Principle 8

Encourage enhanced performance

Below is a brief description of management and performance fee arrangements for RE1 and RE2 as responsible entity and RE1 as manager, remuneration arrangements in relation to DUET staff (whose remuneration is paid by Macquarie Group or AMPCI, not DUET) and also the fees paid to DUET external directors. Full details and a discussion of DUET remuneration arrangements, alignment of interest and manager and staff incentives are set out in the remuneration report in the 2010 Annual Report. Responsible entity and adviser expenses reimbursed by DUET are also set out in the annual report.

1. Responsible entity and adviser fees

RE1, as responsible entity of DUET1 and manager of DIHL, and RE2 as responsible entity of DUET2 and DUET3, are entitled to be paid base management fees and also performance fees for discharging their management/advisory functions.

These fees are calculated in accordance with a defined formula under the trust constitutions and the management services agreement. The fee arrangements were fully disclosed to investors on fund inception and subsequent restructure and continue to be disclosed on the DUET 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 investors.

2. Reimbursement of responsible entity and adviser expenses

RE1 and RE2 are also entitled to be reimbursed for expenses incurred by them in relation to the proper performance of their duties, out of the assets of DUET. This includes routine ongoing expenses such as the third party costs of acquiring businesses and managing them, as well as capital raising costs, registry, audit, insurance, compliance costs and other expenses as set out in the trust constitutions and management services agreement.

3. Staff remuneration

RE1 and RE2 make available employees, including senior executives, to discharge their obligations to the relevant DUET entity. These staff are employed by entities in Macquarie or AMPCI and made available through formalised resourcing arrangements with RE1 and RE2. Their remuneration is not a DUET expense. It is paid by Macquarie or AMPCI as applicable. Instead DUET pays management fees to RE1 and RE2 for providing management services. These fees are DUET expenses and can be found in the remuneration report. DIHL does not have employees and relies on the RE1 management staff under the management services agreement to implement operational decisions and carry out administrative functions. DUET holds its businesses through interests in special purpose project vehicles. Most of these vehicles have their own internal management paid for at the business level. Where RE1 or RE2 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 DUET. Senior RE1 and RE2 executives who are Macquarie employees may have some of or their entire performance bonus retentions notionally invested by Macquarie in DUET securities so that the amount varies as if they were actually invested in the securities.

Macquarie executives may also receive MGL options as part of their remuneration package.

4. Director remuneration

RE1 and RE2 independent director fees are paid by RE1 and RE2 in their personal corporate capacities respectively. They are not paid by the trusts.

In the case of the Macquarie executive directors, remuneration earned in connection with their roles as RE1, RE2 or DIHL directors, as the case may be, is paid by Macquarie and not by RE1, RE2 or DIHL.
DIHL non-executive director fees are paid by DIHL. None of the RE1, RE2 or DIHL directors is entitled to DUET options or securities or to retirement benefits as part of their remuneration package.

Senior Macquarie executives who are DUET directors may have some of or all of their performance bonus retentions notionally invested by Macquarie in DUET securities so that the amount varies as if they were actually invested in the securities, and may also receive Macquarie Group Limited options or share awards as part of their remuneration package.

5. Remuneration committee

Each of the RE1, RE2 and DIHL boards have constituted a Remuneration Committee consisting solely of independent directors. The RE1 and DIHL Remuneration Committees are chaired by Doug Halley and the RE2 Committee is chaired by Duncan Sutherland. The Remuneration Committees have responsibility for reviewing and benchmarking independent director remuneration, recommending remuneration for DIHL directors to the DIHL board and making recommendations to the RE1 and RE2 boards to be passed onto the management company owners Macquarie and AMPCH as they pay RE1 and RE2 director fees. Senior executive remuneration is not paid by DUET and accordingly the DUET boards and Remuneration Committees do not consider executive remuneration.