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Macquarie Capital Alliance Management Limited A Member of the Macquarie Bank Group ABN 94 105 777 704 AFS Licence No. 236894 Macquarie Capital Alliance Limited ABN 96 112 594 662 Macquarie Capital Alliance International Limited ARBN 113 880 783

No. 1 Martin Place SYDNEY NSW 2000 GPO Box 4294 SYDNEY NSW 1164 AUSTRALIA

Telephone 61 2 8232 7942 Facsimile 61 2 8232 5904 Internet www.macquarie.com/mcag

Macquarie Capital Alliance Management Limited is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia), and Macquarie Capital Alliance Management Limited's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 ("MBL"). MBL provides a limited AUD5,000,000 guarantee as required by the Australian Securities and Investments Commission in respect of Corporations Act obligations of Macquarie Capital Alliance Management Limited as a responsible entity of a managed investment scheme. MBL does not otherwise guarantee or provide assurance in respect of the obligations of Macquarie Capital Alliance Management Limited, the performance of funds managed by Macquarie Capital Alliance Management Limited or the repayment of capital. 871707_1.DOC

25 September 2007 ASX RELEASE

Macquarie Capital Alliance Group

MCAG 2007 ANNUAL GENERAL MEETING INFORMATION AND ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2007

Attached are copies of documents which are being mailed to MCAG investors today in connection with the annual general meetings of the entities comprising MCAG to be held on 28 November 2007:

• Letter to investors=• MCAG Annual Report– if investors elected to receive them; • MCAG 2007 Annual General Meeting Notice • MCAG 2007 Annual General Meeting Proxy form

For further information, please contact:

Hugh Fitzsimons Jane Rotsey Investor Relations Public Affairs Tel: 61 2 8232 7942 Tel: 61 2 8232 5026 Mob: 0422 383 753 Mob: 0401 997 160 Email: [email protected] Email: [email protected]

Macquarie Capital Alliance Management Limited A Member of the Macquarie Bank Group ABN 94 105 777 704 AFS Licence No. 236894 Macquarie Capital Alliance Limited ABN 96 112 594 662 Macquarie Capital Alliance International Limited ARBN 113 880 783

No. 1 Martin Place SYDNEY NSW 2000 GPO Box 4294 SYDNEY NSW 1164 AUSTRALIA

Telephone 8232 9284 Facsimile 8232 5904 Internet www.macquarie.com/mcag

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MA

CQ

UA

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CA

PITA

L ALLIA

NC

E G

RO

UP

AN

NU

AL R

EPO

RT 2007

Australia: 1800 215 868International: (612) 8232 9284

Macquarie Capital Alliance GroupNo.1 Martin PlaceSydney NSW 2000

[email protected]

www.macquarie.com/mcag

MA

CQ

UA

RIE

CA

PITA

L ALLIA

NC

E G

RO

UP

AN

NU

AL R

EPO

RT 2007

Investment life cycle

Investment analysis and due diligence

Financial structuring and execution

Ongoing commercial, capital and fi nancial management

Realisations

Deal fl ow

Returns to MCAG

EBITDA1 Growth vs. Prior Corresponding Period (pcp) Pre Specifi c Items Reported

European Directories2 � 3% � 7%

Red Bee Media � 20% � 67%

AIR-serv � 22% � 20%

Retirement Care Australia3 � 34% � 26%

The Zig Inge Group � 40% � 40%

1. Earnings before interest, tax, depreciation and amortisation.

2. Six month pcp (European Directories has a calendar year end). Forecast actual CY07 Earnings before interest, tax, depreciation and amortisation (EBITDA) growth is 13 – 15% vs. full year pcp. Forecasts are subject to uncertainty and contingencies. Actual results may vary from forecasts and any variation may be materially positive or negative.

3. Retirement Care Australia (1) portfolio excluded (negative base).

Corporate DirectoryMacquarie Capital Alliance Group

No.1 Martin PlaceSydney NSW 2000Telephone (Australia): 1800 215 868Telephone (international): (612) 8232 9284Facsimile: (612) 8232 5904Email: [email protected]/mcag

Responsible Entity for Macquarie Capital Alliance Trust, manager for Macquarie Capital Alliance Limited and adviser for Macquarie Capital Alliance International Limited:

Macquarie Capital Alliance Management Limited

DirectorsMCAL

Rowan Ross (Chairman)Robin CrawfordKen MossAnthony Nagel

MCAML

Rowan Ross (Chairman)Robin CrawfordKen Moss Nicholas MooreAnthony Nagel

MCAIL

Kim Carter (Chairman)Rowan RossRodney BirrellAnthony Nagel

Secretaries

Christine Williams (MCAL and MCAML only)Leanne Brown ((MCAL and MCAML only)Dennis Leong (MCAML only)Roslyn O’Brien (MCAIL only)

Chief Executive Offi cer

Michael Cook

Chief Financial Offi cer

Mark Steinberg

Registry

Computershare Investor Services Pty LtdLevel 3, 60 Carrington StreetSydney NSW 2000AustraliaTelephone (Australia): 1800 253 098Telephone (international): (613) 9415 4208Facsimile: (612) 8234 5050

Financial ReportA copy of the MCAG full fi nancial report for the period ended 30 June 2007 is available on the MCAG website: www.macquarie.com/mcag

The MCAG 2007 annual report is printed on an EMAS (Eco-Management and Audit System) accredited paper stock which is totally chlorine free. EMAS is the European Union’s regulated environmental management system.

Typical Investment Life Cycle

1

Contents

Chairman’s Letter

CEO’s Letter

Overview of Accounting Principles

Financial Highlights

Asset Overviews

Social and Environmental Responsibility

Corporate Governance Statement

Concise Financial Report

Remuneration Report

MCAG Stapled Security Holder Information

MCAG Directors

Disclaimer

Corporate Directory

2

6

8

9

10

20

21

37

65

69

70

72

IBC

2

Chairman’s Letter

Dear Security HolderIt is my pleasure to present the annual report of the Macquarie Capital Alliance Group (MCAG).

MCAG listed on the Australian Securities Exchange (ASX) in April 2005 with a mandate to co-invest with the Macquarie Group and its clients. Since listing, MCAG has fully invested its capital in fi ve industry sectors through opportunities generated by the Macquarie Group.

MCAG’s investments have a medium-term investment horizon. We are now, with most of the investments, two years into that investment cycle, and approaching a period where the benefi ts of this investment strategy may start to be realised.

DistributionsThe board approved a special distribution of 30 cents per stapled security which was paid to investors in April 2007. The funds for the special distribution became available as the result of a recapitalisation of Red Bee Media, receipt of proceeds from strategic site sales at Retirement Care Australia (now merged with the Regis Group), and receipt of operating distributions from AIR-serv and The Zig Inge Group.

MCAG’s mandate and the nature of its investment activities means that the level and frequency of distributions will continue to depend primarily on the timing of asset sales and recapitalisations, and will be balanced against available investment opportunities for the fund.

Directors’ ValuationThe directors believe that MCAG’s acquisition investment strategies have created signifi cant value, and that it is appropriate to provide guidance to security holders on their view of this value. We apply the International Private Equity and Venture Capital Guidelines when preparing these valuations.

Applying the methodology set out in the guidelines (which includes the application of discounts for liquidity), the directors’ valuation as at 30 June 2007 was $5.16 per stapled security.

The directors note that the 30 cent special distribution reduced the valuation by that amount compared with the fi rst directors’ valuation of $5.15 as at 31 December 2006. Exchange rate movements over the six-month period resulted in a reduction of 21 cents per stapled security, as the values of European Directories, Red Bee Media and AIR-serv are calculated in the relevant foreign currency.

Further information about the directors’ valuation is set out on page 4.

Financial PerformanceConsolidated revenue from continuing activities increased by 75% to $487.3m. The directors note that the prior corresponding period (pcp) is not directly comparable due to timing of acquisitions over that period.

MCAG’s consolidated net profi t result is impacted by the mandatory amortisation of intangible assets, for example the value of customer contracts at the time of acquisition and trade marks. The outcome of the application of these accounting rules and resulting non-cash charges is that MCAG reported a net loss for the year of $60.8m. If these non-cash charges were added back, MCAG would have reported a net profi t of $7.8m.

We have set out on pages 8 and 9 of this report further information on these accounting policies and the proportionate earnings of MCAG (which take into account MCAG’s actual level of ownership in each business).

3

Board ChangesIn June 2007, Mr Peter Warne, who had been a director of Macquarie Capital Alliance Limited and Macquarie Capital Alliance Management Limited (MCAL and MCAML) since listing, tendered his resignation. Mr Warne has joined the board of Macquarie Bank Limited (MBL) and, given the MBL independence criteria, is no longer able to serve as a director of MCAL and MCAML. Mr Warne’s contribution to MCAG has been much appreciated.

Mr Tony Nagel (who already serves as a director of Macquarie Capital Alliance International Limited) replaced Mr Warne on the board of MCAL and MCAML.

Alignment of InterestThere is a strong alignment of interest between the Macquarie Group and MCAG security holders. During the year, the Macquarie Group increased its stake in MCAG by purchasing additional securities on-market and re-investing some of its base management fees in MCAG securities. The Macquarie Group is MCAG’s largest security holder, with a 16.7% holding, up from 10% at the initial public offering. The MCAG board, CEO and management are also signifi cant holders of MCAG securities, which have all been purchased at the initial public offering or on the market, or issued under the Distribution and Dividend Re-investment Plan. Further details are included in the Remuneration Report on page 65.

On behalf of MCAG’s directors, I thank you for your ongoing support.

Rowan Ross ChairmanMacquarie Capital Alliance Management Limited

4

Notes to the Chairman’s Letter

Directors’ Valuation as at 30 June 2007

A$mEuropean

DirectoriesRed Bee

Media AIR-serv Retirement

Care AustraliaThe Zig Inge

Group Total

Equity value (cost) 468 177 145 117 101 1,009

Equity value (30 June 07) 645 206 1261 151 192 1,320

Value per security $2.45 $0.78 $0.48 $0.57 $0.73 $5.02

Net cash at fund level $0.14

Net asset value (as at 30 June 2007) $5.16

Liquidity discount included (in Equity Value) 10% 10% 10%1 0%2 10%

Distributions/capital returns from asset to MCAG3 – 111 4 34 3

1. AIR-serv valuation impacted by strengthening AUD compared to the USD (13%) and application of 10% liquidity discount for the fi rst time (previously held at cost as owned for less that 12 months). Underlying valuation increased by c.9% since acquisition.

2. 100% owned on 30 June 2007. Pre merger with Regis Group.3. Not included in asset equity value at 30 June 2007 – can be added back to provide an accumulated value comparison with asset equity

value at cost.

Note to the Directors’ ValuationThe directors note that after the balance sheet date of 30 June 2007, fi nancial markets entered a period of volatility.

While there is the potential for the changed fi nancial conditions to impact on the directors’ valuation of MCAG’s investee companies, there has been no impact on the operating performance of the investments themselves. Additionally, MCAG debt management has been prudent, with maturities of debt at the investee company level not arising for four to nine years and interest rates fi xed over the majority of these facilities over this period.

The directors note that, despite this volatility, the S&P/ASX 200 Accumulation Index (a measure of market performance) at 31 August 2007 was slightly higher than at 30 June 2007.

The directors make these comments simply as an observation of current fi nancial market conditions and the potential impact on the 30 June 2007 directors’ valuation. The directors will use the opportunity of the Annual General Meeting on 28 November 2007 to comment further on business conditions and the then currency of the valuation.

A$

5.40

5.20

5.00

4.80

4.60

4.40

4.20

4.00NAV2 per security

(31 Dec 06)

Less: distribution

paid in April 2007

Adjusted NAV per security(31 Dec 06)

Exchange rate

movement

Change in valuation

NAV per security

(30 June 07)

5.15 (0.30)

4.85 (0.21)

0.51 5.16

Directors’ Valuation – Change since 31 December 20061

1. Directors’ Valuations were provided for the fi rst time as at 31 December 2006 (no full year comparison available).2. Net Asset Value (NAV).

Directors’ Valuation

5

MCAG Investee Company Debt Profi les and Interest Rate HedgingMCAG’s policy is not to hold long-term debt at the fund level. At 30 June 2007, MCAG had $37m of net cash at the fund level. Each investee company has its own debt packages, which are non-recourse to MCAG. MCAG has available fund level debt facilities which it may use from time to time to fund short-term opportunities or as bridging fi nance.

MCAG Gearing (Proportional)

Dec 06 A$m

June 07A$m

Investee company net debt 1,530 1,680

Fund level net debt/(cash) 68 (37)

Directors’ valuation 1,361 1,320

Total net debt + directors’ valuation 2,959 2,963

Gearing ratio 54% 55%

Debt Maturity Profi le of MCAG’s Investee Companies

Based on current portfolio (e.g. post Retirement Care Australia/Regis merger). The Zig Inge Group debt is largely development debt which is secured against land and paid down from unit sales when construction completed. The Zig Inge Group’s corporate debt is a standing facility.

MCAG Investee Company Interest Rate Hedging

Comments

Current weighted average c.73%

European Directories 76% of total drawn debt fi xed for 2 years

Red Bee Media 75% of recapitalised debt for 5 years

AIR-serv 100% of acquisition debt for 5 years

Regis (Retirement Care Australia) 75% of forecast total drawn debt for 5 years

The Zig Inge Group None (generally project specifi c construction debt repaid through unit sales)

A$m

600

500

400

300

200

100

0FY08 FY09 FY10 FY16FY15FY14FY13FY12FY11

European Directories Red Bee Media AIR-serv Retirement Care Australia/Regis The Zig Inge Group Fund

AIR-serv acquisition completed

The Zig Inge Group renegotiates debt facilities and reduces margins by 50%

Retirement Care Australia refi nancing and distribution to MCAG

Red Bee Media wins BBC iPlayer contract

Red Bee Media launches seven channel playout for Virgin Media

AIR-serv awarded “hypermarket” contracts in the UK

Retirement Care Australia* sale of seven smaller centres

European Directories sells low margin call centre businesses in France

Jul 06 Dec 06

Financial Year 2007 in Review

Sep 06

6

Dear Security HolderMCAG’s investments are generally two years into a medium-term investment cycle.

During the fi rst two years, the Macquarie Group worked with senior executives at each of MCAG’s investee companies to implement agreed upon business plans. We do not seek to be involved in every aspect of the businesses; rather we work with senior management on specifi c strategic projects. Examples are set out in the chart at the base of these two pages.

Around 50 Macquarie Group staff work regularly with MCAG and its investments. These include investment analysts, operating executives, strategy consultants, accountants, lawyers and tax specialists. Macquarie Group executives are also active on the boards of each investment, with 11 directorships at the investee companies.

The overriding focus of our investment and management process has been to help the investee companies to grow in a profi table manner. Examples include: expanding the geographic focus of a business (for example, the international growth in Red Bee Media), improving the product offering (better online services in European Directories), or simply accelerating the roll-out of high quality offerings (new land acquisitions for The Zig Inge Group).

We also seek to improve operating effi ciency, for example by re-negotiating key costs, developing wage structures which promote training, development and effi ciency and leveraging the purchasing power of the Macquarie Group through initiatives such as bulk purchasing of insurance contracts.

Ensuring that high quality management teams are in place at each investee company is also a priority. Over the year, several key appointments were made, including Mr Cornel Riklin as CEO of European Directories and Mr Simon Greenman as head of online at European Directories.

We seek to implement and maintain effi cient capital structures to enhance returns to security holders. This involves the prudent use of debt, the size of which is tailored to the characteristics of each investment. In addition, hedging programs are in place to mitigate the impact of variations in interest rates.

A good example of our approach to capital structures is the recapitalisation of Red Bee Media which occurred in early 2007. When a Macquarie Group-led consortium acquired Red Bee Media in 2005, the business had underlying earnings of £14m and was in the process of completing a separation from its incumbent parent company. MCAG worked with management to put in place a debt package which was appropriate to its then earnings and the transition the business was facing at that time.

CEO’s Letter

* Now known as the Regis Group.

Red Bee Media preferred supplier for SBS playout

European Directories renegotiates paper and print contracts

Special Distribution to MCAG security holders (30 cents)

The Zig Inge Group acquires premium site in Vaucluse

Retirement Care Australia implements new wages agreement at seven sites

Red Bee Media opens offi ce in France – wins two large contracts

The Zig Inge Group and Retirement Care Australia complete land sale agreement at three sites

Retirement Care Australia signs merger with Regis Group

AIR-serv “bolt-on” acquisition in Texas

Jun 07

Red Bee Media refi nancing and distribution to MCAG

European Directories acquires remaining 50% of JV interest in Poland

Mar 07Feb 07

Retirement Care Australia/Regis merger completed

7

Following acquisition, the underlying earnings of the Red Bee Media business grew very strongly to £21m in 2007. The transition from its parent company was largely complete, and Red Bee Media was diversifying its earnings internationally. The improvement in earnings and the overall position of the business led Red Bee Media to introduce a larger debt package, which resulted in a return of $111m to MCAG. A large portion of these proceeds were returned to MCAG security holders through the 30 cent special distribution in April 2007.

In addition to growing earnings and maintaining effi cient capital structures, the Macquarie Group works with MCAG’s portfolio companies to consider strategic acquisitions or divestments.

At European Directories, MCAG worked with the business to identify and execute over 18 “bolt-on” acquisitions including the 50% interest of a joint venture partner at the operations in Poland. MCAG also worked with the business on the divestment of a low margin call centre business in France.

At The Zig Inge Group, MCAG worked with the business to acquire development sites in Melbourne and, signifi cantly, in Sydney and Perth, which moved the business beyond its traditional base in Victoria and South-East Queensland.

We were delighted to announce in July 2007 that Retirement Care Australia had merged with the Regis Group, with MCAG owning 46% of the enlarged group. The Regis Group has operated in the aged care sector for over 14 years and has an excellent clinical care record. The group also has an established track record in developing high quality aged care centres. The Regis Group has a high quality management team, led by chairman and co-founder Bryan Dorman. The combined group (which will operate under the Regis brand) will operate over 3,600 beds at 37 centres and will be the second largest private sector operator of aged care centres in Australia.

Further information about the operating performance of each of MCAG’s investee companies is set out on pages 10 to 19.

We are confi dent that, two years into a medium-term investment horizon, MCAG is well placed to deliver signifi cant value for security holders.

Michael Cook Chief Executive Offi cerMacquarie Capital Alliance Group

Jul 07

8

Overview of Accounting Principles

Set out on the facing page are summaries of MCAG’s consolidated statutory accounts and MCAG’s proportionate accounts.

Proportionate Accounts

The proportionate accounts set out the relative contribution of each business in accordance with MCAG’s economic level of ownership in each business. In contrast, the consolidated accounts show 100% of the earnings, cash fl ow and balance sheet of the assets where MCAG owns more than 50% (Red Bee Media, AIR-serv and Retirement Care Australia). Where MCAG owns less than 50% of an asset (European Directories and The Zig Inge Group) the performance of the asset is accounted for under the equity method and is refl ected in the “share of net profi t of associates” line in the consolidated accounts.

Amortisation

European Directories, Red Bee Media and AIR-serv are all impacted by non-cash amortisation charges against identifi able intangible assets recognised at the time the businesses were acquired. These charges are required under applicable accounting standards.

For example, in European Directories, at the time of acquisition, the business was required to apportion a value to “customer contracts”, i.e. contracts the business has with its existing customers. This amount is then amortised over a period that is based on the estimated useful lives of these assets. As such, the identifi able intangible assets recorded at acquisition will be amortised regardless of underlying business performance.

The accounts opposite provide an adjusted profi t line which reverses these amortisation charges.

EBITDA

EBITDA is a useful performance measure which removes the impact of capital structures and non-cash charges in assessing operating performance. We also provide an “Adjusted EBITDA” line which excludes the impact of one-off costs (typically restructuring expenses) and non-cash charges associated with items such as pension accounting. Further details can be found in MCAG’s investor presentations at www.macquarie.com/mcag.

9

MCAG’s consolidated income statements 12 mths to 12 mths toA$m 30 June 07 30 June 06

Revenue 494.5 281.3

Operating expenses (410.5) (247.5)

84.0 33.8

Share of profi t/(losses) of associates (15.0) (32.4)

69.0 1.4

Depreciation (51.4) (19.6)

Amortisation (35.9) (6.5)

Net interest (66.0) (32.6)

(84.3) (57.3)

Net income tax benefi t 22.9 6.3

(61.4) (51.0)

Profi t from discontinued operations 0.5 (9.5)

Profi t/(loss) for the year (60.8) (60.5)

Profi t/(loss) pre-amortisation expenses 7.8 2.2

MCAG’s consolidated cash fl ow statements 12 mths to 12 mths toA$m 30 June 07 30 June 06

Net cash infl ows from operating activities 23.8 15.5

Payments for property, plant and equipment (71.3) (45.9)

Payment for investments (561.9) (1,121.7)

Net proceeds from borrowings 593.1 262.2

Dividends paid (93.3) –

Proceeds from minority interests of subsidiaries 75.5 92.3

Proceeds from issue of securities – 500.0

Other 32.4 (25.7)

Net increase/(decrease)in cash held (1.7) (323.3)

MCAG’s consolidated balance sheet 12 mths to 12 mths toA$m 30 June 07 30 June 06

Cash assets 134.2 162.5

Receivables 92.9 84.3

Property, plant and equipment 190.7 260.5

Intangible assets 764.1 496.4

Investment in associates 536.9 550.2

Retirement Care Australia assets held for resale 304.4 –

Other assets 63.8 11.8

Total assets 2,087.0 1,565.7

Payables and provisions 128.1 252.7

Interest-bearing liabilities 712.1 274.7

Retirement Care Australia assets held for sale 227.4 –

Other liabilities 76.7 22.0

Total liabilities 1,144.3 549.4

Net assets 942.7 1,016.2

Financial Highlights

A Summary of MCAG’s Consolidated Financial Results

A Summary of MCAG’s Proportionate EarningsProportionate earnings for the year ended 30 June 2007

Retirement The MCAG European Red Bee Care Zig Inge MCAG Proportionate Directories Media Australia Group AIR-serv Fund Earnings

MCAG interest 39% 65% 98% 49% 60%1

A$’000

Operating revenues 412,392 204,172 121,917 27,361 98,033 – 863,875

Operating expenses (273,488) (176,364) (111,254) (14,083) (68,616) – (643,805)

Corporate expenses – – – – – (18,612) (18,612)

EBITDA 138,904 27,808 10,663 13,278 29,417 (18,612) 201,458

Depreciation (4,905) (20,776) (4,486) (26) (11,666) – (41,859)

Amortisation (73,851) (4,731) – – (17,166) – (95,748)

Net interest (excluding interest on convertible loan notes) (110,433) (14,836) (5,642) (1,912) (18,413) – (151,236)

Corporate net interest income/(expense) – – – – – (2,682) (2,682)

Gain/(loss) on revaluation of interest rate swaps 5,746 3,528 – – (2,586) 462 7,150

Net tax benefi t/(expense) 22,499 6,994 – (4,269) 7,757 (754) 32,227

Proportionate earnings/(loss) attributable to stapled security holders (22,040) (2,014) 535 7,071 (12,657) (21,586) (50,690)

Add back: minority interest – – – – – (10,120) (10,120)

Net profi t/(loss) per consolidated fi nancial report (22,040) (2,014) 535 7,071 (12,657) (31,706) (60,810)

Adjusted proportionate earnings/(loss)(pre-amortisation expenses) 32,609 1,298 535 7,071 (2,014) (31,706) 7,793

1. From 7 July 2006.

Macquarie works with senior directories executives to form European Directories

European Directories acquires YBR directories business

Group online division established

Acquisition of Zed (mobile directory service) in Finland

New fi nance systems implemented

European Directories acquires TDC directories business

Centralisation of key head offi ce functions commences

New management team appointed in Denmark and Sweden

Acquisition of CTP (local directories) in Denmark

Prior Activity

Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06

Czech Republic

The Netherlands

Finland

Denmark

Sweden

Austria

Slovakia

Poland

Gibraltar

Countries of Operation

core markets presence

10

European Directories operates in eight core European markets. It holds the leading market position in six of its core markets (The Netherlands, Finland, Denmark, Austria, the Czech Republic and Slovakia) and is second in Sweden and Poland.

Investment RationaleDirectories provide an important local advertising service and European Directories publishes the leading “book” in most of its markets. Customer retention is typically 80% to 90% each year.

The business generates high levels of operating cash fl ow and requires relatively low levels of capital expenditure. There are growth opportunities through online developments, incremental acquisitions and improving existing print operations.

Prior to MCAG’s investment, each territory within European Directories operated as an autonomous business. MCAG saw the opportunity to centralise and reduce large cost items such as paper, printing and online platforms.

Financial ResultsEuropean Directories has a December fi nancial year end (MCAG has a June year end). For the fi rst six months (January to June) of European Directories’ fi nancial year, reported EBITDA grew by 6.9%.

For the 12 months to June 2007, European Directories reported revenue of €636.5m and EBITDA of €214.4m.

Adjusting for various one-off costs, including restructuring programs, EBITDA was €218.7m.

About the BusinessEuropean Directories is a pan-European directories publisher, providing directory information via numerous delivery channels including print, online, operator directory assistance and mobile.

1. MCAG’s interest in the consortium is subject to various rights in favour of other consortium investors (see pages 34 and 72).

European Directories

Fact Box

MCAG Ownership: 39%1

Co-investors: Caisse De Dépôt et Placement du Québec, Nikko Principal Investments Limited, Macquarie Bank, other minority shareholders

Employees: 3,900

Visit: www.europeandirectories.com

Acquisition of Torget (e-commerce site) in Sweden

Acquisition of white pages listings business in Austria

New CEO and CFO to business in Czech Republic and new CFO appointed in Finland

Sale of low margin call centres business in France

New Group Online Director and Group HR director appointed

Group-wide paper/print contracts signed

New European Directories group CEO appointed

Acquisition of 50% of PKT (Poland) not previously held

MCAG 2007 Financial Year

Jul 06 Sep 06 Nov 06 Jan 07 Mar 07

11

Year in ReviewMr Cornel Riklin was appointed as the Group CEO of European Directories in August 2006. Mr Riklin is an experienced directories and media executive and was most recently the CEO of a leading directories business in Norway.

European Directories successfully negotiated group-wide paper and printing contracts which will result in substantial cost savings commencing in calendar year 2008.

European Directories continued to centralise the development and maintenance of its internet platforms. European Directories introduced enhanced mapping services, “click-to-call” services, and improved the accessibility of its websites.

In December 2006, European Directories completed the sale of a call centre business located in France which had low margins relative to European Directories’ other operations.

European Directories’ two largest businesses, De Telefoongids (The Netherlands) and Fonecta (Finland), performed well over the year, increasing market share and maintaining operating margins.

It was a more challenging period for DGS (Denmark) and Mediatel (Czech Republic). Recent initiatives, including restructuring, have stabilised the operations and growth initiatives are now being progressed.

European Directories’ business in Austria, Herold, purchased the Telekom Listings business from the incumbent telecommunications company which has a 20-year contract for white pages directory publication.

European Directories Sweden grew its online business and consolidated its presence in the local print market.

In May 2007, European Directories acquired the remaining 50% of PKT (Poland). PKT is the second largest directory business in Poland.

OutlookMCAG expects the printed directories component of European Directories’ business to be relatively stable. European Directories’ online directories business is expected to continue to grow very strongly.

MCAG expects European Directories’ 2007 calendar year fi nancial results to be signifi cantly higher than the previous year as benefi ts from operating initiatives fl ow through to earnings.1

1. Forecasts are subject to uncertainty and contingencies. Actual results may vary from forecast and any variation may be materially positive or negative.

Total Business Earnings in Local Currency(Pro-forma: as if held for full period)

EURm (100%)June 2007

June 2006

Revenue 636.5 635.8

EBITDA 214.4 212.0

Adjustments 4.3 n/a

Adjusted EBITDA 218.7 n/a

Capital Expenditure (28.9) (16.6)

Net Debt 1,854.2 1,842.6

MCAG’s Share of Business Earnings in $A(Reported: refl ects actual period of ownership)

A$m (39%)June 2007

June 2006

Revenue 412.4 328.0

EBITDA 138.9 104.4

Acquisition of the business from the BBC

Rebranded “Red Bee Media”

Wins playout contract for “fi ve’s” new digital channels (UK)

Australian Caption Centre acquisition completed

Signs seven-year contract with Virgin Media/Flextech

New fi nance and HR systems implemented

Wins access services contract with Seven Network (Australia)

Prior Activity

Aug 05 Nov 05 Feb 06 May 06

Red Bee Media Offi cesParis SydneyLondon Beijing

12

About the BusinessRed Bee Media provides services which are essential for television broadcasters.

The main part of the business is “playout”, which is the stage in the television production process immediately prior to transmission.

Red Bee Media is also a world leader in access services, which is the provision of subtitling, signing and audio description services for television broadcasts. The creative services division develops network promotions, branding campaigns and interactive advertising campaigns.

Investment RationaleRed Bee Media was acquired with more than £500m of long-term contracts with leading television networks. This provides a stable revenue platform.

The move from analogue to digital broadcasting is expected to result in more broadcasters outsourcing their playout function rather than investing in the necessary equipment upgrade.

MCAG identifi ed an opportunity to help the business expand internationally.

Financial ResultsOver the year, Red Bee Media increased its revenue by 13% to £127.7m and its reported EBITDA by 67% to £17.4m.

The reported earnings results from this year and last year include restructuring costs and non-cash charges relating to the accounting treatment of pensions and options. Excluding these non-cash and non-recurring items, EBITDA grew by 20% from £17.1m to £20.6m.


Red Bee Media

Fact Box


Co-investors: Macquarie Bank, other minority shareholders

Employees: 1,330

Visit: www.redbeemedia.com

Wins contract with the BBC for new video on demand service, iPlayer

Appointed preferred supplier for playout services by Australian broadcaster SBS

Launch of Virgin Media playout service

Wins IPTV Content Management contract for large UK ISP

Re-capitalisation and distribution to shareholders

Wins contract for movie on demand service in Switzerland

Paris offi ce launched and wins contracts with M6 and LCP

Offi ce in China opened


Aug 06 Nov 06 Feb 07 May 07

13

The growth in earnings allowed a substantial recapitalisation of the business, with new drawn debt facilities of £171m replacing pre-existing facilities of £86m. This allowed A$111m of cash to be returned to MCAG – approximately 59% of MCAG’s original investment.

Year in ReviewRed Bee Media’s business in the United Kingdom grew strongly. The Virgin Media (formerly Flextech) playout contract was successfully implemented in the early part of the year.

Several signifi cant new contracts were awarded to Red Bee Media including the BBC iPlayer service, an access services contract with UKTV and an internet television content management service.

Operations outside the United Kingdom also grew rapidly.

In Australia, Red Bee Media was appointed the preferred supplier for playout services by the government-owned broadcaster SBS.

In France, Red Bee Media will help broadcasters meet government targets to subtitle all television programs by 2010. In the fi rst six months after establishing an offi ce in Paris, Red Bee Media won two signifi cant subtitling contracts.

Red Bee Media’s sports graphics technology known as “Piero” was awarded the prestigious International Broadcasters’ Convention Award. Piero was developed for use by BBC Sport and has since been sold to ITV (UK), Sky Italia (Italy), Hong Kong Cable, TV Globo (Brazil), ITI Neovision (Poland) and Digiturk (Turkey).

The creative services division was recognised at the Global Promax awards with 12 awards including the top two honours in channel branding.

OutlookThe outlook remains very promising, with continued strong growth expected in the UK and new markets.


GBPm (100%)June 2007

June 2006

Revenue 127.7 113.0

EBITDA 17.4 10.4

Adjustments 3.2 6.7

Adjusted EBITDA 20.6 17.1


Net Debt 144.2 53.1


A$m (65%)June 2007

June 2006

Revenue 204.2 157.3

EBITDA 27.8 14.1

Prior Activity14 older style centres acquired

Cost savings program implemented

12 modern centres acquired

Jul 05 Oct 05 Dec 05

Retirement Care Australia established by the Macquarie Group

Retirement Care Australia Sites

Apr 05

Retirement Care Australia sites

Regis Group sites

1

4

6

6

2

9

9

Numbers indicate the total number of sites in each state

14

About the BusinessRetirement Care Australia is one of Australia’s largest private sector providers of residential aged care services.

Retirement Care Australia has a mix of modern centres which generate steady earnings, and older centres which provide a redevelopment opportunity.

At the end of the fi nancial year, MCAG announced that Retirement Care Australia had merged with the Regis Group.

Investment RationaleDemand for quality aged care services is expected to continue to grow.

The industry is fragmented, presenting consolidation opportunities. Retirement Care Australia is the third largest private sector operator, but has less than 3% market share.

Financial ResultsRetirement Care Australia’s fi nancial performance improved as newer centres approached full occupancy. Revenue increased 1.6% to $124.2m and EBITDA increased to $10.9m from a negative base.

Year in ReviewMCAG conducted a sale process for seven of Retirement Care Australia’s smaller centres. Operational improvements made during Retirement Care Australia’s ownership allowed a sale price of $16m compared with a book value of $9m.

The release of certain cash reserves was negotiated which, in combination with the sale proceeds from the seven smaller sites, allowed a cash return to MCAG of $34m, or 29% of its original investment in Retirement Care Australia.

Retirement Care Australia

Fact Box (prior to merger with the Regis Group)

MCAG Ownership: 100%

Employees: 2,370

Centres: 19

Visit: www.retirementcareaustralia.com.auwww.regis.com.au


Seven smaller centres sold

Release of cash reserves following operational improvements

Single national wage agreement at seven centres

Completion of merger with the Regis Group

Redevelopment program at three centres

Aug 06 Sep 06 Nov 07 Jan 07 Mar 07 Jul 07

Nursing scholarship announced

Land sale at three sites

15

Retirement Care Australia negotiated a new wages agreement at seven centres, with a single, fl exible agreement replacing 14 previous agreements.

Retirement Care Australia commenced the staged redevelopment and closure of some older centres. Retirement Care Australia worked closely with resident, family and community groups to ensure that disruption to residents and staff was minimised.

Affected residents were offered the choice of relocation to another Retirement Care Australia centre in the area, or to a range of third-party centres. All costs of relocation were borne by Retirement Care Australia.

The expected end result will be the development of over 400 new Retirement Care Australia aged care beds and more than 500 new Zig Inge Group retirement villages units which will serve local communities for many decades.

OutlookOn 16 May 2007, MCAG announced that Retirement Care Australia would merge with the Regis Group. The merger completed on 2 July 2007.

MCAG owns 46%1 of the merged entity, with the remaining 54% owned by the founders of Regis, who continue to work with the business.

The merger valued Retirement Care Australia at an enterprise value of $220m at the entry to the merger – a 10% increase on the MCAG directors’ valuation at 31 December 2006.


Regis has operated in the aged care sector for over 14 years and has an excellent track record in aged care and developing high quality aged care sites.

The merged group, which will operate under the Regis brand, will operate over 3,600 beds at 37 centres. This is expected to increase over the next three years to 4,500 beds at 41 centres.

Regis’s experienced, high quality management team is led by Chairman and co-founder Bryan Dorman. This management team will replace Retirement Care Australia’s external management contracts after a transition period.


A$m (100%)June 2007

June 2006

Revenue 124.2 122.3

EBITDA 10.9 0.0

Adjustments (4.6) –

Adjusted EBITDA 6.2 –

Bond Cash Flows 14.1 19.0


Net Debt 69.0 57.3


A$m (100%)June 2007

June 2006

Revenue 121.9 97.2

EBITDA 10.7 (2.9)

Initiation of conversion of certain deferred management fee contracts to more favourable terms

Oct 05

Completion of MCAG 49% investment

The Zig Inge Group Sites

Dec 05

Prior Activity

1

2

3

126

1

Existing Retirement Villages

Development sites

Numbers indicate the total number of sites in each state

16

About the BusinessThe Zig Inge Group is one of the largest and longest established retirement village managers and developers in Australia.

The Zig Inge Group builds premium quality villages. It has excellent cost control, using a standardised approach to development projects drawn from over 30 years of experience.

Investment RationaleDemand for quality retirement village accommodation is expected to continue to grow. The Zig Inge Group has a privileged market position, with large, established villages at inner metropolitan locations where access to new land sites of comparable size is limited.

Financial ResultsThe Zig Inge Group achieved record results over the year, with revenue increasing 33% to $56m and EBITDA increased 40% to $27m.

The Zig Inge Group’s fi nancial performance was driven by new unit sales, growth in underlying property prices and a general reduction of the cost of capital in the industry (the discount rates used to calculate the present value of future earnings). Using “like for like” discount rates with 2006, EBITDA increased by c.30% to around $22m.

Year in ReviewThe Zig Inge Group made several investments to extend its substantial development pipeline. These included The Zig Inge Group’s fi rst sites in Perth and central Sydney.

The Zig Inge Group

Fact Box


Co-investors: The Inge Family

Employees: 267

Retirement Villages: 18

Visit: www.zig.com.au


Acquisition of remaining 50% JV interest in Roseville RV

Renewal of existing debt facilities on improved terms

Oct 06 Jan 07 Apr 07

Acquisition of Greenfi eld RV development site in Vaucluse

Agreement to acquire an existing RV and three RV development sites in excellent locations from Retirement Care Australia


Jul 06

17

The Zig Inge Group acquired a substantial 1.2 hectare site in Vaucluse. This premium site is an excellent opportunity for The Zig Inge Group to enter the Sydney market with a medium-rise luxury retirement village.

The Zig Inge Group reached agreement with Retirement Care Australia to acquire an existing village and three development sites. This increased The Zig Inge Group’s development pipeline by over 500 units in highly sought-after locations.

In July 2006, The Zig Inge Group reached agreement to buy out the 50% interest of its joint venture partner in the Roseville retirement village in Melbourne.

MCAG worked with The Zig Inge Group to obtain better pricing on its debt facilities. This resulted in a reduction in core margins of close to 50%.

OutlookThe Zig Inge Group’s strategic acquisitions and greenfi eld developments have expanded The Zig Inge Group’s signifi cant development pipeline. The number of units in the portfolio at 30 June 2007 was 2,250 and the existing development pipeline will increase the number of units to over 4,050.1

Valuations in the retirement village sector have increased substantially over the last two years, with the entry of large property and fi nancial players attracted to the underlying demographics of the industry and the stable earnings from the deferred management fees.



A$m (100%)June 2007

June 2006

Revenue 55.8 42.1

EBITDA 27.1 19.4

Adjustments – –



Net Debt 113.3 58.3


A$m (49%)June 2007

June 2006

Revenue 27.4 16.3

EBITDA 13.3 7.6

Acquisition of Coin-tel

Awarded Esso and Morrison’s contracts in UK and Sunoco in Canada

Jul 06 Jan 07

Completion of AIR-serv acquisition by Macquarie

Hired new Sales and Marketing VP

AIR-serv territories of operation


USA Canada United Kingdom

18

About the BusinessAIR-serv owns and operates more than 63,500 tyre infl ation, jet wash and vacuum vending machines under long-term concession agreements with petrol station and convenience store chains across the US, Canada and the UK.

Investment RationaleAIR-serv is the clear market leader in the fragmented US market, operating more machines than all other outsourced providers combined. It has a national distribution network and is the only company capable of servicing national convenience store and petrol station chains.

There is signifi cant potential to grow the business through growth in existing markets and expanding the business model into new territories.

AIR-serv’s network of over 63,500 vending machines at diverse locations provides stable and predictable monthly cash fl ows.

Financial ResultsOver the year, AIR-serv increased its revenue by 22% to US$128m and its EBITDA by 20% to US$39 million.

Year in ReviewAIR-serv completed a vending price increase from 50 cents to 75 cents on air machines in the US market.

In the UK and Canada, AIR-serv continued to grow very strongly. The business installed over 600 machines at hypermarket service stations in the UK and 250 machines in Canada.

AIR-serv

Fact Box


Co-investors: Various Australian pension funds

Employees: 600

Machines in Service: 63,500+

Visit: www.air-serv.com


Jun 07

Completed roll-out of Vend Price Increase

Enhanced cash collection security

Began implementation remote monitoring technology

Acquisition of Air Development

19

Even though EBITDA increased 20% over the year, the result was slightly below MCAG’s expectations. This was primarily due to unusually cold temperatures, heavy snowfall in the US and record high fuel prices over the year.

The fact that EBITDA grew 20% in the face of these external factors highlights the strength of AIR-serv’s business model.

There was increased vandalism of AIR-serv’s machines in Northern California and Mid-Atlantic branches. AIR-serv continues to implement additional security to reduce future vandalism.

The MCAG directors’ valuation for AIR-serv has reduced, primarily because the US dollar depreciated by 13% against the Australian dollar over the year.

OutlookThe extent of earnings growth may be impacted by movements in fuel prices (or consumer adaptation to a higher fuel price point in the US) and modest growth is expected over 2008.1

The business continues to explore additional growth opportunities through bolt-on acquisitions. Shortly after the year end, AIR-serv acquired 2,050 machines in Texas.

AIR-serv management continues to assess opportunities to expand its successful business model into new countries.



US$m (100%)June 2007

June 2006

Revenue 128.4 105.0

EBITDA 38.5 32.2

Adjustments 0.7 –



Net Debt 253.7 265.0


A$m (60%)June 2007

June 2006

Revenue 98.0

EBITDA 29.4

20

MCAG considers that social, environmental and economic benefi ts arise from responsible private-sector investments. MCAG is conscious that its investments generally have a privileged market position which may confer environmental and social responsibilities as a result of the essential services provided by those investments.

Against this awareness of responsibilities, there are practical and structural factors relevant to MCAG which must be acknowledged when determining what steps it can take to address environmental and social responsibilities. MCAG holds and manages an investment stake on behalf of its investors in the underlying asset. The majority of the social and environmental footprint of MCAG’s investments are therefore at the asset level and dealt with by each asset’s management, who are separate from Macquarie and those Macquarie management company staff who administer the fund and monitor the assets through board representation and regular asset reporting.

Accordingly, MCAG approaches its environmental and social responsibilities through an overarching risk management framework governing its investments. Key within that framework is MCAG’s board environmental policy. In essence, this policy recognises that it is the responsibility of each asset to comply with relevant laws and regulations. In addition, the framework requires MCAG to ensure that, to the maximum extent possible depending on the fund’s degree of control over the asset, each asset complies with the regulatory framework and minimum standards of the jurisdiction within which that asset operates, including carbon emissions regulations where they apply, and with any additional requirements imposed by governments or other relevant authorities as part of the process of approving the investment.

In addition, MCAG’s environmental and social responsibilities are identifi ed and acknowledged through the investment process, as follows:

■ Asset selection – social and environmental obligations are identifi ed as part of the acquisition process

■ Ongoing asset management – compliance with environmental requirements is monitored and potential social and environmental issues are identifi ed

■ Stakeholder reporting – policies, social and environmental initiatives and compliance performance are reported internally and, where appropriate and/or required, externally.

Social and Environmental Responsibility

21

Corporate Governance Statement

MCAG is a Macquarie Bank Group branded externally managed vehicle.

The Macquarie Bank Group’s expertise in managing fund assets and sourcing new value-adding opportunities is a key attraction for its managed vehicles. Investors are principally seeking to harness Macquarie Bank Group’s expertise (made available through the management arrangements) as well as the expertise of appropriately qualifi ed external directors.

Legal FrameworkMCAG is a triple stapled structure. The entities which comprise the Group are an Australian trust, Australian public limited company and a Bermudan exempted mutual fund company:

■ Macquarie Capital Alliance Trust (MCAT)

■ Macquarie Capital Alliance Limited (MCAL)

■ Macquarie Capital Alliance International Limited (MCAIL).

The securities of the three entities in the MCAG structure are stapled together and quoted as one on the ASX. As a result the securities cannot be traded separately.

MCAT is an Australian registered managed investment scheme. The combined trustee/manager, known as a responsible entity, for the trust is managed by Macquarie Capital Alliance Management Limited (MCAML), a wholly owned subsidiary of Macquarie Bank Limited (MBL).

MCAML is responsible for the operational activity of MCAT, including all investment and divestment decisions, asset and capital management, fi nancial reporting and investor communications and meetings. It is also responsible for overall corporate governance of MCAT and the general protection of unitholders’ interests.

The Corporations Act, ASX Listing Rules, constitution of MCAT and the general law regulate the workings of MCAT and the essential practices, responsibilities and duties of the responsible entity and its offi cers. The responsible entity must exercise its functions diligently and in the best interests of unit holders.

Registry services are provided by Computershare Investor Services Pty Limited ABN 48 078 279 277 and custodial services are provided by Trust Company Limited ABN 59 004 027 749.

MCAL is an Australian public company regulated by the Corporations Act, ASX Listing Rules, constitution of MCAL and general Australian law.

MCAIL is a Bermudian exempted mutual fund company regulated by the Bermuda Companies Act, ASX Listing Rules, MCAIL bye-laws and general Bermudan law.

The MCAL and MCAIL boards are each responsible for MCAL’s and MCAIL’s respective operational activity and overall corporate governance in the same way that MCAML is responsible for MCAT. MCAL and MCAIL are each managed and advised by MCAML.

Under the terms of the Management Services Agreement appointing MCAML as manager of MCAL, and the Advisory Agreement appointing MCAML as adviser to MCAIL, MCAML makes recommendations to each of MCAL and MCAIL in respect of prospective investments. MCAML also advises on appropriate strategies and actions to maintain and enhance the value, performance and profi tability of MCAL’s and MCAIL’s investments and advises on general capital management for MCAL and MCAIL. MCAML also undertakes certain administrative functions, including fi nancial reporting and investor communications and monitors fund administration services provided by Butterfi eld Fund Services (Bermuda) Limited.

The MCAG entities and MCAML have entered into a Stapling Deed which governs cooperation, investment policy and the making of investments, capital raising, borrowings, continuous disclosure and certain other administrative matters for the three stapled entities with a view to ensuring consistency in the management of MCAG.

22

As at 30 June 2007, MCAG’s portfolio investments are split between the three entities in the following proportions:

i) MCAT 32.17%

ii) MCAL 15.63%

iii) MCAIL 52.20%

What you can fi nd on our website:

– MCAT constitution

– MCAL constitution

– MCAIL bye-laws.

MCAG’s Approach to Corporate GovernanceThe MCAG boards are committed to MCAG seeking to achieve superior fi nancial performance and long-term prosperity, while meeting stakeholders expectations of sound corporate governance practices. This statement outlines MCAG’s main corporate governance practices as at 30 June 2007. Unless otherwise stated, they refl ect the practices in place throughout the fi nancial year ending on that date.

The boards determine the corporate governance arrangements for MCAG. As with all its business activities, MCAG is proactive in respect of corporate governance and puts in place those arrangements which it considers are in the best interests of MCAG and its stapled security holders and consistent with its responsibilities to other stakeholders. It actively reviews Australian and international developments in corporate governance.

MCAG is part of the stable of MBL Group managed vehicles. Accordingly, in setting the corporate governance framework the MCAG boards have also undertaken to comply with the MBL Funds Management Activity policy (MBL Fund Policy). This policy been devised by MBL to safeguard the interests of investors in the investment vehicles, which at times may confl ict with those of the MBL Group sponsors of the vehicles.

The key elements are:

■ Confl icts of interest arising between MBL managed vehicles and its related parties should be managed appropriately and, in particular:

Related party transactions should be identifi ed –clearly and conducted on arm’s length terms

Related party transactions should be –tested by reference to whether they meet market standards

Decisions about transactions between MBL –managed vehicles and MBL or its affi liates should be made by parties independent of MBL

■ The boards of both the corporate vehicles and the management company/responsible entity of the trusts of listed MBL Group managed vehicles which are stapled structures will comprise at least 50% independent directors and at least one of the boards in each stapled structure will have a majority of independents;

■ The funds management business should be resourced appropriately. In particular:

There is a separate MBL Investment Banking –Funds (IBF) division and staff in this area should be dedicated to the funds management business, rather than to advisory or other activities of MBL

All recommendations to the boards of MBL –managed vehicles should be reviewed or prepared by IBF staff

Each listed MBL managed vehicle that invests in –operating assets or businesses should have its own managing director or chief executive offi cer

Chinese Walls operate to separate the MBL’s –corporate fi nance, advisory and equity capital markets business from IBF.

Corporate Governance Statement (cont’d)

23

ASX Corporate Governance PrinciplesThe ASX Corporate Governance Committee has Corporate Governance Principles and Best Practice Recommendations (the Principles) which are designed to maximise corporate performance and accountability in the interests of shareholders and the broader economy. The Principles encompass matters such as board composition, committees and compliance procedures.

Details of the Principles can be viewed at www.asx.com.au/supervision/governance/index.htm. The Principles are not prescriptive, however, listed entities (including MCAG) are required to disclose the extent of their compliance with the Principles, and to explain why they have not adopted a Principle if they consider it inappropriate in their particular circumstances.

MCAG’s corporate governance statement is in the form of a report against the Principles as set out below. MCAG’s corporate governance largely conforms with the Principles. Any deviation is because of MCAG’s externally managed structure and the requirements of the MBL Fund Policy. We have noted the differences in our reporting.

Principle 1 – Lay solid foundations for management and oversight

Responsibility for corporate governance and the internal working of each MCAG entity rests with the board of MCAML, MCAL or MCAIL, as the case may be. The board of each company has adopted a formal charter of directors’ functions and matters to be delegated to management, having regard to the recommendations in the Principles.

These charters vary slightly between MCAML, MCAL and MCAIL to refl ect the differing advisory structures adopted for MCAL and MCAIL. MCAML has its own management staff whereas MCAL and MCAIL have few staff and are advised by MCAML staff pursuant to the Management Services Agreement (in the case of MCAL) and the Advisory Agreement (in the case of MCAIL).

Appropriate staff are provided by MCAML to perform the CEO and CFO roles for each of the MCAG entities.

An outline of the charter for the MCAG entities is set out below:

■ Setting objectives, goals and strategic direction for management, with a view to maximising investor wealth

■ Monitoring the implementation of MCAG’s investment policy

■ Approving and monitoring the progress of major capital expenditure, capital management, acquisitions and divestures

■ Adopting an annual budget and monitoring fi nancial performance

■ Appointing and participating in the review of the performances of the chief executive offi cer (CEO) and chief fi nancial offi cer (CFO) or their equivalents and where appropriate replacing those offi cers

■ Appointing and removing the company secretary

■ Monitoring senior management’s, or in the case of either MCAIL or MCAL, the adviser’s performance and implementation of strategy, and ensuring appropriate resources are available

■ Reviewing and ratifying systems of risk management, compliance and codes of conduct

■ Approving and monitoring fi nancial and other reporting

■ Setting the highest business standards and codes for ethical behaviour.

Full board meetings are held regularly and at least bi-monthly for MCAML, MCAL and MCAIL, and other meetings are called as required. Directors are provided with board reports in advance of board meetings, which contain suffi cient information to enable informed discussion of all agenda items.

Each non-executive director of MCAML, MCAL and MCAIL has received a letter of appointment which details the key terms of their appointment. This letter includes all of the recommended matters in the Principles.


■ A summary of the MCAML, MCAL and MCAIL board charters.

24

Principle 2 – Structure the board to add value

1. Composition

MCAML board of directors

The MCAML board is comprised as follows:

Name and Position

Executive/Independent

Appointment date*

Rowan RossChairman

Executive February 2005

Nicholas MooreDirector

Executive August 2003*

Robin CrawfordDirector

Independent February 2005

Kenneth MossDirector

Independent March 2005

Anthony NagelDirector

Independent June 2007**

* MCAML was incorporated in August 2003 but was dormant until February 2005.

** Peter Warne resigned from the MCAML board on 30 June 2007 and Anthony Nagel was appointed on 30 June 2007.

MCAL board of directors

The MCAL board is comprised as follows:

Name and Position


Appointment date

Rowan RossChairman

Executive (MCAML appointment)

January 2005

Robin CrawfordDirector

Independent (MCAML appointment)

February 2005

Kenneth MossDirector

Independent March 2005



June 2007*

* Peter Warne resigned from the MCAL board on 30 June 2007 and Anthony Nagel was appointed on 30 June 2007.

MCAIL board of directors

The MCAIL board is comprised as follows:

Name and Position


Appointment date

Kim CarterChairman


June 2005

Rodney BirrellDirector


June 2005

Rowan RossDirector

Executive (MCAML appointment)

May 2005


Independent June 2005

The MCAML, MCAL and MCAIL boards satisfy the requirement of the Principles that boards have a majority of independent directors.

Profi les of these directors, including details of their skills, experience and expertise can be found later in this report.

2. Appointment to the boards

MCAML

MCAML is a wholly owned subsidiary of MBL and directors are appointed to MCAML in consultation with the MCAML board.

The following board composition and membership criteria have been adopted by the MCAML board in consultation with MBL:

■ The board is to comprise at least four directors. Additional directors may be appointed if the board feels that additional expertise is required in specifi c areas, or when an outstanding candidate is identifi ed

■ New appointments to the board must be nominated by the MBL Board and require full MCAML board approval

■ Independent directors are to comprise a majority of the board.


25

■ The board is to be comprised of directors with an appropriate range of qualifi cations and expertise

■ Directors can be removed by MCAML’s sole shareholder, MBL, in its absolute discretion and at any time

■ The chairman of the board is to be an MBL executive. The chairman must be nominated by the MBL board and requires full MCAML board approval

■ A lead independent director is to be appointed each fi nancial year using an alphabetical 12-month rotation system

■ To ensure the board has the benefi t of regular new input and to avoid the potential for loss of objectivity over time independent directors will retire after 12 years.

The importance of having appropriately independent directors determined by objective criteria is acknowledged as being desirable to protect investor interests and optimise the fi nancial performance of the fund and returns to investors.

In determining the status of a director, both the MBL and the MCAML boards have adopted the standards of independence required by the MBL Fund Policy.

An independent director is a director of the responsible entity and/or special purpose vehicle of the fund who is not a member of management (a non-executive director) and who (to the satisfaction of the MBL board Corporate Governance Committee) meets the following criteria:

■ Is not a substantial shareholder of:

MBL or the MBL managed vehicle, or –

A company holding more than 5% of the voting –securities of MBL or the MBL managed vehicle

■ Is not an offi cer of, or otherwise associated directly or indirectly with, a shareholder holding more than 10% of the voting securities of MBL or the MBL managed vehicle

■ Has not, within the last three years, been:

Employed in an executive capacity by the –responsible entity and/or special purpose vehicle, or by another MBL entity, or

A director of any such entity after ceasing to –hold any such employment

■ Is not a principal or employee of a professional adviser to the MBL managed vehicle, MBL or other MBL managed vehicles managed by the MBL Group where billings, in aggregate, exceed 5% of the adviser’s total revenues

■ A director who is a principal or employee of a professional adviser will not participate in any consideration of the possible appointment of the professional adviser and will not participate in the provision of any service to the fund, MBL or other funds managed by the MBL Group by the professional adviser

■ Is not a signifi cant supplier or customer of the MBL managed vehicle, MBL Group or other funds managed by MBL Group, or an offi cer of or otherwise associated directly or indirectly with, a signifi cant supplier or customer. A signifi cant supplier is defi ned as one whose revenues from the MBL managed vehicle, MBL Group and other funds managed by MBL Group exceed 5% of the supplier’s total revenue. A signifi cant customer is one whose amounts payable to the MBL managed vehicle, MBL Group and other funds managed by MBL Group exceed 5% of the customer’s total operating costs

■ Has no material contractual relationship with MBL Group other than as a director of a responsible entity and/or special purpose vehicle

■ Is not a director of more than two MBL Group-related responsible entity or special purpose vehicle boards

■ Has no other interest or relationship that could interfere with the director’s ability to act in the best interests of the MBL managed vehicle and independently of management of MBL Group

■ Where an individual may not meet one or more of the above criteria but the MBL board Corporate Governance Committee makes a specifi c determination that, in the particular overall circumstances of that individual, the fact that these criteria have not been met would not prevent the individual from exercising independent judgment on the relevant board(s)

26

The standards of independence which have been applied are substantively similar to, but are not the same as, those which are suggested in the Principles.

The principal area of difference is that the MBL Fund Policy is designed to achieve independence from both the fund (in this case MCAG) and MBL. The directors believe that the adoption of the MBL Fund Policy defi nition of independence better refl ects the true nature of independence in the present circumstances and does not materially prejudice MCAG security holders.

The ability of independent directors to serve on up to two separate managed vehicle boards is considered appropriate because the time commitment and level of remuneration for these roles is not so signifi cant as to compromise independence.

Under its externally managed structure and ASX waivers granted to MCAL, most of the MCAG independent directors are appointed by MBL Group companies (see detail below) rather than elected by security holders. The selection of appropriately experienced independent directors, combined with consistency of management of the MCAL and MCAML boards, is seen by the MBL Group as an important contribution to MCAG’s performance.

MCAG considers that the independence of its directors, each of whom are highly qualifi ed and reputable business people and professionals who satisfy the above criteria, does not depend on who appoints them but on their independence of mind including an ability to constructively challenge and independently contribute to the boards.

Independent directors are asked to confi rm their independence status on appointment, on an annual basis and to notify at any time if they cease to satisfy the criteria.

The following guidelines apply to director selection and nomination by MBL:

■ Integrity

■ Particular expertise (sector and functional) and the degree to which they complement the skill set of the existing board members

■ Reputation and standing in the market

■ In the case of prospective independent directors, actual (as prescribed by the above defi nition) and perceived independence from the MBL Group.

The MCAML board has not appointed a nomination committee. The board does not consider such a committee appropriate in circumstances where there is only one shareholder and it has adopted the MBL Fund Policy set out above. It is considered that this process is suffi ciently transparent to justify not appointing a nomination committee.

MCAL and MCAIL

The procedure for appointing the boards of MCAL and MCAIL refl ects the inherent requirements of the stapling which exists between shares in MCAL and MCAIL, and units in MCAT and the Management Services Agreement (between MCAL and MCAML) and the Advisory Agreement (between MCAIL and MCAML).

Under the MCAL constitution, MCAML has been issued with an A Special Share (and has rights under the Management Services Agreement) which entitles it to appoint the managing director and other director(s) constituting up to 50% of the MCAL board. MCAML as responsible entity of MCAT has been issued with a B Special Share which entitles it to appoint director(s) constituting up to 25% of the MCAL board while the entities are stapled. Neither the A nor B Special Share has any economic interest, which means that the holders of those shares are not entitled to any dividends and are only entitled to the paid up capital of those shares on a winding up of MCAL or MCAIL.

The balance of the directors are elected by MCAG security holders. Of the present MCAL board, the MCAML appointed directors are Rowan Ross, Anthony Nagel and Robin Crawford. Ken Moss is subject to rotation and security holder approval.

MCAIL, under its bye-laws, has identical A and B Special Share arrangements to those of MCAL. Of the present MCAIL board, the MCAML appointed directors are Rowan Ross, Kim Carter and Rodney Birrell. Anthony Nagel will be subject to rotation and security holder approval.

The MCAIL board charter also provides that there must not be half or more of the board located in any jurisdiction other than Bermuda. All MCAIL directors other than Rowan Ross are located in Bermuda.


27

The MBL Fund Policy provides that the boards of the responsible entity of the stapled trust and the stapled companies will have at least 50% independent directors and at least one of the boards in each stapled structure will have a majority of independent directors. MCAL, MCAIL and MCAML each have a majority of independent directors.

The rationale for this approach is that in the stapled structure:

(i) The provisions of the stapling deed between MCAML (as responsible entity of MCAT and manager of MCAL and adviser to MCAIL), MCAL and MCAIL, and also the practical operation of the MCAML, MCAL and MCAIL boards are such that no signifi cant decision (in particular strategy, capital raisings, borrowings and investments) can be made by one board without the consultation and consideration of the other boards

(ii) The MCAL and MCAIL boards have a suffi cient quorum of independent directors to vote on transactions with MBL Group companies

(iii) Under the Corporations Act (in respect of MCAML as responsible entity) and the Management Services Agreement and Advisory Agreement (in respect of MCAML as manager of MCAL and adviser to MCAIL) if security holders are not satisfi ed with the performance of the MBL Group responsible entity and manager, MCAML, it can be removed by ordinary security holder resolution.

In determining the status of directors, the MCAL and MCAIL boards have each adopted the standards of independence required by the MBL Fund Policy.

Additionally under APRA guidelines for MBL-sponsored vehicles such as MCAL and MCAIL, MCAL and MCAIL must each have only one in four or two in seven MBL Group directors or executives on the respective board.

The candidates for the boards of MCAL and MCAIL are selected using the same selection and MBL nomination approval process as for MCAML directors. In the case of candidates to be elected by security holders, the nominee is then recommended by MCAML to the MCAL or MCAIL board (as the case may be) for approval.

The MCAL and MCAIL boards have not constituted a nomination committee because, as a consequence of the management arrangements established for MCAL and MCAIL and their participation in the stapling arrangements with MCAT, its directors are nominated by the relevant MBL Group companies having regard to the board charter criteria and MBL Fund Policy requirements.

3. Chairman

Rowan Ross, being a Macquarie Bank employee, is an executive chairman of MCAML and MCAL and does not satisfy the independence recommendation of the Principles. The MBL Fund Policy requires the chairman of the MCAML board to be an executive chairman, as MCAML is an MBL Group company and MCAG is a Macquarie branded fund.

The MCAML and MCAL boards have resolved to appoint a lead independent director and Ken Moss is lead independent director until 30 June 2008. A different lead independent director is to be appointed each fi nancial year using an alphabetical rotation system.

It is MCAIL’s policy to have an independent chairman and Kim Carter, chairman of MCAIL, is independent even though he is appointed by MCAML. Mr Carter satisfi es the independence test in the MBL Fund Policy.

In each case, the chairman does not exercise the role of CEO. That role is performed by Michael Cook who was appointed as CEO in February 2005.

In the case of each of MCAML, MCAL and MCAIL, the board charters provide that all independent directors will meet at least once per year in the absence of management and at other times as they determine. The convener of the meetings will be the lead independent director and the chairman in the case of MCAIL.

4. Independent professional advice

The directors of MCAML, MCAL and MCAIL are entitled to obtain independent professional advice at the cost of MCAT, MCAL or MCAIL (as the case may be) subject to the estimated costs being fi rst approved by the chairman as reasonable.

28

Principle 3 – Promote ethical and responsible decision making

MCAML, MCAL, MCAIL and their directors and seconded executives are required to act in accordance with the MCAG Code of Conduct. The Code sets out principles and standards for the directors and executives in respect of practices necessary to maintain confi dence in MCAG’s integrity, and the responsibility and accountability of individuals for reporting and investigating reports of unethical behaviour. The Code includes whistleblower, anti-corruption and dealing with governments and anti-money laundering policies.

The Code also encompasses principles for compliance with legal and other obligations to MCAG’s stakeholders, including security holders, employees, customers, and the broader fi nancial and other communities in which MCAG operates.

The Code is periodically reviewed and endorsed by the MCAML, MCAL and MCAIL boards. The Code is distributed to all directors and staff and reinforced at induction and other training programs.

A policy on securities dealings is in place under which directors and staff involved in the management of MCAG are restricted in their ability to deal in MCAG stapled securities.

Security trading by MCAG directors, offi cers and staff is permitted only during four-week special trading windows following the release of MCAG’s half-yearly and yearly fi nancial results, following the annual general meeting or lodgment with ASIC and ASX of a disclosure document for a capital raising or a cleansing statement for a rights issue.

When trading cannot take place during the trading windows following results announcements, pending disclosure of signifi cant transactional activity being undertaken by MCAG, a special four-week trading window may apply following an ASX release in respect of the transaction.

Special arrangements apply for the trading by MCAML and its associates of MCAG securities issued in connection with base fees and performance fees. Standing instructions must be given to an MBL Group broker during a designated directors and staff trading window to sell at above a designated price with the trade to take place at any time in accordance with the instructions. Any instructions given will be on the basis that Chinese walls are operating with the broker at all times during the currency of the instruction. Alternatively the securities will be placed in a blind trust with an external broker during a trading window with irrevocable instructions to sell at above a designated price with the trade to take place at any time in accordance with instructions.


■ A summary of the Code of Conduct

■ A summary of the main provisions of the Securities (Windows) Trading Policy.

Principle 4 – Safeguard integrity in fi nancial reporting

1. Audit and risk committees

Each of MCAML, MCAL and MCAIL has appointed an audit and risk committee comprising only independent directors and which complies with the requirements of the Principles is currently comprised as follows:

MCAML and MCAL

The MCAML and MCAL audit and risk committee is comprised as follows:

Name and Position


Meetings attended

Anthony NagelChairman

Independent 0 out of 3 held*

Robin CrawfordCommittee member

Independent 3 out of 3 held

Kenneth Moss Committee member


* Peter Warne resigned from the MCAL and MCAML boards on 30 June 2007 and Anthony Nagel was appointed on 30 June 2007 and therefore did not attend any MCAL and MCAML audit and risk committee meetings during the year. Peter Warne had attended all three meetings held.


29

MCAIL

The MCAIL audit and risk committee is comprised as follows:

Name and Position


Meetings attended

Anthony NagelChairman


Rodney BirrellDirector


Kim CarterDirector


The qualifi cations of the members of the MCAML, MCAL and MCAIL audit and risk committees can be found on the MCAG website and later in this report.

2. Audit and risk committee charters

In establishing its audit and risk committee, each of MCAML, MCAL and MCAIL has established a charter which sets out the Committee’s role, responsibilities, composition, structure and membership requirements.

The charter is materially the same for each of the companies.

The responsibilities of the audit and risk committee under each charter in relation to fi nancial reporting are to:

■ Review and report to the board on the fi nancial statements and related notes, and on the external auditor’s audit of the fi nancial statements and the report thereon

■ Recommend to the board the appointment and removal of the external auditors, review the terms of their engagement including arrangements for the rotation of external audit partners, and the scope and quality of the audit

■ Monitor auditor independence. The audit and risk committee meets with the external auditors at least twice a year and more frequently if required.

Details of the risk monitoring duties of the audit and risk committee, together with a discussion of auditor independence, are set out in the Principle 7 commentary on page 30.

3. Senior executive reporting

Each of MCAML, MCAL and MCAIL requires representation letters from the CEO (or equivalent) and the CFO (or equivalent) in relation to the fi nancial statements of each entity and the consolidated MCAG fi nancial statements. The letters are required to state:

(i) The fi nancial reports of MCAT, MCAL and MCAIL and the consolidated fi nancial statements of MCAG as the case may be, present a true and fair view, in all material respects, of the relevant entity’s fi nancial condition and operational results and are in accordance with relevant accounting standards

(ii) The statement given in paragraph (i) is founded on sound risk management and internal compliance and control systems which, in all material respects, implement the policies adopted by the relevant board

(iii) MCAG’s risk management and internal compliance and control systems, to the extent that they relate to fi nancial reporting, are operating effi ciently and effectively for the period ended 30 June 2007, in all material respects.

The statements provide a reasonable, but not absolute, level of assurance and do not imply a guarantee against adverse events or more volatile outcomes arising in the future.

The CEO of MCAML, MCAL and MCAIL is Michael Cook. The CFO is Mark Steinberg.

The MCAML directors alone have responsibility for signing the consolidated MCAG fi nancial statements and accordingly the MCAML CEO and CFO will need to provide the representation letters for the consolidated fi nancial statements.


■ The Audit and Risk Committee Charters for MCAML, MCAL and MCAIL

■ Procedures for selection and appointment of the external auditor and for rotation of external audit engagement partners.

30

Principle 5 – Make timely and balanced disclosure

It is MCAG’s policy to provide timely, open and accurate information to all stakeholders, including stapled security holders, regulators and the wider investment community. Under the terms of the Stapling Deed, MCAIL, MCAL and MCAML are obliged to exchange relevant information and coordinate ASX releases and financial reporting.

Each of MCAML, MCAL and MCAIL has developed policies and procedures in relation to disclosure and compliance with ASX Listing Rules disclosure requirements.

The procedures include dealing with potentially price-sensitive information which includes referral to the CEO and company secretary/general counsel for a determination as to disclosure required. The ASX liaison person is the MCAML company secretary.


■ A summary of policies and procedures in relation to disclosure adopted by MCAML, MCAL and MCAIL.

Principle 6 – Respect the rights of shareholders

MCAG has developed a security holder communications policy. The cornerstone of this policy is the delivery of timely and relevant information as described below.

Security holders will receive an annual report and fi nancial statements and a half-yearly update which keep them informed of MCAG’s performance and operations. Newsletters may also be sent to security holders from time to time.

MCAG’s policy is to lodge market-sensitive information with the ASX and place it on its website, including annual and interim result announcements and analyst presentations, as soon as practicably possible. MCAG’s website (www.macquarie.com/mcag) contains recent announcements, presentations and reports to security holders. Investors may also register here to receive email copies of MCAG’s signifi cant ASX announcements.

Domestic investor road shows are held regularly throughout Australia. International road shows are also held for institutional stapled security holders. Where they contain new information, analyst and road show presentations are released to the ASX and included on the MCAG website.

Meetings of the three MCAG entities are convened at least once a year, usually in late October or early November. In the case of MCAT, which is not required under the Corporations Act to hold an AGM, these will be informal annual meetings unless there is formal business to be considered. An AGM will be held for MCAIL at the same time.

For formal meetings an explanatory memorandum on the resolutions is included with the notice of meeting. Unless specifi cally stated in the notice of meeting, all holders of MCAG securities are eligible to vote on all resolutions. In the event that security holders cannot attend formal meetings they are able to lodge a proxy in accordance with the Corporations Act or Bermuda Companies Act as applicable. Proxy forms can be mailed or lodged by facsimile or electronically.


■ A description of the arrangements MCAG has to promote communication with security holders.

Principle 7 – Recognise and manage risk

Each of MCAML, MCAL and MCAIL has formalised risk management policies. Compliance with these policies is monitored by their respective audit and risk committees. Risks are managed through the risk management framework in place and include:

■ Investment risk

■ Regulatory and reporting risks

■ Financial risks (such as liquidity, interest rate, currency, investment, credit)

■ Legal risk (such as contract enforceability, covenants, litigation)

■ Compliance risk

■ Operational risks (such as people, processes, infrastructure, technology, systems, outsourcing and geographic coverage)


31

■ Environmental and social risks

■ Occupational health and safety risks

■ Project risks

■ Asset performance risks

■ Reputation risks (such as investor relations, media management)

■ Strategic risks.

As part of its risk monitoring duties each audit and risk committee is required to:

(i) Enquire of management, and the external auditor about signifi cant risks or exposures and assess the steps management (MCAML) has taken to minimise such risk to MCAT, MCAL or MCAIL as applicable.

(ii) Consider and review with the external auditor:

■ The adequacy of MCAT’s/MCAL’s/MCAIL’s internal controls including computerised information system controls and security

■ Any related signifi cant fi ndings and recommendations of the external auditor on the matter of internal controls together with management’s responses thereto.

(iii) Monitor and review (at least annually) the effectiveness of MCAT’s/MCAL’s/MCAIL’s operational risk management framework and compliance with key risk management policies

(iv) Review the scope of any internal audit to be conducted and the independence of any internal audit team.

In the case of MCAL and MCAIL, given the management arrangements with MCAML, MCAML staff are responsible for the monitoring and reporting to the board on risk management issues. MCAML, as part of the MBL Group, is subject to periodic review conducted by MBL’s Internal Audit division.

Each asset of MCAG maintains its own risk management framework and supporting infrastructure to manage its own risk. MCAG’s ability to control or infl uence this framework and infrastructure differs based on MCAG’s level of ownership and control. It is MCAG’s policy to confi rm that each asset has an appropriate risk management framework in place to assist the asset to effectively manage its risks.

MCAML requires representation letters from management (see Principle 4) to address risk management and internal compliance and controls relevant to risk.

The audit and risk committee has adopted a policy which includes the following to ensure the independence of the external auditor:

■ The external auditor must remain independent from the Macquarie Bank Group and MCAG at all times and must comply with APES 110: Code of Ethics for Professional Accountants pertaining to fi nancial independence, and business and employment relationships

■ The external auditor must monitor its independence and report to the board every six months that it has remained independent

■ Signifi cant permissible non-audit assignments awarded to the external auditor must be approved in advance by the audit and risk committee (or its chairman between meetings)

■ All non-audit assignments are to be reported to the audit and risk committee every six months

■ The MCAG audit engagement partner and review partner must be rotated every fi ve years.

The MCAML, MCAL and MCAIL boards and audit and risk committees are of the view that, at the present time, PricewaterhouseCoopers (PwC) is best placed to provide MCAG’s audit services because PwC is a top tier professional service fi rm. It has provided audit services to MCAG since its establishment and is familiar with its structure and assets. The auditor is required to be independent from MCAG and MBL. PwC meets this requirement.

The auditor will attend MCAG annual general meetings and in accordance with the Corporations Act security holders can submit questions to the auditor at least fi ve business days prior to the AGM. The auditor will also be available to answer security holder questions at the meeting.

32


■ A description of MCAML, MCAL and MCAIL’s risk management policies and framework

■ A description of MCAML, MCAL and MCAIL’s auditor independence policy

■ A description of MCAML, MCAL and MCAIL’s environmental and social responsibility management policy

■ A description of MCAML, MCAL and MCAIL’s occupational health and safety risk management policy.

Principle 8 – Encourage enhanced performance

In order to ensure that the directors and senior executives of MCAML, MCAL and MCAIL are properly performing their duties, MCAML, MCAL and MCAIL have adopted the following procedures:

■ A formal annual performance self-assessment of the board, the audit and risk committee, and individual directors which will occur around 31 March each year

■ The MCAML, MCAL and MCAIL CEO and CFO are MBL employees seconded to MCAML as required. Their performance is assessed in September and March each year as part of MBL’s formal employee performance evaluation process. The relevant boards provide feedback on the performance of the CEO and CFO as part of their performance appraisals

■ A review of the performance of MCAML as manager against its contractual obligations by the MCAL and MCAIL independent directors, with external assistance if required

■ A formal induction programme for directors and executives

■ Access by directors and executives to continuing education to update and enhance their skills and knowledge.

The procedure for evaluation of the board’s performance is:

■ Directors are given the opportunity to discuss individual performance and feedback on performance with the chairman and the MCAML, MCAL and MCAIL chairman speaks with each director separately to discuss individual performance and the effectiveness of the board and board committees as a whole

■ The board as a whole discusses and analyses board and committee performance during the year including suggestions for change or improvement, based on the chairman’s feedback from his separate discussions with each director.

Principle 9 – Remunerate fairly and responsibly

Below is a brief description of management and performance fee arrangements for MCAML as responsible entity and manager/advisor, remuneration arrangements in relation to MCAG staff (whose remuneration is paid by the MBL Group, not MCAG) and also the fees paid to MCAG external directors. Full details, and a discussion of MCAG remuneration arrangements, alignment of interest and manager and staff incentivisations are set out in the Remuneration Report on page 65. Responsible entity and manager/advisor expenses reimbursed by MCAG are set out on page 66.

1. Responsible entity and advisor fees

MCAML, in its role as responsible entity of MCAT, manager of MCAL and adviser to MCAIL, is entitled to be paid base management fees and also performance fees for discharging its management/advisory functions.

These fees are calculated in accordance with a defi ned formula under the MCAT constitution, Management Services Agreement and the Advisory Deed. The fee arrangements were fully disclosed to investors on fund inception and subsequent restructure and continue to be disclosed on the MCAG website and in annual reports so that investors originally invested and continue to invest on this basis. The structure and level of the fee arrangements are consistent with those paid in the market in respect of similar externally managed vehicles and are not subject to review. Any changes to the fee provisions which would have the effect of increasing the fees would need to be approved by stapled security holders.


33

2. Reimbursement of responsible entity and advisor expenses

MCAML is also entitled to be reimbursed for expenses incurred by it in relation to the proper performance of its duties, out of the assets of MCAG. This includes routine ongoing expenses such as the third-party costs of acquiring assets and managing them, as well as capital raising costs, registry, audit, insurance, compliance costs and other expenses as set out in the MCAT constitution, Management Services Agreement and Advisory Deed.

3. Staff remuneration

One of the responsibilities of MCAML is to make available employees (including senior executives) to discharge their obligations to the relevant MCAG entity. These staff are employed by entities in the MBL Group and made available to MCAG through formalised resourcing arrangements with MCAML. MCAL and MCAIL do not have employees and rely on the MCAML management staff under the Management Services Agreement and Advisory Deed arrangements to implement operational decisions and carry out administrative functions.

None of the MCAG stapled entities pay any expenses referable to the staff provided by the MBL Group. These are all paid by the MBL Group.

MCAG holds its investments through interests in special purpose vehicles. Most of these vehicles have their own internal management paid for at the vehicle level. Where MCAML staff are required to serve as directors on the boards of these vehicles or are seconded to them from time to time, any fees paid in respect of these arrangements are paid to MCAG.

Senior MCAML executives may have some or their entire performance bonus retentions notionally invested by MBL in MCAG securities so that the amount varies as if they were actually invested in the securities, and may also receive MBL options as part of their MBL remuneration package.

4. Director remuneration

MCAML independent director fees are paid by MCAML in its personal capacity. They are not paid by MCAT.

MCAL and MCAIL non-executive director fees are paid by MCAL and MCAIL respectively.

In the case of the MBL-employed executive directors, remuneration earned in connection with their roles as MCAL, MCAML or MCAIL directors (as the case may be) is paid by MBL and not by MCAL, MCAML or MCAIL (as the case may be).

None of the MCAML, MCAL or MCAIL directors are entitled to MCAG options or securities or to retirement benefi ts as part of their remuneration package.

Senior MBL executives who are MCAG directors may have some or their entire performance bonus retentions notionally invested by MBL in MCAG securities so that the amount varies as if they were actually invested in the securities, and may also receive MBL options as part of their MBL remuneration package.

5. Remuneration committee

The boards of each of MCAML (as responsible entity of MCAT) MCAL and MCAIL do not consider it necessary or appropriate to constitute a remuneration committee. Given the payment of the management fee (and the fact that any change to the determination of that fee would require security holder approval) and MCAML’s lack of, and MCAL and MCAIL’s limited exposure to, remuneration expenses a remuneration committee is not justifi ed.


■ The MCAG remuneration report.

Principle 10 – Recognise the legitimate interests of stakeholders

The code of conduct adopted by MCAML, MCAL and MCAIL (see Principle 3) establishes a code of conduct which among other things addresses matters relevant to the company’s compliance with its legal obligations to stakeholders.

34


The code of conduct covers those areas which the boards of MCAML, MCAL and MCAIL consider relevant to the operations of MCAG. There is a compliance procedure in place to ensure the code is adhered to and a formal complaints handling procedure has been implemented.


■ A summary of the code of conduct.

Specifi c issues related to MCAG related party transactions

Macquarie Investment Banking Group is the preferred fi nancial adviser to MCAG and as a result MBL Group companies and managed entities undertake various transactions with, and perform various services (such as fi nancial advisory, underwriting, FX hedging) for MCAG from time to time. Arm’s length terms and fees are payable from time to time for these services and transactions on a deal-by-deal basis and are approved solely by MCAML’s, MCAL’s or MCAIL’s (as the case may be) independent directors. Macquarie executive directors do not vote or, unless invited to do so by the independent directors, participate in discussion on related party matters.

All related party transactions involving MCAT, MCAL and MCAIL and their controlled entities are tested by reference to whether they meet market standards. In particular, fees and mandate terms and conditions are subject to third-party review unless the independent directors determine otherwise on the basis of appropriate market information or practice.

Third-party independent review is mostly carried out by the corporate advisory divisions of large accounting fi rms. In the case of the provision of services the reviewers have regard to market evidence gathered from their own enquiries including information requested from the MBL Group. For asset sales or acquisitions the reviewer carries out its own valuation. MCAG independent directors have put in place a panel of reviewers (which does not include the MCAG auditor) and the reviewer for a particular service or transaction is usually chosen by them on a rotational basis.

Foreign exchange transactions where commissions to MBL Group companies are less than $100,000 are transacted with reference to independent pricing checks and arrangements and benchmarked annually. However, in the case of foreign exchange transactions requiring strict confi dentiality, MBL is usually engaged subject to management ensuring pricing is competitive and independent director approval.

MCAG entities may co-invest from time to time with other MBL Group companies or managed entities. Co-investment arrangements may include pre-emption and tag-along and drag-along rights in favour of each other, including rights which are triggered on removal of MBL Group companies as manager or advisor or if the manager or advisor ceases to be part of the MBL Group. Where such arrangements are put in place the MCAG independent directors obtain separate legal advice as necessary and the arrangements are approved by the independent directors and disclosed to stapled securityholders at the time they are put in place and also in the annual fi nancial reports.

In addition, contract counterparties such as lenders may impose similar conditions of ongoing involvement by MBL Group manager entities and their removal may have adverse consequences such as an acceleration of loan repayments.

Details of related party transactions involving the payment of fees to MBL Group companies who have provided services to MCAG are disclosed at note 23 of the full fi nancial report for the year ended 30 June 2007.

Compliance committee

Under the Corporations Act managed investments regime, MCAML as the responsible entity of MCAT is required to register a compliance plan with the Australian Securities and Investments Commission (ASIC). The compliance plan outlines the measures undertaken to ensure compliance with the Corporations Act and MCAT constitution. Under the Corporations Act, a compliance committee is not required if at least half of the responsible entity board are independent. Accordingly, MCAML has not appointed a compliance committee and it is the board’s responsibility to monitor MCAML’s compliance with the compliance plan.

35

Compliance offi cers have been appointed for MCAT and they are responsible for reviewing and monitoring the effi ciency of compliance systems on an ongoing basis so that appropriate compliance procedures, staff education and compliance reporting arrangements are in place to enable observance of the compliance plans.

The independent directors must satisfy the independence criteria set out in s601JB(1) of the Corporations Act. Independent directors are required to certify their compliance with these requirements on an annual basis and otherwise notify MCAML if they cease to satisfy the criteria.

What can you fi nd on our website:

■ The compliance plan for MCAT.

Concise Financial ReportFor The Year Ended 30 June 2007

37

Introduction to the Financial Report

Directors’ Report

Auditor’s Independence Declaration

Consolidated Income Statement

Consolidated Balance Sheet

Statement of Recognised Income and Expense

Consolidated Cash Flow Statement

Notes to the Concise Consolidated Financial Statements

Statement by the Directors of the Responsible Entity of the Trust on the fi nancial report of MCAT

Independent Audit Report

38

40

46

47

48

49

50

51

62

63

38

Explanation of the Financial ReportMacquarie Capital Alliance Group (MCAG or the Group) consists of three entities stapled together:

■ A share in Macquarie Capital Alliance Limited (MCAL)

■ A unit in Macquarie Capital Alliance Trust (MCAT or the Trust)

■ A share in Macquarie Capital Alliance International Limited (MCAIL).

Macquarie Capital Alliance Management Limited (MCAML), a wholly owned subsidiary of Macquarie Bank Limited (MBL), is the manager, responsible entity and the adviser to the three stapled entities, respectively. The diagram below illustrates this relationship.

These three stapled entities trade as one listed security, Macquarie Capital Alliance Group (MCAG or the Group), on the Australian Securities Exchange (ASX code: MCQ).

Under Australian Accounting Standards, MCAT has been deemed the parent entity of MCAL and MCAIL for accounting purposes. Therefore the MCAT consolidated fi nancial statements include all entities that comprise MCAG.

The fi nancial report for the Group serves as a summary of the fi nancial performance and position of MCAG as a whole, including MCAT.

As the securities held by investors are stapled securities in MCAG, the fi nancial report for MCAG provides the most relevant information regarding the performance of investors’ funds, with further information on the components of the investment presented in the remaining columns.

Relationship of the concise fi nancial report to the full fi nancial report

The concise fi nancial report is an extract from the full fi nancial report for the year ended 30 June 2007. The fi nancial statements and specifi c disclosures included in the concise fi nancial report have been derived from the full fi nancial report.

The concise fi nancial report cannot be expected to provide as full an understanding of the fi nancial performance, fi nancial position and fi nancing and investing activities of MCAG and its subsidiaries as the full fi nancial report. Further fi nancial information can be obtained in the full fi nancial report.

The full fi nancial report and auditor’s report will be sent to members on request, free of charge. Please call Computershare Investor Services on 1800 253 098 (free call within Australia) or (613) 9415 4208 (international) and a copy will be forwarded to you. Alternatively, you can access both the full fi nancial report and the concise report via the internet at our Investor Centre on our website: www.macquarie.com/mcag

Introduction to the Financial Report

MCAG Stapled Security Holders

Share Australian Investments/Controlling Interests

Non-Controlling Interests

Foreign Investments

Unit

ShareMCAIL

MCAL

MCAT

MCAML

Adviser

Responsible Entity

Manager

39

MCAG’s InvestmentsAt 30 June 2007 MCAG’s portfolio of assets and ownership interests was as follows:

Red Bee Retirement The European Media Care Zig Inge Directories Limited Australia Group AIR-serv

Date of initial acquisition 1 Jul 05 31 Jul 05 1 Jul 05 6 Oct 05 7 Jul 06

Percentage shareholding at initial acquisition 36% 65% 95% 49% 60%

Date of subsequent major acquisition (if applicable) 30 Nov 05 – 1 Dec 05 – –

Percentage shareholding after subsequent acquisition 39% – 98% – –

Date of subsequent major acquisition (if applicable) – – 29 May 07 – –

Percentage shareholding after subsequent acquisition – – 100% – –

The table below outlines the fair values (FV) of each of MCAG’s investments as at 30 June 2007. It is MCAG’s intention to provide this information on a six-monthly basis. These valuations have not been applied in preparing the consolidated fi nancial statements but are provided for information purposes.

The fair values of MCAG’s investments have been determined in accordance with a valuation framework adopted by the directors. Investee companies’ equity value attributable to MCAG security holders is calculated by aggregating the fair values of investments less corporate net debt. New unquoted investments are generally valued at cost for the fi rst 12 months unless there is a strong indication that the valuation should be revised (either upwards or downwards). After 12 months, the investment is valued at fair value or by means of another methodology which is appropriate. As at 30 June 2006 all of the MCAG investments had been held for less than 12 months. The following table outlines the Equity Value of each of MCAG’s assets and the asset backing on a per stapled security basis as at 30 June 2007:

Retirement The European Red Bee Care Zig Inge Valuation A$m Directories Media AIR-serv Australia Group Total

Equity Invested – Cost 468 177 145 117 101 1,009

Equity Valuation – 31 Dec 06 605 281 145 161 168 1,361

Distributions to Date – (111) (4) (34) (3) (151)

Adjusted Equity Valuation – 31 Dec 06 605 170 141 127 165 1,210

Equity Valuation – 30 June 07 645 206 126 151 192 1,320

Value per security* – 30 June 07 $2.45 $0.78 $0.48 $0.57 $0.73 $5.02

Fund Level Net (Debt)/Cash – 30 June 07 37

Net Asset Value per security – 30 June 07 $5.16

* The number of MCAG stapled securities on issue as at 30 June 2007 was 263,096,501 (31 December 2006: 251,016,968; 30 June 2006: 250,000,000).

40

Macquarie Capital Alliance Management Limited (MCAML or the responsible entity) acts as the responsible entity for Macquarie Capital Alliance Trust (MCAT or the Trust), the Manager of Macquarie Capital Alliance Limited (MCAL) and the advisor to Macquarie Capital Alliance International Limited (MCAIL).

The directors of MCAML submit the following report on the consolidated fi nancial report of Macquarie Capital Alliance Group (MCAG or the Group) for the year ended 30 June 2007. AASB Interpretation 1002: Post-Date-of-Transition Stapling Arrangements requires one of the stapled entities of a stapled structure to be identifi ed as the parent entity for the purpose of preparing a consolidated fi nancial report. In accordance with this requirement, MCAT has been identifi ed as the parent of the consolidated group comprising MCAT, MCAL and its controlled entities and MCAIL and its controlled entities together acting as Macquarie Capital Alliance Group.

Principal ActivitiesThe principal activity of MCAG during the year was to identify attractive investment opportunities and invest a signifi cant proportion of its funds in various industry sectors. The investment policy of MCAG is to invest funds in accordance with the provisions of the governing documents of the individual entities which together comprise MCAG. Refer to Review and Results of Operations below for further discussion.

DirectorsThe following persons were directors of the responsible entity of the Trust during the year and up to the date of this report:

■ Rowan Alexander Ross (Chairman)

■ Robin Anthony Crawford

■ Nicholas William Moore

■ Kenneth John Moss.

John Stuart Roberts was appointed on 14 December 2006 as alternate director to Nicholas William Moore on the board of MCAML and continues in offi ce at the date of this report. Peter Hastings Warne was a director from the beginning of the fi nancial year until his resignation on 30 June 2007. Anthony Victor Nagel was appointed as a director on 30 June 2007 and continues in offi ce at the date of this report.

DistributionsA special distribution for the year ended 30 June 2007 of 30 cents per stapled security was announced on 28 February 2007 and was paid on 5 April 2007 (2006: Nil). The distribution was paid entirely by MCAT.

Directors’ Report

41

Review and Results of Operations The performance of the Group for the year ended 30 June 2007 was as follows:

MCAG MCAG 30 June 07 30 June 06 $’000 $’000

Revenue and other income from continuing operations 494,521 281,276

Profi t/(loss) attributable to:

– Equity holders of the parent – MCAT unit holders 42,965 21,420

– Equity holders of other stapled entities (MCAL & MCAIL as minority interests) (103,775) (81,918)

– Equity holders of other stapled entities (MCAL & MCAIL as parent interest) – –

Stapled security holders (60,810) (60,498)

Loss attributable to other minority interest – –

(60,810) (60,498)

Earnings/(loss) per unit/share for profi t/(loss) attributable to unit/shareholders (cents)

Basic earnings/(loss) per unit/share from continuing activities 16.7 12.4

Basic earnings/(loss) per unit/share from discontinued operations 0.2 (3.8)

16.9 8.6

The 30 June 2007 results set out above represent a full year of operations for all entities in the Group with the exception of AIR-serv which was acquired on 7 July 2006.

■ MCAG

The operating entities outlined in the next section were acquired during the previous and current reporting periods and have contributed to the result of MCAG. As in prior reporting periods, MCAG has generated positive operating cash fl ows in the current reporting period, despite reporting accounting losses in the current and prior reporting period. The accounting losses are due predominantly to non-cash charges being mainly amortisation of identifi able intangible assets as mandated under Australian Accounting Standards and depreciation of property, plant and equipment in subsidiaries and associate entities (refer notes 5 and 6).

The following section outlines the performance of the operating entities in MCAG:

■ Retirement Care Australia

Retirement Care Australia Holdings Pty Ltd (RCAH) is a leading operator of aged care facilities that is wholly owned by MCAG as at 30 June 2007.

On 16 May 2007, MCAG announced the signing of a merger implementation agreement between RCAH and the Regis Group (Regis). Following the successful completion of the transaction on 2 July 2007, MCAG disposed of its existing interest in RCAH and acquired 46% of the equity of the combined RCAH/Regis group (together “the combined group”). Following the transaction, the combined group will become the second largest private aged care operator in Australia with over 3,600 beds across 37 facilities. Further information about how the transaction was effected is set out in Events Occurring After the Balance Sheet Date, below.

As a result of the merger, RCAH has been classifi ed as a held for sale investment in the current period and has been disclosed separately as a discontinued operation in line with the requirements of AASB 5: Non Current Assets Held for Sale and Discontinued Operations in the MCAL and MCAG consolidated fi nancial reports.

Immediately prior to the signing of the merger implementation agreement, MCAL held 98% of RCAH and TriCare Limited (Tricare) held 2%. On 29 May 2007, MCAT purchased Tricare’s 2% shareholding in RCAH.

42

The consolidated loss after income tax for RCAH for the period ended 30 June 2007 was $15.4m. This loss is after interest expense on redeemable preference shares of $16.3m which is predominantly payable to MCAT. The RCAH consolidated EBITDA for the same period was $10.8m.

■ Red Bee Media

MCAG holds a 65% interest in Creative Broadcast Services International Limited (CBSIL) who owns 100% of the contributed equity of Red Bee Media Limited (formerly BBC Broadcast Ltd) which was acquired from the British Broadcasting Corporation.

The consolidated loss after income tax for the CBSIL Group for year ended 30 June 2007 was approximately $3.1m. The earnings before interest, tax, depreciation and amortisation (EBITDA) for the same period was approximately $42.8m.

On 6 March 2007, MCAG announced the launch of Red Bee Media Australia. Subject to fi nalisation of contracts, the launch of Red Bee Media Australia will involve opening a state-of-the-art broadcast centre in Australia during the 2008 calendar year which will bring together all of Red Bee Media’s existing Sydney operations into a new multi-client facility.

Red Bee Media Australia has also been appointed, subject to fi nalisation of contracts, by SBS Corporation (SBS) to provide outsourced playout and digital media management services. SBS is the fi rst of the main broadcasters in Australia to outsource these types of services.

■ AIR-serv Holding Corp

On 7 July 2006, Macquarie AIR-serv Holdings Inc (MASH) reached fi nancial close on the acquisition of AIR-serv Holding Corp, the holding company for the AIR-serv group of companies. The AIR-serv group of companies earns revenue from providing tyre infl ation vending services in the United States, Canada and the United Kingdom.

The MASH consolidated loss after income tax for the period ended 30 June 2007 was $21.1m. This loss is after non-cash amortisation charges on identifi able intangibles of $28.6m. The MASH consolidated EBITDA for the same period was $49m.

■ European Directories

MCAG has an ownership interest in European Directories S.A. (EDsa) of 39% and applies equity accounting principles to recognise its share of EDsa’s results. The equity accounted loss recognised in relation to EDsa for the year ended 30 June 2007 was $22m after non-cash amortisation charges on identifi ed intangibles of $74m (refer note 5).

■ The Zig Inge Group

MCAG owns 49% of The Zig Inge Group (ZIG, previously named RV Holdco Pty Ltd) and its controlled entities and applies equity accounting principles to recognise its share of ZIG’s results. The equity accounted profi t recognised in relation to ZIG for the year ended 30 June 2007 was $7.1m (refer note 5).

Signifi cant Changes in State of Affairs■ On 16 August 2006, RCAH announced that it had reached agreement to sell seven smaller facilities from its

portfolio. The sales were affected through the disposal of six wholly owned subsidiaries of Retirement Care Australia Operations Pty Ltd (RCA Ops 1) and the disposal of the assets of one further subsidiary that is now dormant. These facilities were sold for $15.9m generating a profi t on sale of $7.3m.

■ During the period, the responsible entity and advisor (MCAML) elected to reinvest the MCAG management fees for the September 2006 quarter and the December 2006 quarter. On 17 November 2006, the September 2006 quarter management fee of $3.6m was applied to the subscription of an additional 1,016,968 MCAG stapled securities. On 1 March 2007, the December 2006 quarter management fee of $4.0m was applied to the subscription of an additional 1,013,074 MCAG stapled securities.

Directors’ Report (cont’d)

43

■ On 19 December 2006, CBSIL incorporated two new entities within the group, namely Creative Broadcast Services Holdings Limited and Creative Broadcast Services Holdings (2) Limited.

■ On 28 February 2007, Macquarie Capital Alliance International 3 Limited (MCAIL3) acquired MCAT’s 14.1% ownership interest in Creative Broadcast Services International Limited (CBSIL), increasing MCAIL3’s ownership interest in CBSIL from 51.2% to 65.3% and reducing MCAT’s ownership interest in CBSIL to nil. The cost of the shares approximated the fair value of the assets acquired.

■ On 28 February 2007, MCAIL acquired MCAT’s 2% ownership interest in Macquarie Capital Alliance International 2 Limited (MCAIL2), increasing MCAIL’s ownership interest in MCAIL2 from 98% to 100% and reducing MCAT’s ownership interest in MCAIL2 to nil. The cost of the shares approximated the fair value of the assets acquired.

■ A loss of $5.9m on the sale of the CBSIL shares and a gain of $5.4m on the sale of MCAIL2 shares was recognised by MCAT in its parent entity fi nancial statements.

■ On 28 February 2007, MCAIL2 bought back 7,708,274 of its issued share capital from MCAIL at the fair value of $1.50 per share ($11,586,879).

■ The refi nancing of the CBSIL group was completed on 28 February 2007. The Royal Bank of Scotland (RBS) has provided funding of £171m which in part has been used to clear the existing facilities provided by BNP, and also to pay a £68m special dividend to the shareholders of CBSIL. The RBS package comprises £171m of drawn senior and second lien debt, with a £10m working capital facility and £37.5m a capex and acquisition facility. Details of the amounts drawn on each of these facilities are set out in note 17 to the full fi nancial statements.

■ On 5 April 2007, MCAG issued 11,066,459 stapled securities to security holders who elected to participate in the dividend and distribution reinvestment plan (DRP) on the special distribution.

Other than referred to above and in the Review and Results of Operations, in the opinion of the directors, there were no other signifi cant changes in the state of affairs of MCAG that occurred during the year.

Likely Developments and Expected Results of OperationsInformation on likely developments in the operations of the Group and the expected results of operations have not been included in this annual fi nancial report because the directors believe it would be likely to result in unreasonable prejudice to the Group.

Interests in the Group Issued During the Financial YearThe movement in the number of securities on issue in the Group and the Trust during the year is as set out below:

MCAG 2007 MCAT 2007 MCAG 2006 MCAT 2006 ’000 ’000 ’000 ’000

Securities on issue at the beginning of the year 250,000 250,000 250,000 250,000

Securities issued during the year 13,096 13,096 – –

Securities on issue at the end of the year 263,096 263,096 250,000 250,000

Value of AssetsThe value of the Group’s assets at 30 June 2007 are $2,087,012,000 (2006: $1,565,675,000). The value of the Group’s assets are derived using the basis set out in note 1 to the fi nancial statements.

44

Events Occurring After the Balance Sheet DateThe following events have occurred subsequent to reporting date:

(i) Completion of the merger of Retirement Care Australia with the Regis Group

On 2 July 2007, MCAG reached fi nancial close on the disposal of its interest in the RCAH group and the acquisition of a non-controlling interest in the combined RCAH/Regis group. Regis is a provider of aged care facilities located in Queensland and Victoria. The combined group will be managed by Regis at the completion of a transition period between Regis and the current RCAH facility managers: TriCare and the Moran Health Care Group.

MCAG’s investment in the combined RCA/Regis group was effected through an exchange of MCAL and MCAT’s existing ownership of ordinary and redeemable preference shares in RCAH for ordinary shares in Fairway Investment Holdings Pty Limited (FIHPL). FIHPL owns 100% of the combined group via its ownership of A.C.N. 125 223 645 Pty Ltd (renamed Regis Aged Care Pty Limited on 6 August 2006). On 2 July 2007 the following transactions occurred in MCAL and MCAT:

■ MCAL transferred 44 ordinary shares and 4,399,304 RPS in RCAH to A.C.N. 125 223 645 Pty Limited (Regis) in exchange for the acquisition of 36,882,619 ordinary shares in FIHPL

■ MCAT transferred one ordinary share and 109,209,583 RPS in RCAH to Regis in exchange for the acquisition of 113,997,381 ordinary shares in FIHPL.

Following the above transactions, MCAL and MCAT’s respective investments in FIHPL were 11.2% and 34.8%. Immediately prior to the completion of the merger, MCAL and MCAT held 98% and 2% respectively of RCAH. Acquisition costs of approximately $844,463 were incurred as part of this transaction.

(ii) Other

On 2 July 2007, immediately prior to the fi nancial close of the RCA/Regis transaction, MCAL acquired 4,399,304 RPS issued by RCAH from MCAT for a consideration of $4,562,582. The RPS were issued by RCAH on 1 July 2005 and are redeemable on 1 July 2022 for a fi xed amount of $1 per RPS. The RPS do not attract voting rights in RCAH and holders are entitled to fi xed cumulative dividends of 13% per annum on the capital paid up on the shares.

In exchange for the consideration payable to MCAT of $4,562,582 in the above transaction, MCAL issued 4,562,582 RPS for $1.00 each to MCAT on 2 July 2007. The RPS are redeemable on 2 July 2024 for a fi xed amount of $1 per RPS. The RPS do not attract voting rights in MCAL and holders are entitled to fi xed cumulative dividends of 13% per annum on the capital paid up on the shares.

Other than as described above, no matters or circumstances have arisen since the end of the year that have signifi cantly affected or may signifi cantly affect the operations of the MCAG, MCAL Group or MCAIL Group, the results of these operations in future fi nancial years or the state of affairs of the entities in periods subsequent to the year ended 30 June 2007.

Director’s and Other Staff Holdings of Stapled Securities The aggregate number of MCAG stapled securities held directly, indirectly or benefi cially by directors of MCAML or their director-related entities at the date of this fi nancial report is 2,057,832 (30 June 2006: 1,072,500).

The aggregate number of MCAG stapled securities held directly, indirectly or benefi cially by directors of MCAL or their director-related entities at the date of this fi nancial report is 828,144 (30 June 2006: 672,500).

Employees of Macquarie Bank Limited (including those who are directors) associated with the management of MCAG, also hold stapled securities in MCAG at the date of this report. Michael Cook, Chief Executive Offi cer of MCAG and an employee of Macquarie Bank Limited, held 1,560,182 stapled securities at the date of this fi nancial report (30 June 2006: 1,053,500).

Directors’ Report (cont’d)

45

MCAML’s Holdings of Stapled SecuritiesMCAML holds 43,990,198 stapled securities in MCAG at the date of this fi nancial report (30 June 2006: 25,000,000).

Fees Paid to MCAML and Associates (as Responsible Entity, Manager and Adviser)Fees paid to the responsible entity out of MCAG’s property during the year are disclosed in the full fi nancial report.

No fees were paid out of Group property to the directors of the responsible entity, in their capacity as directors of the Responsible Entity, during the year.

Interests in the Group held by the responsible entity during the year are disclosed in the full fi nancial report.

Interests in the Group held by the directors during the year are disclosed in the full fi nancial report.

Indemnifi cation and Insurance of Offi cers and Auditors No insurance premiums are paid out of the assets of the Group in regard to insurance cover provided to either the responsible entity or auditors of the Group. So long as the offi cers of the responsible entity act in accordance with the Trust constitution and the law, the offi cers remain indemnifi ed out of the assets of the Group against any losses incurred while acting on behalf of the Group. The auditors of the Group are in no way indemnifi ed out of the assets of the Group.

Environmental RegulationThe operations of the consolidated Group are not subject to any particular environmental regulations under a Commonwealth, State or Territory law.

Auditor’s Independence DeclarationA copy of the auditor’s independence declaration, as required under section 327C of the Corporations Act 2001, is set out on page 46.

Rounding of Amounts in the Directors’ Report and the Financial ReportThe Group is of a kind referred to in Class Order 98/0100, as amended by Class Order 04/667, issued by the Australian Securities & Investments Commission relating to the “rounding off” of amounts in the directors’ report and the fi nancial report. Amounts in the directors’ report and the fi nancial report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

This report is made in accordance with a resolution of the directors of Macquarie Capital Alliance Management Limited.

Rowan Ross Anthony Nagel

Sydney Bermuda30 August 2007 30 August 2007

46

As lead auditor for the audit of Macquarie Capital Alliance Trust, Macquarie Capital Alliance Limited and Macquarie Capital Alliance International Limited for the year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have been:

a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

b) No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Macquarie Capital Alliance Trust, Macquarie Capital Alliance Limited and Macquarie Capital Alliance International Limited and the entities they controlled during the year.

E A BarronPartner

PricewaterhouseCoopers

Sydney30 August 2007

Auditor’s Independence Declaration

47

MCAG MCAG Year ended Year ended 30 June 07 30 June 06 Note $’000 $’000

Revenue from continuing activities 2 487,302 278,127

Other income 2 7,219 3,149

Total revenue and other income from continuing activities 2 494,521 281,276

Share of net profi t/(losses) of associates accounted for using the equity method 5 (14,969) (32,390)

Employee expenses 2 (196,623) (120,872)

Depreciation and amortisation expenses 2 (87,295) (26,070)

Management and administration expenses 2 (209,187) (125,452)

Finance costs 2 (65,998) (32,623)

Other expenses 2 (4,737) (1,138)

Operating expenses from continuing activities (563,840) (306,155)

Profi t/(loss) from continuing activities before income tax (84,288) (57,269)

Income tax benefi t/ (expense) 22,933 6,304

Profi t/(loss) from continuing activities after income tax (61,355) (50,965)

Profi t/(loss) from discontinued operations 4 545 (9,533)

Profi t/(loss) for the year (60,810) (60,498)

Profi t/(loss) attributable to:

– Equity holders of the parent 42,965 21,420

– Equity holders of other stapled entities (MCAL & MCAIL as minority interests) (103,775) (81,918)

– Equity holders of other stapled entities (MCAL & MCAIL as parent interests) – –

– Stapled security holders (60,810) (60,498)

– Other minority interests – –

(60,810) (60,498)

Earnings/(loss) per unit/share for profi t/(loss) attributable to unit/share holders

Basic earnings/(loss) from continuing operations per unit/share 16.7 12.4

Basic earnings/(loss) from discontinued operations per unit/share 0.2 (3.8)

Basic earnings/(loss) from continuing and discontinued operations per unit/share 16.9 8.6

The above consolidated income statement should be read in conjunction with the accompanying notes.

Consolidated Income Statement

48

MCAG MCAG Year ended Year ended 30 June 07 30 June 06 Note $’000 $’000

Current assets

Cash and cash equivalents 134,251 162,506Receivables 84,874 71,154Inventories 6,684 2,136Derivative fi nancial instruments 9,402 8,381Assets of disposal group classifi ed as held for sale 304,363 –Total current assets 539,574 244,177

Non-current assetsReceivables 8,019 13,100Investments accounted for using the equity method 5 536,868 550,242Property, plant and equipment 190,678 260,494Deferred tax assets 47,789 1,266Intangible assets 6 764,084 496,396Total non-current assets 1,547,438 1,321,498Total assets 2,087,012 1,565,675

Current liabilitiesPayables 110,123 221,146Provisions 2,044 15,319Interest-bearing liabilities (4,894) 18,846Derivative fi nancial instruments – 142Liabilities directly associated with assets of a disposal group classifi ed as held for sale 227,397 –Total current liabilities 334,670 255,453

Non-current liabilitiesPayables 20,849 9,456Provisions (4,873) 6,773Interest-bearing liabilities 716,968 255,891Deferred tax liabilities 72,740 21,869Derivative fi nancial instruments 3,994 –Total non-current liabilities 809,678 293,989Total liabilities 1,144,348 549,442

Net assets 942,664 1,016,233

Equity

Equity attributable to equity holders of the parent – MCATContributed equity 569,000 539,033Retained profi t/(accumulated losses) – 27,030Reserves (3,219) –

MCAT unit holders’ interest 565,781 566,063

Equity attributable to equity holders of MCAL & MCAIL (as minority interest/parent entity)Contributed equity 423,491 404,229Retained profi ts/(accumulated losses) (182,330) (79,405)Reserves 14,590 26,424Other stapled security holders’ interest 255,752 351,248Other minority interests 121,132 98,922

Total equity 942,664 1,016,233

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

Consolidated Balance Sheet

49

MCAG MCAG Year ended Year ended 30 June 07 30 June 06 $’000 $’000

Cash fl ow hedges – reclassifi ed to investment acquired – 13,592

Cash fl ow hedges – gains/(losses) taken to equity (189) 189

Exchange differences on translation of foreign operations (32,179) 20,320

Retirement benefi ts reserve 5,798 (2,363)

Capital reserve (3,219) –

Share of associates reserves 4,249 14,493

Total income/(loss) recognised directly in equity (25,540) 46,231

Profi t/(loss) for the year (60,810) (60,498)

Total recognised income and expenses for the year (86,350) (14,267)

Total recognised income and expenses for the year attributable to:

– Equity holders of the parent 42,965 21,420

– Equity holders of other stapled entities (minority interests) (108,708) (39,485)

– Other minority interests (20,607) 3,798

(86,350) (14,267)

The above statement of recognised income and expense should be read in conjunction with the accompanying notes.

Statement of Recognised Income and Expense

50

MCAG MCAG Year ended Year ended 30 June 07 30 June 06 $’000 $’000

Cash fl ows from operating activities

Receipts from customers 547,974 341,579

Payments to suppliers (451,637) (302,470)

Net accommodation bonds received – 18,705

Interest received 9,498 4,712

Interest paid (58,081) (35,557)

Indirect taxes paid (29,282) (11,606)

Income taxes (paid)/received 629 152

Dividend income 4,674 –

Net cash infl ows/(outfl ows) from operating activities 23,775 15,515

Cash fl ows from investing activities

Payments for property, plant and equipment (71,320) (45,925)

Payment for investments (2,454) (554,781)

Payment for investments in subsidiaries net of cash (559,439) (566,953)

Other 2,077 –

Net cash infl ows/(outfl ows) from investing activities (631,136) (1,167,659)

Cash fl ows from fi nancing activities

Proceeds from third-party borrowings 866,428 789,220

Repayment of third-party borrowings (273,342) (527,000)

(Repayment)/proceeds of related party loans – 649

Dividends paid to minority interests (59,322) –

Dividends paid to MCAG security holders (33,990) –

Proceeds from RPS buy-back 6,914 –

Interest received/(paid) on RPS 23,517 –

Proceeds from issue of shares to minority interests in subsidiaries 75,472 92,316

Proceeds from issue of stapled securities – 500,000

Capital raising costs paid – (26,327)

Net cash infl ows/(outfl ows) from fi nancing activities 605,677 828,858

Net increase/(decrease) in cash assets held (1,684) (323,286)

Cash and cash equivalents at the beginning of the year 162,506 489,162

Reclassifi ed to assets of disposal group classifi ed as held for sale (29,224) –

Exchange rate movements on cash denominated in foreign currency 2,653 (3,370)

Cash and cash equivalents at the end of the year 134,251 162,506

The above consolidated cash fl ow statement should be read in conjunction with the accompanying notes.

Consolidated Cash Flow Statement

51

1. Signifi cant Accounting PoliciesThe principal accounting policies adopted in the preparation of the fi nancial report have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of preparation

This concise fi nancial report has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001. The concise fi nancial report has been derived from the MCAG full fi nancial report for the year in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.

■ Compliance with IFRS and comparative periods

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with Australian Accounting Standards ensures that the consolidated fi nancial statements and notes comply with International Financial Reporting Standards (IFRS).

■ Historical cost convention

These fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of fi nancial assets and liabilities (including derivative instruments) at fair value through profi t and loss.

■ Stapled security

The units of Macquarie Capital Alliance Trust (MCAT), the shares of Macquarie Capital Alliance Limited (MCAL) and the shares of Macquarie Capital Alliance International Limited (MCAIL) are combined and issued as stapled securities in Macquarie Capital Alliance Group. The units of MCAT and shares of MCAL and MCAIL cannot be traded separately and can only be traded as stapled securities.

This fi nancial report consists of the consolidated fi nancial statements of MCAT and the entities it controlled at the end of, and during, the year (collectively referred to as MCAG or the Group). MCAT has been identifi ed as the parent of the consolidated group comprising MCAT, MCAL and its controlled entities and MCAIL and its controlled entities together acting as MCAG.

(b) Consolidated accounts

The consolidated fi nancial statements of MCAT incorporate the assets and liabilities of the entities deemed to be controlled by MCAT as at the year end (and their subsidiaries) for the period of control.

Upon stapling of the units of MCAT and the shares of MCAL, the directors deemed MCAT to have acquired MCAL. On the 23 June 2005, MCAIL, a third stapled entity was deemed to be acquired by MCAT. Accordingly, the stapled entities of MCAG are represented as the consolidated fi nancial statements of MCAT.

(c) Principles of consolidation

The consolidated fi nancial statements of MCAT incorporate the assets and liabilities of the entities deemed to be controlled by MCAT as at the year end (and their subsidiaries) and the results of the deemed controlled entities (and their subsidiaries) for the period of control. The effects of all transactions between entities in the consolidated entities are eliminated in full.

(i) Subsidiaries

Subsidiaries, other than those that MCAT has been deemed to have directly acquired through stapling arrangements, are all those entities over which the MCAG has the power to govern the fi nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Where control of an entity is obtained during a fi nancial period, its results are included in the Income Statement from the date on which control commences. Where control of an entity ceases during a fi nancial period, its results are included for that part of the period during which control existed.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Notes to the Concise Consolidated Financial Statements

52

1. Signifi cant Accounting Policies (cont’d) While MCAT, the parent of MCAG, does not

control and has no ownership interest in the other stapled entities (MCAL and MCAIL), for the purposes of the MCAT fi nancial report, MCAL and MCAIL are deemed to be minority interests. Other minority interests are interests which are attributable to parties other than the stapled security holders. Minority interests in the results and equity of the subsidiaries are shown separately in the consolidated Income Statement and Balance Sheet respectively.

(ii) Associates

Associates are entities over which the Group has signifi cant infl uence, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates that are not designated at fair value through profi t or loss on initial recognition are accounted for in the parent entity fi nancial statements using the cost method and in the consolidated fi nancial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investments in associates includes goodwill (net of any accumulated impairment loss) identifi ed on acquisition.

The Group’s share of its associates’ post-acquisition profi ts or losses are recognised in the Income Statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Post-acquisition dividends receivable from associates are recognised in the parent entity’s Income Statement, while in the consolidated fi nancial statements they reduce the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s do not recognise further losses, unless they have incurred obligations or made payments on behalf of the associates.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

(d) Foreign currency

■ Functional and presentation currency

Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated fi nancial statements are presented in Australian dollars, which is MCAT’s functional and presentation currency.

■ Transactions and balances

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 translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except when deferred in equity from applying cash fl ow hedge accounting and applying net investment hedge accounting.

■ Group companies

The results and fi nancial position of all of the Group’s entities (none of which has the currency of a hyperinfl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

– Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

– Income and expenses for each Income Statement are translated at average exchange rates

– All resulting exchange differences are recognised as a separate component of equity.

Notes to the Concise Consolidated Financial Statements (cont’d)

53

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(e) Non-current assets (or disposal groups) held for sale and discontinued operations

A discontinued operation is a component of an entity that has been disposed of or is classifi ed as held for sale and that represents a separate major line of business or geographical area of operations, is part of single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement.

Non-current assets (or disposal groups) are classifi ed as held for sale and stated at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classifi ed as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classifi ed as held for sale continue to be recognised.

Non-current assets classifi ed as held for sale and the assets of a disposal group classifi ed as held for sale are presented separately from the other assets on the balance sheet. The liabilities a disposal group classifi ed as held for sale are presented separately from other liabilities on the balance sheet.

(f) Acquisition of assets

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus the costs directly attributable to the acquisition.

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of cost of acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded as goodwill. If the cost of

acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement, but only after a reassessment of the identifi cation and measurement of the net assets acquired.

(g) Investments and other fi nancial assets

The Group classifi es its investments in the following categories: fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments, and available-for-sale fi nancial assets. Investments in subsidiaries are classifi ed separately and are held at cost. The classifi cation depends on the purpose for which the investments were acquired. Management determines the classifi cation of its investments at initial recognition. At balance date, the consolidated entities had the following fi nancial assets:

■ Loans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They arise when any entity within the Group provides money, or defers payment on ordinary equity, to an external party with no intention of selling the receivable immediately or in the near future. Loans and receivables with maturity less than 12 months are included in current assets and those with greater than 12-month maturity are included in non-current assets. Loans and receivables are initially recorded at fair value and then subsequently at amortised cost using the effective interest rate method.

■ Investments in associates

Investments in associates that are not designated at fair value through profi t or loss on initial recognition are accounted for by the Groups using the equity method of accounting after initially being recognised at cost. The Group’s share of the associates’ post-acquisition profi ts or losses is recognised in the income statement, and its share of movement in post-acquisition reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investments.

MCAG’s interest in the consortia are generally subject to various rights in favour of other consortium investors. Those rights include provisions which treat it as having offered to sell all of its interests to other investors at “fair market value” in the event of a “change of control” of MCAG (including a change of MCAG’s manager).

54

1. Signifi cant Accounting Policies (cont’d)

(h) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s shares of the identifi able net assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

(ii) Other identifi able intangible assets

Subsequent to their initial recognition as assets on acquisition, other identifi able intangibles are measured at cost. Identifi able intangibles are amortised over the period that the benefi ts are expected to be received.

For Red Bee Media Limited the amortisation period for the renewable contracts is matched to the life of the contract which is typically seven to 10 years.

For Macquarie AIR-serv Holdings Inc amortisation of identifi able intangibles is calculated using the straight line method to allocate their cost or revaluated amounts over their estimated useful lives as follows:

Customer contracts and relationships 10 – 15 yearsTrade names 15 yearsNon-compete agreements 4 yearsSoftware 5 years

(i) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments.

(j) Rounding of amounts

The Group is of a kind referred to in Class Order 98/0100, as amended by Class Order 04/667, issued by the Australian Securities & Investments Commission relating to the “rounding off” of amounts in the directors’ report and the fi nancial report. Amounts in the directors’ report and the fi nancial report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

(k) Comparative fi gures

Where necessary, comparative fi gures have been adjusted to conform with changes in presentation in the current period.


55

2. Profi t for the Year MCAG MCAG 30 June 07 30 June 06 $’000 $’000

The operating profi t/(loss) from continuing activities before income tax includes the following specifi c items of revenue, other income and expenses:

Consolidated

Revenue and other income from continuing activities

Asset operating revenue 477,499 251,949

Interest revenue 9,803 5,955

Effective interest on second instalment of equity issued – 20,223

Revenue 487,302 278,127

Fair value gain on fi nancial instruments 5,889 3,149

Foreign exchange gains 1,330 –

Other income 7,219 3,149

Total revenue and other income from continuing activities 494,521 281,276

Employee expenses

Defi ned contribution superannuation expense 1,282 –

Defi ned benefi t superannuation expense 10,787 10,928

Share-based payment expense 338 233

Other employee expenses 184,216 110,341

Total employee expenses 196,623 120,872

Depreciation and amortisation expenses

Depreciation

Plant and equipment 32,337 18,376

Furniture, fi ttings and equipment 2,230 1,225

Vending machines 16,839 –

Total depreciation 51,406 19,601

Amortisation

Customer contracts and relationships 32,945 6,469

Trade names, non-compete agreements and other rights 2,944 –

Total amortisation 35,889 6,469

Total depreciation and amortisation 87,295 26,070

Management and administration expenses

Management fees 15,374 12,327

Minimum lease payments – operating leases 17,833 –

Remuneration of auditors 2,603 766

General administration and operating expenses 173,377 112,359

Total management and administration expenses 209,187 125,452

Finance costs

Third-party loans 65,998 32,623

Total fi nance costs 65,998 32,623

Other expenses 4,737 1,138

56

3. Distributions Paid A special distribution for the year ended 30 June 2007 of 30 cents per stapled security was announced on 28 February 2007 and was paid on 5 April 2007 (2006: Nil). The distribution of $75.609m was paid entirely by MCAT and was 100% unfranked.

4. Discontinued OperationsOn 16 May 2007, MCAG announced its intention to sell its ownership interest in the Retirement Care Australia Group. The sale was completed on 2 July 2007 and the RCAH Group is therefore disclosed in this fi nancial report as a discontinued operation. The details of transaction are set out in note 9(i).

Financial information relating to the discontinued operation for the period to the date of this report is set out below.

(a) Financial performance and cash fl ow information

The fi nancial performance and cash fl ow information presented are for the 12 months ended 30 June 2007 and 30 June 2006 respectively:

MCAG MCAG 30 June 07 30 June 06 $’000 $’000

Financial performance

Revenue 125,666 101,931

Expenses (125,121) (111,464)

Profi t/(loss) before income tax 545 (9,533)

Income tax expense – –

Profi t/(loss) after income tax of discontinued operation 545 (9,533)

Profi t/(loss) from discontinued operations 545 (9,533)

Cash fl ow information

Net cash infl ow/(outfl ow) from operating activities (13,148) 14,777

Net cash infl ow/(outfl ow) from investing activities 12,327 (192,924)

Net cash infl ow/(outfl ow) from fi nancing activities (20,878) 152,401

Net increase/(decrease) in cash generated by the Group (21,699) (25,746)


57

(b) Gain on disposal of RCAH

The following table sets out how the pre-tax gain on the disposal of RCAH has been calculated:

MCAG MCAL Group MCAIL GroupAs at 2 July 2007 $’000 $’000 $’000

Consideration received on disposal:

Shares acquired in the RCAH/Regis combined group 150,830 36,883 –

Total disposal consideration receivable 150,830 36,883 –

Carrying amount of net assets sold (114,713) (4,563) –

Gain on sale before income tax 36,117 32,320 –

Income tax expense (10,850) (9,696) –

Gain on sale after income tax 25,267 22,624 –

Less: profi t attributable to unrelated investors in FIHPL (11,646) (2,534) –

Profi t attributable to MCAG/MCAL 13,621 20,090 –

5. Investment in Associates

(a) Carrying amount in MCAG

Information relating to associates is set out below:

MCAG ownership Carrying amount Carrying amount

30 June 2007 30 June 2006 30 June 2007 30 June 2006Name of Company Principal Activity % % $’000 $’000

European Directories sa (EDsa) Directories services 39 39 428,201 445,992

The Zig Inge Group Pty Limited (previously RV Holdco Pty Ltd) Retirement village management and development 49 49 108,667 104,250

536,868 550,242

MCAT and MCAL own 24% and 25% respectively of The Zig Inge Group Pty Limited (Zig Inge Group). The ownership in EDsa is held by MCAIL2. EDsa is incorporated in Luxembourg and Zig Inge Group is incorporated in Victoria, Australia.

58

5. Investment in Associates (cont’d)

(b) Summarised fi nancial information of associates

(i) European Directories sa

MCAG share based on average EDsa MCAG share EDsa ownership 30 June 07 30 June 07 30 June 06 30 June 06 €’000* $’000* €’000* $’000*

Revenue/(loss) 636,460 412,392 533,642 328,031

EBITDA (including results from EDsa associates) 214,382 138,904 169,833 104,397

Depreciation (7,570) (4,905) (6,440) (3,959)

Amortisation (113,977) (73,851) (120,779) (74,243)

Interest expense (161,567) (104,687) (133,826) (82,771)

Tax benefi t/(expense) 34,724 22,499 33,364 20,509

Net (loss) after tax (34,008) (22,040) (57,848) (36,067)

Assets 3,042,618 1,893,966 3,083,730 2,069,620

Liabilities (2,990,088) (1,861,267) (2,883,774) (1,939,448)

Net assets 52,530 32,699 193,956 130,172

* The EUR:AUD average exchange rate used to convert income statement items in the current period is 1.6614. The EUR:AUD spot rate at 30 June 2007 used to convert assets and liabilities is 1.5961. The EUR:AUD average exchange rate used to convert income statement items in the prior period is 1.629. The EUR:AUD spot rate at 30 June 2006 used to convert assets and liabilities is 1.721.

(ii) Zig Inge Group

MCAG share based on Zig Inge Zig Inge average Group MCAG share Group ownership 30 June 07 30 June 07 30 June 06 30 June 06 $’000 $’000 $’000 $’000

Revenue/(loss) 55,838 27,361 33,226 16,281

EBITDA (including results from Zig associates) 27,098 13,278 15,551 7,620

Depreciation (53) (26) (47) (23)

Interest expense (3,903) (1,912) (2,145) (1,051)

Tax benefi t/(expense) (6,104) (4,269) (4,500) (2,869)

Net profi t/(loss) after tax 17,038 7,071 8,859 3,677

Assets 390,592 191,390 315,739 154,712

Liabilities (167,880) (82,261) (104,651) (51,279)

Net assets 222,712 109,129 211,088 103,433


59

6. Intangible Assets Trade names, non-compete agreements Customer Bed and other Contracts Licences rights Goodwill Total $’000 $’000 $’000 $’000 $’000

Year ended 30 June 2007

Opening net book amount 66,873 83,298 – 346,225 496,396

Reclassifi ed to assets of disposal group classifi ed as held for sale – (83,298) – (73,659) (156,957)

Acquisition of subsidiaries 192,498 – 15,090 315,922 523,510

Additions 784 – 2,282 6,964 10,030

Amortisation charge (32,945) – (2,944) – 35,889

Foreign currency translation reserve (22,781) – (1,473) (48,751) (73,006)

Closing net book amount 204,429 – 12,955 546,701 764,084

Year ended 30 June 2006

Opening net book amount – – – – –

Acquisition of subsidiaries 73,622 83,298 – 346,225 503,145

Amortisation charge (6,469) – – – (6,469)

Foreign currency translation reserve (280) – – – (280)

Closing net book amount 66,873 83,298 – 346,225 496,396

7. Segment InformationMCAG is organised on a global basis into the following divisions by product and service type. The primary basis of segment reporting for MCAG is by business segment.

Discontinued Vehicle Tyre Total operation Media Infl ation continuing Aged Care Services Services operations Services ConsolidatedBusiness Segment $’000 $’000 $’000 $’000 $’000

30 June 2007

Total segment revenue and income* 319,538 163,388 482,926 124,183 607,109

Segment result** 8,610 (4,306) 4,304 6,291 10,595

Segment assets 526,164 530,760 1,056,924 296,837 1,353,761

Segment liabilities (81,828) (42,492) (124,320) (150,911) (275,231)

30 June 2006

Total segment revenue and income* 251,949 – 251,949 100,438 352,387

Segment result** 2,149 – 2,149 (5,766) (3,616)

Segment assets 581,322 – 581,322 349,389 930,621

Segment liabilities 302,782 – 302,782 371,214 673,996

* The segment revenue is before interest revenue.** The segment result is before interest revenue, interest expense, minority interests and tax.

60

8. Business Combinations

Acquisition of Macquarie AIR-serv Holdings Inc (MASH)

On 12 June 2006, MCAG US LLC was incorporated in the United States to act as the US holding company for MCAG’s investment in Macquarie AIR-serv Holdings Inc (MASH).

On 7 July 2006, MASH reached fi nancial close on the acquisition of ASI Holding Corp, the holding company for the AIR-serv group of companies. The AIR-serv group of companies earn revenue from providing tyre infl ation vending services in the United States, Canada and the United Kingdom. The purchase consideration paid by MASH in acquiring AIR-serv was $546m*. Additionally, acquisition costs of approximately $20m* were incurred as part of this transaction. MCAG’s direct investment in the AIR-serv group was effected through the acquisition of 594,310 ordinary voting shares in MASH for $145.2m (60% equity investment in MASH). The consideration paid approximated the fair value of the MASH assets and liabilities and minority interests at 7 July 2006.

The acquired business contributed revenues of $164m, EBITDA of $49m and a net loss of $21m for the period since acquisition to 30 June 2007. If the acquisition had occurred on 1 July 2006, the acquired business would have contributed revenues of $166.6m and a net loss of $23m.

Details of the fair values of the assets and liabilities acquired and goodwill are as follows:

$’000

Purchase consideration*:

– Cash paid 545,890

– Direct costs relating to the acquisition 20,058

Total purchase consideration 565,948

Fair value of net identifi able assets acquired 250,026

Goodwill 315,922

* The purchase consideration in local currency was USD420m and additional acquisition costs of USD15m were incurred. The AUD:USD exchange rate used to convert the purchase consideration and acquisition costs was 1.3292. In the notes to the 30 June 2006 fi nancial statements, an AUD:USD exchange rate of 1.357 was used to convert the purchase consideration and acquisition costs to AUD.

The goodwill is attributable to unique market positioning and development opportunities.

The assets and liabilities arising from the acquisition are included in the table below:

Acquiree’s carrying amount Fair value $’000 $’000

Cash and cash equivalents 15,167 15,167

Receivables 3,399 3,399

Financial instruments – –

Inventory 7,478 7,479

Property, plant and equipment 82,436 81,133

Identifi able intangibles 64,710 207,588

Other assets 1,025 1,025

Creditors and accruals (35,453) (36,098)

Deferred tax liabilities (3,511) (29,667)

135,251 250,026

Minority interest (40%) 100,010

Net identifi able assets acquired by MCAG 150,016


61

The fair value of the assets and liabilities was determined provisionally as at 31 December 2006. The Group has subsequently completed a fair value exercise to determine the fair value of the assets and liabilities acquired at 7 July 2006 and the amounts shown above include substantially all completion adjustments.

9. Events Occurring After the Balance Sheet DateThe following events have occurred subsequent to reporting date:

(i) Completion of the merger of Retirement Care Australia with the Regis Group

On 2 July 2007, MCAG reached fi nancial close on the disposal of its interest in the RCAH group and the acquisition of a non-controlling interest in the combined RCAH/Regis group. Regis is a provider of aged care facilities located in Queensland and Victoria. The combined group will be managed by Regis at the completion of a transition period between Regis and the current RCAH facility managers: TriCare and the Moran Health Care Group.

MCAG’s investment in the combined RCA/Regis group was effected through an exchange of MCAL and MCAT’s existing ownership of ordinary and redeemable preference shares in RCAH for ordinary shares in Fairway Investment Holdings Pty Limited (FIHPL). FIHPL owns 100% of the combined group via its ownership of A.C.N. 125 223 645 Pty Ltd (renamed Regis Aged Care Pty Limited on 6 August 2006). On 2 July 2007 the following transactions occurred in MCAL and MCAT:

– MCAL transferred 44 ordinary shares and 4,399,304 RPS in RCAH to A.C.N. 125 223 645 Pty Limited (Regis) in exchange for the acquisition of 36,882,619 ordinary shares in FIHPL

– MCAT transferred 1 ordinary share and 109,209,583 RPS in RCAH to Regis in exchange for the acquisition of 113,997,381 ordinary shares in FIHPL.

Following the above transactions, MCAL and MCAT’s respective investments in FIHPL were 11.2% and 34.8%. Immediately prior to the completion of the merger, MCAL and MCAT held 98% and 2% respectively of RCAH. Acquisition costs of approximately $844,463 were incurred as part of this transaction.

(ii) Other

On 2 July 2007, immediately prior to the fi nancial close of the RCA/Regis merger, MCAL acquired 4,399,304 redeemable preference shares (RPS) issued by RCAH from MCAT for a consideration of $4,562,582. In exchange for the purchase price of $4,562,582, MCAL issued 4,562,582 RPS to MCAT for $1 each. The RCAH RPS were issued by RCAH on 1 July 2005 and are redeemable on 1 July 2022 for a fi xed amount of $1 per RPS. The MCAL RPS were issued on 2 July 2007 and are redeemable on 2 July 2024. The RPS do not attract voting rights in RCAH or MCAL and holders are entitled to fi xed cumulative dividends of 13% per annum on the capital paid up on the shares.

Since the end of the year, the directors of the responsible entity, the directors of MCAL and the directors of MCAIL are not aware of any other matter or circumstance not otherwise dealt with in the fi nancial report that has signifi cantly affected or may signifi cantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in period between the year ended 30 June 2007 and the date of this fi nancial report.

The fi nancial report was authorised for issue by the directors on 30 August 2007. The Group has the power to amend and reissue the fi nancial report.

62

In the opinion of the directors of Macquarie Capital Alliance Management Limited (the responsible entity), the concise fi nancial report of the consolidated entity for the year ended 30 June 2007 set out on pages 47 to 61 complies with Accounting Standard AASB 1039: Concise Financial Reports.

The concise fi nancial report is an extract from the full fi nancial report for the year ended 30 June 2007. The fi nancial statements and specifi c disclosures included in the concise report have been derived from the full fi nancial report.

The concise fi nancial report cannot be expected to provide as full an understanding of the fi nancial performance, fi nancial position and fi nancing and investing activities of the consolidated entity as the full fi nancial report, which is available on request.

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

Rowan Ross Anthony Nagel

Sydney Bermuda30 August 2007 30 August 2007

Statement by the Directors of the Responsible Entity of the Trust on the fi nancial report of MCAT

63

To the stapled security holders of Macquarie Capital Alliance Group

Report on the Concise Financial Report

The accompanying concise fi nancial report of Macquarie Capital Alliance Group (‘MCAG’) (defi ned below), which comprises the balance sheet as at 30 June 2007, the income statement, statement of recognised income and expense and cash fl ow statements for the year then ended and related notes, is derived from the audited fi nancial report of MCAG for the year ended 30 June 2007. The concise fi nancial report does not contain all the disclosures required by the Australian Accounting Standards. MCAG comprises both MCAT and the entities it controlled at the year’s end or from time to time during the fi nancial year, including the MCAL Group and the MCAIL Group. The MCAL Group comprises both MCAL and the entities it controlled at the year’s end or from time to time during the fi nancial year. The MCAIL Group comprises both MCAIL and the entities it controlled at the year’s end or from time to time during the fi nancial year.

Directors’ Responsibility for the Concise Financial Report

The directors of Macquarie Capital Alliance Management Limited, the Responsible Entity of MCAT are responsible for the preparation and presentation of the concise fi nancial report in accordance with Accounting Standard AASB 1039: Concise Financial Reports, and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation of the concise fi nancial report; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the concise fi nancial report based on our audit procedures. We have conducted an independent audit, in accordance with Australian Auditing Standards, of the fi nancial report of MCAG for the year ended 30 June 2007. Our audit report on the fi nancial report for the year was signed on 30 August 2007 and was not subject to any modifi cation. The Australian Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report for the year is free from material misstatement.

Our procedures in respect of the concise fi nancial report included testing that the information in the concise fi nancial report is derived from, and is consistent with, the fi nancial report for the year, and examination on a test basis, of evidence supporting the amounts and other disclosures which were not directly derived from the fi nancial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise fi nancial report complies with Accounting Standard AASB 1039: Concise Financial Reports.

For further explanation of an audit, visit our website http://www.pwc.com/au/fi nancialstatementaudit

Independent Audit Report

64

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion, the concise fi nancial report of MCAG for the year ended 30 June 2007 complies with Australian Accounting Standard AASB 1039: Concise Financial Reports.

E A BarronPartner

PricewaterhouseCoopers

Sydney30 August 2007

Independent Audit Report (cont’d)

65

Remuneration Report

As noted in the Corporate Governance Statement, MCAG is an externally managed vehicle comprising an Australian trust, Australian public company and a Bermudan exempted mutual fund company:

■ Macquarie Capital Alliance Trust (MCAT)

■ Macquarie Capital Alliance Limited (MCAL)

■ Macquarie Capital Alliance International Limited (MCAIL).

The combined trustee/manager, known as a responsible entity, for MCAT is Macquarie Capital Alliance Management Limited (MCAML), a wholly owned subsidiary of Macquarie Bank Limited (MBL). MCAML is also the manager/advisor of MCAL and MCAIL respectively.

MCAML makes available employees (including senior executives) to discharge their obligations to the relevant MCAG entity. These staff are employed by entities in the MBL Group and made available to MCAG through formalised resourcing arrangements with MCAML. Their remuneration is not a MCAG expense. It is paid by MBL Group. Instead MCAG pays management fees to the MBL Group for providing management and advisory services.

Under the Corporations Act, it is only Australian listed companies that are required to prepare a remuneration report. Accordingly, the remuneration report that appears in the MCAL Directors’ Report is only for MCAL and only MCAL security holders participate on a non-binding advisory vote in respect of it. MCAT, MCAIL and MCAG as a whole are not required to prepare a remuneration report.

However, in order to provide appropriate remuneration disclosure for MCAG as a whole, we have set out below details of the management fees and non-executive director fees paid by the MCAG entities, together with qualitative disclosure detailing how MCAML staff working on MCAG but paid for by the MBL Group are incentivised and their interests aligned with MCAG.

Management fees

Under the terms of the MCAT constitution, Management Services Agreement and the Advisory Deed, MCAML is entitled to base and performance fees for acting as responsible entity and manager/adviser respectively to the stapled entities that comprise MCAG.

Base management and performance fees are calculated in accordance with a defi ned formula under the MCAT constitution, management services agreement with MCAL and the advisory agreement with MCAIL. The management fee structure is linked to market performance and, in the case of performance fees, ongoing outperformance against an external benchmark. The management fees paid or payable by MCAG to MCAML for the fi nancial year ending 30 June 2007 were:

Base fee $15.37m*

Performance fee Nil

* Including non-recoverable GST.

The fee arrangements were fully disclosed to investors on fund inception and subsequent restructure and continue to be disclosed on the MCAG website and in annual reports so that investors originally invested and continue to invest on this basis. The structure and level of the fee arrangements are consistent with those paid in the market in respect of similar externally managed vehicles and are not subject to review. Any changes to the structure of the fee provisions which would have the effect of increasing the fees would need to be approved by MCAG stapled security holders.

Base fees

The Base Fee is calculated as 1.5% of the net investment value of MCAG (less any management fees payable to a manager of an MBL managed fund) at the end of each quarter.

For the purposes of calculating the base fee, the net investment value of MCAG is determined on an enterprise value basis, being:

■ The average market capitalisation over the last 15 ASX trading days of each quarter (based on closing price), plus

■ Borrowings, plus

■ Firm commitments for future investment, less

■ Cash or cash equivalents.

The quantum of the base management fee can increase or decrease as a result of both the movement in MCAG securities on issue and any movement in the security price. Investors can effectively control the growth of securities on issue and therefore any base fee increases by factors such as deciding whether or not to support a capital raising involving the issue of new MCAG securities.

66

As capital raisings would invariably be undertaken to fund new acquisitions or retire bridging debt for new acquisitions, MCAML is incentivised to ensure that each new investment is seen as disciplined and value accretive by the market in order to attract investor support for the raising and general ongoing support for the security price.

Performance fees

A performance fee is calculated and payable by MCAG quarterly in arrears in the event that the MCAG accumulation index outperforms the S&P ASX 200 Accumulation Index having made up for any underperformance in previous quarters.

The performance fee is 20% of the amount of the net outperformance.

Where MCAG underperforms the benchmark a fee defi cit exists. Before any future performance fees can be earned, all accumulated defi cits from prior periods of underperformance must be eliminated ensuring that any performance fees are paid as a result of sustained benchmark outperformance.

This requirement for sustained outperformance creates a strong alignment of interest between MCAML and MCAG security holders.

Fees are apportioned between MCAT, MCAL and MCAIL based on each entity’s share of the net assets of MCAG. The net market values of the assets are used in the calculation of this apportionment.

Oversight of fee payments

There is independent oversight in respect of the calculation and payment of management fees as follows:

(i) The calculation and payment of management fees (both base and performance fees) are audited as part of the annual fi nancial statement audit and through the audit of the stapled scheme’s compliance plan

(ii) The calculation of every performance fee to be paid is checked by an actuarial fi rm

(iii) The fund independent directors review the external certifi cations and authorise payment of the performance fee.

Reinvestment of fees

Under MCAG’s constituent documents, non-executive directors of MCAML acting in the interests of stapled security holders have the discretion as to whether or not the base fee and performance fee is applied for a subscription in new MCAG stapled securities.

Under ASX Listing Rule waiver requirements, the ability to reinvest base fees and performance fees is subject to MCAG security holder approval every three years and is seen by MCAG as creating further alignment between MCAG management and MCAG security holders. At the 2007 AGM, MCAG security holders will be asked to refresh the approval for base fees and performance fees to be reinvested in MCAG securities.

The issue price for the new MCAG stapled securities is the volume weighted average trading price of all MCAG stapled securities traded on the ASX during the last 15 trading days of the relevant quarter.

Expense reimbursement

MCAML is also entitled to be reimbursed for expenses incurred by it in relation to the proper performance of its duties, out of the assets of MCAG. This includes routine ongoing expenses such as the third-party costs of acquiring assets and managing them, as well as capital raising costs, registry, audit, insurance, compliance costs and other expenses as set out in the MCAT constitution, management services agreement and advisory deed.

DirectorsNo director of MCAML is remunerated by MCAG. The independent directors of MCAML receive fees of A$45,000 per annum from MCAML, a wholly owned subsidiary of MBL, for acting as directors. MCAML’s executive directors are employed and remunerated by the MBL Group.

MCAL and MCAIL non-executive director fees are paid by MCAL and MCAIL respectively. The independent and non-executive directors of MCAL received fees of A$45,000 per annum for acting as directors of MCAL.

The independent and non-executive directors of MCAIL received fees of US$25,000 per annum from 1 July 2006 to 30 September 2006 and US$35,000 per annum from 1 October 2006 for acting as directors of MCAIL.

Remuneration Report (cont’d)

67

MCAL’s and MCAIL’s executive director is employed and remunerated by the MBL Group.

The fees paid to the independent and non-executive directors of MCAML, MCAL and MCAIL are determined by reference to current market rates for directorships. The level of fees is not related to the performance of MCAG. The boards of MCAML, MCAL and MCAIL will consider remuneration payable to their independent and non-executive directors from time to time. Remuneration for the independent and non-executive directors is approved by the boards and any increases are benchmarked to market based on external advice.

None of the MCAML, MCAL or MCAIL independent and non-executive directors are entitled to MCAG options or securities or to retirement benefi ts as part of their remuneration package.

ExecutivesMCAG management is employed and remunerated by the MBL Group, not MCAG.

While MCAG management are MBL Group employees there is a strong alignment of interest between those employees and MCAG investors as described below.

Under MBL Group’s remuneration system a signifi cant amount of remuneration is at risk and solely dependent on performance. The remuneration package of all MBL Group executives consists of a base salary and an annual profi t share allocation. The base salary is reviewed annually and the profi t share allocation, which is not guaranteed, is based on performance.

Performance assessment of MBL Group employees takes place half yearly. The MCAML, MCAL and MCAIL boards, which comprise a majority of independent and non-executive directors, provide feedback in respect of the MCAG CEO’s and CFO’s performance and can request that they be replaced if not performing satisfactorily.

The levels of base salary for senior executives take into consideration the role of the individual and market conditions. However, the levels of base salary can be low compared to similar roles in non-investment banking companies.

The profi t share allocations to executives provide substantial incentives for superior performance but low or no participation for less satisfactory outcomes. Profi t share allocations are therefore highly variable and can comprise a high proportion of total remuneration in the case of superior performance. The level of profi t share received by members of the MCAG management team is driven predominantly by their individual contribution to the performance of MCAG, taking into account the following elements:

■ Strong operational performance of MCAG’s underlying assets

■ Management and leadership of MCAG and the assets controlled by MCAG

■ Acquisitions and subsequent management of the assets purchased to ensure performance is in line with the acquisition business plans

■ Effective capital management

■ Maintenance of Macquarie’s reputation and track record in respect of its branded funds.

There is no formulaic approach to determining MCAG management’s profi t share allocation. It is completely discretionary and takes into account factors outlined above as well as input from the MCAML, MCAL and MCAIL boards in the case of the MCAG CEO and CFO.

MCAG management may also receive MBL options as part of their remuneration package.

MBL Group also recently revised the profi t share arrangements for its executive directors which require 20% of their profi t share amounts each year to be withheld and subject to restrictions, so as to further align their interests with the investors of the MBL Group managed entities that they work for.

Accordingly, part of the retained profi t share amounts of the MCAG CEO Mr Michael Cook, and also any other senior members of the MCAG management team who are executive directors, are to be notionally invested by MBL in MCAG securities so that returns on these amounts are based on the MCAG security price performance. The remaining profi t share amounts may be invested in the securities of other funds in which members of MCAG management may be involved.

68

The investment is described as “notional” because these staff do not directly hold securities in relation to this investment. However, the value of the retained amounts vary as if these amounts were directly invested in MCAG securities (or the other respective funds).

These retained profi t share amounts vest between fi ve and 10 years.

Alignment between MBL and MCAG security holders is also demonstrated through the interest the MBL Group holds in MCAG. At September 2007, the MBL Group held approximately $180million1 in MCAG securities, including those securities that have been acquired as part of the issue of MCAG securities for the reinvestment of base fees (discussed above). MCAG senior staff and directors of the MCAG entities also hold approximately $16million in MCAG securities (including approximately $7million in MCAG securities held by the MCAG CEO Mr Michael Cook).

The staff and directors’ securities have all been purchased by those individuals either on the market or at the IPO, or issued under the distribution re-investment plan.

1. Includes both principal and fi duciary holdings with the latter being about 14% of the total holdings.

Remuneration Report (cont’d)

69

MCAG Stapled Security Holder Information

Distribution of Stapled Securities Total stapled % of issued Investor ranges Holders securities stapled securities

1 – 1,000 515 435,757 0.171,001 – 5,000 3,635 10,685,633 4.065,001 – 10,000 1,320 10,201,182 3.8810,001 – 100,000 1,145 25,648,136 9.75100,001 and over 81 216,125,793 82.15

Total 6,696 263,096,501 100.00

Investors with less than the minimum marketable parcel of stapled securities: 19

Top 20 Holder List % ofInvestor Units issued capital

Macquarie Capital Alliance Management Ltd 41,838,691 15.90J P Morgan Nominees Australia Limited 28,300,268 10.76Pan Australian Nominees Pty Limited 25,871,994 9.83National Nominees Limited 24,197,427 9.20Credit Suisse Securities (Europe) Ltd 20,145,000 7.66HSBC Custody Nominees (Australia) Limited 13,946,615 5.30Brispot Nominees Pty Ltd 9,885,978 3.76HSBC Custody Nominees (Australia) Limited 5,952,361 2.26ANZ Nominees Limited 4,879,709 1.85Citicorp Nominees Pty Limited 4,058,312 1.54Citicorp Nominees Pty Limited 3,467,708 1.32Cogent Nominees Pty Limited 2,588,276 0.98Macquarie Capital Alliance Management Limited1 2,151,507 0.82HSBC Custody Nominees (Australia) Limited 1,680,155 0.64Sandhurst Trustees Ltd 1,534,092 0.58Cogent Nominees Pty Limited 1,527,658 0.58Irrewarra Investments Pty Ltd 1,498,204 0.57Fortis Clearing Nominees P/L 1,262,506 0.48Serioso Pty Limited 1,100,000 0.42AMP Life Limited 1,042,630 0.40

Total for Top 20 196,929,091 74.85

1. Re-invested base management fees.

Details of Substantial Stapled Security Holders Number of % of issuedName stapled securities1 stapled securities2

Macquarie Bank (Group) 46,165,849 17.55Deutsche Bank (Group) 24,539,286 9.33Credit Suisse (Group) 19,959,273 7.59

1. Based on ASIC form 604 lodged with the ASX prior to 30 August 2007.

2. Based on stapled securities on issue as at 30 August 2007.

Unquoted Securities1. MCAL has on issue 54,949,189 redeemable preference shares (RPS) issued to MCAT on the terms and conditions set out

in Schedule 1 of the MCAL constitution and note 17 of the full fi nancial report for the year ending 30 June 2007. The RPS do not attract voting rights in MCAL and MCAT is entitled to a fi xed cumulative dividend at a rate of 13% per annum on the capital paid up on the RPS.

2. MCAL and MCAIL have each issued one A Special Share and one B Special Share to MCAML on the terms and conditions set out in Principle 1 of the Corporate Governance Statement.

As at 30 August 2007

70

MCAG Directors

Rowan Ross

MCAL and MCAML Chairman, MCAIL Director

Rowan Ross was appointed a director and chairman of Macquarie Capital Alliance Limited in January 2005. He is an executive director of Macquarie Bank and has had more than 35 years’ experience in investment banking.

Rowan is currently a director of Insurance Australia Group Limited, IAG Finance (New Zealand) Limited, Chairman of Sydney IVF Limited and Chairman of Australian Brandenburg Orchestra. He is the former Chairman of Bankers Trust Investment Bank, former National President of the Securities Institute of Australia and former Chairman of the Sydney Dance Company and the Australian Major Performing Arts Group.

Rowan graduated from Sydney University with a Bachelor of Economics and from the University of New South Wales with a Bachelor of Commerce. Rowan is a Fellow of the Australian Society of CPAs and is a Senior Fellow of the Financial Services Institute of Australasia.

Robin Crawford

MCAL and MCAML Independent Director, member audit and risk committee for MCAL and MCAML

Robin Crawford has more than 20 years’ experience in banking and investment banking and worked on the creation of Macquarie Bank, of which he was a founding director. He set up the underwriting division and formed Macquarie Equities, and was a member of the Bank’s executive committee until he resigned from his executive roles in 1990.

Robin was an independent adviser to the investment committee of Macquarie Direct Investments until 2006 and Chairman of IVF Australia Limited. Robin has also been active in the not-for-profit sector, formerly as a director of the Autistic Children’s Association of NSW, Schizophrenia Foundation of Australia, and currently with Clean Up Australia and the Sydney Cancer Centre Foundation.

Robin graduated with a Bachelor of Laws and a Bachelor of Arts from the University of Sydney.

Nicholas Moore

MCAML Director

Nicholas Moore is the head of the Investment Banking Group of Macquarie Bank (Macquarie IBG). He joined Macquarie Bank in 1986 and became Head of the Financial Packaging Group in 1996, the Head of the Asset & Infrastructure Group upon its formation in 1998 and the Head of Macquarie IBG upon its formation in 2001.

Nicholas is a director of Macquarie Infrastructure Investment Management Limited, the responsible entity of the trusts comprised in Macquarie Infrastructure Group and Macquarie Communications Infrastructure Management Limited, the responsible entity of the trust comprised in Macquarie Communications Infrastructure Group. He is also a director of Macquarie Airports Management Limited, the responsible entity of the trusts comprising Macquarie Airports, and Chairman of the Police and Citizens Youth Club.

Nicholas graduated from the University of NSW with a Bachelor of Commerce and a Bachelor of Laws, Nicholas is a solicitor of the Supreme Court of NSW and is a Fellow of the Institute of Chartered Accountants.

Ken Moss

MCAL and MCAML Independent Director, member audit and risk committee for MCAL and MCAML

Ken Moss has extensive experience as an executive and company director. Ken is the chairman of Boral Limited and Centennial Coal Company Limited. He is also a director of GPT Management Holdings Limited. Ken commenced his career with Howard Smith in 1974 and held senior positions both in Australia and overseas with Howard Smith before becoming managing director in 1993 until August 2000. He was also a director of NAB until 2004.

Ken graduated with a Bachelor of Engineering (Honours) and holds a Doctorate of Philosophy in mechanical engineering from Newcastle University.

71

Kim Carter

MCAIL Chairman, member audit and risk committee for MCAIL

Kim Carter has extensive experience in business management. He owned and operated a manufacturing company, QRT Ltd, from 1977 to 1989, and in 1991 launched a publishing company, Carter & Carter Ltd, publisher of non-fiction books.

Kim is a certified hedge fund specialist (CHFS) and in 2004 became a director of Tribley Asset Management Ltd in Bermuda. Kim is a director of Macquarie MCG International Limited and Chairman of international squash tournaments; the Bermuda Open, the PSA Masters 2005 and 2006, and the World Open 2007.

Kim is also active in the not-for-profi t sector and is chairman of the ‘Kathmandu Kids Club’, a division of the ISIS Foundation, a registered charity in Bermuda.

Rodney Birrell

MCAIL Independent Director: Member audit and risk committee for MCAIL

As a corporate attorney with Appleby Spurling & Kempe between 1988 and 1993, Rodney Birrell was involved in a number of high profile merger and acquisition transactions. Since then, Rodney has been managing director and president of Bristol Limited and, since 2003, co-executive director of the Wine Investment Project. Rodney is the Chairman of Macquarie MCG International Limited, Paradigm Limited and C.Venture Limited in Bermuda, Quorum Secured Equity Trust in Canada and Kew Trading in the British Virgin Islands.

Rodney has degrees in Law (McGill University, Montreal, Canada) and Arts (Queens University, Ontario, Canada) and also has a diploma from the Université de Besançon (Besançon, France). Rodney is a member of the Canadian, Ontario and Quebec Bar Associations and is fluent in both English and French.

Anthony Nagel

MCAIL, MCAML and MCAL Independent Director, chairman audit and risk committee for MCAIL, MCAML and MCAL

Anthony Nagel is Chief Executive Officer of QuoVadis Limited which specialises in the provision of computer encryption and security services and products. Until recently, Anthony was a member of the E-Commerce Advisory Board established by the Bermuda Minister of Telecommunications and Commerce.

Anthony served as Chief Financial Officer of Full Service Trade System Limited between 1996 and 1999 and Bermuda Commercial Bank between 1993 and 1996. Anthony is currently a director of Cybermuda Limited and is also a member of the Bermuda International Business Association E-Commerce Committee.

Anthony has a Bachelor of Laws (Honours) from the University of Manchester and became a member of the Institute of Chartered Accountants of England and Wales in 1987. He also holds a diploma from the Bermuda Insurance Institute.

Company secretariesMCAL and MCAML

Christine Williams

MA LLB (Syd)

Christine Williams has been the legal/compliance head of Macquarie Bank’s Investment Banking Funds division since 1998, prior to which she performed a company secretarial/general counsel role at Bankers Trust.

Leanne Brown

BEc LLB (Macquarie)

Leanne Brown is a qualifi ed solicitor with ten years’ experience and an associate director in Macquarie Bank’s Investment Banking Funds division having joined Macquarie Bank in 2005. Leanne is responsible for the legal and company secretarial function for a number of listed funds managed by the Macquarie Bank Group.

MCAIL

Roslyn O’Brien JP

Roslyn O‘Brien has been employed by Butterfield Fund Services (Bermuda) Limited for over 10 years and has worked as a Corporate Administrator for over 25 years. Her responsibilities include administration of international mutual funds and other companies.

MCAML

Dennis Leong

BSc BE (Hons) (Syd), MCom (UNSW), CPA, FCIS

Dennis Leong has been Macquarie Bank company secretary since 1993, prior to which he spent 12 years working in corporate finance at Macquarie Bank and Hill Samuel Australia Limited.

72

Disclaimer

DisclaimerMacquarie Capital Alliance Group (MCAG) comprises Macquarie Capital Alliance Trust ARSN 112 638 212 (MCAT), Macquarie Capital Alliance Limited ABN 96 112 594 662 (MCAL) and Macquarie Capital Alliance International Limited ARBN 113 880 783 (MCAIL). Macquarie Capital Alliance Management Limited (MCAML) ABN 94 105 777 704 (MCAML) is the responsible entity of MCAT, manager to MCAL and adviser to MCAIL. MCAML is a wholly owned subsidiary of Macquarie Bank Limited ABN 46 008 583 542.

Consortium InvestmentsMCAG’s interest in consortium investments is subject to various rights in favour of other consortium investors. Those rights include provisions which treat it as having offered to sell all of its interests to other investors at “fair market value” in the event of a change of control of MCAG (including a change of MCAG’s manager).

StaplingIn accordance with its requirements in respect of stapled securities, ASX reserves the right (but without limiting its absolute discretion) to remove any or all of MCAT, MCAL and MCAIL from the offi cial list of ASX if, while the stapling arrangements apply, the securities in one of the entities cease to be stapled to the securities in the other entities or one of the entities issues equity securities (other than the A Special Share and B Special Share issued by each of MCAL and MCAIL) which are not then stapled to equivalent securities in the other entities.

Performance DisclaimerInvestments in MCAG are not deposits with or other liabilities of Macquarie Bank Limited or any entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MCAL, MCAIL, nor any member of the Macquarie Bank Group, including MCAML, guarantees the performance of MCAG, the repayment of capital or the payment of a particular rate of return on MCAG stapled securities.

Advice WarningThis annual report does not take into account the investment objectives, fi nancial situation and particular needs of the investor. Before making an investment in MCAG, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and fi nancial circumstances and consult an investment adviser if necessary.

Manager FeesMCAML, as responsible entity of MCAT, manager of MCAL and adviser to MCAIL, is entitled to fees for so acting. Macquarie Bank Limited and its related corporations (including MCAML) together with their offi cers and directors and offi cers and directors of MCAL and MCAIL may hold stapled securities in MCAG, from time to time.

Financial ReportThe full fi nancial report and auditor’s report will be sent to security holders on request, free of charge. Please call Computershare Investor Services on 1800 253 098 and a copy will be forwarded to you.

Complaints HandlingA formal complaints handling procedure is in place for MCAG. MCAML (the responsible entity) is a member of the Banking and Financial Services Ombudsman (BFSO). Complaints should in the fi rst instance be directed to the responsible entity. If you have any enquiries or complaints, please contact:

The Manager – Investor Relations Macquarie Capital Alliance Group

Level 11, No. 1 Martin PlaceSydney NSW 2000Telephone (Australia): 1800 215 868Telephone (international): (612) 8232 9284Email: [email protected]

MCAG’s Ongoing Commitment To Your PrivacyWe understand the importance you place on your privacy and are committed to protecting and maintaining the confi dentiality of the personal information you provide to us. MCAG has adopted the Macquarie Bank Limited privacy policy. For further information, visit the MCAG website at www.macquarie.com/mcag or contact our Investor Relations team on 1800 215 868.

Investment life cycle

Investment analysis and due diligence

Financial structuring and execution

Ongoing commercial, capital and fi nancial management

Realisations

Deal fl ow

Returns to MCAG

EBITDA1 Growth vs. Prior Corresponding Period (pcp) Pre Specifi c Items Reported

European Directories2 � 3% � 7%

Red Bee Media � 20% � 67%

AIR-serv � 22% � 20%

Retirement Care Australia3 � 34% � 26%

The Zig Inge Group � 40% � 40%

1. Earnings before interest, tax, depreciation and amortisation.

2. Six month pcp (European Directories has a calendar year end). Forecast actual CY07 Earnings before interest, tax, depreciation and amortisation (EBITDA) growth is 13 – 15% vs. full year pcp. Forecasts are subject to uncertainty and contingencies. Actual results may vary from forecasts and any variation may be materially positive or negative.

3. Retirement Care Australia (1) portfolio excluded (negative base).

Corporate DirectoryMacquarie Capital Alliance Group

No.1 Martin PlaceSydney NSW 2000Telephone (Australia): 1800 215 868Telephone (international): (612) 8232 9284Facsimile: (612) 8232 5904Email: [email protected]/mcag

Responsible Entity for Macquarie Capital Alliance Trust, manager for Macquarie Capital Alliance Limited and adviser for Macquarie Capital Alliance International Limited:


DirectorsMCAL

Rowan Ross (Chairman)Robin CrawfordKen MossAnthony Nagel

MCAML

Rowan Ross (Chairman)Robin CrawfordKen Moss Nicholas MooreAnthony Nagel

MCAIL

Kim Carter (Chairman)Rowan RossRodney BirrellAnthony Nagel

Secretaries

Christine Williams (MCAL and MCAML only)Leanne Brown ((MCAL and MCAML only)Dennis Leong (MCAML only)Roslyn O’Brien (MCAIL only)

Chief Executive Offi cer

Michael Cook

Chief Financial Offi cer

Mark Steinberg

Registry

Computershare Investor Services Pty LtdLevel 3, 60 Carrington StreetSydney NSW 2000AustraliaTelephone (Australia): 1800 253 098Telephone (international): (613) 9415 4208Facsimile: (612) 8234 5050

Financial ReportA copy of the MCAG full fi nancial report for the period ended 30 June 2007 is available on the MCAG website: www.macquarie.com/mcag

The MCAG 2007 annual report is printed on an EMAS (Eco-Management and Audit System) accredited paper stock which is totally chlorine free. EMAS is the European Union’s regulated environmental management system.

Typical Investment Life Cycle

MA

CQ

UA

RIE

CA

PITA

L ALLIA

NC

E G

RO

UP

AN

NU

AL R

EPO

RT 2007

Australia: 1800 215 868International: (612) 8232 9284

Macquarie Capital Alliance GroupNo.1 Martin PlaceSydney NSW 2000

[email protected]

www.macquarie.com/mcag

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MACQUARIE CAPITAL ALLIANCE GROUPNOTICES OF MEETING

MACQUARIE CAPITAL ALLIANCE LIMITED (ABN 96 112 594 662)Notice of Annual General Meeting 2007

MACQUARIE CAPITAL ALLIANCE TRUST(ARSN 112 638 212)Notice of Meeting 2007

MACQUARIE CAPITAL ALLIANCE INTERNATIONAL LIMITED (ARBN 113 880 783)Notice of Annual General Meeting 2007

2 - Macquarie Capital Alliance Group - Notices of Meeting

BACKGROUND AND PURPOSE

Macquarie Capital Alliance Group (MCAG) is a stapled structure and comprises the following entities:

Macquarie Capital Alliance Limited (MCAL);

Macquarie Capital Alliance Trust (MCAT or the Trust); and

Macquarie Capital Alliance International Limited (MCAIL).

Macquarie Capital Alliance Management Limited (MCAML or the Responsible Entity) is the responsible entity of the Trust.

The issued units of MCAT and the issued ordinary shares of MCAL and MCAIL are stapled together and quoted jointly on the Australian Securities Exchange (ASX) and are referred to as stapled securities. As a result each such unit and share cannot be traded separately. Under the Corporations Act and Bermuda Companies Act it is necessary for MCAL and MCAIL (respectively) to hold an annual general meeting. It is MCAG’s policy to also hold a general meeting for MCAT in conjunction with the annual general meeting of MCAL and MCAIL.

The business to be considered at the annual general meeting of MCAL is:

to receive and consider the audited financial statements of MCAL for the period to 30 June 2007;

to adopt the remuneration report included in the directors’ report for the period to 30 June 2007;

to re-elect Kenneth Moss as a director of MCAL;to approve future issues of base fee and performance fee securities; and

to renew the proportional takeover provisions in articles 5.11 to 5.16 of the MCAL Constitution.

The directors of MCAL recommend that investors vote in favour of the resolutions

The business to be considered at the annual general meeting of MCAIL is:

to receive, consider and approve the audited financial statements of MCAIL for the period to 30 June 2007;

to re-appoint PricewaterhouseCoopers as auditors;

to re-elect Anthony Nagel as a director of MCAIL;

to approve future issues of base fee and performance fee securities; and

to adopt New Bye-laws of MCAIL given recent changes to the Bermuda Companies Act.

The directors of MCAIL recommend that investors vote in favour of the resolutions

The business to be considered at the general meeting of MCAT is:

to renew the proportional takeover provisions in clauses 3.22 to 3.27 of the MCAT Constitution; and

to approve future issues of base fee and performance fee securities.

The directors of MCAML recommend that investors vote in favour of the resolution

The meetings will be held at:

11.00am on Wednesday, 28 November 2007Ballroom 1The Westin Hotel 1 Martin PlaceSydney NSW 2000

Macquarie Capital Alliance Group - Notices of Meeting - 3

Notice is given that an Annual General Meeting of the members of MCAL will be held at 11.00am on Wednesday, 28 November 2007 at Ballroom 1, The Westin Hotel, 1 Martin Place, Sydney in conjunction with the annual general meeting of Macquarie Capital Alliance International Limited and the general meeting of Macquarie Capital Alliance Trust, to transact the following business:

Ordinary business

Financial Accounts and Reports

To receive and consider the Financial Report, the Directors’ Report and the Auditor’s Report thereon, for the period ended 30 June 2007.

Resolution 1: Adoption of remuneration report

To consider, and if thought fit, to pass as a non-binding and advisory resolution in accordance with section 250R of the Corporations Act:

“That MCAL adopt the remuneration report included in MCAL’s Directors’ Report for the period ended 30 June 2007.”

Resolution 2: To re-elect director

To consider, and if thought fit, to pass as an ordinary resolution:

“That Kenneth Moss be re-elected as a director of MCAL.”

NOTICE OF ANNUAL GENERAL MEETINGMACQUARIE CAPITAL ALLIANCE LIMITED(ACN 112 594 662) (MCAL)

Resolution 3: To renew the proportional takeover provisions in the MCAL Constitution

To consider, and if thought fit, to pass as a special resolution:

“That the proportional takeover provisions contained in articles 5.11 to 5.16 (inclusive) of the MCAL Constitution be renewed with effect from 1 December 2007 for a period of three years.”

Resolution 4 - Future issues of base fee and performance fee securities


“That (for all purposes including for the purposes of Listing Rules 7.1 and 10.11) MCAL approve issues of shares in MCAL that occur during the three year period from 28 November 2007 to Macquarie Capital Alliance Management Limited (or its related body corporate nominee) (MCAML) as advisor to MCAL under the Management Services Agreement in consideration of MCAML applying, subject to approval of the MCAG independent directors, the base fees or performance fees payable by MCAG to MCAML at the end of each calendar quarter in each year whilst this approval is in force as the subscription price for those new securities.”

MCAL will disregard any votes cast on Resolution 4 by MCAML or its associates (including its directors and MBL), however need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides. See pages 12 and 13 of the Explanatory Notes for further information regarding voting by nominees.

By Order of the Board of Macquarie Capital Alliance Limited

Leanne BrownCompany Secretary

14 September 2007


Notice is given that an Annual General Meeting of the members of MCAIL will be held at 11.00am on Wednesday, 28 November 2007 at Ballroom 1, The Westin Hotel, 1 Martin Place, Sydney, in conjunction with the annual general meeting of Macquarie Capital Alliance Limited and the general meeting of Macquarie Capital Alliance Trust, to transact the following business:

Ordinary business

Resolution 1: Financial Accounts and Reports


“To receive, consider and approve the Financial Report, the Directors’ Report and the Auditor’s Report thereon, for the period ended 30 June 2007.”

Resolution 2: To re-appoint PricewaterhouseCoopers as auditors


“To re-appoint PricewaterhouseCoopers as auditors of MCAIL and to authorise the directors to determine their remuneration.”

Resolution 3: To re-elect director


“That Anthony Nagel be re-elected as a director of MCAIL.”



“That (for all purposes including for the purposes of Listing Rules 7.1 and 10.11) MCAIL approve issues of shares in MCAIL that occur during the three year period from 28 November 2007 to Macquarie Capital Alliance Management Limited (or its related body corporate nominee) (MCAML) as advisor to MCAIL under the Advisory Agreement in consideration of MCAML applying, subject to approval of the MCAG independent directors, the base fees or performance fees payable by MCAG to MCAML at the end of each calendar quarter in each year whilst this approval is in force as the subscription price for those new securities.”

MCAIL will disregard any votes cast on Resolution 4 by MCAML or its associates (including its directors and MBL), however need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides. See pages 12 and 13 of the Explanatory Notes for further information regarding voting by nominees.

Resolution 5: to adopt new MCAIL Bye-laws

To consider, and if thought fit, to pass as a special resolution:

“To adopt New Bye-laws of MCAIL in substitution for the existing Bye-laws.”

By Order of the Board of Macquarie Capital Alliance International Limited

Roslyn O’BrienCompany Secretary

14 September 2007

NOTICE OF ANNUAL GENERAL MEETINGMACQUARIE CAPITAL ALLIANCE INTERNATIONAL LIMITED(ARBN 113 880 783) (MCAIL)


NOTICE OF ANNUAL GENERAL MEETINGMACQUARIE CAPITAL ALLIANCE TRUST(ARSN 112 638 212) (MCAT OR TRUST)

Macquarie Capital Alliance Management Limited ACN 105 777 704 (AFSL 236894) being the responsible entity of MCAT gives notice that a meeting of the members of MCAT will be held at 11.00am on Wednesday, 28 November 2007 at Ballroom 1, The Westin Hotel, 1 Martin Place, Sydney, in conjunction with the annual general meetings of Macquarie Capital Alliance Limited and Macquarie Capital Alliance International Limited, to transact the following business:

Resolution 1 - To renew the proportional takeover provisions in the MCAT Constitution

To consider, and if thought fit, to pass a special resolution:

“That the proportional takeover provisions contained in clauses 3.22 to 3.27 (inclusive) of the MCAT Constitution be renewed with effect from 1 December 2007 for a period of three years.”



“That (for all purposes including for the purposes of Listing Rules 7.1 and 10.11) MCAT approve issues of units in MCAT that occur during the three year period from 28 November 2007 to Macquarie Capital Alliance Management Limited (or its related body corporate nominee) (MCAML) as responsible entity of MCAT

under the Constitution of MCAT in consideration of MCAML applying, subject to approval of the MCAG independent directors, the base fees or performance fees payable by MCAG to MCAML at the end of each calendar quarter in each year whilst this approval is in force as the subscription price for those new securities.”

MCAML will disregard any votes cast on Resolution 2 by MCAML or its associates (including its directors and MBL), however need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides. See pages 12 and 13 of the Explanatory Notes for further information regarding voting by nominees.

By Order of the Board of Macquarie Capital Alliance Management Limitedbeing the responsible entity of MCAT

Leanne BrownCompany Secretary

14 September 2007


Resolutions

To validly pass an ordinary resolution, more than 50% of the votes cast by security holders entitled to vote on the resolution must be in favour of the resolution.

To validly pass a special resolution, at least 75% of the votes cast by security holders entitled to vote on the resolution must be in favour of the resolution.

Note that Resolution 1 of the MCAL Notice of Meeting is advisory only and is a non-binding shareholder vote in accordance with section 250R of the Corporations Act.

Note that a voting exclusion statement applies to MCAL and MCAIL Resolution 4 and MCAT Resolution 2 as set out in further detail on pages 12 and 13 of these Explanatory Notes.

Financial Accounts and Reports

MCAL no resolution required / MCAIL Resolution 1

As required by the Corporations Act and the Bermuda Companies Act respectively, the Financial Report, Directors’ Report and Auditor’s Report of each of MCAL and MCAIL for the most recent financial year will be laid before the meeting. In the case of MCAL, no resolution is required. However, it is a requirement under the Bermuda Companies Act that a resolution is passed to approve MCAIL’s reports. This is a standard form of resolution common to annual general meetings in Bermuda incorporated companies. To pass this resolution, more than 50% of the votes cast by MCAIL shareholders entitled to vote on the resolution must be in favour of the resolution.

An MCAL shareholder (ie MCAG stapled security holder) who is entitled to vote at the MCAL meeting may submit a written question to MCAL’s auditor under section 250PA of the Corporations Act if the question is relevant to the content of the MCAL Auditor Report or the conduct of the audit of the MCAL Financial Report. Any such security holder wanting to do so, must give the question to MCAL (attention Leanne Brown) at the address for MCAG shown in the Corporate Directory no later than the 5th Business Day before the meeting (that is, by 21 November 2007). The auditor will also be available at the AGM to answer security holder questions on the conduct of the audit and the preparation and content of the auditor’s report.

Resolution to adopt Remuneration Report

MCAL Resolution 1

Under Section 300A of the Corporations Act, MCAL must include a Remuneration Report in the Directors’ Report and under section 250R of the Corporations Act a resolution that MCAL’s Remuneration Report be adopted must be put to members. The MCAL Remuneration Report appears in the MCAL Directors’ Report for the period ending 30 June 2007 which was sent to MCAG security holders (note that it is not included in the MCAG Concise Financial Report) and is also available from MCAG’s website: www.macquarie.com/mcag.

The MCAL Remuneration Report describes the policies behind and sets out the remuneration arrangements in place for each MCAL Director.

The independent and non-executive directors of MCAL are remunerated by MCAL and each received fees of A$45,000 per annum for acting as directors of MCAL. MCAL’s executive director is employed and remunerated by the MBL Group.

None of the MCAL independent and non-executive directors are entitled to MCAG options or securities or to retirement benefits as part of their remuneration package.

As noted in the Remuneration Report and MCAG’s Annual Report, MCAML makes available employees (including senior executives) to discharge its obligations to MCAL. These staff are employed by entities in the MBL Group and made available to MCAG through formalised resourcing arrangements with MCAML. Their remuneration is not a MCAG expense. It is paid by the MBL Group. Instead MCAG pays management fees to the MBL Group for providing management and advisory services.

While MCAG management are MBL Group employees there is a strong alignment of interest between those employees and MCAG investors as described in the MCAG Remuneration Report appearing in the Annual Report.

An opportunity for discussion of the Remuneration Report will be provided at the AGM. The vote on this resolution is advisory only, and does not bind the Directors of MCAL.

EXPLANATORY NOTES TO MACQUARIE CAPITAL ALLIANCE GROUPNOTICES OF MEETING


Resolution to re-appoint Auditors

MCAIL Resolution 2

All companies in Bermuda to which the Bermuda Companies Act applies are required (unless all shareholders and directors, either in writing or at a general meeting, otherwise agree) to appoint auditors at each annual general meeting to hold office until the close of the next annual general meeting. The existing auditors of MCAIL, PricewaterhouseCoopers (PwC), were appointed at the first annual general meeting of MCAIL. This resolution proposes the re-election of PwC as auditors and, in accordance with standard practice, authorises the directors to fix their remuneration.

MCAG’s Audit and Risk Committees have adopted an auditor independence policy to ensure that PwC remains independent from the Macquarie Group and MCAG at all times and complies with APES 110: Code of Ethics for Professional Accountants pertaining to financial independence, business and employment relationships – please see the MCAG Annual Report (Corporate Governance Statement) or the MCAG website:www.macquarie.com/mcag for more details.

The MCAIL board and Audit and Risk Committee is of the view that, at the present time, PwC is best placed to provide MCAIL’s audit services because PwC is a top tier professional service firm. It has provided audit services to MCAIL since MCAIL’s establishment and is familiar with MCAIL’s structure and assets. The auditor is required to be independent from MCAIL and MBL. PwC meets this requirement.

To pass this resolution, more than 50% of the votes cast by MCAIL shareholders entitled to vote on the resolution must be in favour of the resolution.

Resolution to re-elect directors

MCAL Resolution 3– re-elect Kenneth Moss

MCAIL Resolution 3 – re-elect Anthony Nagel

Article 10.3 of the Constitution of MCAL and the MCAIL Existing Bye-laws require that one-third of the directors on each Board retire at each annual general meeting. If they are eligible, they may stand for re-election.

Directors appointed by the MCAL A Special Shareholder (Rowan Ross and Robin Crawford) and MCAL B Special Shareholder (Anthony Nagel) are exempt from the requirement to retire by rotation as a director of MCAL. Accordingly, Kenneth Moss retires by rotation and, being eligible, offers himself for re-election as a director of MCAL.

Directors appointed by the MCAIL A Special Shareholder (Rowan Ross and Kim Carter) and MCAIL B Special Shareholder (Rodney Birrell) are exempt from the requirement to retire by rotation as a director of MCAIL. Accordingly, Anthony Nagel retires by rotation and, being eligible, offers himself for re-election as a director of MCAIL.

To pass these resolutions, more than 50% of the votes cast by MCAIL and MCAL shareholders (respectively) entitled to vote on the resolution must be in favour of the resolution.

Kenneth Moss

Kenneth Moss has extensive experience as an executive and company director. Kenneth is the chairman of Boral Limited and Centennial Coal Company Limited. He is also a director of GPT Management Holdings Limited. Kenneth commenced his career with Howard Smith in 1974 and has held senior positions both in Australia and overseas with Howard Smith before becoming managing director in 1993 until August 2000.

Kenneth graduated with a Bachelor of Engineering (Honours) and holds a Doctorate of Philosophy in mechanical engineering from Newcastle University.

Anthony Nagel

Anthony Nagel is Chief Executive Officer of QuoVadis Limited which specialises in the provision of computer encryption and security services and products. For the past five years, Anthony has been a member of the E-Commerce Advisory Board established by the Bermuda Minister of Telecommunications and Commerce.

Anthony served as Chief Financial Officer of Full Service Trade System Limited between 1996 and 1999 and Bermuda Commercial Bank between 1993 and 1996. Anthony is currently a director of Cybermuda Limited and is also a member of the Bermuda International Business Association E-Commerce Committee.

Anthony has a Bachelor of Laws (Hons) from the University of Manchester and became a member of the Institute of Chartered Accountants of England and Wales in 1987. He also holds a diploma from the Bermuda Insurance Institute.


Resolutions to renew proportional takeover provisions in MCAL and MCAT Constitutions

MCAL Resolution 3, MCAT Resolution 1

Introduction

The Constitutions of MCAL and MCAT currently contain provisions dealing with proportional takeover bids for MCAL and MCAT securities in accordance with the Corporations Act. The provisions are designed to assist members to receive proper value for their shares if a proportional takeover bid is made for MCAL and MCAT.

Under the Corporations Act and the Constitutions of MCAL and MCAT, the provisions must be renewed every three years or they cease to have effect. If renewed, the proposed proportional takeover provisions will be in exactly the same terms as the previous provisions.

The Corporations Act requires that the following information be provided to members when they are considering the inclusion of proportional takeover provisions in a constitution.

Effect

The relevant provisions of MCAL’s constitution (articles 5.11 to 5.16 (inclusive)), and MCAT’s constitution (clauses 3.22 to 3.27 (inclusive)) prohibit the registration of any transfer of MCAL and MCAT securities giving effect to any offer made under a proportional takeover bid for MCAL and MCAT securities unless and until the persons holding securities in the class for which the bid was made have passed a resolution approving

the bid, with each such person having one vote for each bid class security held by the person as at the end of the day on which the first offer under the bid was made. The bidder and any associate of the bidder are excluded from voting on any such resolution. The resolution will be passed if more than 50% of votes are cast in favour of the resolution.

If a proportional takeover bid is made, the Directors of MCAL and the Directors of the Responsible Entity must ensure that such a resolution to approve the bid is voted on before the end of the day before the fourteenth day before the last day of the bid period (otherwise a resolution approving the bid is taken to have been passed). The Directors can determine whether the approving resolution is to be voted on at a meeting of persons entitled to vote on the resolution or by means of a postal ballot.

If a resolution to approve the bid is rejected, binding acceptances are required to be rescinded, and all unaccepted offers and offers failing to result in binding contracts are taken to have been withdrawn.

If the bid is approved or taken to have been approved, the transfers resulting from the bid may be registered provided that they comply with other provisions of the Corporations Act and the constitutions. of MCAL and MCAT

The proportional takeover provisions do not apply to full takeover offers.

Reasons

Without the proportional takeover approval provisions, a proportional takeover bid may enable control of MCAL and MCAT to pass without members having the opportunity to

sell all of their securities to the bidder. Members may be exposed to the risk of being left as a minority in MCAL and MCAT and of the bidder being able to acquire control of MCAL and MCAT without payment of an adequate control premium for their securities.

The proposed proportional takeover provisions lessen this risk because they allow members to decide whether a proportional takeover bid is acceptable and should be permitted to proceed.

No knowledge of any acquisition proposals

At the date of this notice, no Director of MCAL is aware, and the Directors of the Responsible Entity are not aware in relation to MCAT, of any proposal by any person to acquire, or to increase the extent of, a substantial interest in MCAL and MCAT.

Review of proportional takeover approval provisions

The Corporations Act requires that members be given a statement which retrospectively examines the advantages and disadvantages, for Directors and members, of the proportional takeover approval provisions proposed to be renewed. Such a statement follows.

While proportional takeover approval provisions have been in effect there have been no takeover bids for MCAL or MCAT, either proportional or otherwise. So, there are no actual examples against which to review the advantages or disadvantages of the original proportional takeover approval provisions (i.e. articles 5.11 to 5.16 of the MCAL Constitution and clauses 3.22 to 3.27 of the MCAT Constitution) for the Directors and members of MCAL or the Directors

EXPLANATORY NOTES TO MACQUARIE CAPITAL ALLIANCE GROUPNOTICES OF MEETING (CONTINUED)


of the Responsible Entity and the members of MCAT. Neither the MCAL Board nor the Directors of the Responsible Entity are aware of any potential takeover bid that was discouraged by articles 5.11 to 5.16 of the MCAL Constitution or clauses 3.22 to 3.27 of the MCAT Constitution. It follows that the MCAL Board and the Directors of the Responsible Entity are not aware of any advantages or disadvantages of the proportional takeover provisions in the past.

Potential Advantages and Disadvantages

As well as a retrospective look at the provisions proposed to be renewed, the Corporations Act requires that members be given a statement of the potential future advantages and disadvantages, for Directors and members of MCAL and the Directors of the Responsible Entity and members of MCAT, of the provisions.

The Directors of MCAL and the Responsible Entity consider that the proposed renewal of the proportional takeover approval provisions has no potential advantages or potential disadvantages for Directors because they remain free to make a recommendation on whether a proportional takeover bid should be approved.

The potential advantages of the proposed proportional takeover approval provisions for members of MCAL and MCAT are:

(a) they give members their say in determining by majority vote whether a proportional takeover bid should proceed;

(b) they may assist members in not being locked in as a relatively powerless minority;

(c) they increase members’ bargaining power and may assist in ensuring that any proportional bid is adequately priced; and

(d) knowing the view of the majority of members assists each individual member in assessing the likely outcome of the proportional takeover bid and whether to approve or reject that offer.

Some potential disadvantages to members of MCAL and MCAT are:

(a) it is a hurdle and may discourage the making of proportional takeover bids in respect of MCAL and MCAT;

(b) this hurdle may depress the security price or deny members an opportunity to sell their securities at a premium; and

(c) it may reduce the likelihood of a proportional takeover being successful.

However, the Boards of MCAL and the Responsible Entity do not perceive those or any other possible disadvantages as justification for not renewing the proportional takeover approval provisions for a further three years.

Special Resolution

To pass MCAL Resolution 3 and MCAT Resolution 1 at least 75% of the votes cast by MCAL shareholders and MCAT unitholders (respectively) entitled to vote on the resolution must be in favour of the resolution.

Resolution to approve future issues of base fee and performance fee securities

MCAL and MCAIL Resolution 4, MCAT Resolution 2

Provisions in the MCAT Constitution, Management Services Agreement and the Advisory Agreement allow MCAML to reinvest the base fees or performance fees payable to MCAML as MCAG’s manager/advisor by subscribing for MCAG securities and applying the base fees or performance fees payable to it as the subscription price of those securities (Provisions). It is necessary for ASX Listing Rule purposes for MCAG security holders to refresh their approval for the issue, in accordance with the Provisions, of MCAG securities to MCAML.

ASX Listing Rule 10.11 requires that an issue of securities to a responsible entity of a trust or its related parties requires MCAG security holder approval. Listing Rule 7.1 limits the number of securities that may be issued without MCAG security holder approval to 15% of the market capital of the entity in any 12 month period. Any issue of securities without MCAG security holder approval is deducted from an entity’s 15% placement capacity under Listing Rule 7.1.

ASX has granted MCAG a waiver from Listing Rules 10.11 and 7.1 in respect of the issue of base fee and performance fee securities to MCAML in accordance with the Provisions on the condition, among others, that MCAG security holder approval is obtained every third year for such issues of MCAG securities. The other conditions of this waiver are that MCAG has fully disclosed the Provisions in any prospectus or


product disclosure statement, that any base fee or performance fee securities are issued in accordance with the Provisions and that the details (including the number) of base fee or performance fee securities are disclosed to the ASX at the time of issue using an ASX Listing Rule Appendix 3B Form, and also disclosed in the annual report of MCAG in the year they are issued. MCAG has complied with these other conditions and MCAG security holder approval is being sought for the issue, in accordance with the Provisions, of MCAG securities to MCAML over the next 3 years.

The MCAG Boards are of the view that MCAML’s ability to apply to reinvest base fees and performance fees in MCAG securities is in the best interests of MCAG security holders for the following reasons:

the manager/advisor’s interests are more closely aligned with the interests of MCAG security holders. The value of MCAG securities held by MCAML increases and decreases the same as it does for other MCAG security holders.

MCAG does not have to retain cash to satisfy base fees and performance fees and can use it for other purposes.

if the base fees and performance fees are payable in cash, without reinvestment they may, depending on their amount, impact on the cash available for distribution (if any) to members.

While the reinvestment of Base Fees and Performance Fees in MCAG securities is likely to increase near-term cash flows, it is correspondingly likely to dilute long-term cash flows.

This resolution will not affect the level of base fees and performance fees or the obligations of MCAG to pay the fees. This resolution is only relevant to the ability of MCAML (or its associate nominee) to apply the base fee or performance fee for a subscription for MCAG securities.

The MCAG independent directors acting in the best interests of members make the decision as to whether fees will be paid in cash or whether the manager/adviser will be permitted to reinvest the fees in MCAG securities. Accordingly, at the time of choosing how to meet the fee obligations, consideration will be given by MCAG’s Independent Directors to the security price, net asset backing and available cash and the impact of the application on MCAG security holders at that time.

If the base fees and performance fees (which are payable quarterly) are reinvested in MCAG securities, new MCAG Stapled securities must be issued as soon as reasonably practicable after the relevant quarter end and the issue price for the new MCAG stapled securities is the volume weighted average trading price of all MCAG stapled securities traded on the ASX during the last 15 trading days of the relevant quarter (Issue Price). The maximum number of MCAG stapled securities that may be issued in respect of the base or performance fees payable in respect of a particular quarter is the amount of the base fee or the performance fee (as the case may be) divided by the Issue Price for the relevant quarter.

Base fees

MCAML’s Base Fees are calculated as 1.5% of the net investment value of MCAG (less any management fees payable to a manager of an MBL managed fund) at the end of each quarter.

To date, MCAML has re-invested base fees in MCAG securities for the following quarters as set out in the table below. All other base fees were paid in cash.

Performance fees

A performance fee is calculated and payable by MCAG quarterly in arrears in the event that the MCAG accumulation index outperforms the S&P ASX 200 Accumulation Index having made up for any underperformance in previous quarters. The performance fee is 20% of the amount of the net outperformance. To date MCAML has not earned a performance fee.

More than 50% of the votes cast by MCAG security holders must be in favour of the relevant resolution for MCAL, MCAT and MCAIL. MCAML and its associates (including its directors and MBL) are excluded from voting on these resolutions as set out in the Voting Exclusion Statement on pages 12 and 13 of these Explanatory Notes.

Quarter end date Base Fee payable and re-invested

Number of MCAG securities issued

30 September 2006 $3,581,895 1,016,968

31 December 2006 $4,023,514 1,013,074



MCAIL Resolution to adopt bye-laws

MCAIL Resolution 5

The principal Bermuda statute governing the formation and operation of companies carrying on business in or from within Bermuda is The Companies Act 1981 of Bermuda (the Bermuda Companies Act). The Bermuda Companies Act was based on the Companies Act 1948 of England and Wales and has over the years been revised with a view to incorporating developments in company law, occurring predominantly in the United Kingdom and Canada. In 2006, an extensive review was undertaken of the Bermuda Companies Act with a view to upgrading it in order to ensure that Bermuda company law could meet the demands of business in the twenty-first century. As a result, The Companies Amendment Act 2006 of Bermuda (the BCA Amendment Act) came into force at the end of 2006.

The current MCAIL Bye-laws were adopted on 6 June 2005 (the Existing Bye-laws). It is proposed that a complete new set of Bye-laws for MCAIL be adopted (the New Bye-laws) to reflect the recent changes made to the Bermuda Companies Act by the BCA Amendment Act which the Board considers to be beneficial to MCAIL. MCAIL is also taking this opportunity to amend certain other provisions in the Existing Bye-laws. A copy of the New Bye-laws will be tabled at the AGM and after adoption be available on the ASX and MCAG websites.

Summary of Principal Provisions in the New Bye-laws

A summary of the principal provisions in the New Bye-laws which are significantly different from the equivalent provisions in the Existing Bye-laws is set out below.

Electronic Records and the electronic delivery of documents: New Bye-laws 1, 46, 47, 48, 50, 84 and 86

Bye-law 1 has been revised to allow for a new definition of Electronic Records, as the BCA Amendment Act enables a company to deliver an electronic record of documents (by way of electronic means) and may also include an electronic code or device to decrypt or interpret the Electronic Record. An Electronic Record may be delivered by communicating it by electronic means to an address provided by the recipient for that purpose (effectively, e-mail). An Electronic Record is also deemed to have been delivered if it is published on a website and the person to whom the document is to be provided has agreed to that method and been given access to the necessary webpage.

References to Electronic Records and/or the electronic manner of delivery of documents are now contained in Bye-laws 1 (Definitions), 46 (Meetings by Technology), 47 (Voting at General Meetings which includes the counting of votes by way of Electronic Records), 48 (Procedure for Polls), 50 (Representation and Voting of Shareholders), 84 (Accounting Records) and 86 (Notices Generally).

Written Resolutions of Shareholders: New Bye-law 40

Bye-law 40 has been revised to remove the requirement for unanimity as a matter of law. The BCA Amendment Act has removed the need for different voting requirements by shareholders depending on whether a matter was presented to members at a general meeting (in which case the specified voting majority applied) or decided by way of written resolution (in which case unanimity was required). Pursuant to the BCA Amendment Act notice must be given to all members entitled to vote on the resolution, and the majority that could have passed the resolution at a general meeting can pass such resolution by way of a written resolution. This amendment therefore confers greater flexibility on the mode of obtaining shareholder approval whist ensuring compliance with the necessary voting majorities.

It should be noted that the BCA Amendment Act has not removed the requirement for unanimity by the Board of Directors with respect to written resolutions of the Board irrespective of their voting majority requirements in an actual meeting of the Board.


Appointment of Officers: New Bye-laws 44, 67, 68 and 72

Bye-laws 44, 67, 68 and 72 have been revised to reflect that a company no longer has to appoint any officers (other than the secretary), whereas previously a Bermuda company had to appoint directors as either a chairman and deputy chairman or president and vice-president. This amendment enables the Board to have complete flexibility over who should be appointed officers (apart from the secretary). Currently the Company has appointed two directors as chairman and deputy chairman and it is expected that these appointments will remain in place for the time being.

Execution of Documents: New Bye-law 74

Historically, a Bermuda company was required by statute to affix its common seal to various instruments or deeds. However, given advances in corporate law around the world, the common seal has become an anachronistic practice in modern day commerce. The BCA Amendment Act allows Bermuda companies to execute deeds or other instruments (such as share certificate or debentures) which were previously executed under the company seal, by way of an authorised person.

Bye-law 74 has been revised to allow for this greater flexibility in executing documents but the use of the common seal has been retained for use if needed (for example to comply with requirements outside of those contained in the Bermuda Companies Act). If the seal is applied to a document, the usual formalities related to the affixing of the seal continue to apply.

Indemnification of Directors and Officers: New Bye-law 90

Bye-law 90 has been revised to clarify that the Company can fund the costs of proceedings against directors and officers in circumstances where there have been allegations of fraud or dishonesty. However if such allegations are proved against that Director or Officer then such advance must be repaid to the Company.

Consequential changes

Various minor amendments have been made throughout the Bermuda Companies Act to remove references to “post” and the like. This alteration is reflected through out the New Bye-laws.

MCAIL Resolution 5 is a special resolution and, to be passed, must be passed by 75% or more of the votes cast by MCAIL security holders present (in person or by proxy or by representative) and entitled to vote on the resolution.

Defined terms

Certain defined terms are set out in the Glossary although terms which are defined in the Constitution of MCAL, Existing Bye-laws of MCAIL and the Constitution of the Trust have the same meaning when used in these notices (including these notes and the Explanatory Notes to security holders) unless the context requires otherwise.

Quorum

The quorum for a meeting of members of MCAL and unit holders of MCAT is at least teo security holders present in person or by representative or proxy holding or representing the holders of at least

10% of the securities on issue. The quorum for a meeting of shareholders of MCAIL is two shareholders present in person or by proxy and entitled to vote.

Voting Exclusion Statement

As required by the ASX Listing Rules, MCAL, MCAML or MCAIL (as required) will disregard any votes cast on Resolutions 4 (MCAL and MCAIL) and Resolution 2 (MCAT) (each, a Relevant Resolution and together, the Relevant Resolutions) by MCAML or its associates (including its directors and MBL), however need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

On this basis, MCAL, MCAML and MCAIL would be required under the ASX Listing Rules to exclude all votes cast on the Relevant Resolutions by a person acting solely in a fiduciary, nominee or custodial capacity (Nominees) on behalf of a number of beneficial owners of MCAG Securities in circumstances where such beneficial owners are otherwise not excluded from voting under ASX Listing Rule 14.11.

However, the ASX has granted MCAG a waiver of the ASX Listing Rules to the extent necessary to enable MCAG to count any votes cast on the applicable Relevant Resolutions by Nominees on behalf of, and as directed by, those beneficial owners of MCAG Securities who are not otherwise excluded from voting under ASX Listing Rule 14.11.



MCAG’s ability to count the votes cast by Nominees are subject to the following conditions:

(a) the eligible beneficial owners of MCAG securities provide written confirmation to the Nominees that they:

(i) have no interest in the outcome of the Relevant Resolution; and

(ii) are not an associate of a person who has an interest in the outcome of the Relevant Resolution;

(b) the eligible beneficial owners of MCAG Securities direct the Nominees to vote for or against the Relevant Resolution; and

(c) the Nominees do not exercise discretion in casting a vote on behalf of the beneficial owners.

If you are a person who is excluded from voting and:

you vote in person at the meeting – you will be deemed to represent and warrant to MCAG that you do so only as a Nominee in compliance with the above conditions, or

you wish to vote by proxy – you should contact MCAG to confirm your Nominee status and compliance with the above conditions, otherwise your proxy will not count.

Proxy voting information

You can vote in either of two ways:

attending the meetings and voting in person or, if you are a corporate member, by corporate representative voting for you; or

appointing a proxy to attend and vote for you, using the enclosed voting and proxy form.

Voting in person

If you plan to attend the meeting, we ask that you arrive at the meeting venue at least 15 minutes prior to the time designated for the meeting so that we may check your security holding against our register of members and note your attendance.

Voting by corporate representative

If a corporate member plans to attend through a corporate representative (as opposed to a proxy), it must appoint a person to act as its representative under section 250D of the Corporations Act and the appointed person must bring appropriate written evidence of the appointment to the meeting signed in accordance with s127 of the Corporations Act.

Voting by proxy

If you do not intend to attend the meetings and are entitled to vote on the resolutions, you may select a representative or the chairman of the meetings to act as your proxy to attend and vote for you. A representative may be a natural person or a body corporate. A proxy need not be a member of MCAL, MCAT or MCAIL.

Your proxy can be appointed in respect of some or all of your votes. If you are entitled to cast two or more votes at the meetings you may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. An additional voting and proxy form is available on request if you wish to appoint two proxies.

Your proxy will also have the right to speak at the meeting and join in a demand for a poll.

You can use the attached voting and proxy form to appoint a proxy. A reply paid envelope has also been included with the Notices of Meeting for return of the voting and proxy form. You can also lodge your proxy appointment online from 2 October 2007 to 11.00am, Monday 26 November 2007 through the Computershare website at www.computershare.com/au/proxy/mcq (in which case your appointment will need to be authenticated in the manner described on that website).

If you return your voting and proxy form but do not nominate the identity of your proxy, the chairman of the meetings will automatically be your proxy. If you return your voting and proxy form but your nominated proxy does not attend the meeting, then your proxy will revert to the chairman.

Should you appoint a body corporate as your proxy, that body corporate will need to ensure that it

appoints an individual as its corporate representative to exercise its powers at meetings, in accordance with the Corporations Act; and

provides satisfactory evidence of the appointment of its corporate representative prior to commencement of the meeting.

If such evidence is not received prior to the commencement of the meeting, the body corporate (through its representative) will not be permitted to act as your proxy.


How will my proxy vote?

You can direct your proxy how to vote using the voting and proxy form. If your proxy votes, all your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes.

If you do not mark any of the boxes on a given item, your proxy may vote, or abstain from voting, as he or she chooses.

If you mark the “abstain” box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll, and your securities will not be counted in computing the required majority on a poll.

If you mark more than one box on an item your vote on that item will be treated as invalid.

The Chairman of the Meeting intends to vote undirected proxies in favour of each of the items of business on the Notices of Meeting.

Signing

If the member is a corporation, the voting and proxy form must be signed in accordance with s127 of the Corporations Act or under the hand of a duly authorised officer of the corporation.

A member which is a corporation having a sole director/secretary must state that fact on the voting and proxy form. If the member is a natural person, the voting and proxy form must be signed by the member

or the member’s attorney duly authorised in writing. Where stapled securities are jointly held, only one of the holders is required to sign the voting and proxy form.

Authorised officers

If the voting and proxy form is signed by an attorney or authorised officer, a certified copy of the power of attorney or other document signed by or on behalf of the member detailing the person’s authority must be provided to the registry before or at the same time as providing the voting and proxy form.

If the proxy appointment is lodged electronically and authenticated by a member’s attorney, a certified copy of the power of attorney or other document signed by or on behalf of the member detailing the person’s authority must be provided to the registry no later than 11.00am, Monday 26 November 2007.

Timing

For the appointment of a proxy to be effective, you must ensure that your voting and proxy form (and a certified copy of any relevant authority) is received by the registry, Computershare Investor Services Pty Limited, not less than 48 hours before the time of the meeting, i.e. no later than 11.00am, Monday 26 November 2007:

by mail;

by facsimile;

by hand delivery; or

electronically.

MCAL, MCAIL and the Responsible Entity have determined under Regulation 7.11.37 of Corporations Regulations 2001 Cth that for the purpose of voting at the meetings, stapled securities will be taken to be held by those persons recorded on the register as at 7.00pm, Sydney time, Monday, 26 November 2007.

Details for lodgement of Voting and Proxy Forms

Mailing Address: Computershare Investor Services Pty Limited GPO Box 242 MELBOURNE VIC 8060

Delivery Address: Computershare Investor Services Pty Limited Level 2, 60 Carrington Street SYDNEY NSW 2000

Facsimile: (+613) 9473 2118

Electronically: www.computershare.com.au/proxy/mcq

A reply paid envelope is enclosed for the return of the proxy form by mail

Computer Investor Services Pty Limited advises that Chapter 2C of the Corporations Act requires information about you as a security holder (including your name, address and details of the securities you hold) to be included in the public register of the entity in which you hold securities. Information is collected to administer your security holding and if some or all of the information is not collected then it might not be possible to administer your security holding. Your personal information may be disclosed to the entity in which you hold securities. You can obtain access to your personal information by contacting us at the address or telephone number shown in the Corporate Directory.



$ means Australian Dollars

Advisory Agreement means the advisory agreement dated 7 June 2005 between MCAML and MCAIL

ASX means ASX Limited (ACN 008 624 691) trading as the Australian Securities Exchange

Bermuda Companies Act means The Bermuda Companies Act 1981 of Bermuda

BCA Amendment Act means The Companies Amendment Act 2006 of Bermuda

Business Day means a business day for the purposes of the Corporations Act, being a day which is not a Saturday, Sunday or public holiday or bank holiday in Sydney

Corporations Act means Corporations Act 2001 (Cth)

Directors means the directors of MCAL, MCAML or MCAIL (as the case may require)

Existing Bye-laws means the Bye-laws of MCAIL as adopted on 6 June 2005

Explanatory Memorandum means this Explanatory Memorandum dated 14 September 2007

Management Services Agreement means the management services agreement between MCAML and MCAL

MBL means Macquarie Bank Limited (ACN 008 583 542)

MBL Group means MBL and its related bodies corporate within the meaning of the Corporations Act

MCAIL means Macquarie Capital Alliance International Limited (ARBN 113 880 783)

MCAG means Macquarie Capital Alliance Group, comprising MCAL, MCAT and MCAIL

MCAL means Macquarie Capital Alliance Limited (ACN 112 594 662)

MCAML means Macquarie Capital Alliance Management Limited (ACN 105 777 704), the responsible entity of MCAT

MCAT or Trust means Macquarie Capital Alliance Trust (ARSN 112 638 212)

MCAG Boards means the boards of Directors of MCAL, MCAML or MCAIL (as the case may require)

MCAG securities means the existing stapled securities in MCAG

New Bye-laws means the Bye-laws of MCAIL proposed to be adopted by security holders at the annual general meeting of MCAIL as explained in further detail in this Explanatory Memorandum

Responsible Entity means MCAML as responsible entity of MCAT

GLOSSARY

CORPORATE DIRECTORY

Macquarie Capital Alliance Group

No.1 Martin PlaceSydney NSW 2000

Telephone (Australia): 1800 215 868Telephone (international): +612 8232 9284Facsimile: +612 8232 5904Email: [email protected]: www.macquarie.com/mcag

Responsible Entity for Macquarie Capital Alliance Trust and manager for Macquarie Capital Alliance Limited and adviser for Macquarie Capital Alliance International Limited:


Directors

MCAL:Rowan Ross (Chairman)Robin CrawfordAnthony NagelKenneth Moss

MCAML:Rowan Ross (Chairman)Robin CrawfordAnthony NagelKenneth MossNicholas Moore

MCAIL:Kim Carter (Chairman)Rowan RossRodney BirrellAnthony Nagel

Chief Executive Officer

Michael Cook

Secretaries

Christine Williams MCAL and MCAML onlyLeanne Brown MCAL and MCAML onlyDennis Leong MCAML onlyRoslyn O’Brien MCAIL only

Registry

Computershare Investor Services Pty LtdLevel 3, 60 Carrington StreetSydney NSW 2000Australia

Telephone: +613 9415 4208Facsimile: +613 8234 5050

Financial report

A copy of the MCAG consolidated financial report for the period ended 30 June 2007, together with the financial reports for each of MCAL and MCAIL are available on the MCAG website: www.macquarie.com/mcag.

Mark this box with an ‘X’ if you have made any changes to your address details (see reverse)

Individual or securityholder 1

Sole Director and Sole Company SecretaryIn addition to signing the Proxy form in the above box(es) please provide the information below in case we need to contact you.

Securityholder 2

Director

Securityholder 3

Director/Company Secretary

PLEASE SIGN HERE

Contact Name Contact Daytime Telephone Date/ /

This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Proxy Form

1 8 P R

AAllll ccoorrrreessppoonnddeennccee ttoo::Computershare Investor Services Pty Limited

GPO Box 242 MelbourneVictoria 8060 Australia

Enquiries (within Australia) 1800 253 098(outside Australia) 61 3 9415 4208

Facsimile 61 3 9473 [email protected]

www.computershare.com

017974 - V7M C Q

Macquarie Capital Alliance GroupMacquarie Capital Alliance Limited ABN 96 112 594 662Macquarie Capital Alliance International Limited ARBN 113 880 783Macquarie Capital Alliance Management Limited ABN 94 105 777 704 as responsible entity of Macquarie Capital Alliance Trust ARSN 112 638 212

Appointment of Proxy

the Chairman of the meetings(mark with an ‘X’)

ORIf you are not appointing the Chairman of the meetings as yourproxy please write here the full name of the individual or bodycorporate (excluding the registered securityholder) you areappointing as your proxy.

I/We being a member/s of Macquarie Capital Alliance Group and entitled to attend and vote hereby appoint

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the meetings, as my/our proxy to act generally at the meetings onmy/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the meetings of Macquarie Capital Alliance Groupto be held at Ballroom 1, The Westin Hotel, 1 Martin Place, Sydney NSW on Wednesday 28 November 2007 at 11.00am and at any adjournment of the meetings.

Voting directions to your proxy - please mark to indicate your directionsX

Ordinary Business1. To adopt the remuneration report

included in the directors’ report for the period to 30 June 2007(non-binding resolution)

ForMacquarie Capital Alliance Limited -Annual General Meeting

1. To renew the proportional takeover provisions in clause 3.22 to 3.27 of the MCAT constitution

2. To approve future issues of base fee and performance fee securities

Macquarie Capital Alliance Trust - General Meeting

Abstain*Against

1. To receive, consider and approvethe audited financial statements ofMCAIL for the period to 30 June 2007

Ordinary Business

2. To re-elect Kenneth Moss as adirector of MCAL

2. To re-appointPricewaterhouseCoopers as auditors

ForMacquarie Capital Alliance InternationalLimited - Annual General Meeting Abstain*Against

*If you mark the abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and yourvotes will not be counted in computing the required majority on a poll.

+

IMPORTANT - To ensure your proxy votes count, you should mark this box.By marking this box, when you have not directed your proxy how to vote below, you acknowledge that the Chairman of the meetings (whethernominated or by default), acting as your proxy, may exercise your undirected proxy votes even if he has an interest in the outcome of eachresolution which carries a voting exclusion, and that votes cast by him, other than as a proxyholder, will be disregarded because of those interests.If you do not mark this box, and you have not directed your proxy how to vote, the Chairman will not cast your votes on the resolution and yourvotes will not be counted in calculating the required majority if a poll is called on the resolution. The Chairman of the meetings intends to voteundirected proxies in favour of each such resolution. If you direct your proxy how to vote, it is not necessary to mark this box.

For Abstain*AgainstOrdinary Business

3. To renew the proportional takeoverprovisions in articles 5.11 to 5.16 of the MCAL constitution

4. To approve future issues of basefee and performance fee securities

3. To re-elect Anthony Nagel as adirector of MCAIL

4. To approve future issues of basefee and performance fee securities

5. To amend the MCAIL Bye-Laws

017974 - V2

Documents may be lodged using the reply paid envelope or:IN PERSON Share Registry - Computershare Investor Services Pty Limited, Level 2, 60 Carrington Street, Sydney NSW 2000 AustraliaBY MAIL Share Registry - Computershare Investor Services Pty Limited, GPO Box 242, Melbourne VIC 8060 AustraliaBY FAX 61 3 9473 2118ELECTRONICALLY www.computershare.com/au/proxy/mcq

How to complete this Proxy Form

1 Your AddressThis is your address as it appears on MCAG’s share register. If this information is incorrect, please mark the box and make the correction on theform. Securityholders sponsored by a broker (in which case your reference number overleaf will commence with an ‘x’) should advise your brokerof any changes. Please note, you cannot change ownership of your securities using this form.

2 Appointment of a ProxyIf you wish to appoint the Chairman of the Meetings as your proxy, mark the box. If the individual or body corporate you wish to appoint asyour proxy is someone other than the Chairman of the Meetings please write the full name of that individual or body corporate in the spaceprovided. If you leave this section blank, or your named proxy does not attend the Meetings, the Chairman of the Meetings will be yourproxy. A proxy need not be a Securityholder of MCAG. Do not write the name of the issuer or the registered Securityholder in the space.

3 Votes on Items of BusinessYou may direct your proxy how to vote by placing a mark in one of the three boxes opposite each item of business. If your proxy votes, allyour securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be treated as invalid.

4 Appointment of a Second ProxyIf you are entitled to cast 2 or more votes at the Meetings, you may appoint up to two proxies to attend the Meetings and vote. If you wishto appoint a second proxy, an additional Proxy Form may be obtained by telephoning MCAG’s share registry or you may copy this form.

To appoint a second proxy you must:(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of securities

applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, eachproxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together in the same envelope.

5 Signing InstructionsYou must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder or the holder’s duly authorised attorney must sign.

Joint Holding: where the holding is in more than one name, only one of the securityholders (or their attorneys) is required to sign.

Power of Attorney: to sign under Power of Attorney or other authority, you must lodge the document with the registry. If you have notpreviously lodged this document for notation, please attach a certified photocopy of the Power of Attorney or otherauthority to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by thatperson. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, aSole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Directoror a Company Secretary or by an authorised officer. Please indicate the office held by signing in the appropriate place.

If a representative of a corporate Securityholder or proxy is to attend the Meetings the appropriate "Certificate of Appointment of CorporateRepresentative" should be produced prior to admission. A form of the certificate may be obtained from MCAG’s share registry or atwww.computershare.com.

Lodgement of a ProxyThis Proxy Form (and any Power of Attorney or other authority under which it is signed) must be received at an address (including theelectronic address) given below no later than 48 hours before the commencement of the Meetings at 11.00am on Wednesday 28 November 2007. Any Proxy Form received after that time will not be valid for the scheduled Meetings.

AAllll ccoorrrreessppoonnddeennccee ttoo::Computershare Investor Services Pty Limited

GPO Box 2975 MelbourneVictoria 3001 Australia

Enquiries (within Australia) 1800 253 098(outside Australia) 61 3 9415 4208

Facsimile 61 2 8234 [email protected]

www.computershare.com

017974 - V2

Dear Securityholder,

We have been trying to contact you in connection with matters arising from your securityholding in MACQUARIECAPITAL ALLIANCE GROUP (“MCAG”). Unfortunately, our correspondence has been returned to us marked"Unknown at the current address". For security reasons we have flagged this against your securityholding whichwill exclude you from future mailings other than notices of meetings.

We value you as a securityholder and request that you supply your current address so that we can keep youinformed about MCAG. Where the correspondence has been returned to us in error we request that you adviseus of this so that we may correct our records.

You are requested to include the following;

• Securityholder Reference Number (SRN) or Holder Identification Number (HIN);

• ASX trading code (ie MCQ);

• Name of company in which security is held (ie MCAG);

• Old address; and

• New address.

Please ensure that the notification is signed by all securityholders and forwarded to our Share Registry at:

Computershare Investor Services Pty LimitedGPO Box 2975Melbourne Victoria 3001Australia

In addition, if your holding is sponsored within the CHESS environment you need to advise your sponsoringparticipant (in most cases this would be your broker) of your change of address so that your records withCHESS are also updated.

Yours sincerely

MACQUARIE CAPITAL ALLIANCE GROUP

Macquarie Capital Alliance GroupMacquarie Capital Alliance Limited ABN 96 112 594 662Macquarie Capital Alliance International Limited ARBN 113 880 783Macquarie Capital Alliance Management Limited ABN 94 105 777 704 as responsible entity of Macquarie Capital Alliance Trust ARSN 112 638 212