vote on a resolution to replace the current directors of AIFL. In the Explanatory Booklet for the general meeting dated 23 August 2013, the directors of AIFL have recommended that AIFL shareholders vote for the capital return resolution and against the resolutions to replace the directors.

Thank you, on behalf of your Directors, for your support throughout the 2012 and 2013 year and to date.

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Paul Espie, Chairman Australian Infrastructure Fund Limited 24 September 2013

Directors as at 30 June 2013

Paul Espie

BSc, MBA, FAICD Term of office: Chairman since 13 August 2004, Director since June 1994 Non-executive and Independent: Yes

John Harvey

BJuris, LLB, FCA Term of office: Director since July 2004 Non-executive and Independent: Yes

Mike Hutchinson

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

James Evans

BEc, CPA, F FIN, FAICD Term of office: March 2010 – May 2013 Non-executive: Yes Independent: No

Robert Humphris

OAM ARSM, BSc (Eng) Hons, CEng, FIMMM, FAIMM Term of office: September 2006 – May 2013 Non-executive and Independent: Yes

Robert Tsenin

BEc, Dip Corp Fin Term of office: September 2005 – May 2013 Non-executive and Independent: Yes

Directors as at 30 June 2013

Alan Cameron AO (Chairman)

BA, LLM (Syd), FAICD Term of office: Chairman since 6 October 2009, Director since April 2009 Non-executive and Independent: Yes

BEng (Hons), BSc (Hons), MEngSc Term of office: Director since October 2011 Non-executive and Independent: No

James Evans

BEc, CPA, F FIN, FAICD Term of office: Director since October 2009 Non-executive and Independent: Yes

BSc (Econ), MAICD Term of office: Director since January 2006 Non-executive and Independent: Yes

Stephen Gibbs

BEcon, MBA Term of office: Director since December 2008 Non-executive and Independent: Yes

FAICD Term of office: Director since July 2007 Non-executive and Independent: Yes

Victoria Poole

LL.B (Hons), LL.M, B.Sc Term of office: Director since April 2011 Non-executive: Yes Independent: No

AIFL Corporate Governance Statement

Corporate Governance

AIX’s framework and approach to corporate governance

Australian Infrastructure Fund (AIX) comprised the Australian Infrastructure Fund Limited (AIFL or Company) and Australian Infrastructure Fund Trust (AIFT or Trust). Hastings Funds Management Limited (Hastings or HFML) is the Responsible Entity of the Trust and the Manager of the Company.

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.

As a listed entity, AIX complies with the Australian Securities Exchange (ASX) Listing Rules, which require AIFL 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.hastingsinfra.com.

Up until 30 May 2013, the Board consisted of six directors, five of whom were 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 diversity.

The composition of the Board of AIFL was designed to ensure that it achieved 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 looked to achieve in its membership is set out below. The Board acknowledges that it is critical that its membership comprised a majority of independent directors in accordance with Principle 2 of the ASXCGC’s Recommendations. The current Board of three Directors reflects this balance of skills and experience and all three directors are independent.

The AIFL Board had adopted the definition 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 AIFL Board has the responsibility of managing and administering the Company for the benefit 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.hastingsinfra.com. The Board’s overall responsibilities include:

(c) the strategic direction and control of AIX, delegating certain responsibilities for the operation and administration of AIFL to Hastings as Manager; and
(d) monitoring the performance of Hastings in discharging its responsibilities and reviewing the method and appropriateness of the remuneration paid to Hastings.

At 30 June 2013, the directors of AIFL were:

Paul Espie, Chairman: Paul was appointed to the Board in June 1994 and in August 2004 was appointed Chairman. He is an independent director.
John Harvey: John was appointed to the Board in July 2004 and is an independent director.
Mike Hutchinson: Mike was appointed to the Board in September 2005 and is an independent director.

The following directors retired on 30 May 2013:

James Evans: James was appointed to the Board in March 2010. James was 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 was not considered an independent
Robert Humphris: Robert was appointed to the Board in September 2006 and was an independent director.
Robert Tsenin: Robert was appointed to the Board in September 2005 and was an independent director.

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

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Extraordinary [(1)]
No. of scheduled No. of Meetings eligible No. of
meetings held meetings to attend held meetings
Director while a director attended while a director attended
Paul Espie 11 10 1 1
Jim Evans 10 9 1 1
John Harvey 11 11 1 1
Bob Humphris 10 10 1 1
Mike Hutchinson 11 11 1 1
Robert Tsenin 10 10 1 1
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This table does not include matters dealt with by the Board by way of circular

The number of joint AIFL and Hastings Board meetings held during the year and the number of meetings attended by each

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No. of scheduled No. of
meetings held meetings
Director while a director attended
Paul Espie 3 3
Jim Evans 3 3
John Harvey 3 3
Bob Humphris 3 3
Mike Hutchinson 3 3
Robert Tsenin 3 3
Alan Cameron 3 2
Andrew Day 3 2
Liam Forde 3 1
Stephen Gibbs 3 2
Jim McDonald 3 0
Victoria Poole 3 3
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This table does not include matters dealt with by the Board by way of circular

The Board 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 4 respectively.

The Board of AIFL determined that it was more appropriate for the full Board to consider and address the selection and appointment of directors, rather than establish a Nomination Committee. The Board adopted a Nomination Policy that is available at www.hastingsinfra.com. In considering the membership of the Board, the directors considered 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, as appropriate.

The Board has encouraged Board membership from appropriately qualified directors of diverse backgrounds.

The Board reviewed its 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 assessed 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.

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.

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.

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

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.

AIFL Corporate Governance Statement

2. Financial Reporting

The AIFL Board established an Audit Committee with a formal Charter setting out its roles and responsibilities. The HFML and AIFL Boards also established a Joint Audit Committee with a formal Charter which operated to 1 June 2013. The Charters are available on the AIX website at www.hastingsinfa.com.

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

reviewing the financial management and internal controls, including reviewing the financial statements and the adequacy of the scope and quality of the annual and halfyear 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.

From 1 June 2013, the role of the Audit Committee was formally taken on by the Directors of AIFL. Prior to that, the AIFL Audit Committee comprised only independent non-executive directors. The Chairman of the AIFL Audit Committee was John Harvey; Robert Tsenin and the Board Chairman, Paul Espie, were members. They were also members of the Joint Audit Committee. Each member was expected to be financially literate (be able to read and understand financial statements).

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

The number of Audit Committee meetings held from 1 July 2012 to 1 June 2013 and the number of meetings attended by each member is shown below.

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No. of scheduled No. of non-
meetings scheduled
held while a No. of meetings held No. of
member of the meetings while a member meetings
Director Committee attended of the Committee attended
Paul Espie 2 2 0 0
John Harvey 2 2 0 0
Robert Tsenin 2 2 0 0
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The number of Joint AIFL/Hastings Audit Committee meetings held from 1 July 2012 to 1 June 2013 and the number of meetings attended by each member is shown below.

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No. of scheduled No. of
meetings held meetings
Director while a director attended
Paul Espie 3 2
Jim Evans 3 3
John Harvey 3 3
Robert Tsenin 3 3
Stephen Gibbs 3 3
Jim McDonald 3 2
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PricewaterhouseCoopers is the external auditor of the Company. The audit partner is invited to attend Audit Committee and Board 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 confirm 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. Specifically, 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 or financial statements of AIX.

In accordance with the Audit Committee Charter, the Audit Committee reviewed 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 five years. In making its recommendation to the Board for the appointment of an external auditor of AIX, the Audit Committee called for tenders from suitably qualified firms of auditors and in assessing the tenders. The Audit Committee and now the Board, ensures that the lead external audit partner does not perform more than five consecutive years’

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

3. Risk management

The Board of AIFL is responsible for reviewing and approving the Company’s overall risk management strategy. From 1 June 2013, the Board is responsible for ensuring that a risk management framework is in place. Prior to this, the Audit Committee monitored and reviewed the risk and compliance processes in place for the identification, management and reporting of business and financial risk. AIFL 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 AIFL has developed and implemented a risk assessment plan for AIX.

The risk assessment plan was reviewed annually by the Audit Committee and adopted by the Board of AIFL. 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 financial and business); the nature, extent and effectiveness of risk management processes, internal compliance, accounting and internal control systems; and corporate conduct generally.

CFO assurance

The Chief Financial Officer of Hastings annually certifies to the Board of AIFL 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 financial reporting risks.

4. 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.hastingsinfra.com. Each director of AIFL is currently a member of the Remuneration Committee.

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.
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-
Ensure that the Board is provided with sufficient information and external advice to facilitate informed decision-making about the Company’s remuneration policy and practices.

Specific 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. 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.

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. Details of AIX’s approach to remuneration by gender is described in

Details of the Company’s remuneration policies and the remuneration of, and benefits paid to, the directors are set out in the Remuneration Report on pages 25 and 26.

Securityholders will have an opportunity to consider the Remuneration Report at the 2013 Annual General Meeting.

Details of amounts paid to HFML as Responsible Entity of the Fund are disclosed in the related party note contained in the financial statements. HFML was 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 of amounts paid to Hastings during the year are set out in the notes of the financial statements.

AIFT Corporate Governance Statement

Corporate Governance

Hastings Funds Management Limited (HFML) is the Responsible Entity of Australian Infrastructure Fund Trust (AIFT). Application was made to the Australian Securities Exchange (ASX) in May 2013 to de-list AIFT. On 5 June 2013, AIFT was de-listed. 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.hastingsinfa.com.

1. Board, committees and oversight of management

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 benefit of securityholders. 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 Banking Corporation (Westpac). Prior to 1 June 2013, the HFML Board had responsibility for the investment activities and performance of 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.hastingsinfra.com. Key responsibilities of the Board in respect of AIFT prior to 1 June 2013, were to:

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;

At 30 June 2013, the Board of HFML consisted of seven directors, five of whom were independent. The composition of the Board of HFML was 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

The HFML Board has adopted the definition 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.

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 was not independent.
Liam Forde: Liam was appointed to the Board in January 2006, an independent director.
James Evans: James was appointed to the Board in October 2009, an independent director.
Stephen Gibbs: Stephen was appointed to the Board in December 2008, an independent director.
James McDonald:
Victoria Poole: Victoria was appointed to the Board in April 2011. Victoria is an employee of Westpac and was not independent.

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 15.

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 15.

to monitor the financial position of AIFT; and
to monitor and review the risk management framework of AIFT.

The Board 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.

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

Audit & Compliance Committee; and

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.

• 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 conflicts of interest arise. To 30 June 2013, the members of the Governance Committee were Alan Cameron, Victoria Poole and Andrew Day.

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

1.5 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 financial year, reviews of the performance of the Board, its directors and the Audit & Compliance Committee were undertaken in accordance with the processes described above.

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HFML Board
Extraordinary [(1)]
No. of scheduled No. of Meetings eligible No. of
meetings held meetings to attend held meetings
Director while a director attended while a director attended
A Cameron 11 10 12 11
J Evans 11 11 12 12
L Forde 11 10 12 10
S Gibbs 11 10 12 11
J McDonald 11 9 12 10
V Poole 11 11 12 12
A Day 11 11 12 8
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(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 full attendance is not possible.
Eligible to attend several extraordinary meetings of independent directors regarding AIFL.

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

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Joint Board Meetings
No. of scheduled No. of
meetings held meetings
Director while a director attended
Paul Espie 3 3
Jim Evans 3 3
John Harvey 3 3
Bob Humphris 3 3
Mike Hutchinson 3 3
Robert Tsenin 3 3
Alan Cameron 3 2
Andrew Day 3 2
Liam Forde 3 1
Stephen Gibbs 3 2
Jim McDonald 3 0
Victoria Poole 3 3
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This table does not include matters dealt with by the Board by way of circular

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 defined, agreed and reviewed throughout the year. The management performance evaluations are conducted each year following the end of the Hastings Group’s financial 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, that have been granted under the Hastings Long Term Incentive Plan. A review of the performance of senior executives was conducted in the Fund’s financial year and was in accordance with the process described above.

AIFT Corporate Governance Statement

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.

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

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

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 also established a Joint Audit Committee with a formal Charter. The Charters are available for inspection on the website at www.hastingsinfra.com

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

reviewing the financial management and internal controls, including reviewing the financial 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.

During the year, the Audit & Compliance Committee consisted of three members, all non-executive and independent. The Chairman of the committee was James Evans; Stephen Gibbs and James McDonald were members. They were also members of the Joint Audit Committee. Each member was expected to be financially literate (be able to read and understand financial statements).

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

The internal and external auditors, Chief Executive, Chief Financial Officer, Company Secretary and Head of Risk and Compliance attended 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.

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Audit Committee
No. of scheduled No. of scheduled
meetings meetings No. of
held while a No. of held while a meetings
member of the meetings member of the attended
Director committee attended committee
J Evans 8 8 7 7
S Gibbs 8 8 7 7
J McDonald 8 7 7 6
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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.

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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 confirm 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. Specifically, 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 or financial statements of the Fund.

In accordance with the Audit & Compliance Committee Charter, the Committee reviews the performance and value of the external auditor’s services at least once every three years and re-tenders the external audit contract no less than every five 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 qualified firms of auditors and in assessing the tenders, the Committee may interview the firms and seek additional information in support of the tender. The Committee ensures that the lead external audit partner does not perform more than five consecutive years’ audits.

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. Risk management

The Board of HFML was responsible for reviewing and approving AIFT’s overall risk management strategy. The Board delegated to the Audit & Compliance Committee responsibility for ensuring that a risk management framework was in place with regular reporting to the Board. The Audit & Compliance Committee monitored and reviewed the risk and compliance processes in place for the identification, management and reporting of business and financial 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 financial 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.

4. Remuneration

Details of amounts paid to HFML as Responsible Entity of the Fund are disclosed in the related party note contained in the financial statements. HFML is paid a management fee in accordance with the terms of the Fund’s Trust Deed. HFML was 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 financial statements. Neither employees of the Hastings Group nor HFML’s directors are remunerated out of the property of the Fund.

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

Conflicts 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.hastingsinfra.com. 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.

The Chief Executive and Chief Financial Officer annually certify to the Board, and have certified to the Board during the Fund’s financial 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 financial reporting risks.

The Boards of the Australian Infrastructure Fund Limited (AIFL) and Hastings Fund Management Limited (HFML) (the responsible entity of the Australian Infrastructure Fund Trust (AIFT)) together comprising the Australian Infrastructure Fund (AIX) 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 confidence 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 company’s legal obligations. This Code applies to all AIX directors and Hastings executives 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.

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

1.2 Conflicts of interest

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

All related party transactions or potential conflicts of interest involving any director or any related parties of the directors or AIX, are disclosed. Further, Hastings establishes transaction specific conflict management protocols, which create information barriers and other arrangements to manage conflicts throughout Hastings, including the Boards. These conflict management protocols are deployed when appropriate and monitored regularly. The Boards approve any HFML transaction specific conflict management protocols.

AIX 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.hastingsinfra.com. As part of the policy, all employees at Hastings respond to a fortnightly email from the Company Secretary confirming 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 Chairmen or the Boards prior to making any disclosure to the ASX.

The AIX Board are 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:

(b) 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;
(e) 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 Hastings’ website should any further information be required.

The AIX Boards have adopted a policy on trading in securities issued by HFML’s funds to ensure compliance with the Australian Securities Exchange (ASX) Listing Rules. The policy specifies the periods during which directors of AIX 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.hastingsinfra.com.

4. 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 2013, the proportion of women employed by Hastings was follows:

Board of Directors, HFML – (1 woman) 14 percent.
Senior executive positions – (8 women) 23 percent.
Total Hastings workforce – (38 women) 44 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.

Hastings is committed to supporting gender diversity by attracting appropriately qualified and skilled women through promoting workplace flexibility, 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.

Parental leave

Hastings offers up to two years’ parental leave to the primary-carer, including 24 weeks of paid leave (13 weeks during the maternity leave period) and up to 40 weeks of employees 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 flexible 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.

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 specific leadership and mentoring programs:

Women in Banking and Financing mentoring program;
Participation in Women in Banking and Finance forum; and

Flexible work arrangements

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

Hastings has introduced flexible start and finish times; parttime work arrangements; and work from home arrangements. Currently flexible work arrangements have been implemented

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.

Financial Information

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Directors’ Report

The directors of Australian Infrastructure Fund Limited present their report together with the consolidated financial statements of Australian Infrastructure Fund Limited (AIFL or the Company) consisting of AIFL and the entities it controlled at the end of or during the year ended 30 June 2013.

Structure of consolidated financial statements

Until 23 May 2013 the ordinary shares issued by AIFL were stapled to ordinary units issued by Australian Infrastructure Fund Trust (AIFT). The combined entity of AIFL and its controlled entities and AIFT and its controlled entities was known as the Australian Infrastructure Fund (AIX). The stapled securities were listed on the Australian Securities Exchange (ASX) on the 6 March 1997 with the ASX code of AIX. When preparing consolidated financial statements that combined the assets and liabilities of AIFL and AIFT and its controlled entities, AIFL was identified as the parent entity.

At the end of May 2013 the following steps were implemented in order to return asset sales proceeds to AIX securityholders:

on 23 May 2013 the AIFL ordinary shares and AIFT ordinary units were destapled so that they could be dealt with separately;
on 28 May 2013 AIFT issued one special unit with an issue value of $10 per special unit to each of AIFL and AIFL’s wholly owned subsidiary.

As a result, AIFT has become a wholly owned subsidiary of AIFL and AIFL shareholders continue to have an indirect ownership interest in AIFT in their capacity as shareholders of AIFL.

On 5 June 2013 AIFT was removed from the official list of the ASX at the request of its Responsible Entity, Hastings Funds Management Limited (Hastings) pursuant to the restructuring of AIX.

Hastings remains the manager of AIFL and the Responsible Entity of AIFT.

The consolidated financial statements presented comprise Consolidated AIFL (AIX) which represents the entire AIX group, consisting of AIFL and its controlled entities which includes AIFT.

Directors

The names of the directors of the Company in office during the year and up to the date of this report are:

Paul EspieChairman	(ret ired on 30 June 2013,
	reappoint ed on 1 July 2013)
James Evans	(ret ired on 1 June 2013)
John Harvey
Robert Humphris	(ret ired on 1 June 2013)
Michael Hutchinson
Robert Tsenin	(ret ired on 1 June 2013

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 office during the year and until the date of this report are set out below.

Jane Frawley

Qualifications: BA, LLB, ACM, GAICD

Jane Frawley has over 17 years of company secretarial and financial 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

Qualifications: LLB(Hons), BCom(Hons), MCom(Hons), SA(Fin)

Jefferson Petch has over 8 years of legal and financial services experience and joined Hastings in June 2011. Jefferson was appointed Company Secretary of Hastings and the Company on 1 July 2011.

Principal activities

During the financial year ending 30 June 2013 AIX experienced significant changes to its business and undertakings, with an agreement being entered into with the Future Fund Board of Guardians (Future Fund) to sell all of its infrastructure assets. This resulted in a large proportion of the proceeds from the sale of the infrastructure assets being distributed to AIX securityholders in May 2013, and a smaller proportion in July 2013. This transaction and the impact this has had on AIX is

Prior to the sale of AIX’s infrastructure assets the principal activity of AIX was to invest in, and actively manage infrastructure assets on behalf of AIX securityholders, to optimise securityholder returns. On 24 August 2012, AIFL and Hastings as Responsible Entity for AIFT announced that AIX had entered into a memorandum of understanding in relation to a proposal received from the Future Fund to acquire all of AIX’s infrastructure assets, being AIX’s interests in Perth Airport, Australian Pacific Airport Corporation (primarily Melbourne Airport), Queensland Airports, HOCHTIEF Airport Capital Group, Airport Development Group (primarily Darwin Airport) and Statewide Roads (the Assets). The indicative price proposed by the Future Fund for the assets was $2 billion.

On 26 November 2012, AIX announced that it had entered into a binding implementation agreement with the Future Fund for the proposed sales of the Assets for an offer price of $2 billion (the Asset Sale), subject to a number of conditions precedent being satisfied, including AIX securityholders approving the Asset Sale and the return of substantially all of AIX’s cash reserves (including the net proceeds of the Asset Sale) to AIX securityholders (the Cash Return). The Asset Sale and the Cash Return together constituted the Proposed Transaction.

At an Extraordinary General Meeting (EGM) on 15 January 2013, AIX securityholders passed a number of resolutions approving the Proposed Transaction. Shortly thereafter AIX entered into individual sale and purchase deeds with the Future Fund or its nominee for the sale of each of AIX’s assets. The entry into these sale arrangements triggered pre-emptive rights in favour of asset-level co-investors at most of the AIX assets such that co-investors at these assets had the right to purchase the assets at the price offered by the Future Fund.

Directors’ Report

Continued

The asset sale was completed over the course of January to April 2013, with the final asset sale completing on 15 April 2013. AIX then completed a special review and due diligence process and on 13 May 2013 confirmed that the Cash Return to AIX securityholders was expected to amount to $3.1925 per AIX stapled security. This Cash Return was comprised of an expected Main Return of $3.018576 per AIX stapled security and an expected Residual Return of $0.173924 per AIX stapled security.

The Main Return of $1,873,732,585 ($3.018576 per AIX stapled security) was subsequently paid to securityholders on 30 May 2013 following the:

de-stapling of AIFL shares and AIFT ordinary units on 23 May 2013; and

A special unit with an issue value of $10 per special unit was also issued by AIFT to each of AIFL and AIFL’s wholly owned subsidiary, resulting in AIFT also becoming a wholly owned subsidiary of AIFL. Consequently, AIX securityholders continue to have an indirect ownership interest in AIFT in their capacity as shareholders of AIFL. Hastings continues to act as Responsible Entity for AIFT and manager of AIFL.

Hastings, as Responsible Entity for AIFT, applied to the ASX on 31 May 2013 to de-list AIFT. AIFT was subsequently delisted on 5 June 2013. This did not affect the ongoing listing of AIFL ordinary shares.

At a general meeting of AIFL shareholders held on 21 June 2013, the AIFL shareholders approved a resolution to reduce the share capital of AIFL. This resulted in a Residual Return payment of $107,960,530 ($0.173924 per AIFL ordinary share) to each AIFL shareholder being made on 8 July 2013.

Results

The profit after income tax attributable to securityholders of AIX for the year ended 30 June 2013 was $168,320,000 (2012: $195,974,000).

a dividend of $45,583,000 (7.3434 cents per stapled security) declared by AIFL franked to 100%;
a distribution of $1,457,590,000 (234.82 cents per stapled security) declared by AIFT;
a return of capital of $43,452,000 (7.0 cents per stapled security) by AIFL; and
a $327,109,000 (52.697 cents per stapled security) payment by AIFT upon cancellation of AIFT ordinary units.

Interim dividend and distribution

An interim distribution of $34,140,000 (5.50 cents per stapled security) was declared by AIX for the half year ended 31 December 2012 and was paid on 25 February 2013 (2011: $31,037,000 and 5.00 cents per stapled security).

an interim dividend of $Nil (Nil cents per stapled security) declared by AIFL for the half year ended 31 December 2012 (2011: $4,500,000 and 0.72 cents per stapled security fully franked); and
an interim distribution of $34,140,000 (5.50 cents per stapled security) declared by AIFT for the half year ended 31 December 2012 (2011: $26,537,000 and 4.28 cents per stapled security).

Business strategies and prospects

On 7 August 2013, AIFL received a notice pursuant to section 249D of the Corporations Act 2001 (Act) from RBC Investor Services Australia Nominees Pty Limited on behalf of entities managed by Wilson Asset Management (International) Pty Limited and its related entities, (Wilson), requesting the AIFL Directors convene a general meeting of AIFL shareholders. Wilson has prepared a Member Statement which sets out a proposal to remove the current AIFL Directors and replace them with three Wilson Nominees. The Member Statement states that Wilson does not support the proposed delisting and winding-up of AIFL. If successful, the nominee directors would undertake a review of AIFL and identify alternative capital management options including, but not limited to, an equal access share buy-back and a recapitalisation of AIX.

Section 249D of the Act requires that a meeting be held no later than 2 months after the request was given to AIFL. The request was received after business hours on 7 August 2013. To remove any ambiguity about when the meeting ought to be convened, Wilson has consented to the meeting being

Distributions and dividends

Final dividend and distribution

No final dividend or distribution was declared as at 30 June 2013.

In the prior year the final divided and distribution comprised:

a final dividend of $4,000,000 (0.64 cents per stapled security) declared by AIFL for the year ended 30 June 2012 franked to 100%; and
a final distribution $30,141,000 (4.86 cents per stapled security) declared by AIFT for the year ended 30 June 2012.

Main Return dividend, distribution, return of capital and cancellation of units

A Main Return of $1,873,733,000 (301.86 cents per stapled security) was declared on 21 May 2013 and paid on 30 May 2013.

At the meeting, AIFL shareholders will be asked to consider a resolution which would permit AIFL to make a return of capital of $5,021,602 equating to 0.81 cents per AIFL share. In addition to this, shareholders will be asked to consider a resolution that supports Wilson’s proposal to replace the

The AIFL Directors consider that its previously announced strategy of seeking to return all available cash to AIFL shareholders at or before its proposed AGM (the date of which is to be confirmed), will deliver an outcome which is in the best interests of all AIFL shareholders. Accordingly, the AIFL Directors will unanimously recommend that shareholders vote against the board changes and in favour of the capital return. If the board changes are not approved by the share holders, AIFL will continue with its previously announced strategy.

In addition to the proposed return of capital, on 27 August 2013, AIFL announced that it had resolved to pay a fully franked dividend of $1,868,545, being 0.30 cents per share. The dividend and capital return, (if approved by AIFL shareholders), when combined with the payment of the Main Return of $3.018576 per AIX security on 30 May 2013 and the Residual Return of $0.173924 per AIFL share on 8 July 2013, brings the total amount returned to AIFL shareholders in 2013, to $3.2036 per share.

It is anticipated that the dividend and capital return (if approved) will be paid on or about 22 October 2013.

Prior to the AGM and depending on the outcome of the 8 October meeting, AIX may also request the Australian Securities Exchange to de-list AIX and will provide prior notice to shareholders on the timing of any request to do so.

If there is any cash left in the AIX at the time that AIFL is wound-up, AIFL shareholders will receive the remaining cash balance at a time the liquidator considers it is appropriate to distribute any surplus.

As AIFL shareholders may be requested to approve the appointment of a liquidator at the AGM, the consolidated financial statements of AIX have been prepared on a wind up basis rather than a going concern basis.

Significant changes in state of affairs

Other than detailed in the Directors Report, in the opinion of the directors, there were no other significant changes in the state of affairs of AIX that occurred during the year.

Following the approval by AIFL shareholders to reduce AIFL’s share capital by up to $0.173924 per share, a Residual Return of $107,960,530 ($0.173924 per AIFL share) was made on 8 July 2013.

undertake a review of AIFL and identify alternative capital management options including, but not limited to, an equal access share buy-back and a recapitalisation of AIX.

It is anticipated that the dividend and capital return (if approved) will be paid on or about 22 October 2013.

Other than the events described above and under business strategies and prospects, no significant events have occurred since the end of the reporting period which would impact on the financial position of AIX disclosed in the Consolidated Statement of Financial Position as at 30 June 2013 or on the results and cash flows of AIX for the year ended on that date.

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:

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AIFL/Hastings AIFL/Hastings Joint AIFL Board AIFL Audit
Joint Board Meetings Audit Committee Meetings Committee Meetings
Meetings
Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetings
held while attended held while attended held while attended held while attended
Director Name a director a director a director a director
Paul Espie 3 3 3 2 12 11 2 2
James Evans 3 3 3 3 11 10 n/a n/a
John Harvey 3 3 3 3 12 12 2 2
Robert Humphris 3 3 n/a n/a 11 11 n/a n/a
Michael Hutchinson 3 3 n/a n/a 12 12 n/a n/a
Robert Tsenin 3 3 3 3 11 11 2 2
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Directors’ Report

Continued

Directors’ interests

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Number of shares held in AIFL
Beneficially held in Beneficially held in the name Total Holdings
own name of another
Director
Paul Espie 0 906,668 906,668
John Harvey 9,487 75,000 84,487
Robert Humphris [(1)] 0 300,000 300,000
Michael Hutchinson 0 122,024 122,024
Robert Tsenin [(1)] 18,173 138,887 157,060
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(1)

Indemnification and insurance of officers and auditors

During or since the year end, the Company has paid premiums in respect of a contract insuring all the directors and executive officers 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;

The auditor of the Company is not indemnified out of the assets of the Company and AIX.

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

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2013 2012
$ $
Amounts paid or payable excluding GST,
to PricewaterhouseCoopers, for:
Agreed upon Procedures - Regulatory Guide 231 0 46,750
Agreed upon Procedures - Annual Report 3,246 6,365
Agreed upon Procedures - Calculation of Cash Return 12,500 0
Agreed upon Procedures - Non-statutory review 13,750 0
Agreed upon Procedures - EGM 12,500 0
Specified Procedures - Internalisation 118,00 0
Total non-audit services 159,996 53,115
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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 the Group are not subject to any particular significant environmental regulation under a law of the Commonwealth or of a State or Territory. There have been no known significant breaches of any other environmental requirements applicable to the Group. 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 companies rather than AIX.

Rounding of amounts to the nearest

The Group 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 financial report. Amounts in the Directors’ Report and consolidated financial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 28.

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

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 2013. 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.

The responsibility for the Company’s remuneration policy rests with the Board. The Remuneration Committee assists the Board in fulfilling 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.

(i) 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 reflect 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 AIFT.

In setting fee levels, the Board takes into account:

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

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.

(ii) Remuneration structure

Directors’ fees expensed for the year ended 30 June 2013 totalled $1,175,337 (2012: $936,855).

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.

directors were entitled to an annual board fee of $110,000 per annum;
the Chairman of the Audit Committee was entitled to a fee of $23,000 per annum; and
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 were paid on behalf of the non-executive directors in accordance with the Company’s statutory superannuation obligations.

The AIFL Director’s Retirement Plan (the Plan) was phased out in April 2003, so that directors who joined the Board after that date are not entitled to a retirement benefit under the Plan. The Chairman of the Board was appointed prior to April 2003 and is therefore entitled to a retirement benefit under the Plan, which will be calculated by a consulting actuary as

In order to preserve the value of the Chairman’s longstanding retirement benefits notwithstanding the new fee arrangements to apply from 1 July 2013 referred to below, the Chairman resigned from the Board effective 30 June 2013 and was re-appointed with immediate effect as a non-executive director and Chairman. Consistent with board policy, once the retirement benefit under the Plan is due and payable to the Chairman, the Plan will effectively terminate.

As a consequence of the Chairman’s retirement on 30 June 2013, his retirement benefit of $696,928 became due and payable as at 30 June 2013.

Having regard to the significant change to the business and undertakings of AIX following payment of the Cash Return on 8 July 2013, the three remaining directors of AIFL agreed that it was appropriate for them to remain on the Board until at least 30 November 2013 under new remuneration arrangements commencing 1 July 2013. These new arrangements include a reduction in annual board fees by 50%, resulting in the Chairman being entitled to a fee of $137,500 per annum and directors being entitled to a fee of $55,000 per annum from 1 July 2013. In addition from 1 July 2013 no fees will be payable with respect to the Audit Committee services provided by the Chairman of the Audit Committee or Audit Committee Members.

In accordance with the AIFL Constitution, directors are entitled to additional remuneration for extra services or special exertions made by them for the benefit of AIX. Under these provisions, the Chairman and Michael Hutchinson were awarded additional remuneration by the Board in respect of the services they performed in relation to the internalisation project and the Future Fund the transaction. These additional amounts are detailed in Note 30 (b) (iv).

the Chairman of the Board was entitled to an annual board fee of $275,000 per annum;

Directors’ Report

Continued

(ii) Remuneration paid or payable to non-executive directors

Details of non-executive directors’ remuneration for the year ended 30 June 2013 are set out in the following table. No bonuses, options or other emoluments are paid to the directors of AIFL.

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Short-term Post employment
Board fees Committee Superannuation Retirement Total
Directors Name $ fees $ $ benefits $ $
Paul Espie 2013 [ (1) (3)] 325,000 0 24,750 696,928 1,046,678
2012 275,000 0 24,750 0 299,750
James Evans 2013 100.834 0 9,075 0 109,909
2012 110,000 0 9,900 0 119,900
John Harvey 2013 [ (2)] 110,000 23,000 11,970 0 144,970
2012 110,000 23,000 11,970 0 144,970
Robert Humphris 2013 100,833 0 9,075 0 109,908
2012 110,000 0 9,900 0 119,900
Michael Hutchinson 2013 [ (1)] 160,000 0 14,400 0 174,400
2012 110,000 0 9,900 0 119,900
Robert Tsenin 2013 100,833 10,542 10,024 0 121,399
2012 110,000 11,500 10,935 0 132,435
Total compensation: Key management personnel of AIFL
2013 897,501 33,542 79,294 696,928 1,707,265
2012 825,000 34,500 77,355 0 936,855
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(1) Board fee includes $50,000 paid in relation to work performed in connection with the internalisation proposal and the Future

(2) In addition to the fees detailed above John Harvey was paid board fees of $151,376 and superannuation contributions of $13,624 for services provided following his appointment to the Australia Pacific Airports Corporation Limited board as AIX’s representative. These amounts were fully recovered by AIFL from Hastings. Hastings reimbursement of these costs is reflected in

(3) Paul Espie’s retirement benefit became due and payable upon his retirement at 30 June 2013.

(iii) Interests in the securities issued by AIX held by non-executive directors and their related entities

Interests in the securities issued by AIX held by non-executive directors and their related entities at the end of the reporting period are as follows:

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Opening Acquisitions DRP Issue Disposals Closing Holding
Holding 1 July No. No. No. 30 June No.
Directors Name No.
Paul Espie 2013 906,668 0 0 0 906,668
2012 906,668 0 0 0 906,668
John Harvey 2013 84,487 0 0 0 84,487
2012 84,487 0 0 0 84,487
Robert Humphris [ (1)] 2013 300,000 0 0 0 300,000
2012 300,000 0 0 0 300,000
Michael Hutchinson 2013 122,024 0 0 0 122,024
2012 122,024 0 0 0 122,024
Robert Tsenin [ (1)] 2013 157,060 0 0 0 157,060
2012 157,060 0 0 0 157,060
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(1)

Relationship with and fees paid to the Manager - Hastings Funds Management Limited

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

Hastings was paid a fee to provide a range of services and as part of that arrangement Hastings was required to provide appropriately qualified employees and resources to undertake those services, including the former AIX Chief Executive Officer, the Hastings Chief Executive Officer and the AIFL Company Secretaries. These individuals were and are remunerated by Hastings or its related entities out of the management fee.

(i) Base Management Fees

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

The AIFL Management Agreement and the AIFT Constitution provided for the management fee to be calculated at the rate of 1% 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 accrued daily and was payable monthly in arrears.

The management fee was varied following execution of a facilitation deed on 23 November 2012 between Hastings in its personal capacity, Hastings Management Pty Ltd, AIFL and Hastings as Responsible Entity for AIFT (Facilitation Deed). For the period commencing on 24 August 2012 (being the date that AIX announced the indicative offer that it had received from the Future Fund) and ending on 28 May 2013, the date on which all AIFT units except those AIFT units held by AIFL or a wholly owned subsidiary of AIFL were cancelled, the management fee for each month or part thereof was

$1,342,933, being 1% of AIX’s market capitalisation on 24 August 2012, divided by 12 months; and
1% of AIX’s market capitalisation on the last day of each calendar month occurring after 24 August 2012, divided by 12 months.

On the 28 May 2013, following the date on which all AIFT ordinary units except those AIFT special units held by AIFL and AIFL’s wholly owned subsidiary were cancelled, Hastings received a final management fee of $1 million for its services as Responsible Entity of AIFT and manager of AIFL up until the date AIX is wound up.

(ii) Performance Fees

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

Specifically, under the AIFL Management Agreement and

the AIFT Consolidated Constitution, at the end of each year Hastings was entitled to a performance fee equal to 10% 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 deficit (previous shortfall). If the calculation of the AIX total return for a year was less than the benchmark return for that year, the shortfall was carried forward and taken into account in calculating whether the AIX total return exceeds the benchmark return in subsequent years.

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) did provide AIFL the discretion to determine the form of settlement. At the 2010 AIX Annual General Meeting (AGM) held on 17 November 2010 AIX 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.

The performance fee for the period from 1 July 2012 was varied following execution of the Facilitation Deed and by approval of AIX Securityholders at the Extraordinary General Meeting on 15 January 2013. In accordance with the Facilitation Deed, for the period commencing on 1 July 2012 and ending on the date on which all of the AIFT ordinary units were cancelled, other than those special units held by AIFL and AIFL’s wholly owned subsidiary, a final performance fee of $54 million (exclusive of GST) would be payable. Under the amendments to the AIFT Constitution approved by AIX securityholders on 15 January 2013, Hastings’ entitlement to any future performance fees terminated upon payment of the $54 million.

A performance fee of $54 million (exclusive of GST) was paid to Hastings in accordance with the Facilitation Deed on 28 May 2013, being the date on which all AIFT ordinary units except those AIFT special units held by AIFL and AIFL’s wholly owned subsidiary were cancelled.

(iii) Reimbursable expenses

Hastings was 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 defined in the AIFT Constitution and AIFL Management Agreement.

For the year ended 30 June 2013, Hastings was reimbursed $255,000 (2012: $600,000) for costs incurred on behalf of AIX.

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

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Paul Espie Chairman 27 August 2013

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2013 2012
Income Note $’000 $’000
Interest income 3 25,028 16,522
Dividend income 4 38,245 58,310
Distribution income 5 616 1,404
Net gain/(loss) - securities 6 161,906 139,577
Net gain/(loss) - subsidiaries 7 2,584 0
Net gain/(loss) - cash and cash equivalents 34 145
Net gain/(loss) - other (22) (16)
Other income 8 429 506
Total income 228,820 216,448
Expenses
Manager base fees 9 15,657 12,822
Manager performance fees 10 55,350 0
Board administrative expenses 87 57
Director fees 1,175 937
Director retirement expense (83) 59
Investment expenses 23 328
Security bid costs 0 128
Audit fees 136 183
Tax fees 1,328 54
Securityholder and investor relations expenses 891 488
Strategic initiatives costs 11 5,993 1,689
Other expenses 614 780
Finance costs 12 1,248 1,699
Total expenses 82,419 19,224
Net profit before income tax for the year 146,401 197,224
Income tax expense/(benefit) 14(a) (21,919) 1,250
Net profit after income tax for the year 168,320 195,974
Other comprehensive income for the year, net of tax 0 0
Total other comprehensive income for the year, net of tax 0 0
Total comprehensive income for the year 168,320 195,974
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2013 2012
Basic earnings per security (cents) 27.12 31.57
Weighted average number of securities (000’s) 620,734 620,734
Net profit after income tax ($000’s) 168,320 195,974
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2013 2012
Assets Note $’000 $’000
Cash and cash equivalents 15 123,081 157,110
Receivables 16 5,368 507
Other assets 17 111 484
Current tax asset 14(c) 0 304
Securities 18 0 1,816,155
Deferred tax asset 14(e) 155 0
Total assets 128,715 1,974,560
Liabilities
Payables 19 1,130 71,102
Current tax liability 14(d) 88 0
Provisions 20 0 780
Deferred tax liability 14(f) 0 35,627
Total liabilities 1,218 107,509
Net assets 127,497 1,867,051
Equity
Contributed equity 22(b) 116,569 1,043,575
Reserves 23 (35,476) (35,476)
Retained earnings 24 46,404 858,952
Total equity 127,497 1,867,051
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Contributed Retained
equity Reserves earnings Total
Note $’000 $’000 $’000 $’000
At 1 July 2011 1,043,575 0 728,156 1,771,731
Net profit/(loss) after income tax for the year 0 0 195,974 195,974
Other comprehensive income/(loss) for the year, net of tax 0 0 0 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 25 0 0 (65,178) (65,178)
Security-based payment reserve 23 0 (35,476) 0 (35,476)
As at 30 June 2012 1,043,575 (35,476) 858,952 1,867,051
At 1 July 2012 1,043,575 (35,476) 858,952 1,867,051
Net profit/(loss) after income tax for the year 0 0 168,320 168,320
Other comprehensive income/(loss) for the year, net of tax 0 0 0 0
Total comprehensive income/(loss) for the year 0 0 168,320 168,320
Transactions with owners in their capacity as owners:
Ordinary units cancelled during the year 22(b) (327,109) 0 0 (327,109)
Transfer from contributed equity upon cancellation of ordinary units 24 (556,445) 0 556,445 0
Return of capital 22(b) (43,452) 0 0 (43,452)
Dividends and distributions paid and payable to securityholders 25 0 0 (1,537,313) (1,537,313)
As at 30 June 2013 116,569 (35,476) 46,404 127,497
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2013 2012
Cash flows from operating activities Note $’000 $’000
Interest received 25,030 14,118
Dividends received 38,245 58,310
Distributions received 594 3,230
Other income received 591 426
Finance costs paid (815) (2,111)
Other expenses paid (26,394) (15,469)
Performance fees paid (90,826) 0
Income tax paid (14,849) (651)
Net cash flows from operating activities 15(a) (68,424) 57,853
Cash flows from investing activities
Payments for purchase of unlisted securities 0 (2,498)
Payments for unlisted security loan advances (1,348) (24,934)
Proceeds from sale of unlisted securities 1,970,456 89,575
Proceeds from sale of subsidiary 10,795 0
Proceeds from repayment of unlisted loan securities 2,410 21,494
Net cash flows from/(used in) investing activities 1,982,313 83,637
Cash flows from financing activities
Payment of strategic initiatives costs (5,903) (1,689)
Payment upon cancellation of ordinary units (327,109) 0
Payment upon return of capital (43,452) 0
Dividends and distributions paid (1,571,454) (62,073)
Net cash flows from/(used in) financing activities (1,947,918) (63,762)
Net decrease in cash and cash equivalents (34,029) 77,728
Cash and cash equivalents at the beginning of the year 157,110 79,237
Effects of foreign exchange rate movements on cash and cash equivalents 2 145
Impact on cash and cash equivalents upon sale of subsidiary (2) 0
Cash and cash equivalents at the end of the year 15(b) 123,081 157,110
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1. General information

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

The registered office of AIFL is located at Level 27, 35 Collins Street, Melbourne, Victoria, 3000.

As at 30 June 2013 AIFL had nil employees, apart from the non-executive directors of AIFL (2012: nil employees).

Structure of consolidated financial statements Until 23 May 2013 the ordinary shares issued by AIFL were stapled to ordinary units issued by Australian Infrastructure Fund Trust (AIFT). The combined entity of AIFL and its controlled entities and AIFT and its controlled entities was known as the Australian Infrastructure Fund (AIX). The stapled securities were listed on the Australian Securities Exchange (ASX) on the 6 March 1997 with the ASX code of AIX. When preparing consolidated financial statements that combined the assets and liabilities of AIFL and AIFT and its controlled entities, AIFL was identified as the parent entity.

At the end of May 2013 the following steps were implemented in order to return asset sales proceeds to AIX securityholders:

on 23 May 2013 the AIFL ordinary shares and AIFT ordinary units were destapled so that they could be dealt with separately;
on 28 May 2013 AIFT issued one special unit with an issue value of $10 per special unit to each of AIFL and AIFL’s wholly owned subsidiary.

As a result, AIFT became a wholly owned subsidiary of AIFL and AIFL shareholders continue to have an indirect ownership interest in AIFT in their capacity as shareholders of AIFL.

On 5 June 2013 AIFT was removed from the official list of ASX at the request of its Responsible Entity, Hastings Funds Management Limited (Hastings) pursuant to the restructuring

AIFL continues to trade on the ASX under the name “Australian Infrastructure Fund Limited” (ASX code: AIX).

Hastings remains the manager of AIFL and the Responsible Entity of AIFT.

The consolidated financial statements presented comprise Consolidated AIFL (AIX) which represents the entire AIX group, consisting of AIFL and its controlled entities which includes AIFT.

2. Summary of significant accounting policies

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

(a) Basis of preparation

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with the Australian Accounting Standards (including Interpretations) the Corporations Act 2001 and

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

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

At AIFL’s next Annual General Meeting (AGM), AIFL shareholders may be requested to approve the appointment of liquidators to wind up at the AGM, the consolidated financial statements of AIX have been prepared on a wind up basis rather than a going concern basis. This basis of accounting has not changed the measurement or recognition of the significant accounting policies from the prior year.

The Consolidated Statement of Financial Position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and are not distinguished

The functional and presentation currency of AIFL and its

The consolidated financial statements of AIFL for the year ended 30 June 2013 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 financial statements.

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2013 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 AASB 9 (effective from 1 January 2015)

AASB 9 Financial Instruments (AASB 9) addresses the classification and measurement of financial assets and financial liabilities.

AASB 9 Financial Instruments requires all financial assets to be:

classified on the basis of the entity’s business model for managing its financial assets and the contractual cash flow characteristics of the financial asset;
initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, particular transaction costs; and

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

If AIFL is preparing accounts at this time, AIFL 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

(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)

2. Summary of significant accounting policies (continued)

(b) New accounting standards and interpretations (continued) In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and

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 definition 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 significantly influence 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 significant 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 classified 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 for 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 financial 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 financial statements, but will impact the type of

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 financial statements. Application of this standard by AIX will not affect any of the amounts recognised in the consolidated financial

AASB 128 Investments in Associates is renamed AASB 128 Investments in Associates and Joint Ventures (AASB 128). Amendments to AASB 128 provide clarification 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 financial statements.

(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 financial statements. However, application of the new standard and amendments will impact the type of information disclosed in the notes to the consolidated financial statements. AIX will apply the new standard and amendments from 1 July 2013.

(iv) 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 financial statements, it will not affect any of the amounts recognised in the financial statements. The amendments apply from 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.

In the prior year, in accordance with AASB 3 Business Combinations, for the purpose of preparing consolidated financial statements that combines the assets and liabilities of AIFL and AIFT and its subsidiaries, AIFL was identified as the parent entity.

The consolidated financial statements of AIFL incorporate the assets and liabilities of all subsidiaries of AIFL, including AIFT, as at 30 June 2013 and the results of all subsidiaries for the year ended 30 June 2013. AIFL and its subsidiaries together are referred to in these consolidated financial statements as

Subsidiaries are those entities (including special purpose entities) over which AIFL has the power to govern the financial 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 control is established over another entity.

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

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

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

(d) Parent entity financial information

The financial information for the parent entity, disclosed in Note 34 has been prepared on the same basis as the consolidated financial statements, except as set out below:

Investments in subsidiaries

Investments in subsidiaries are recorded at fair value through profit or loss in the individual financial statements of the parent entities.

The fair value of each subsidiary is determined by reference to the net asset value of the subsidiary.

(e) Significant accounting judgements, estimates and

assumptions

In applying the Group’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. Significant estimates, judgements and assumptions are outlined below:

Valuation of unlisted securities

In the prior year the fair values of unlisted securities were determined by an appropriately qualified independent valuer, KPMG Corporate Finance, by projecting future cash flows and then discounting these cash flows back to their present value using a post-tax, risk adjusted discount rate.

The carrying amount of unlisted securities held by the Group as at 30 June 2013 was nil (2012: $1,816,155,000).

Further information in relation to unlisted securities is provided in Note 18.

(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 profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

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

For Consolidated Statement of Cash Flows presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with financial 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 insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings on the Consolidated Statement of

(h) 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(m).

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 the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial 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 flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is

The amount of the impairment loss is recognised as expense in the profit 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 profit or loss .

(i) Securities

Securities are recorded at fair value through the profit or loss upon initial recognition. Costs incidental to the acquisition of securities and subsidiaries are recognised in the profit 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 profit or loss and represent:

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

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

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

Realised gains and losses on securities are recognised through profit 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

2. Summary of significant accounting policies (continued)

Unlisted securities

Unlisted securities comprised ordinary shares, ordinary units, preference shares, partnership interests, shareholder loans

In the prior year the fair value of unlisted securities was determined by an appropriately qualified independent valuer, KPMG Corporate Finance (KPMG), primarily by projecting future cash flows and then discounting these cash flows 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 AIX 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 flows 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 firm specific risk. KPMG uses a 10 year government bond rate in the relevant country as a proxy for the risk free rate. The Company adopted KPMG’s valuations as

Further information relating to unlisted securities is provided

(j) Payables

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

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

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

(k) Borrowings

All borrowings are initially recognised at fair value being the

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

Other borrowing costs are expensed through profit or loss.

Borrowings are derecognised when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial 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 as other income or finance costs.

(l) Issued financial instruments

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

Income is recognised to the extent that it is probable that the economic benefits will flow to AIX and the income can be reliably measured.

Expenses are recognised in the Consolidated Statement 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 benefits that qualify for recognition in the

The following specific 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 financial instrument) to the net carrying amount of the financial 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 base fees

Information in relation to Manager base management fees payable to Hastings is provided in Note 9.

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

Manager performance fees

Information in relation to Manager performance fees payable to Hastings is provided in Note 10.

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

Current Period

In the current period, AIX had a present obligation to settle the performance fee in cash, as supported by AIFL’s determination to cash settle the performance fee for the year ended 30 June 2012. As a consequence, AIX must account for any performance fee transaction in accordance with the requirements of AASB 2 applying to cash settled share-based payment transactions.

Applying AASB 2 in this regard, for cash settled share-based payment transactions, AIX are required to measure the performance fee obligation and the liability incurred at the fair value of the performance fee liability. Until the liability is settled, AIX are required to re-measure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in the Income Statement for the period.

Prior Period

In the prior period, because AIX did not have a present obligation to settle in cash, as supported by a past practice or a stated policy of settling in cash, AIX were required to account for any performance fee transaction in accordance with the requirements of AASB 2 applying to equity settled share-based payment transactions.

Applying the AASB 2 for equity settled share-based payment transactions, the fair value of the performance fee obligation was determined at the beginning of the financial year (1 July 2011) and was recognised as a performance fee expense and an increase in a security-based payment reserve in AIX’s Statement of Financial Position on a progressive basis throughout the year ended 30 June 2012.

Finance and borrowing costs

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

(n) Income tax

Whilst AIFL is subject to tax, certain entities within the Group are not subject to tax, including AIFT.

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

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. The Board 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 financial 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 profit 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 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.

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

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 profit 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 sufficient taxable profit will be available to allow all or part of the deferred tax asset to be

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 profit will allow the

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 Statement of Financial Position. Reduced input tax credits recoverable by AIFL or AIFT from the Australian Taxation Office are recognised as receivables in

Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

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

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 financial report. Amounts in the consolidated financial statements have been rounded off to the nearest thousand dollars in accordance with that Class Order, unless

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3. Interest income
2013 2012
$’000 $’000
Cash and cash equivalents 14,869 2,577
Unlisted securities 10,156 13,945
Other 3 0
Total interest income 25,028 16,522
4. Divided income 2013 2012
$’000 $’000
Unlisted securities 38,245 58,310
Total dividend income 38,245 58,310
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5. Distribution Income
2013 2012
$’000 $’000
Unlisted securities 616 1,404
Total distribution income 616 1,404
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6. Net gain/(loss) – securities 2013 2012
$’000 $’000
Net gain/(loss) - unlisted securities
Net gain/(loss) - unrealised (1,384,627) 105,752
Net gain/(loss) - realised 1,546,533 33,825
Total net gain/(loss) - unlisted securities 161,906 139,577
Total net gain/(loss) - securities 161,906 139,577
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As part of the Future Fund transaction, AIX sold its interests in Perth Airport, Australian Pacific Airports Corporation, Queensland Airports, Airport Development Group and Statewide Roads for gross sale proceeds of $1,992,325,950 in consideration for its $425,055,035 investment holding. These sales resulted in a holding period gain on sale of $1,546,783,564 (net of divestment costs).

The current year net unrealised loss of $1,384,626,999 reflects the reversal of unrealised gains totalling $1,093,483,174 that were recognised in prior years for Perth Airport, Australian Pacific Airports Corporation, Queensland Airports and Airport Development Group and current year unrealised losses of $291,143,825 recognised with respect to HTAC up until the date of sale of the subsidiary holding the Group’s interest in HTAC.

In the prior year AIX sold its interests in Port of Geelong Unit Trust and Infrastructure Investment Corporation, Metro transport Sydney and Sydney Light Rail Company and Port of Portland for gross sale proceeds of $98,964,973 in consideration for its $59,209,679 investment holding. These sales resulted in a holding period gain on sale of $37,810,292. (net of divestment costs).

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7. Net gain/(loss) - subsidiaries 2013 2012
$’000 $’000
Net gain/(loss) - realised 2,584 0
Total net gain/(loss) - subsidiaries 2,584 0
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As part of the Future Fund transaction, AIX sold its interests in its wholly owned subsidiary that held AIX’s interest in HOCHTIEF Airport Capital Group for gross sale proceeds of $11,214,948 in consideration for its $8,211,186 net asset value. These sales resulted in a gain on sale of $2,584,073 (net of divestment costs).

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8. Other income
2013 2012
$’000 $’000
Director fee income 264 487
Director fee reimbursement 165 0
Other income 0 19
Total other income 429 506
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Director fee income represents amounts received from infrastructure assets for director services provided by AIX’s nominated director representatives on the boards of its infrastructure assets.

Director fee reimbursement reflects amounts reimbursed by Hastings to the Company in connection with board fees and superannuation contributions paid to John Harvey in connection with John Harvey representing AIX on the Australian Pacific Airports Corporation Board.

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9. Manager base fees 2013 2012
$’000 $’000
Manager base fees 15,657 12,822
Total Manager base fees 15,657 12,822
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In accordance with the AIFL Management Agreement and the AIFT Constitution, Hastings as Manager and Responsible Entity was entitled to a base management fee.

The management fee was varied following execution of a facilitation deed on 23 November 2012 between Hastings in its personal capacity, Hastings Management Pty Ltd, AIFL and Hastings as Responsible Entity for AIFT (Facilitation Deed). For the period commencing on 24 August 2012 (being the date that AIX announced the indicative offer that it had received from the Future Fund) and ending 28 May 2013, the date on which all AIFT units except those AIFT units held by AIFL or a wholly owned subsidiary of AIFL were cancelled, the management fee for each month or part thereof was determined as the lesser of:

$1,342,933, being 1% of AIX’s market capitalisation on 24 August 2012, divided by 12 months; and

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10. Manager performance fees 2013 2012
$’000 $’000
Manager performance fees 55,350 0
Total Manager performance fees 55,350 0
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Specifically, under the AIFL Management Agreement and the AIFT Consolidated Constitution, at the end of each year Hastings was entitled to a performance fee equal to 10% 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 deficit (previous shortfall). If the calculation of the AIX total return for a year was less than the benchmark return for that year, the shortfall was carried forward and taken into account in calculating whether the AIX total return exceeds the benchmark return in subsequent years.

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) did provide AIFL the discretion to determine the form of settlement. At the 2010 AIX Annual General Meeting (AGM) held on 17 November 2010 AIX securityholders approved the resolution that 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.

The performance fee for the period 1 July 2012 was varied following execution of the Facilitation Deed and by approval of AIX securityholders at the Extraordinary General Meeting on 15 January 2013. In accordance with the Facilitation Deed for the period commencing on 1 July 2012 and ending on the date on which all of the AIFT ordinary units were cancelled, other than those special units held by AIFL and AIFL’s wholly owned subsidiary, a final performance fee of $54 million (exclusive of GST) would be payable. Under the amendments of the AIFT constitution approved by AIX securityholders on 15 January 2013, Hastings’ entitlement to any future performance fees terminated upon payment of the $54 million (exclusive of GST).

Current period

A performance fee of $54 million (exclusive of GST) was paid to Hastings in accordance with the Facilitation Deed on 28 May 2013 being the date on which all AIFT ordinary units except those AIFT special units held by AIFL and AIFL’s wholly owned subsidiary were cancelled.

Prior period

In accordance with AASB 2 Share Based Payments, the fair value of the performance fee obligation was assessed at the beginning of the financial 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.

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11. Strategic initiatives costs 2013 2012
$’000 $’000
Internalisation costs 3,763 1,689
Future Fund Offer costs 2,230 0
Total strategic initiatives costs 5,993 1,689
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Internalisation costs

On 29 June 2012, the boards of AIFL and Hastings announced that they had entered into a non-binding agreement on the key terms upon which the management of AIX could be internalised. It was intended that the in-principle agreement would be developed into a detailed implementation agreement following which, if appropriate terms were agreed, the approval of AIX securityholders would be sought.

Internalisation costs reflect, amongst other costs, financial advisor fees, legal fees and tax fees, incurred in connection with the internalisation process, specifically, the negotiation of the non-binding in-principle internalisation agreement and the development of a detailed implementation agreement.

On 24 August 2012, AIFL and Hastings announced that AIX had received a proposal from the Future Fund to acquire all of AIX’s infrastructure assets, and had entered into a conditional and non-binding memorandum of understanding with the Future Fund.

On 26 November 2012, AIFL and Hastings announced that AIX had entered into a binding implementation agreement with the Future Fund (Future Fund Offer) for the proposed sale of AIX’s infrastructure assets. The approval of AIX securityholders to the Future Fund Offer and to the distribution of the net proceeds was sought, and received, on 15 January 2013, following which binding sale agreements were entered into for all of AIX’s infrastructure assets.

Future Fund Offer costs reflect costs incurred in relation to the advice received in connection with the distribution of net sale proceeds to AIX securityholders and costs incurred to ensure on-going management arrangements.

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12. Finance costs
2013 2012
$’000 $’000
Other borrowing costs 1,248 1,699
Total finance costs 1,248 1,699
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Other borrowing costs comprise establishment fees, agency fees and facility fees relating to the $100 million standby debt facility with Westpac and ANZ.

On 29 January 2013 AIX cancelled this $100 million standby debt facility with Westpac and ANZ.

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

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for services provided by the auditor:he auditor:or:
2013 2012
Amounts paid and payable excluding GST, to
PricewaterhouseCoopers, for:
(a) Audit services
- Audit and Review of Financial Statements 83,000 139,906
- Audit of Compliance Plan 7,000 16,228
Total audit services 90,000 156,134
(b) Non-audit services
- Agreed upon Procedures - Regulatory Guide 231 0 46,750
- Agreed upon Procedures - Annual Report 3,246 6,365
- Agreed upon Procedures - Calculation of Cash Return 12,500 0
- Agreed upon Procedures - Non-statutory review 13,750 0
- Agreed upon Procedures - EGM 12,500 0
- Specified Procedures - Internalisation 118,000 0
Total non-audit services 159,996 53,115
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14. Income Tax 2013 2012
$’000 $’000
(a) Major components of income tax for the year recognised in the Income Statement
Current tax expense/(benefit) 15,236 0
Deferred tax expense/(benefit) (37,155) 1,250
Total income tax expense/(benefit) (21,919) 1,250
(b) Reconciliation of prima facie tax to income tax expense for the year
Net profit/(loss) before income tax for the year 146,401 197,224
Tax at the applicable Australian tax rate of 30% (2011 – 30%) 43,920 59,167
Tax effect of amounts either not deductible/(taxable), or are attributable income in nature,
in calculating the taxable income:
Profit not assessable in hands of the Trust (127,849) (55,052)
Non assessable income (178) 0
Franked dividend gross up 348 742
Tax offset for franked dividend (1,161) (2,472)
Security-based payment reserve 0 (1,134)
Other 0 231
Derecognition of current year temporary differences 89,409 0
Derecognition of prior year temporary difference (26,408) (1,573)
Rerecognition of prior year capital losses 0 1,341
Income tax expense (21,919) 1,250
(c) Current tax asset
Current tax asset 0 304
(d) Current tax liability
Current tax liability 88 0
(e) Deferred tax asset
Deferred tax asset 155 0
Comprising:
Other 155 0
The movement in the deferred tax asset balance has been charged through profit or loss.
(f) Deferred tax liability
Deferred tax liability 0 35,627
Comprising:
Net unrealised gain on unlisted securities 0 37,749
Provision for retirement benefit 0 (234)
Unutilised imputation credits - available for future offset 0 (1,576)
Other 0 (312)
The movement in the deferred tax liability balance has been charged through profit or loss.
(g) Unrecognised capital losses
Unused capital losses for which no deferred income tax asset has been recognised 0 18,137
Potential tax benefit at 30% 0 5,441
(h) Unrecognised income tax losses
Unused income tax losses for which no deferred income tax asset has been recognised 0 5,252
Potential tax benefit at 30% 0 1,576
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15. Cash and cash equivalents 2013 2012
$’000 $’000
(a) Reconciliation of net profit/(loss) after income tax to the net cash flows
from operating activities
Net profit/(loss) after income tax 168,320 195,974
Adjustments for non-cash and non-operating items:
Net gain/(loss) – securities (161,906) (139,577)
Net gain/(loss) – subsidiaries (2,584) 0
Net gain/(loss) – cash and cash equivalents (34) (145)
Net gain/(loss) – other 22 16
Net gain/(loss) - distribution income (22) 0
Strategic initatives costs 5,993 1,689
Interest income 0 (42)
Changes in operating related assets and liabilities:
(Increase)/decrease in receivables (5,004) 1,805
(Increase)/decrease in prepayments 373 (395)
(Increase)/decrease in accrued income (115) (2,361)
Increase/(decrease) in payables (35,919) 231
Increase/(decrease) in current tax liability 391 (651)
Increase/(decrease) in deferred tax liability (37,159) 1,250
Increase/(decrease) in provisions (780) 59
Net cash flows from operating activities (68,424) 57,853
(b) Components of cash and cash equivalents
Cash at bank 123,081 157,110
Cash at bank earns interest at floating rates based on daily deposit rates.
(c) Significant non-cash investing and financing activities
There were no significant non-cash investing and financing activities during the year (2012: nil).
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16. Receivables
2013 2012
$’000 $’000
Other receivables 5,368 507
Total receivables 5,368 507
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17. Other assets 2013 2012
$’000 $’000
Prepayments 111 484
Total other assets 111 484
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18. Securities 2013 2012
$’000 $’000
Unlisted securities
Perth Airport (Perth Airport Development Group & PAPT Holdings) 0 609,597
Australia Pacific Airports Corporation Limited 0 477,354
HOCHTIEF AirPort Capital Group 0 297,902
Queensland Airports Limited 0 315,148
Airport Development Group Pty Ltd 0 115,106
Statewide Roads 0 1,048
Total unlisted securities 0 1,816,155
Total securities 0 1,816,155
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2013 2012
Percentage ownership % %
Perth Airport (Perth Airport Development Group & PAPT Holdings) 0.00% 29.74%
Australia Pacific Airports Corporation Limited 0.00% 12.39%
HOCHTIEF AirPort Capital Group 0.00% 40.02%
Queensland Airports Limited 0.00% 49.07%
Airport Development Group Pty Ltd 0.00% 28.23%
Statewide Roads 0.00% 6.25%
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Following approval of the Future Fund Offer by AIX securityholders on 15 January 2013, AIX entered into separate and independent deeds of sale for each of its infrastructure assets with Future Fund or its nominee for the sale of each of AIX’s assets, for a total $2 billion consideration (subject to adjustments). The entry into these sale arrangements triggered pre-emptive rights in favour of assetlevel co-investors at most of the AIX assets such that co-investors at these assets had the right to purchase the assets at the price offered by the Future Fund. The asset sales were completed over the course of January 2013 to April 2013 with the final asset sale completing on 15 April 2013.

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19. Payables 2013 2012
$’000 $’000
Payable – Hastings 0 36,688
Distribution and dividend payable 0 34,141
Payable - Directors 697 0
Other payables 433 273
Total payables 1,130 71,102
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The Payable – Directors balance in the current year relates to the retirement benefit payable to Paul Espie. For further information refer to Note 30 - Key management personnel.

The prior year Payable – Hastings balance included $35,475,864 (inclusive of non recoverable GST) payable to Hastings in connection with performance fees for the year ended 30 June 2012. For further information refer to Note 10 - Manager performance fees.

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20. Provisions 2013 2012
$’000 $’000
Provision for directors’ retirement benefit 0 780
Total provisions 0 780
Movement in the provision for directors’ retirement benefit:
Opening balance 780 722
Charged/(credited) to the profit or loss (83) 58
Less: provision paid or due and payable during the year (697) 0
Closing balance 0 780
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As a consequence of Paul Espie’s retirement on 30 June 2013, his directors’ retirement benefit crystalised and was payable as at 30 June 2013. Refer also to Note 30 - Key management personnel.

21. Borrowings

(a) Financing Arrangements s

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(a) Financing Arrangements s
At the end of each reporting period the following financing facilities were available: 2013 2012
$’000 $’000
Facilities available:
Standby debt facility 0 100,000
Facilities drawn:
Standby debt facility 0 0
Facilities undrawn:
Standby debt facility 0 100,000
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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 was charged at a floating base rate plus a fixed margin.

On 29 January 2013 AIX cancelled this $100 million standby debt facility with Westpac and ANZ.

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22. Contributed equity 2013 2012
$’000 $’000
Ordinary securities 116,569 1,043,575
Total issued securities 116,569 1,043,575
No’000 No’000
(a) Issued ordinary securities (number)
Opening balance 620,734 620,734
Issued ordinary securities at the end of the year 620,734 620,734
$’000 $’000
(b) Issued ordinary securities (dollars)
Opening balance 1,043,575 1,043,575
Cancellation of ordinary units (327,109) 0
Return of capital (43,452 0
Transfer balance of ordinary units to retained earnings (556,445) 0
Issued ordinary securities at the end of the year 116,569 1,043,575
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On 23 May 2013 the AIFL ordinary shares and AIFT ordinary units were destapled. Subsequent to this, on 28 May 2013 all of the AIFT ordinary units were cancelled. AIFL shareholders will continue to have an indirect ownership in AIFT in their capacity as shareholders in AIFL.

On 28 May 2013 AIFT cancelled all of its ordinary units on issue for a total cancellation consideration of $327,109,000. Following the cancellation of ordinary units, the remaining net issue value of the ordinary units was transferred from contributed equity to retained earnings.

On 30 May 2013 AIFL made a return of capital of $43,452,000 to AIX securityholders.

Issued ordinary securities as at 30 June 2013 comprised AIFL ordinary shares. Issued ordinary securities as at 30 June 2012 comprised stapled securities whereby one stapled security comprised one AIFL ordinary share stapled to one AIFT ordinary unit.

receive dividends;
attend and vote at meetings of shareholders; and

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

- receive dividends;

attend and vote at meetings of shareholders; and

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

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23. Reserves
2013 2012
$’000 $’000
Security-based payment reserve (35,476) (35,476)
Total reserves (35,476) (35,476)
Movement in the security-based payment reserve:
Opening balance (35,476) 0
Charge to reserve 0 (35,476)
Closing balance (35,476) (35,476)
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The prior year charge to the security-based payment reserve represents the 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 financial year (1 July 2011) and recognised as an expense in the Income Statement. For further details refer to Note 10 – Manager performance fees.

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24. Retained earnings 2013 2012
$’000 $’000
Opening balance 858,952 728,156
Net profit/(loss) after income tax 168,320 195,974
Dividends and distributions paid and payable to securityholders (1,537,313 (65,178
Transfer net issue value balance of ordinary units from contributed
equity upon cancellation of ordinary units 556,445 0
Closing balance 46,404 858,952
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The current year movement in retained earnings includes the remaining net issue value of AIFT ordinary units of $556,445,196, which was transferred from contributed equity on 28 May 2013 following the cancellation of AIFT ordinary units on 28 May 2013.

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25. Distributions and dividends paid and payable to securityholders 2013 2012
$’000 $’000
Interim distribution and dividend declared and paid 34,140 31,037
Main return distribution and dividend declared and paid 1,503,173 0
Final distribution and dividend declared and payable 0 34,141
Total distributions and dividends paid and payable to securityholders 1,537,313 65,178
Comprising:
Distributions declared during the year 1,491,730 56,678
Dividends declared during the year 45,583 8,500
1,537,313 65,178
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No final dividend or distribution was declared in the current year.

In the prior year the final dividend and distribution comprised:

a final dividend of $4,000,000 (0.64 cents per stapled security) declared by AIFL for the year ended 30 June 2012 franked to 100%; and
a final distribution $30,141,000 (4.86 cents per stapled security) declared by AIFT for the year ended 30 June 2012.

A Main Return of $1,873,733,000 (301.86 cents per stapled security) was declared on 21 May 2013 and paid on 30 May 2013.

a dividend of $45,583,000 (7.3434 cents per stapled security) declared by AIFL franked to 100%;
a distribution of $1,457,590,000 (234.82 cents per stapled security) declared by AIFT;
a return of capital of $43,452,000 (7.0 cents per stapled security) by AIFL; and
a $327,109,000 (52.697 cents per stapled security) payment by AIFT upon cancellation of ordinary units.

an interim dividend of $Nil (Nil cents per stapled security) declared by AIFL for the half year ended 31 December 2012

(2011: $4,500,000 and 0.72 cents per stapled security fully franked; and

an interim distribution of $34,140,000 (5.50 cents per stapled security) declared by AIFT for the half year ended 31 December 2012 (2011: $26,537,000 and 4.28 cents per stapled security).

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26. Franking credit availability 2013 2012
$’000 $’000
Franking credits available for distribution at the end of the year 0 5,240
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27. Segment information

Operating segments were based on the reports reviewed by the Board of AIFL that are, in conjunction with the input and guidance of the chief executive officer of AIX, used to make strategic decisions for AIX. The operating segments were aligned with the investment objectives and guidelines set out in AIX’s PDS and in accordance with the provisions of the AIFL Constitution.

The AIFL Board took a broad portfolio construction approach to its investment and divestment activities of infrastructure securities and to the management of AIX. Accordingly, all operating decisions were based upon analysis of AIX as one operating segment.

The segment information reported to the Board was consistent with the Accounting Standards and therefore consistent with the information included within the consolidated financial statements.

28. Financial instruments

(a) Financial risk management objectives and policies AIX’s principal financial instrument as at 30 June 2013 is cash.

In the prior year AIX’s principal financial instruments comprised cash and short-term deposits, investments in unlisted securities and interest-bearing loans and borrowings. The main purpose of these financial instruments was to generate a return on the investment made by AIX securityholders.

AIX has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations.

AIX does not enter into or trade financial instruments for speculative purposes.

The main risks arising from AIX’s financial instruments as at 30 June 2013 are interest rate risk and liquidity risk.

The main risks arising from AIX’s financial instruments in the prior year were credit risk, interest rate risk, price risk, foreign currency risk and liquidity risk.

Credit risk

Credit risk represents the risk that a counterparty will be unable to pay amounts in full when they fall due and AIX will incur a financial loss.

In the prior year the main concentration of credit risk to which AIX was exposed arose from its exposure to unlisted securities that were debt securities such as shareholder loans. AIX was also exposed to counterparty credit risk on cash and cash equivalents and

To manage credit risk, AIX dealt only with high credit quality financial institutions for their cash transactions. At an asset level, AIX aimed to achieve an appropriate risk adjusted return for each of its investments. This was achieved through appropriate investment due diligence on an asset by asset basis. With regard to credit risk at the portfolio level, AIX was diversified by sector, geography and stage of development.

Interest rate risk

Interest rate risk is the risk that a financial instrument’s value or the value of its cash flows may fluctuate as a result of changes in market interest rates. Financial instruments whose cashflows 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 affected the value of AIX’s unlisted securities. As discussed in Note 2(i), the value of the unlisted securities is determined by discounting the projected future cashflows of the underlying entity. The discount rate utilised incorporates a risk free rate component as well as a market risk premium factor that reflects 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 cashflows generated by AIX’s cash and cash equivalents, and previously directly affected interest bearing receivables, interest bearing unlisted securities and interest bearing borrowings.

Price risk

Price risk is the risk that a financial instruments value may fluctuate as a result of changes in its price.

AIX mitigated price risk by a thorough due diligence process and careful selection of investments. On an ongoing basis, investee companies were 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 were reported to the Board on a regular basis.

28. Financial instruments (continues)

Price risk (continued)

Unlisted security prices were affected by the underlying cashflows of the unlisted security. The underlying cashflows used in valuing unlisted securities were provided by investee management in the form of a financial model, which was reviewed at least annually during the budgeting process and approved by representatives on the investee’s board. The key drivers of the financial model

included expected volumes, agreed pricing and the cost and timing of capital expenditure projects at each asset. Forecast volumes and pricing negotiations were performed by investee management with the assistance of, as appropriate, external consultants who provided specialist advice and a further layer of objectivity. In pricing negotiations, the investee boards were often consulted on key issues and provided with regular updates throughout the process. Capital expenditure was planned by investee management and also required investee board approval prior to project commencement.

Due to the long term view that was taken, AIX did not hedge against these short-term fluctuations.

Foreign exchange rate risk

Foreign exchange rate risk is the risk that a financial instrument’s value or the value of its cash flows may fluctuate as a result of changes in foreign exchange rates.

AIX previously held one offshore unlisted security, whose value and cashflows were denominated in Euro (EUR). As a result, AIX was exposed to movements in the Euro/Australian dollar (EUR/AUD) foreign exchange rate.

It was AIX’s policy not to hedge the carrying value of foreign currency denominated unlisted securities or any foreign currency cash flows that these foreign currency denominated unlisted securities generate.

Liquidity risk

Liquidity risk is the risk that AIX may not be able to generate sufficient cash resources to settle its obligations in full as and when they fall due or can do so in forms that are materially disadvantageous.

To manage liquidity risk, the Board actively monitors cash balances and forecast operational cashflows and liabilities on a regular basis. In addition to available cash on hand, in the prior year AIX had short term funding lines.

All AIX’s financial liabilities as at 30 June 2013 and 30 June 2012 were at call and due within twelve months.

Concentration of credit risk

Credit exposures at balance date are cash and cash equivalent balances (Note 15), receivables balances (Note 16) as well as the following unlisted security balances:

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2013 2012
Unlisted security name Instrument type $’000 $’000
Perth Airport Shareholder loans 0 43,284
HOCHTIEF AirPort Capital Group Shareholder loans 0 79,429
Queensland Airports Limited Loan notes 0 24,786
0 147,499
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The following tables summarise the sensitivity of material financial assets and financial liabilities to movements in interest rates and foreign exchange rates.

Interest Rate Sensitivity

The effect of a +/- 1% 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 1%.

A change in interest rates affects the interest revenue and interest expense of AIX, affecting (as applicable) cash and cash equivalents, interest bearing receivables, unlisted securities and borrowings.

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 +/- 1% shift in interest rates on unlisted securities has been approximated through valuation sensitivities performed at discount rates reflecting the selected range while all other

Foreign Exchange Rate Sensitivity

In the prior year AIX had exposure to the EUR/AUD foreign exchange rate movement and the effect of a +/- 10% movement in foreign exchange rates was selected for foreign exchange rate sensitivity.

The 10% sensitivity was selected as it represented foreign exchange movements over a 12 month period in the context of the longer term historical volatility.

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(c) Summarised sensitivity analysis Interest rate risk Foreign exchange risk
(continued)
-1.0% 1.0% -10.0% 10.0%
Carrying Value Profit Equity Profit Equity Profit Equity Profit Equity
2013 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets:
Cash and cash equivalents 123,081 (1,231) (1,231) 1,231 1,231 0 0 0 0
Receivables 5,368 0 0 0 0 0 0 0 0
Financial liabilities:
Payables 1,130 0 0 0 0 0 0 0 0
Total increase/(decrease) (1,231) (1,231) 1,231 1,231 0 0 0 0
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Interest rate risk Foreign exchange risk
-1.0% 1.0% -10.0% 10.0%
Carrying Value Profit Equity Profit Equity Profit Equity Profit 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 507 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
Total increase/(decrease) (138,716) (138,716) 138,716 138,716 33,123 33,123 (27,102) (27,102)
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(d) Fair values of financial instruments

The carrying amounts of AIX’s financial instruments and the methods and assumptions used to determine the fair values of

Cash and cash equivalents

Receivables and payables

The carrying amounts of receivables and payables approximate their fair values because of their short term to settlement.

Securities

Unlisted securities were measured at fair value through profit or loss. The determination of the fair values of the unlisted securities is outlined in Note 2(i).

Borrowings

The carrying amount of borrowings approximated their fair value on the basis that the borrowings that were in place were floating rate borrowings. The fair value of borrowings was determined by projecting future cash flows and then discounting these cash flows back to their present value using a post-tax, risk adjusted discount rate. Where appropriate, fair value is calibrated to relevant market developments.

(d) Fair values of financial instruments (continued)

Fair value hierarchy of financial instruments measured at fair value through profit or loss

AASB 7 Financial Instruments: Disclosure requires financial instruments measured at fair value to be classified in the following fair value hierarchy:

(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

The only financial instruments that are fair valued are unlisted securities.

Unlisted securities are included in Level 3 on the basis that the valuation techniques adopted are based on significant unobservable inputs.

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Level 1 Level 2 Level 3 Total
AIX 2013 2012 2013 2012 2013 2012 2013 2012
Consolidated AIFL $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Assets
Financial assets held at fair value through profit or
loss: 0 0 0 0 0 1,816,155 0 1,816,155
Unlisted Securities
Total Assets 0 0 0 0 0 1,816,155 0 1,816,155
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The following table presents the movements in Level 3 instruments.
Unlisted equity securities
2013 2012
$’000 $’000
Opening balance 1,816,155 1,756,228
Acquisitions 0 27,522
Loan advances 1,441 2,453
Capital reductions and disposals (425,651) (75,619)
Disposal of subsidiary holding unlisted securities (5,239) 0
Change in unrealised gain/(loss) recognised in profit or loss (1,384,627) 105,752
Movement in accrued loan interest (2,079) (181)
Closing balance 0 1,816,155
Total gain/(loss) recognised in profit or loss 161,906 139,577
Total gain/(loss) for the year included in profit or loss that relates to assets
held at the end of the reporting period 0 101,535
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(e) Foreign currency risk

In the prior year AIX had unlisted securities denominated in EUR. As a result, the Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income could be materially affected by movements in the respective EUR/AUD foreign exchange rate.

~~Foreign currency exposures are summarised below:~~

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Foreign currency exposures are summarised below:
Financial assets in Euro
2013 2012
AUD $’000 AUD $’000
Financial assets:
Cash and cash equivalents 0 214
Securities 0 297,902
0 298,116
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2013 2012
Unlisted security name Holding % Holding %
Perth Airport Development Group & PAPT Holdings Pty Ltd (Perth Airport) 0.00% 29.74%
HOCHTIEF AirPort Capital Group 0.00% 40.02%
Queensland Airports Limited 0.00% 49.07%
Airport Development Group Pty Ltd 0.00% 28.23%
Port of Portland 0.00% 0.00%
Metro Light Rail and Monorail 0.00% 0.00%
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2013 2012
Transactions with associate entities $’000 $’000
Distribution income from:
HOCHTIEF AirPort Capital Group 616 0
Queensland Airports Limited 0 778
Port of Portland 0 (119)
Port of Geelong Unit Trust & Infrastructure Investment Corporation 0 745
Dividend income from:
Perth Airport Development Group & PAPT Holdings Pty Ltd (Perth Airport) 0 18,437
Queensland Airports Limited 0 14,679
Airport Development Group Pty Ltd 12,192 7,283
Port of Geelong Unit Trust & Infrastructure Investment Corporation 8,097 242
Interest income from:
Perth Airport Development Group & PAPT Holdings Pty Ltd (Perth Airport) 0 3,531
HOCHTIEF AirPort Capital Group 5,094 7,360
Queensland Airports Limited 3,378 2,243
Metro Light Rail and Monorail 0 811
Advance/(repayment) of unlisted security loans to/(from):
Perth Airport Development Group & PAPT Holdings Pty Ltd (Perth Airport) (801) 22,504
HOCHTIEF AirPort Capital Group 0 (14,771)
Queensland Airports Limited 0 2,453
Unlisted equity securities issued/(redeemed) by:
Perth Airport Development Group & PAPT Holdings Pty Ltd (Perth Airport) 0 2,498
Security redemption proceeds from:
Airport Development Group Pty Ltd 0 (1,299)
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2013 2012
Receivable and payable balances with associate entities $’000 $’000
Income receivable
HOCHTIEF AirPort Capital Group 0 1,784
Queensland Airports Limited 0 559
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Name of the Manager

The Manager of AIFL 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.

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2013 2012
Transactions with the Manager and its related entities $’000 $’000
Manager base fees
Hastings 15,657 12,822
Manager performance fees
Hastings 55,350 35,476
Reimbursement of expenses paid or payable on behalf of AIX
Hastings 255 600
Distributions, dividends, returns of capital and cancellation of units declared to
Westpac 55,362 1,891
Interest income
Westpac 14,869 2,577
Finance expenses
Westpac
- Standby debt facility - facility fees 802 654
- Standby debt facility - agency fee 16 25
- Standby debt facility - establishment, amendment & cancellation fees 394 337
Bank fees
Westpac 14 11
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For further details in relation to base management fees and performance fees paid to Hastings refer to Note 9 – Manager base fees and Note 10 – Manager performance fees.

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2013 2012
Outstanding balances with the Manager and its related entities $’000 $’000
Cash and cash equivalents
Westpac 123,081 157,110
Distribution payable
Westpac 0 901
Manager base fees payable
Hastings 0 1,211
Manager performance fees payable
Hastings 0 35,476
Standby debt facility
Westpac
Total facility available 0 50,000
Less: facility drawn 0 0
Facility undrawn 0 50,000
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The Manager and its related entities’ interests in the financial instruments issued by AIX

The number of securities and the percentage ownership interest held by Hastings and its related entities in the financial instruments issued by AIX is detailed below:

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Securities Ownership interest
2013 2012 2013 2012
No. No. No. No.
Westpac entities (excluding Hastings) 18,012,204 18,012,204 2.90% 2.90%
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30. Key management personnel

Paul Espie Chairman (retired on 30 June 2013 and reappointed on 1 July 2013) James Evans Director (retired on 1 June 2013) John Harvey Director Robert Humphris Director (retired on 1 June 2013) Michael Hutchinson Director Robert Tsenin Director (retired on 1 June 2013) Jeff Pollock AIX Chief Executive Officer (retired on 17 May 2013)

The key management personnel of AIFT include the Board of Directors of Hastings which is the Manager of AIFL and Responsible Entity of AIFT whose ordinary issued units were stapled to the ordinary issued shares of AIFL up until 23 May 2013.

Alan Cameron Chairman Andrew Day Director James Evans Director William Forde Director Stephen Gibbs Director James McDonald Director Victoria Poole

Key management personnel related entities

John Harvey was a director of Australia Pacific Airports Corporation Limited during the year until 15 February 2013. For details in relation to AIX’s investment holding in Australia Pacific Airports Corporation Limited refer to Note 18 – Securities.

Transactions between Australia Pacific Airports Corporation Limited and AIX during the year were as follows:

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2013 2012
$’000 $’000
Dividend income from:
Australia Pacific Airports Corporation Limited 8,781 17,562
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There were no receivable or payable balances between Australia Pacific Airports Corporation Limited and AIX at 30 June 2013 and 30 June 2012.

(i) Compensation policy for key management personnel of the manager and Responsible Entity

Key management personnel of the Responsible Entity are paid by Hastings or its related entities in their roles as key management personnel of the Responsible Entity, not of AIX.

Key management personnel of the Responsible Entity are not remunerated by AIX. As such, disclosure of compensation paid to key management personnel of the Responsible Entity is not required.

(ii) Compensation policy for key management personnel of AIFL

30. Key management personnel (continued)

Board and Remuneration Committee responsibility

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.

In setting fee levels, the Board takes into account:

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.

(ii) Compensation policy for key management personnel of AIFL (continued)

Remuneration structure

Directors’ fees expensed for the year ended 30 June 2013 totalled $1,175,337 (2012: $936,855).

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 AIX 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 Chairman of the Board was entitled to an annual fee of $275,000 per annum;
directors were entitled to an annual fee of $110,000 per annum;
the Chairman of the Audit Committee was entitled to a fee of $23,000 per annum; and
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 were paid on behalf of the non-executive directors in accordance with the Company’s statutory superannuation obligations.

In order to preserve the value of the Chairman’s long-standing retirement benefits notwithstanding the new fee arrangements to apply from 1 July 2013 referred to below, the Chairman resigned from the AIFL board effective 30 June 2013 and was re-appointed with immediate effect as a non-executive director and Chairman. Consistent with board policy, once the retirement benefit under the Plan is due and payable to the Chairman, the Plan will effectively terminate.

As a consequence of the Chairman’s retirement on 30 June 2013, his retirement benefit of $696,928 became due and payable as

Having regard to the significant change to the business and undertakings of AIX following payment of the Cash Return on 8 July 2013, the three remaining directors of AIFL agreed that it was appropriate for them to remain on the Board until at least 30 November 2013 under new remuneration arrangements commencing 1 July 2013. These new arrangements include a reduction in annual board fees by 50%, resulting in the Chairman being entitled to a fee of $137,500 per annum and directors being entitled to a fee of $55,000 per annum from 1 July 2013. In addition from 1 July 2013 no fees will be payable with respect to Audit Committee services provided by the Chairman of the Audit Committee or Audit Committee members.

In accordance with the AIFL Constitution, directors are entitled to additional remuneration for extra services or special exertions made by them for the benefit of AIX. Under these provisions, the Chairman and Michael Hutchinson were awarded additional remuneration Board in respect of the services they performed in relation to the internalisation project and the Future Fund transaction. These additional amounts are detailed in Note 30 (b) (ii).

(ii) Compensation policy for key management personnel of AIFL (continued)

Details of non-executive directors’ remuneration for the year ended 30 June 2013 are set out in the following table. No bonuses, options or other emoluments are paid to the directors of AIFL.

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(1) Board fee includes $50,000 paid in relation to work performed in connection with the internalisation proposal and the Future

(3) Paul Espie’s retirement benefit became due and payable upon his retirement at 30 June 2013.

Remuneration paid to the AIX Chief Executive Officer

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

30. Key management personnel (continued)

(c) Key management personnel interests in financial instruments issued by AIX

Interests acquired or disposed of in the financial instruments issued by AIX were within the allowable trading periods determined by the Board of Directors of AIFL and Hastings. 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:

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Opening Acquisitions DRP Issue Disposals Closing Holding
Holding 1 July No. No. No. 30 June No.
Directors Name No.
Paul Espie 2013 906,668 0 0 0 906,668
2012 906,668 0 0 0 906,668
Stephen Gibbs 2013 139 0 0 0 139
2012 139 0 0 0 139
John Harvey 2013 84,487 0 0 0 84,487
2012 84,487 0 0 0 84,487
Robert Humphris [ (1)] 2013 300,000 0 0 0 300,000
2012 300,000 0 0 0 300,000
Michael Hutchinson 2013 122,024 0 0 0 122,024
2012 122,024 0 0 0 122,024
James McDonlad 2013 15,000 0 0 0 15,000
2012 15,000 0 0 0 15,000
Robert Tsenin [ (1)] 2013 157,060 0 0 0 157,060
2012 157,060 0 0 0 157,060
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(1)

Distributions, dividends, returns of capital and proceeds upon cancellation of ordinary units that were declared and paid by AIX to key management personnel and their related entities during the year were as follows:

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Amounts Declared Amounts Payable
2013 2012 2013 2012
Directors Name $ $ $ $
Paul Espie 2,786,713 95,200 0 49.867
Stephen Gibbs 427 15 0 8
John Harvey 259,677 8,871 0 4,647
Robert Humphris 922,073 31,500 0 16,500
Michael Hutchinson 375,050 12,813 0 6,711
James McDonald 46,104 1,575 0 825
Robert Tsenin 482,736 16,491 0 8,638
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31. Earnings per security 2013 2012
Basic earnings per security (cents) 27.12 31.57
Weighted average number of securities (000’s) 620,734 620,734
Net profit after income tax ($000’s) 168,320 195,974
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Following the approval by AIFL shareholders to reduce AIFL’s share capital by up to $0.173924 per share, a Residual Return of $107,960,530 ($0.173924 per AIFL share) was made on 8 July 2013.

On 7 August 2013, AIFL received a notice pursuant to section 249D of the Corporations Act 2001 (Act) from RBC Investor Services Australia Nominees Pty Limited on behalf of entities managed by Wilson Asset Management (International) Pty Limited and its related entities, (Wilson), requesting the AIFL Directors convene a general meeting of AIFL shareholders. Wilson has prepared a Member Statement which sets out a proposal to remove the current AIFL Directors and replace them with three Wilson Nominees. The Member Statement states that Wilson does not support the proposed delisting and winding-up of AIFL. If successful, the nominee directors would undertake a review of AIFL and identify alternative capital management options including, but not limited to, an equal access share buy-back and a recapitalisation of AIX.

There were no other significant events have occurred since the end of the reporting period which would impact on the financial position of AIX disclosed in the Consolidated Statement of Financial Position as at 30 June 2013 or on the results and cash flows of AIX for the year ended on that date.

34. Parent entity financial information

(a) Summary of financial information

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2013 2012
Statements of Financial Position $’000 $’000
Total assets 126,587 216,998
Total liabilities 3,652 20,679
Equity
Contributed equity 116,569 160,021
Reserves (3,781) (3,781)
Retained earnings 10,147 40,079
Statements of Comprehensive Income
Net profit/(loss) after income tax for the year 15,652 9,723
Total comprehensive income/(loss) for the year 15,652 9,723
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Directors’ Declaration

(a) the financial statements and notes set out on pages 29 to 58 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 Consolidated AIFL’s (AIX’s) financial position as at 30 June 2013 and of its performance for the year ended on that date; and

Note 2(a) confirms that the financial statements also 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 .

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Paul Espie Chairman 27 August 2013

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Investor Details

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Twenty largest holders of securities Number held % of total
RBC Investor Services Australia Nominees Pty Limites 115,823,400 18.66
CS Fourth Nominees Pty Ltd c/-Credit Suisse Eqts Australia Ltd 62,110,577 10.01
National Nominees Limited 58,750,709 9.46
Brispot Nominees Pty Ltd 46,657,923 7.52
J P Morgan Nominees Australia Limited 31,300,550 5.04
Bainpro Nominees Pty Limited 21.088,565 3.40
Westpac Banking Corporation C/-Principal Investments 18,012,204 2.90
HSBC Custody Nominees (Australia) Limited –A/C 3 11,752,375 1.89
Aust Executor Trustee Ltd 10,270,645 1.65
Citicorp Nominees Pty Limited 9,846,455 1.59
Mr Warwick Sauer 8,999,999 1.45
HSBC Custody Nominees (Australia) Limited 8,998,965 1.45
Colour Proof Pty Ltd 8,865,362 1.43
BT Portfolio Services Limited 4,000,000 0.64
Mr Benjamin Youngman Graham 4,000,000 0.64
Morgan Stanley Australia Securities (Nominee) Pty Limited (No 1 Account) 3,287,960 0.53
Mr Gabriel Berger 3,095,000 0.50
BNP Pariabas Noms Pty Ltd 3,069,791 0.49
Longmuir Resources Pty Ltd 3,050,000 0.49
Merrill Lynch (Australia) Nominees Pty Limited 2,817,713 0.45
435,798,193 70.21
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Number % of issued
Range of holders % of holders Units capital
1–1,000 1,284 10.84 529,067 0.09
1,001–5,000 3,912 33.03 12,191,322 1.96
5,001–10,000 2,980 25.16 22,042,903 3.55
10,001–100,000 3,490 29.47 81,452,503 13.12
100,001–over 178 1.5 504,518,149 81.28
Total 11,844 100.00 620,733,944 100.00
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Date Received Company Name of Holdings Securities Held % of Total
19/7/2012 National Australia Bank Limited National Australia Bank Limited and its 31,059,945 5.00
and its associated entities associated entities
20/7/2012 JCP Investment Partners Ltd JCP Investment Partners Ltd 38,591,266 6.22
26/7/2012 National Australia Bank Limited National Australia Bank Limited and its 0 0.00
and its associated entities associated entities
27/7/2012 JCP Investment Partners Ltd JCP Investment Partners Ltd 32,149,871 5.18
1/8/2012 JCP Investment Partners Ltd JCP Investment Partners Ltd 0 0.00
29/8/2012 AMP Limited AMP Limited and its related bodies corporate 34,371,099 5.54
14/9/2012 AMP Limited AMP Limited and its related bodies corporate 0 0.00
16/11/2012 UBS AG and its related bodies UBS AG and its related bodies corporate 50,359,372 8.11
corporate
2911/2012 UBS AG and its related bodies UBS AG and its related bodies corporate 57,856,295 9.32
corporate
8/1/2013 Bank of America Corporation Bank of America Corporation and its related 31,060,447 5.00
bodies corporate
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Investor Details

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Date Company Name of Holdings Securities Held % of Total
Received
9/1/2013 Bank of America Corporation Bank of America Corporation and its 0 0.00
related bodies corporate
1/2/2013 Morgan Stanley Australia Securities Limited Morgan Stanley Australia Securities 33,761,439 5.44
Limited
1/2/2013 Mitsubishi UFG Financial Group Inc Mitsubishi UFG Financial Group Inc 33,761,439 5.44
1/2/2013 Deutsche Bank AG Deutsche Bank AG 46,615,971 7.51
5/3/2013 Deutsche Bank AG Deutsche Bank AG 54,816,169 8.83
5/3/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 51,305,935 8.27
corporate
6/3/2013 Deutsche Bank AG Deutsche Bank AG 61,867,613 9.97
6/3/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 58,521,916 9.43
corporate
15/3//2013 UBS AG and its related bodies corporate UBS AG and its related bodies 52,305,994 8.43
corporate
18/3/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 59,695,934 9.62
corporate
27/3/2013 Mitsubishi UFG Financial Group Inc Mitsubishi UFG Financial Group Inc 0 0.00
29/4/2013 Morgan Stanley Australia Securities Limited Morgan Stanley Australia Securities 31,639,041 5.10
Limited
17/5/2013 Morgan Stanley Australia Securities Limited Morgan Stanley Australia Securities 50,407,506 8.12
Limited
17/5/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 49,138,740 7.92
corporate
24/5/2013 Wilson Asset Management Group Wilson Asset Management Group 35,683,372 5.75
7/6/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 56,380,033 9.08
corporate
11/6/2013 Deutsche Bank AG Deutsche Bank AG 53,144,076 8.56
10/6/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 47,277,268 7.62
corporate
14/6/2013 Wilson Asset Management Group Wilson Asset Management Group 44,257,917 7.13
26/6/2013 Wilson Asset Management Group Wilson Asset Management Group 68,905,467 11.10
26/6/2013 Credit Suisse Holdings (Australia) Limited Credit Suisse Holdings (Australia) 31,200,435 5.03
Limited
27/6/2013 Wilson Asset Management Group Wilson Asset Management Group 115,813,210 18.66
27/6/2013 Australian Foundation Investment Company Australian Foundation Investment 0 0.00
Limited Company Limited
27/6/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 33,870,058 5.46
corporate
28/6/2013 Credit Suisse Holdings (Australia) Limited Credit Suisse Holdings (Australia) 39,901,690 6.43
Limited
28/6/2013 UBS AG and its related bodies corporate UBS AG and its related bodies 41,282,893 6.65
corporate
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Distribution Information

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Distribution (cents per stapled security)
Distribution for six months to 31 December 2012 5.5 cents
Main return - Distribution 234.82 cents
Main return - Cancellation of units 52.70 cents
Main return - Dividend 7.34 cents
Main return - Return of capital 7.00 cents
Total distributions for the year 307.36 cents
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Payment components Amount (%) Tax credit (%)
Company Dividend
Australian income
– Dividends – franked 100.00 100.00
Total Company Dividend 100.00 100.00
Company Return of Capital 100.00 n/a
Total Company Return of Capital 100.00 n/a
Trust Distribution
Australian income
– Dividends – franked 0.0000 0.7356
Capital Gains
- Discounted capital gain - Taxable Australian property 31.2931 Nil
- Discounted capital gain - Non-Taxable Australian property 8.5284 Nil
- CGT concession amount 57.8898 Nil
Return of Capital 2.2886 Nil
Total Trust Distribution 100.00 0.7356
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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 2013 are as follows:

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Fund
payment amount
Date (dollars per unit) Units held
31 December 2012 0.00000 -
30 June 2013 1.50406 -
1.50406 -
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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.hastingsinfra.com.

Manage your investment (including change of address, banking and TFN details) and view statements by visiting www.hastingsinfra.com 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 emailing your contact details to [email protected].

Investor Information

Australian Infrastructure Fund Limited and

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

Please note, your Securityholder Reference Number (SRN) or Holder Identification 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 Identification 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.

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia Telephone (within Australia) 1300 131 164 Telephone (outside Australia) +61 3 9415 4243 Website www.computershare.com.au

Australian Securities Exchange listing

The securities are listed on the ASX under the name Australian Infrastructure Fund and under the code ‘AIX’. The 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).

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 notification, 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 Office and securityholders 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 notification 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

Change of address

Securityholders 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

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 confidentiality 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.hastingsinfra.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).

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

If you are dissatisfied 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, first try to resolve your concern with Hastings by calling +61 3 8650 3600.

Corporate Directory

ABN 97 063 935 553

Registered Office Level 27, 35 Collins Street Melbourne VIC 3000 Australia Telephone +61 3 8650 3600 Facsimile +61 3 8650 3701 Email [email protected] Website www.hastingsinfra.com

Security Register Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Australia Telephone (within Australia) 1300 132 288 Telephone (outside Australia) +61 3 9415 5000 Facsimile +61 3 9473 2500 Website www.computershare.com

Paul Espie, Chairman John Harvey

Company Secretaries

Jane Frawley

Responsible Entity

Hastings Funds Management Limited ABN 27 058 693 388 Holder of Australian Financial Services Licence No. 238309 Registered Office Level 27, 35 Collins Street Melbourne VIC 3000 Australia Telephone +61 3 8650 3600 Facsimile +61 3 8650 3701 Email [email protected] Website www.hastingsinfra.com

Other Offices

Sydney Level 10, 55 Market Street Sydney NSW 2000 Australia Telephone +61 2 9287 8700 Facsimile +61 2 9287 8801

London 2nd Floor 50 St Mary Axe London EC3A 8FR United Kingdom Telephone +44 20 7337 6720 Facsimile +44 20 7929 2502

New York 39th Floor 575 Fifth Avenue New York, NY 10017-24 United States of America Telephone +1 212 681 2524

Singapore

18-00 77 Robinson Road Singapore 068896 Telephone +65 6216 2297

Alan Cameron AO, Chairman Andrew Day, Chief Executive James Evans Liam Forde Stephen Gibbs James McDonald

Company Secretaries Jane Frawley

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, financial products. The information contained in this report is not financial product advice. This report has been prepared without taking into account the investment objectives, financial 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 financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial 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 financial year ended 30 June 2013 reflect 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.

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www.hastingsinfra.com

AI assistant

FUTURE GENERATION AUSTRALIA LIMITED — Annual Report 2013

64916_rns_2013-09-29_46aa9bc4-8dfb-4c63-b1a1-e5286436baf6.pdf

ASX Announcement

Australian Infrastructure Fund (AIX)

AIX 2013 Annual Report

For further enquiries, please contact:

Contents

About this report

Chairman’s Report

Directors as at 30 June 2013

Paul Espie

John Harvey

Mike Hutchinson

James Evans

Robert Humphris

Robert Tsenin

Directors as at 30 June 2013

Alan Cameron AO (Chairman)

James Evans

Stephen Gibbs

Victoria Poole

AIFL Corporate Governance Statement

Corporate Governance

At 30 June 2013, the directors of AIFL were:

The following directors retired on 30 May 2013:

• Audit Committee; and

• Remuneration Committee.

1.9 Company Secretaries

AIFL Corporate Governance Statement

2. Financial Reporting

3. Risk management

CFO assurance

4. Remuneration

AIFT Corporate Governance Statement

Corporate Governance

1. Board, committees and oversight of management

• Governance Committee.

1.5 Review of performance Board, committees and directors

Management

AIFT Corporate Governance Statement

1.9 Company Secretaries

2. Financial reporting

3. Risk management

4. Remuneration

1.2 Conflicts of interest

4. Diversity

Proportion of female representation

Recruitment practices

Parental leave

Development of intranet staff communication site

Flexible work arrangements

Pay equity

Financial Information

Directors’ Report

Structure of consolidated financial statements

Directors

Company secretaries

Jane Frawley

Jefferson Petch

Principal activities

Directors’ Report

Continued

Company information

Results

Interim dividend and distribution

Business strategies and prospects

Distributions and dividends

Significant changes in state of affairs

Directors meetings

Directors’ Report

Continued

Directors’ interests

Indemnification and insurance of officers and auditors

Environmental regulation

Rounding of amounts to the nearest

Remuneration Report

(i) Remuneration Policy

(ii) Remuneration structure

Directors’ Report

FUTURE GENERATION AUSTRALIA LIMITED Annual Report 2013