For Personal Use Only Use Personal for Transfield Services Infrastructure Fund Has High Quality Essential Infrastructure Assets with Substantially Contracted Revenues

Transfield Services Infrastructure Fund

2008 Annual Report For personal use only use personal For Transfield Services Infrastructure Fund has high quality essential infrastructure assets with substantially contracted revenues. Our relationship with Transfield Services gives us access to expert development and

asset management support. For personal use only use personal For

Notice of Annual General Meeting Securityholders are advised that the 2008 Annual General Meetings of Transfield Services Infrastructure Limited and TSI International Limited, will be held concurrently and in conjunction with a General Meeting of unitholders of Transfield Services Infrastructure Trust (together TSI Fund) on Friday, 14 November 2008 at 2.00pm (AEDT), at the AGL Theatre, Museum of Sydney, Corner Phillip and Bridge Streets, Sydney.

ii Transfield Services INFRASTRUCTURE FUND Contents 02 Overview 04 Chairman’s Report 06 CEO’s Report 08 Renewable Energy Assets 10 Thermal Energy Assets 12 Water Assets 14 Board of Directors 15 Executive Management 16 Corporate Governance Statement 21 Financial Report – Transfield Services infrastructure Limited 81 Financial Report – Transfield Services infrastructure Trust 111 Financial Report – TSI International limited 140 Securityholder Information

141 Corporate Directory For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 1 Overview

TSI Fund’s Asset Portfolio

Windy Hill Wind Farm (100%) Townsville Power Station (100%)

Collinsville Power Station (100%) For personal use only use personal For

BP Kwinana Cogeneration Plant (30%) Mt Millar Wind Farm (100%) Macarthur Water Filtration Plant (50%) Kemerton Power Station (100%) Starfish Hill Wind Farm (100%) Loy Yang A Power Station (14.03%) Yan Yean Water Filtration Plant (50%) Toora Wind Farm (100%)

Main photo: Toora Wind Farm

2 Transfield Services INFRASTRUCTURE FUND What sets us apart

Sustainable Beneficial distributions relationship funded by with Transfield operating cash Services flow

High quality Leading essential position in infrastructure renewable assets energy

Renewable Substantially energy contracted development revenue pipeline streams

TSI Fund has performed strongly in FY2008, delivering results NPAT $25.7 million up 25 per cent ahead of guidance in the Product Disclosure Statement (PDS) on PDS guidance

20.0 Townsville Power 18.5 Station 17.9 Collinsville Power Station Kemerton Power 15.0 H2 Station 9.0 BP Kwinana Cogeneration Plant 17.1 Loy Yang A 10.0 Power Station Macarthur Water Filtration Plant Cents per stapled security stapled per Cents Yan Yean Water H1 Filtration Plant 5.0

For personal use only use personal For 8.7 Mt Millar Wind Farm Starfish Hill Wind Farm 0.8 stub 0.8 stub 0 Windy Hill FY2008 FY2008 Wind Farm PDS GUIDANCE ACTUAL Toora Wind Farm (20) (15) (10) (5) (0) 5 10 15 20 25 30 35 40 The tax deferred component for the full year Years in operation Years of remaining life of contract distribution is 63 per cent, approximately in line with Estimated asset life PDS guidance of 57.6 per cent.

Transfield Services INFRASTRUCTURE FUND 3

chairman’s report For personal use only use personal For

Collinsville Power Station

4 Transfield Services INFRASTRUCTURE FUND

Macarthur Kemerton Mt Millar Water Filtration Power Wind Farm Plant Station

Toora Wind Farm “TSI Fund delivered net profit after tax of $25.7 million, up 25 per cent on PDS guidance.”

Dear Securityholder, Our investment in wind energy assets will become increasingly attractive under the Australian Government’s proposed National Transfield Services Infrastructure Fund (TSI Fund) had a successful Renewable Energy Targets Scheme and Carbon Pollution first full year of operations, delivering returns above the guidance Reduction Scheme (CPRS). in our Product Disclosure Statement (PDS). Our power assets, with the exception of Loy Yang A, are TSI Fund has delivered a full year distribution of 17.7 cents per substantially protected from CPRS impact by their contractual stapled security for the year ended 30 June 2008. The payment of arrangements. Loy Yang A will be impacted if the proposed this distribution reflects the strong performance of TSI Fund and is changes are implemented. The direction of the Australian 0.6 cents above PDS guidance. The tax deferred component is Government’s Green Paper supports the long-term viability of 63 per cent. the plant and TSI Fund’s investment. Loy Yang A is essential Net profit after tax was $25.7 million, up 25 per cent on PDS infrastructure that supplies one-third of Victoria’s power needs. guidance. Earnings before interest, tax, depreciation and It has the lowest carbon footprint of Australia’s brown coal amortisation were $92.9 million, up 17 per cent on PDS guidance. generators. Net interest, operating capex and FY2008 distributions were fully We are working with the Australian government, industry funded from operating cash flow. TSI Fund also secured new debt associations and other stakeholders to provide input on the facilities which are in place until 2011, mitigating exposure to design of CPRS. fluctuations in the debt market. TSI Fund is well positioned to continue to perform strongly and Based on our distributions for the current year, TSI Fund is deliver attractive returns to securityholders. targeting growth in distributions of three per cent per annum for the medium term. I would like to thank our people and the Manager, Transfield Services, for contributing to our successes during our first full The strength of TSI Fund’s financial performance is underpinned by year of operation. the substantially contracted revenue stream from our portfolio of essential infrastructure assets. Your Directors and I thank you for your support. TSI Fund differs from other infrastructure funds in the market Yours faithfully, because of the benefits of our relationship with Transfield Services. Transfield Services is an expert asset management company and we have direct access to its market position and expertise in asset development, operations and maintenance. Transfield Services holds a 49 per cent interest in TSI Fund, Peter Young AM manages TSI Fund and is the preferred provider of asset Chairman management services for our wholly-owned assets. This creates strong alignment between the two organisations.

For personal use only use personal For TSI Fund’s portfolio of essential infrastructure assets was strengthened with the addition of renewable energy assets in December 2007. We now have four wind farms in Australia and access to another 13 potential wind farms in joint development with Transfield Services. These are all high quality sites which position us for growth in the renewable energy sector in the medium to long term.

Transfield Services INFRASTRUCTURE FUND 5 ceo’s Report

Collinsville Power Station

Macarthur Kemerton Mt Millar Water Filtration Power

Wind Farm only use personal For Plant Station

Toora Wind Farm

6 Transfield Services INFRASTRUCTURE FUND “A highlight of the year was our entry into the renewable energy sector.”

TSI Fund’s strong results in our first year of operation demonstrate We are jointly developing a portfolio of new wind farm projects with the high quality of our portfolio of essential infrastructure assets Transfield Services. The portfolio of 13 wind farms is an attractive and its substantially contracted revenue streams. This result pipeline of high quality sites. Wind is the most commercial source allowed TSI Fund to exceed PDS distribution guidance. of renewable energy and this portfolio has the potential to boost Australia’s renewable energy by up to 1,150 megawatts, providing Our portfolio of assets outperformed against expectations for power to more than 500,000 homes. This builds on our leading the year. Kemerton, Townsville and Kwinana power stations all position in the growing renewable energy sector. performed strongly. The performance of Collinsville Power Station was impacted by the worst flooding in Queensland in 30 years. TSI Fund has performed strongly in our first year of operation. We Transfield Services, as operator and maintainer of Collinsville, kept are well positioned to take advantage of future opportunities in the the power station running even though there was an impact on coal changing Australian energy market. supply for power generation. We are reviewing the efficiency and sustainability of our assets A highlight of the year was our entry into the renewable energy following our first year of operation. Our focus for FY2009 is the sector. We purchased four wind farms in late 2007. The wind wind farm development portfolio and upgrades of existing assets. farms – Mt Millar and Starfish Hill in South Australia, Toora in Thank you for your support of TSI Fund. Victoria and Windy Hill in Queensland – have a capacity of 137.5 megawatts. We are now the second largest provider of wind energy in Australia. The 50 per cent acquisition of Emu Downs Wind Farm remains subject to the Queensland Government securing the necessary approvals. Steve MacDonald Chief Executive Officer A key differentiator for TSI Fund is the value we derive from our relationship with our Manager, Transfield Services who provide asset management services and upgrades to assets. This was demonstrated during the year on a number of projects. Transfield Services completed an upgrade to Kemerton Power A key differentiator – Value of relationship with our Manager, Transfield Services Station in Western Australia, ahead of time and on budget. Its innovative solution improved efficiency and increased Kemerton’s Transfield Services Infrastructure Fund capacity by 40 megawatts in high summer temperatures, providing power to an additional 10,000 households while reducing d s l e greenhouse gas emissions. e c f i i

s Operations and

v Operations and r n UUppffrroonntt ffeeasibiliittyy Projecctt

a mainttennaannccee Upgradess anndd We will upgrade the turbine blades at Townsville Power Station Investigation managemeenntt aanndd S e Investigation

T r Asset modificaattiioonnss DDeeaall creatioonn deliivveerryy later this year, increasing capacity by 10 megawatts to 250 managemeenntt For personal use only use personal For megawatts. We have amended the power purchase agreement with AGL/Arrow to account for this additional capacity. Kemerton Power Station – Wet compression upgrade s n t

8 Townsville Power Station – Turbine blades upgrade m 0 e 0 v e i

F Y 2 Wind farms Future upgrades h c a Wind farm development portfolio Future O&M

Transfield Services INFRASTRUCTURE FUND 7 Renewable Energy

TSI Fund purchased four wind farms in December 2007 – our first acquisition since listing on the ASX in June 2007. We are now the second largest provider of wind energy in Australia with a capacity of 137.5 megawatts. Our investments in renewable energy are environmentally and commercially sustainable. Wind is the most commercial source of renewable energy. It is safe, clean and offers an inexhaustible supply of fuel for power generation. As a fuel source, wind is not subject to price volatility and once developed, the running costs of wind farms are low. Australia has the coastline and latitude to be a leading producer of wind energy and as the Australian Government’s National Renewable Energy Scheme (NRETS) is introduced, wind farms will become an increasingly attractive investment. The four wind farms were purchased from Queensland state-owned generators Tarong Energy and Stanwell Corporation. The 50 per cent acquisition of a fifth wind farm, Emu Downs in Western Australia, remains subject to the Queensland Government receiving the necessary approvals. Starfish Hill, Toora and Windy Hill are high quality mature assets which are meeting performance expectations. Mt Millar Wind Farm in South Australia is an outstanding asset with leading edge technology. TSI Fund is in the process of ramping up Mt Millar to its full capacity of 70 megawatts, expected during the fourth quarter of 2008. Our wind farms produce enough energy to supply more than 64,000 homes. By harnessing the natural resource of wind, our wind farms reduce Australia’s greenhouse gas emissions by more than 325,000 tonnes of carbon per year. Renewable energy schemes Our investments Australian Government renewable energy schemes allow producers of renewable energy to sell the power generated and obtain Renewable Energy Certificates (RECs). Energy retailers are required to purchase RECs to in renewable meet renewable energy targets. The power and the RECs generated by the wind farms are contracted through offtake agreements with some of energy are Australia’s major energy retailers including AGL, Ergon and Energy Australia. environmentally The offtake agreement for Starfish Hill Wind Farm ends in December 2008. There is significant potential for revenue growth as this and other contracts expire. and commercially Growth opportunities sustainable. Transfield Services’ wind farm portfolio has the potential to double Australia’s current wind generation capacity. TSI Fund has the first option on any wind farm developed from this portfolio. It is one of the largest wind development portfolios in Australia, with up to 1,150 megawatts of capacity and the potential to provide power to more than 500,000 homes. All 13 sites are located in high wind areas across mainland Australia. Wind monitoring is ongoing at all sites. TSI Fund will leverage Transfield Services’ experience in developing and managing power assets in the development of the portfolio. The first wind farm development is Barn Hill in South Australia, which we expect to be operational in 2011. Looking ahead, the value of our investment in wind farms should be enhanced by the Australian Government’s target of 20 per cent Collinsville Power Station

renewable energy by 2020. For personal use only use personal For

Capacity Number of homes TSI Fund (megawatts) turbines powered Offtaker ownership Macarthur Mt Millar Wind Farm 70 35 36,000 energy Australia Kemerton100 per cent Mt Millar Water Filtration Power Starfish Hill Wind Farm 34.5 23 18,000 aGL and Hydro Tasmania 100 per cent Wind Farm Plant Station Toora Wind Farm 21 12 6,600 energy Australia 100 per cent Windy Hill Wind Farm 12 20 3,500 ergon Energy 100 per cent

Transfield Services INFRASTRUCTURE FUND Toora 8 Wind Farm Mt Millar Wind Farm – energy for the future Mt Millar Wind Farm is located on South Australia’s Eyre Peninsula in an area with consistently strong winds. The land continues to be used for sheep grazing and cropping. The wind turbine sites have been leased from four families who have worked the land for several generations. The first electricity was generated from the site on 28 February 2006. Staged ramp up of generation to full capacity of 70 megawatts is expected to be achieved during the fourth quarter of 2008.

At full capacity, Mt Millar will reduce Australia’s greenhouse gas emissions by up to 168,000 tonnes of carbon per year and produce enough power to supply 36,000 homes. The wind farm comprises 35 wind turbines on an elongated site to

maximise wind exposure. The diameter of the turbine blades is For personal use only use personal For 71 metres, atop an 85 metre high tower. The Enercon E70 wind turbines use advanced gearless inverter connected technology. Each generator has a capacity of 2,000 kilowatts. Mt Millar is the largest wind farm in Australia using this extremely reliable and efficient gearless technology. A 33 kilometre overhead transmission line connects the wind farm to ElectraNet’s existing transmission network at Yadnarie substation. The transmission line ensures the security of the electricity supply to the Cowell and Cleve region.

Transfield Services INFRASTRUCTURE FUND 9 Thermal Energy Our thermal energy portfolio is made up of power stations that are powered primarily by gas and coal and operate as base, intermediate or peaking plants with a range of offtakers. This diversity protects our investment from unexpected events or circumstances that could impact the whole portfolio. Long-term contracts with quality offtakers exist for all assets, excluding Loy Yang A Power Station, which operates as a merchant plant providing one-third of Victoria’s electricity requirements. All of TSI Fund’s power assets, excluding Loy Yang A, are substantially protected from the impacts of the Australian Government’s proposed Carbon Pollution Reduction Scheme (CPRS) by their TSI Fund does not bear fuel price risk for coal for Collinsville as energy contractual arrangements. While Loy Yang A would be impacted should charges under the power purchase agreement are matched to cover the the proposed changes be implemented, the direction of the Australian fuel costs under the coal supply agreement. Government’s Green Paper supports the long-term viability of Loy Yang A Townsville Power Station operates as a gas base load plant providing and TSI Fund’s investment. input to the Queensland region of the National Electricity Market. TSI Fund’s focus is to work with Loy Yang A management to negotiate Townsville performed well during the year, meeting availability and power transition arrangements which secure available compensation and develop purchase agreement requirements. Financial performance was aided abatement opportunities to attract Australian Government support and by a one-off payment of $5 million following the transfer of the power reduce Loy Yang A’s carbon footprint. purchase agreement to AGL/Arrow. Under the power purchase agreement, TSI Fund is engaged with the Australian Government and various industry AGL/Arrow supplies and transports the gas for the operation of the plant, bodies to provide our views on the scheme design. removing any fuel supply risk for TSI Fund. Asset performance Townsville’s turbine blades will be upgraded during FY2009, increasing capacity by 10 megawatts to 250 megawatts. This work is part of a Kemerton Power Station is a gas peaking plant providing input into the South planned overhaul of the power station by Manager Transfield Services. West Interconnected System in Western Australia. Kemerton Power Station The power purchase agreement has been amended to account for this performed extremely well during the year due to increased customer demand additional capacity. for power and the high availability and efficiency of the power station. TSI Fund owns 14.03 per cent of Loy Yang A Power Station, an essential Demand for power increased due to an unusually warm summer and a gas base load power generator, providing one-third of Victoria’s electricity shortage in June. Primarily run on gas, Kemerton utilised its dual fuel capacity requirements with a base generating capacity of 2,200 megawatts. during the gas shortage. The fuel risk for the power station – for both gas and Located in Victoria’s Latrobe Valley, it consists of the power station and liquid fuel – does not rest with TSI Fund, but forms part of the power purchase the adjacent brown coal mine. agreement with Verve Energy. Lower than expected demand for power, combined with the high availability We improved the efficiency of Kemerton Power Station with the installation of Victorian generators, resulted in lower pool prices in the second half of of an innovative and environmentally friendly upgrade. This solution boosts FY2008. Loy Yang A also experienced an increase in operating expenditure, as Verve Energy’s ability to supply power to the West Australian market, a result of increased maintenance costs. Despite this, the cash contribution supplying power to up to an additional 10,000 homes. The power purchase from Loy Yang A was in line with the PDS assumption for FY2008. agreement between TSI Fund and Verve Energy was amended to account for the increased capacity at Kemerton. TSI Fund owns 30 per cent of BP Kwinana Cogeneration Plant, a 118 megawatt gas power station located at BP’s Kwinana Refinery Collinsville Power Station operates as a coal-fired intermediate plant and in Western Australia. It provides electrical output to the South West provides input to the Queensland region of the National Electricity Market. Interconnected System in Western Australia and electrical output and Extreme wet weather in north Queensland during February 2008 caused the steam to the BP Refinery. worst flooding in 30 years. Manager Transfield Services, kept Collinsville The Kwinana plant outperformed for the year due to additional payments running despite the impact on coal supply for power generation.

for power generation above contractual requirements. For personal use only use personal For Total energy produced Energy TSI Fund (megawatts) source Offtaker ownership Kemerton Power Station 300 gas and liquid fuel verve Energy 100 per cent Townsville Power Station 240 gas AGL/Arrow 100 per cent Collinsville Power Station 180 black coal cs Energy 100 per cent BP Kwinana Cogeneration Plant 118 gas BP and Verve Energy 30 per cent Loy Yang A Power Station 2,200 brown coal n/a 14.03 per cent

10 Transfield Services INFRASTRUCTURE FUND We improved the efficiency of Kemerton Power Station with the installation of an innovative and environmentally friendly upgrade.

an innovative upgrade increases kemerton’s capacity TSI Fund upgraded Kemerton Power Station’s capacity by more than 40 megawatts in June 2008. Transfield Services, as Manager, developed the environmentally friendly approach, working with offtaker V The capacity upgrade retrofitted wet compression technology so that the powererve station Energy can to operatecreate aat value more add than solution. 300 megawatts during high summer temperatures. The technology has improved Kemerton’s overall efficiency while reducing greenhouse gas emissions. The innovative technology involves spraying micron-sized water droplets into the gas turbine to cool the air. The water droplets then pass through a compressor and evaporate to cool the air inside the compressor. This makes the compressor more efficient and makes more power available to generate electricity.Collinsville Power Station To support the technology, a number of components were installed at the power station, including micro-fine droplet sprays, high pressure pumps, a reverse osmosis water treatment plant and storage tanks for raw water and high purity water. The water droplets which pass through the compressor must be smaller than 20 microns for the technology to be effective. High pressure pumps produce fine droplets, creating a haze when sprayed. Additionally, the water must be extremely pure to ensure the

For personal use only use personal For pump spray nozzles do not become blocked. Transfield Services managed the highly technical project and secured approvals from a number of regulators, including the Environmental Protection Authority, the W and Infrastructure and the Economic RegulationA Department Authority for W Planning There was minimal downtime during the upgrade as the workA .was undertaken while the power station was operating. Macarthur Compressor Combustion Kemerton Transfield Services’ experience in operations and maintenance Air Intake Chamber Turbine Mt Millar Water Filtration Power services, as well as undertaking projects in an operating Wind Farm Plant Cooling Air Station environment, demonstrates the value of our relationship. Evaporative Intercooling effect cooling Steam expansion effect Extra 40 Megawatts WET COMPRESSION PROCESS output

Transfield Services INFRASTRUCTURE FUND 11 Toora Wind Farm Water

TSI Fund’s two water filtration plants, Macarthur and Yan Yean, have performed to expectations and continued to meet their contractual obligations. Drought and water restrictions have had little impact on investment returns. Our 50 per cent interest in each water filtration plant provides reliable cash flow to TSI Fund. Macarthur Water Filtration Plant, near Appin in New South Wales, has a total capacity of 265 megalitres per day, supplying more than 200,000 Sydney Water customers in the Camden, Campbelltown and Wollondilly areas. Broughton’s Pass Weir supplies raw water to the plant from the Nepean, Avon, Cordeaux and Cataract dams. The plant has two pumping stations and provides clean, safe drinking water with minimal environmental footprint. The remaining 50 per cent interest in Macarthur Water Filtration Plant is owned by a subsidiary of United Utilities plc. Yan Yean Water Filtration Plant is located at the Yan Yean reservoir 30 kilometres north of Melbourne. It is a single stage direct filtration plant with a capacity of 155 megalitres per day. The plant receives raw water from the Yan Yean reservoir and supplies Melbourne during peak periods, generally the warmer months from October to April. The remaining 50 per cent interest in Yan Yean Water Filtration Plant is owned by a subsidiary of United Utilities plc.

Capacity (megalitres TSI Fund per day) Counterparty ownership Macarthur Water Filtration Plant 265 sydney Water 50 per cent

Yan Yean Water Filtration Plant 155 Melbourne Water 50 per cent Collinsville

Power Station For personal use only use personal For

Macarthur Kemerton Mt Millar Water Filtration Power Wind Farm Plant Station

Transfield Services INFRASTRUCTURE FUND Toora 12 Wind Farm Drought and water restrictions have had little impact on investment

returns. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 13 Board of Directors

1. Peter Young AM – independent Chairman 3. Anthony Shepherd – Non-Executive Master of Business Administration Director Bachelor of Science (Geology) Bachelor of Commerce Peter was appointed Chairman of Transfield Services Anthony was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Infrastructure Fund in April 2007. Peter has been a Director of Fairfax Media Limited since Anthony was appointed Chairman of Transfield Services September 2005, Chairman of the Federal Government’s in 2005, is Chairman of the ConnectEast Group, a Director Export Finance and Insurance Corporation since 2002 and of The Global Foundation and the Australian Chamber Chairman of Delta Electricity since 2004. Orchestra, as well as a Trustee of the Sydney Cricket and 1. Sports Ground Trust. He is also a member of the Australian He is a Trustee of the Art Gallery of New South Wales, Institute of Company Directors and Patron of Infrastructure Director of the Sydney Theatre Company and Director of the Partnerships Australia. Federal Government’s Australian Business Arts Foundation. Anthony was responsible for the development of many From 2003 to 2006, Peter was Chairman of Investment landmark projects, including the Sydney Harbour Tunnel, Banking for ABN AMRO Group in Australia and New Melbourne CityLink, a number of other build-own-operate- Zealand. In 2006, Peter became Senior Adviser at ABN transfer projects as well as the redevelopment of Walsh AMRO Group. Bay. He was an inaugural Director of Transurban Limited. Peter commenced his career as a Consulting Petroleum Resides in Sydney. Geologist at Core Laboratories Inc. of Texas, USA, and has 2. held senior positions in a number of banking and financial Age: 64 years. services organisations. Resides in Sydney. 4. Kate Spargo – Independent Age: 63 years. Non-Executive Director Bachelor of Laws (Honours) Bachelor of Arts 2. David Mathlin – Independent Kate was appointed a Director of Transfield Services Non-Executive Director Infrastructure Fund in April 2007. Master of Business Administration 3. Bachelor of Science, Bachelor of Engineering Kate is Chairperson of the Accounting Professional (Honours) and Ethical Standards Board. She has been a Non-Executive Director of IOOF Holdings Ltd since 1999, David was appointed a Director of Transfield Services Pacific Hydro Pty Ltd since 2004, and Investec Bank Infrastructure Fund in April 2007. (Australia) Ltd since 2005. Kate also serves on the Boards of David has worked at global consulting services firm, Sinclair Colnvest Ltd and NeuroSciences Victoria Ltd. Knight Merz (SKM) Group since 1974. During this time, David In July 2008, Kate was selected for the Board of the has held a number of senior positions in the firm, including Australian Energy Market Operator (AEMO), which Director of Sinclair Knight Merz Management Pty Ltd from commences operations on 1 July 2009. 1987 to 2006 and Chairman of Sinclair Knight Merz Holdings Kate was a Non-Executive Director of IOOF Ltd from 1999 to 4. Ltd from 2001 to 2006. 2002, Non-Executive Director of Fulton Hogan Ltd from 2003 David commenced his career at the Electricity Commission to 2007, Chairman of HomeStart Finance for seven years to of NSW and was Chairman of landscape, architecture and 2002 and Chairman of PrimeGro Ltd from 2002 to 2003. planning company EDAW Pty Ltd from 1989 to 2000. Kate began her career as a Barrister and Solicitor with the He is a Fellow of the Institution of Engineers Australia and a South Australia Attorney General’s Department in the Crown Fellow of the Australian Institute of Company Directors. Solicitor’s Office. Resides in Sydney. She is a Fellow of the Australian Institute of Company For personal use only use personal For Age: 59 years. Directors and a Member of its Victorian Council. Resides in Melbourne. 5. Age: 56 years.

14 Transfield Services INFRASTRUCTURE FUND Executive Management

5. Peter Watson – Non-Executive 1. Steve MacDonald – Chief Executive Officer Director Bachelor of Engineering (Civil) (Honours) Diploma of Engineering (Civil) Steve was appointed Chief Executive Officer of TSI Fund in April 2007. Peter was appointed a Director of Transfield Services Steve joined the Transfield Holdings group in 1987 and has worked Infrastructure Fund in April 2007. in a number of senior business development, project management Peter was appointed Managing Director and Chief and executive management roles across the business. Steve has Executive Officer of Transfield Services in 2002. held a number of CEO roles including CEO of Transfield Construction Peter has played an integral role in the successful and Yarra Trams, which is operated by Transfield Services’ joint development of Transfield Services since its venture company, TransdevTSL. Steve was also responsible for the 1. inception in 1993 and led the organisation as CEO establishment and successful growth of Transfield Services in New through its successful public listing in 2001. Peter Zealand in the late 1990s. has guided the international expansion of Transfield Prior to his current role, Steve was Chief Strategy Officer of Transfield Services into North America through the acquisitions Services. In this role, he successfully expanded Transfield Services’ of US Maintenance, TIMEC and VMS as well as a skill base and geographic presence through acquisitions and new major contract win with Suncor Energy in Canada. work with clients. Peter is a member of the Institution of Engineers Australia and the Australian Institute of Company Directors. He is an alumnus of The Wharton School 2. Charles Mott – Chief Financial Officer of Executive Education. Peter is a founding sponsor 2. Master of Business Administration of the Australian Sustainable Industry Research Bachelor of Engineering (Civil) Centre and a Fellow of the Australian Academy of Technological Sciences and Engineering. Charles was appointed Chief Financial Officer of TSI Fund in May 2007. Resides in Melbourne. Charles is responsible for the financial and commercial functions of TSI Fund, including financial management reporting, treasury, funding Age: 52 years. and investor relations. Prior to commencing with TSI Fund, Charles held a variety of senior commercial and financial roles with a major Australian construction, development and investment group. He has more than 15 years 3. corporate finance and treasury experience in the construction services industry, particularly in the development of major social and economic infrastructure. Charles is a member of the Institution of Engineers Australia, an associate member of CPA Australia and a member of the Australian Institute of Company Directors.

3. Geoff Dutton – General Manager, Assets Bachelor of Engineering (Electrical) Graduate Diploma in Accounting and Finance Geoff joined TSI Fund in March 2008 as General Manager, Assets. Geoff is responsible for managing all aspects of the owner’s responsibilities in relation to the existing power infrastructure assets within TSI Fund, ensuring the power assets under the control of TSI Fund are managed, operated and maintained to best industry practice. Geoff has extensive experience in energy, engineering and mining, For personal use only use personal For having worked and consulted in six countries. He has held senior roles in energy companies during the past 12 years, including the roles of Vice President China Operations for Alliant Energy Group, USA and also for Sithe Energies, USA.

Transfield Services INFRASTRUCTURE FUND 15 CORPORATE GOVERNANCE STATEMENT

Background TSI Fund has entered into a Management Services Relationship between TSI Fund and Agreement (MSA) with Transfield Services Transfield Services Transfield Services Infrastructure Fund (TSI Fund) (Australia) Pty Limited (Manager), a wholly-owned is a triple stapled entity where a unit in Transfield Given the arrangements between TSI Fund and major operating subsidiary of Transfield Services Services Infrastructure Trust (TSIT) is stapled to one Transfield Services, a protocol has been developed Limited (Transfield Services). share in Transfield Services Infrastructure Limited to manage governance issues that may arise (TSIL) and one share in TSI International Limited Under the MSA, the Manager sources investment between TSI Fund and Transfield Services and its (TSIIL), so that none of the securities (unit and opportunities, provides management, corporate, related bodies corporate. This protocol is contained shares, collectively Stapled Securities) can be dealt and administrative services, and operations and in the Corporate Governance Framework and is with separately. Infrastructure Fund Management maintenance services to TSI Fund. supported by TSI Fund’s Conflict of Interest Policy Limited (IFML) is the responsible entity of TSIT (RE). and Related Party Transactions Policy. The management of TSI Fund is, however, vested The RE, TSIL and TSIIL have entered into a stapling in the Directors of TSI Fund and they are ultimately To illustrate, the Corporate Governance Framework deed, which sets out the terms and conditions accountable to securityholders for the activities and addresses the management of conflicts between TSI governing the relationship between them in respect performance of TSI Fund. Fund and Transfield Services in the pursuit of new of the Stapled Securities. investment opportunities. The Manager must act in the best interests of TSI Fund securityholders at The boards of the RE, TSIL and TSIIL (collectively all times. Any pursuit of investment opportunities, the Board) are composed of the same Directors, and which involves both TSI Fund and Transfield hold Board and committee meetings concurrently. Services, is agreed on a case-by-case basis under the MSA and the Corporate Governance Framework.

TSI Fund corporate structure

Investors

Management Services Agreement Transfield Services TSI Fund (stapled Security) (Australia) Loan Pty Limited TSIT TSIL TSIIL

For personal use only use personal For O&M Alliance Agreement

Responsible Entity Asset Portfolio

16 Transfield Services INFRASTRUCTURE FUND ASX Recommendations • undertaking stewardship and protection of TSI The Board has arranged for a Chief Executive Fund’s assets Officer (CEO), Chief Financial Officer (CFO), and TSI Fund is committed to genuine and robust General Manager Assets (collectively Seconded corporate governance, as it aims to: • monitoring compliance with law, corporate Employees) to be provided by the Manager to TSI governance principles and internal policies Fund on secondment under the MSA. The Board • ensure appropriate accountability has assigned roles and responsibilities to the CEO • identifying and managing key risks in liaison • minimise business risks subject to specified limits set out in a delegated with TSI Fund’s management, and authority statement. • promote ethical conduct, and • evaluating the performance of executives The CEO is supported by the Investment Review seconded to TSI Fund in consultation with the • enhance investor confidence. Committee – a committee of the Board formed to Manager. assist the Board by providing early involvement, TSI Fund is required to report on its compliance feedback and guidance in respect of investment The Board meets as frequently as required, but not with the ASX Corporate Governance Principles and opportunities. The committee comprises all less than six times a year. Recommendations in this Annual Report. members of the Board, with the CEO and CFO being The Board Charter is available at In 2007, the ASX Corporate Governance regular attendees. www.tsinfrastructurefund.com. Council introduced its revised Principles and A TSI Fund Management Committee, involving Recommendations, with the effective compliance The Board may refer some of its functions to TSI Fund’s CEO and CFO and Transfield Services date being the first financial year commencing on committees formed to provide expert advice on representatives will oversee the management or after 1 January 2008. TSI Fund is transitioning to specific matters. The Board has established the of MSA activities and address areas for the revised Principles and Recommendations in this following committees: modification and improvement. Transfield Services Annual Report. has appointed an MSA Manager who will be • Risk, Audit and Compliance Committee, and TSI Fund believes that it has complied with the responsible for overseeing MSA activities, and will participate in the Management Committee. Principles and Recommendations during this • Investment Review Committee. reporting period, other than Recommendation 2.4 in New Directors and Seconded Employees will The committees regularly report to the Board and respect of a Nomination Committee for reasons set participate in an induction program as an make recommendations to it. out on page 18 and Recommendation 8.1 in respect introduction to TSI Fund’s vision and functions, as of a Remuneration Committee for reasons set out The number of Board and committee meetings held well as its systems, processes and key contacts. on page 20. and Director attendance is set out in the Directors’ The program, operating under the MSA, offers Principle 1: Lay solid foundations Report on page 24 of this Annual Report. resources to allow Directors and Seconded for management and oversight Employees to participate in TSI Fund’s operations at Upon appointment, new Directors are provided the earliest opportunity. The Board is accountable to securityholders for the with a letter of appointment, which sets out their overall direction and management of TSI Fund. term in office, duties and responsibilities and The performance of Seconded Employees is other matters such as remuneration and time reviewed by the Manager with input from the A formal Board Charter outlines the Board’s roles, commitment. Board. The Board may notify the Manager of responsibilities and internal procedures. The its recommended revisions to key performance Board’s responsibilities include: The term of appointment is agreed as part of such measures, remuneration and incentive programs, appointment. However, TSI Fund’s constitutions which the Manager must consider in consultation • considering management recommendations and require that every three years, a third of Directors with the Board. This review has been completed in making decisions on key issues such as budget, must retire and, if applicable, offer themselves for accordance with the process disclosed. strategic plans, investment proposals and re-election. significant capital expenditure The performance of dedicated personnel, The powers and duties of Directors are set out in other than Seconded Employees, who provide • reviewing TSI Fund’s financial information in TSI Fund’s constitutions, the Board Charter and the support to TSI Fund, remains the responsibility

liaison with the external auditor, and monitoring Corporations Act. of Transfield Services. Dedicated personnel For personal use only use personal For the financial position of TSI Fund participate in an annual Performance Development Review and, in some instances, a • ensuring an informed market exists at all times Short Term Incentive Scheme, where performance in respect of TSI Fund is measured against set key performance indicators. Transfield Services has completed these evaluations in accordance with its internal processes.

Transfield Services INFRASTRUCTURE FUND 17 CORPORATE GOVERNANCE STATEMENT

Principle 2: Structure the Board to the operation and management of infrastructure Principle 3: Promote ethical and add value assets, as well as its expertise in sourcing responsible decision-making acquisitions, and improving and developing The Directors are profiled on pages 14 - 15 of this TSI Fund recognises the value of ethical and infrastructure assets. Annual Report. The Directors’ skills, knowledge and responsible corporate practices and decision- experience are appropriate to ensure the effective All Directors are required to exercise independent making. To promote appropriate practices, TSI performance of TSI Fund and to address current and and informed judgment in their role on the Board. Fund has adopted a Code of Conduct and a emerging industry issues. To this end, the Board Charter facilitates Directors comprehensive policy framework. having access, where necessary, to independent, The Board comprises five Directors, of whom a The Code of Conduct outlines TSI Fund’s external and professional advice at TSI Fund’s majority (three) are independent non-executive commitment to a high standard of behaviour, expense. Directors also have access to Transfield Directors, including the Chairman. The CEO is not including: Services’ executives for direct information to assist a Director. in making informed decisions. • conducting operations with fairness, integrity TSI Fund has determined that Peter Young, Given the current size of the Board (with the and good faith David Mathlin and Kate Spargo are independent majority being independent Directors), the having regard to the guidelines set out in the • striving towards best practice in internal arrangements between TSI Fund and Transfield ASX Corporate Governance Principles and business controls, financial administration and Services, and TSI Fund having only listed on the Recommendations. These guidelines seek to accounting policies ASX in 2007, the Board has not established a determine whether a Director is generally free Nomination Committee. This is inconsistent with of any interest or other relationship, which could • committing to protecting assets and ensuring Recommendation 2.4 which recommends the Board or could reasonably be perceived to materially sufficient use of those assets for legitimate establish a Nomination Committee. The functions interfere with the Director’s ability to act in the business purposes of a Nomination Committee, including ensuring the best interests of TSI Fund. TSI Fund reviews appropriate structure of the Board, and setting and • recognising obligations to individuals’ rights to Directors’ independence on an ongoing basis. reviewing selection, appointment and performance privacy in respect of confidential information, Peter Young holds an advisory role with ABN criteria of the Board, are carried out by the Board. and AMRO Group. ABN AMRO Group may potentially The Board considers this appropriate in the current earn fees for transactions entered into by TSI circumstances and will continue to review the • maintaining practices and policies that accord Fund. David Mathlin holds an executive role need for a separate committee to perform these with best practice including those in respect with Sinclair Knight Merz Group, which may functions. of occupational health and safety, anti- potentially earn fees for transactions on which it discrimination and conflicts of interest. Board, committee and Director performance will be advises TSI Fund. As the interests held by Peter reviewed internally on an annual basis. The internal The Code of Conduct is available at Young and David Mathlin either do not provide a review process for this reporting period will involve www.tsinfrastructurefund.com. personal benefit to them or are not material given seeking responses from directors and Seconded the Directors’ circumstances, the Board considers Ethical decision-making is further promoted through Employees in relation to key elements of Board them to be independent, notwithstanding the the following policies: effectiveness, including: relationships described. The Directors have • Securities Trading Policy provided standing notices to these interests to • Board composition and responsibilities other Directors, and the Board considers that they • Conflicts of Interest Policy, and are able to exercise independent and unfettered • Board meetings and decision-making judgment in discharging their duties. • Related Party Transactions Policy. • Board committees The other two Directors, Anthony Shepherd The Securities Trading Policy restricts Directors and Peter Watson, are non-executive, but are • Chairman’s role and designated persons to buy or sell TSI Fund not considered to be independent as they are Stapled Securities only in the one-month period • strategic planning and budgeting the nominee directors of Transfield Services, a immediately following the announcement of substantial holder of TSI Fund. In accordance with For personal use only use personal For • evaluation and remuneration of Directors, and half-yearly and annual results, and the Annual TSI Fund’s constitutions, while Transfield Services General Meeting. The Chairman or the Company holds at least 15 per cent of the Stapled Securities, • evaluation of Seconded Employees. Secretary may waive the restriction in limited it may appoint two Directors to the Board. The circumstances. Board considers this to be in the best interests of The results of the review will be analysed and TSI Fund as the nominee Directors provide access recommendations formed and adopted to enhance to Transfield Services’ significant expertise in performance.

18 Transfield Services INFRASTRUCTURE FUND The policy also places restrictions on TSI Fund The RAC Committee receives written representation Annual General Meetings are an opportunity Directors, CEO, CFO, General Manager Assets, letters from the CEO and CFO regarding the to outline TSI Fund’s recent developments and and the Company Secretary trading in Transfield accuracy and completeness of financial information, strategy. The Board encourages securityholder Services shares. prior to the Board’s approval of their respective participation at the meetings, allowing financial reports. securityholders to ask questions or make comments Directors and designated persons are prohibited on the management of TSI Fund. Securityholders from buying or selling securities in TSI Fund at any The RAC Committee Charter is available at also have the opportunity to ask TSI Fund’s external time they are in possession of market-sensitive www.tsinfrastructurefund.com. auditor questions relevant to its audit function. information. Principle 5: Make timely and Principle 7: Recognise and manage The Conflicts of Interest Policy is aimed at balanced disclosure risk protecting the integrity of TSI Fund’s decision- TSI Fund aims to support the transparency and making processes by avoiding ethical, legal, The Board is responsible for determining the integrity of the market through timely and accurate financial or other conflicts of interest. overall risk management strategy for TSI Fund disclosure of material information. and communicating it to Seconded Employees The Related Party Transactions Policy provides TSI Fund’s Continuous Disclosure Policy sets out and dedicated personnel involved in TSI Fund guidance on recognising and reporting related party obligations and guidelines for disclosure of material operations. The Board is also responsible for transactions, and where necessary submitting information, pursuant to the ASX Listing Rules. The reviewing major risk exposures and monitoring these for securityholder approval. policy also outlines the role of TSI Fund’s Disclosure the overall effectiveness of the risk management These policies are available at Committee, which is responsible for determining program. www.tsinfrastructurefund.com. what information must be disclosed and ensuring To assist the Board in discharging its risk TSI Fund complies with its disclosure obligations. Principle 4: Safeguard integrity in management duties, the Board has delegated the The committee comprises an independent Non- financial reporting following activities to the RAC Committee: Executive Director, CEO, CFO, Company Secretary The Board has established the Risk, Audit and and Transfield Services’ Group General Manager, • overseeing strategies and procedures used to Compliance (RAC) Committee to oversee the Corporate Affairs. identify and evaluate principal risks and their financial and business risk management of TSI The policy is available at potential impact Fund, and report significant matters to the Board. www.tsinfrastructurefund.com. • reviewing management plans for mitigation of The committee comprises three Non-Executive Principle 6: Respect the rights of material risks Directors (two of whom are independent). It is securityholders chaired by an independent Non-Executive Director, • evaluating the ongoing effectiveness and who is not the Chairman of the Board. TSI Fund believes in providing securityholders independence of risk management functions, and the market with timely, clear and consistent and The RAC Committee operates in accordance with communication in relation to TSI Fund’s operations its Charter, which sets out its responsibilities, and performance. • reporting to the Board on risk management. composition and internal procedures. The responsibilities of the RAC Committee cover: TSI Fund follows communication plans to ensure Although ultimate responsibility for risk its message is effectively delivered through various management lies with the Board and the RAC • financial reporting communication channels. ASX announcements are Committee, the day-to-day responsibility for risk a primary source of material information regarding management rests with the Manager. As part of • risk management TSI Fund. Both ASX and media announcements the services provided under the MSA, the Manager are immediately uploaded to TSI Fund’s website. is required to maintain, identify and implement • compliance with laws and regulations, and The website contains information about TSI appropriate risk management policies and corporate governance principles, and Fund’s operations and achievements and features procedures in respect of TSI Fund and report on the • external audit. publications and investor presentations. adequacy and effectiveness of those policies and procedures on a regular basis to the Board.

For personal use only use personal For TSI Fund’s procedure for the selection, appointment, removal and rotation of external auditors follows TSI Fund’s CEO and the Transfield Services’ the relevant statutory requirements. Group Risk Officer are responsible for the overall coordination of the risk management services to be provided by the Manager to TSI Fund.

Transfield Services INFRASTRUCTURE FUND 19 CORPORATE GOVERNANCE STATEMENT

Transfield Services’ General Counsel and the legal TSI Fund is responsible for the remuneration of team manage commercial risks by undertaking independent Non-Executive Directors. Transfield thorough contract and transaction reviews Services nominee Directors do not receive fees to identify and address commercial and legal from TSI Fund. The review of TSI Fund’s Director implications. performance is outlined under Principle 2.

Transfield Services’ Financial Controls Group Fees for independent Non-Executive Directors ensures that financial policies and processes are directly calculated on the extent of their include appropriate controls required to identify and involvement at Board and committee level. They are manage financial risks. not based on TSI Fund’s performance. Independent Non-Executive Directors are not entitled to options, TSI Fund also utilises the expertise of Transfield bonuses or retirement benefits other than statutory Services’ Health, Safety and Sustainability entitlements as part of their remuneration package. Committee which provides risk management support in the areas of health, safety, sustainability Compliance structure of the RE and environmental performance. The RE has a compliance program to ensure it Pertinent findings and recommendations are complies with, and fulfils its obligations under communicated to the RAC Committee, which then the Compliance Plan for TSIT, and all other ensures that management effectively responds to requirements set out in the Corporations Act, the recommendations. The Chairman of the RAC its Australian Financial Services Licence (AFSL) Committee raises significant risk issues with the conditions and other relevant regulations. Board. These compliance procedures include arrangements As part of the annual financial reporting processes, for monitoring and supervision of outsourced the CEO and CFO have certified to the RAC providers of services and arrangements for dealing Committee and the Board that TSI Fund’s financial with conflicts of interest. results are founded on a sound system of risk The Responsible Managers under the RE’s AFSL management, internal compliance and controls include a Compliance Officer who is primarily adopted by the Board, and that the system is responsible for monitoring compliance issues for operating effectively in all material respects. the RE and TSIT. The Compliance Officer reports Principle 8: Remunerate fairly and regularly to the RAC Committee. responsibly

TSI Fund’s policy in relation to Director remuneration is set out in the Remuneration Report on pages 26 - 33 of this Annual Report.

All personnel involved in TSI Fund’s operations are employed by the Manager and provided to TSI Fund as part of the MSA. This includes TSI Fund’s CEO, CFO and General Manager Assets.

The performance review process of Seconded Employees and dedicated personnel involved in TSI Fund operations is outlined under Principle 1. TSI Fund can make recommendations to the Manager on revisions to remuneration, incentive paymentsonly use personal For and programs linking remuneration to key performance measures of the Seconded Employees.

In light of the above, the Board does not consider it appropriate or necessary to establish a separate Remuneration Committee, as recommended by Recommendation 8.1.

20 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited FINANCIAL REPORT 30 june 2008

Transfield services infrastructure limited ACN 106 617 332

Directors’ Report (including Remuneration Report) 22 Auditor’s Independence Declaration 35 Income Statements 36 Balance Sheets 37 Statements of Cash Flows 38 Statements of Changes in Equity 39 Notes to and forming part of the Financial Statements 40 Directors’ Declaration 78 Independent Auditor’s Report to the Members 79

This financial report covers both Transfield Services Infrastructure Limited as an individual entity and the consolidated entity consisting of Transfield Services Infrastructure Limited and its controlled entities. The financial report is presented in Australian currency. Transfield Services Infrastructure Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Transfield Services Infrastructure Limited Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 The financial report was authorised for issue by the Directors on 18 September 2008. The Company has the power to amend and reissue the financial report. A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and activities and in the Directors’ Report. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, financial reports and other information are available at our Media and Investor Centre on our website www.tsinfrastructurefund.com.

For queries in relation to our reporting please call (02) 9464 1000 or e-mail [email protected]. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 21 Directors’ Report

Your Directors present their report on the consolidated entity consisting of Transfield Services Infrastructure Limited and the entities it controlled at the end of, or during, the year ended 30 June 2008. Directors The following persons were Directors of Transfield Services Infrastructure Limited during the financial year and up to the date of this report unless otherwise indicated: Peter Young AM (Chairman) David Mathlin Kate Spargo Peter Watson Anthony Shepherd Matthew Irwin (Alternate Director for Peter Watson) Kate Munnings (Appointed on 22 May 2008 as Alternate Director for Peter Watson) Principal activities During the year the principal continuing activities of the consolidated entity consisted of infrastructure ownership in the power generation and water filtration sectors. Stapling arrangement Transfield Services Infrastructure Limited shares are stapled to shares in TSI International Limited (TSIIL) and units in Transfield Services Infrastructure Trust (TSIT) and together these are listed on the Australian Securities Exchange as Transfield Services Infrastructure Fund (TSI Fund). Distributions Distributions paid to members during the financial year were as follows: 2008 2007* $000 $000 Interim distribution paid on 5 March 2008 25,339 -

cents cents* Interim distribution 9.5 -

* TSI Fund paid distributions for the stub period between listing on 12 June and 30 June 2007 as part of the interim distribution for 2008 financial year paid on 5 March 2008.

Review of operations A summary of consolidated revenues and results by significant business segments is set out below: SEGMENT SEGMENT REVENUE RESULT 2008 2007 2008 2007 $000 $000 $000 $000 Power stations 165,574 142,357 75,013 8,607 Wind farms 11,070 - (4,051) - Water filtration plants 249 - 4,676 1,678

176,893 142,357 75,638 10,285 Unallocated amounts 5,180 - (43,157) -

Total revenue / Profit from continuing operations before income tax expense 182,073 142,357 32,481 10,285

Income tax (expense) (6,781) (8,751)

Profitonly use personal For from continuing operations after income tax expense 25,700 1,534 Profit attributable to minority interests (18,180) (2,730)

Profit / (loss) attributable to members of Transfield Services Infrastructure Limited 7,520 (1,196)

22 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Earnings / (Loss) per Share 2008 2007 centS cents Basic earnings / (loss) per share 2.8 (1.2) Diluted earnings / (loss) per share 2.8 (1.2)

Significant changes in the state of affairs During the year, Transfield Services Infrastructure Limited (the Company) acquired four wind farms from the Queensland Government. The acquisition of a 50% share in Emu Downs wind farm was scheduled for completion in early 2008, but completion is subject to the Queensland Government receiving necessary approval. This condition is yet to be satisfied at the date of this Directors’ Report. The Queensland Government has until December 2008 to satisfy this condition. Matters subsequent to the end of the financial year On 22 August 2008, the Directors of Infrastructure Fund Management Limited, as responsible entity for Transfield Services Infrastructure Trust declared a final distribution of 9.0 cents per unit to be paid to stapled securityholders of TSI Fund on 17 September 2008. Other than the above, there have been no matters or circumstances that have arisen since 30 June 2008 that have significantly affected, or may significantly affect: (a) the consolidated entity’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the consolidated entity’s state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. Environmental regulation and greenhouse gas and energy data reporting requirements Because of the diversity of its operations in many regulatory frameworks, it is essential that Transfield Services Infrastructure Limited has a systematic and adaptable approach to environmental management across all of its activities. To manage risk and to ensure protection of the environment, the Manager has developed and implemented an Environmental Management System. This system is based on the International Standard: AS/NZS ISO 14001:1996 for environmental management systems, and is integrated into the Transfield Services Operational Systems Manual (which is in turn certified against the AS/NZS ISO: 9001:2000 Quality Management Systems standard). This service is provided under the terms of the Management Services Agreement between TSI Fund and the Manager. TSI Fund is subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007. However, it does not currently trigger the requirements of the Energy Efficiency Opportunities Act 2006. The National Greenhouse and Energy Reporting Act 2007 requires TSI Fund to report its annual greenhouse gas emissions and energy use. The first measurement period for this Act runs from 1 July 2008 until 30 June 2009. The Manager on behalf of TSI Fund has implemented systems and processes for the collection and calculation of the data required to enable it to prepare and submit the initial report to the Greenhouse and Energy Data Officer (GEDO) by 31 October 2009. TSI Fund will register with the GEDO before the deadline of 31 August 2009 and its report will include the greenhouse gas emissions and

energy use of TSI Fund’s assets. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 23 Directors’ Report

Meetings of Directors The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2008, and the numbers of meetings attended by each Director were: Extra-ordinary Risk, Audit and Director Board Meetings Board Meetings Compliance Committee H held Attended held Attended held Attended Peter Young AM 9 9 5 5 4 N/A David Mathlin 9 9 5 4 4 4 Kate Spargo 9 9 5 4 4 4 Anthony Shepherd 9 8 5 5 4 N/A Peter Watson 9 9 5 3 4 4

N/A: Not applicable as the Director is not a member of the committee

The Board also formed an Investment Review Committee (IRC). All matters relevant to the IRC were considered at Board or Extra-ordinary Board meetings which were attended by all IRC members. Information on Directors Details of the Directors’ responsibilities, qualifications and shareholdings are set out below. Particulars of Indirect interest Directors’ interests in Transfield Services in shares of infrastructure Limited Special Transfield Services through Transfield Director responsibilities Infrastructure Limited Services Limited Peter Young AM independent Chairman 293,528 - David Mathlin independent Non-Executive Director and member of the Risk, Audit and Compliance Committee 199,413* 2,903 Kate Spargo Independent Non-Executive Director and Chairperson of the Risk, Audit and Compliance Committee 35,913 - Anthony Shepherd Transfield Services’ nominee and member of the Risk, Audit and Compliance Committee 145,120* 1,019,423 Peter Watson Transfield Services’ nominee 267,521* 1,228,535

* includes shares that are held by a related party.

banking and financial services organisations. For personal use only use personal For

24 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

David Mathlin – Independent Non-Executive Director Master of Business Administration Bachelor of Science, Bachelor of Engineering (Honours) David was appointed a Director of TransfieldS ervices Infrastructure Fund in April 2007. David has worked at global consulting services firm, Sinclair Knight Merz (SKM) Group since 1974. During this time, David has held a number of senior positions in the firm, including Director of Sinclair Knight Merz Management Pty Ltd from 1987 to 2006 and Chairman of Sinclair Knight Merz Holdings Ltd from 2001 to 2006. David commenced his career at the Electricity Commission of NSW and was Chairman of landscape, architecture and planning company EDAW Pty Ltd from 1989 to 2000. He is a Fellow of the Institution of Engineers Australia and a Fellow of the Australian Institute of Company Directors. Anthony Shepherd – Non-Executive Director Bachelor of Commerce Anthony was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Anthony was appointed Chairman of Transfield Services in 2005, is Chairman of the ConnectEast Group, a Director of The Global Foundation and the Australian Chamber Orchestra, as well as a Trustee of the Sydney Cricket and Sports Ground Trust. He is also a member of the Australian Institute of Company Directors and Patron of Infrastructure Partnerships Australia. Anthony was responsible for the development of many landmark projects, including the Sydney Harbour Tunnel, Melbourne CityLink, a number of other build-own-operate-transfer projects as well as the redevelopment of Walsh Bay. He was an inaugural Director of Transurban Limited. Kate Spargo – Independent Non-Executive Director Bachelor of Laws (Honours) Bachelor of Arts Kate was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Kate is Chairperson of the Accounting Professional and Ethical Standards Board. She has been a Non-Executive Director of IOOF Holdings Ltd since 1999, Pacific Hydro Pty Ltd since 2004, and Investec Bank (Australia) Ltd since 2005. Kate also serves on the Boards of Colnvest Ltd and NeuroSciences Victoria Ltd. In July 2008, Kate was selected for the Board of the Australian Energy Market Operator (AEMO), which commences operations on 1 July 2009. Kate was a Non-Executive Director of I00F Ltd from1999 to 2002, Non-Executive Director of Fulton Hogan Ltd from 2003 to 2007, Chairman of HomeStart Finance for seven years to 2002 and Chairman of PrimeGro Ltd from 2002 to 2003. Kate began her career as a Barrister and Solicitor with the South Australia Attorney General’s Department in the Crown Solicitor’s Office. She is a Fellow of the Australian Institute of Company Directors, and a Member of its Victorian Council. Peter Watson – Non-Executive Director Diploma of Engineering (Civil) Peter was appointed a Director of Transfield Services Infrastructure Fund in April 2007. He was appointed Managing Director and Chief Executive Officer (CEO) of TransfieldS ervices in 2002. Peter has played an integral role in the successful development of Transfield Services since its inception in 1993 and led the organisation as CEO through its successful public listing in 2001. Peter has guided the international expansion of Transfield Services into North America through the acquisitions of US Maintenance, TIMEC and VMS as well as a major contract win with Suncor Energy in Canada. He is a member of the Institution of Engineers Australia and the Australian Institute of Company Directors. He is an alumnus of The Wharton School of Executive Education. Peter is a founding sponsor of the Australian Sustainable Industry Research Centre and a fellow of the Australian Academy of Technological Sciences and Engineering. Marianne Suchanek – Company Secretary Bachelor of Laws Bachelor of Arts Marianne is the Company Secretary for the Company and the other stapled entities comprising TSI Fund. Marianne has legal counsel, corporate

For personal use only use personal For governance and compliance responsibilities and works in the Legal and Company Secretarial Department of the Manager. Marianne is currently studying the Graduate Diploma in Applied Corporate Governance at Chartered Secretaries Australia Ltd.

Transfield Services INFRASTRUCTURE FUND 25 Directors’ Report

Remuneration Report

The Remuneration Report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration B details of remuneration c service agreements D Performance Awards provided as remuneration e share-based compensation for Performance Awards F Transfield Services Infrastructure Fund Notional Securities Scheme provided as remuneration G additional information Under the Management Services Agreement (MSA), the Manager sources new investment opportunities and provides management, corporate and operations and maintenance services (Services) to TSI Fund. The Manager makes available its employees to TSI Fund, on a dedicated or as needed basis. Their remuneration is paid by TSI Fund as part of a management fee, which is an agreed estimate of certain expenses incurred by the Manager in performing its obligations for providing the Services (Expense Amount). In the 2008 financial year, the Manager was entitled to an Expense Amount of $5.1 million. This will increase to $5.3 million in the 2009 financial year. From the end of the 2009 financial year onwards, the Manager and TSI Fund will review the Expense Amount to reflect actual and anticipated costs incurred by the Manager in the performance of its duties under the MSA. The Chief Executive Officer CE( O), Chief Financial Officer (CFO) and General Manager Assets (GM Assets) are employed by the Manager and seconded to TSI Fund (Seconded Employees). Those employees seconded to TSI Fund are dedicated to meeting the business requirements of TSI Fund and in performing their functions must act in the best interests of securityholders in TSI Fund. TSI Fund does not have employees and relies on the executive staff under the MSA to implement operational decisions and carry out and ensure administration functions are discharged. A. Principles used to determine the nature and amount of remuneration The executive remuneration framework detailed below sets out the policies of the Manager as they refer to the Seconded Employees. The amount of remuneration is calculated based on the total remuneration awarded by the Manager from the date of secondment to TSI Fund. The Independent Non-Executive Directors (NEDs) are appointed directly by TSI Fund, and their remuneration is set by the TSI Fund Board with reference to external peers. The objective of the Manager’s executive remuneration framework is to ensure reward for performance is competitive in the markets where it competes to recruit executives, and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic business objectives to create value for TSI Fund securityholders, and conforms with market best practice for delivery of reward. The executive reward framework is: • market competitive and reasonable • performance linked, and • transparent. In consultation with external remuneration consultants, the Manager has structured an executive remuneration framework that aligns executive performance with securityholders’ interests. Alignment to securityholders’ interests is achieved through the following performance measures: • financial measures including growth, earnings and distributions, and • strategic and non-financial drivers of value. Alignment to executives’ interests to ensure it attracts and retains high calibre executives is achieved by offering rewards that: • are commensurate with the contributions made • are sufficient to provide appropriate recognition • are competitive in respective executive employment markets, and • are earned within a clear and well communicated structure. The framework provides a mix of fixed and variable pay, including short-term and long-term incentives. Not all the Manager’s employees participate in the short-term and long-term incentive programs. Participation in both plans is selectively applied to people in positions more able to influence the business

performance. The proportion of variable or ‘at risk’ remuneration is higher for the more senior executives. For personal use only use personal For

26 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Independent Non-Executive Directors’ fees Fees and payments to NEDs reflect the demands which are made on, and the responsibilities of, the Directors. NEDs’ fees and payments are reviewed annually by the Board. The Board has also taken advice from independent remuneration consultants to ensure NEDs’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of NEDs based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. NEDs do not receive equity based remuneration under the Transfield Services Infrastructure Fund Notional Securities Scheme. NEDs receive a minimum 20 per cent of their remuneration in TSI Fund units, which are acquired prospectively on‑market in January and July each year and held in the Transfield Services Infrastructure Fund Tax Deferred Plan. NEDs receive a Directors’ fee inclusive of superannuation. The Directors’ fee was set with effect from 26 April 2007, and will be reviewed annually thereafter. NEDs who chair or serve on a committee receive additional annual fees. Directors’ fees NEDs’ fees are determined within the aggregate Directors’ fee pool limit of $750,000. The current Directors’ fee is $80,000 per Director per annum and the Chairman’s fee is $200,000 per annum. Committee members currently each receives $8,000 per annum per committee and the Committee Chairs each receive $15,000 per annum per committee. Transfield Services Nominee Directors Peter Watson who is an executive officer of Transfield Services is not paid a fee for serving as a director of TSI Fund. Anthony Shepherd is paid by Transfield Services to represent Transfield Services on the TSI Fund Board. Retirement allowances for Directors Retirement allowances are not paid to Directors. Executive reward The executive pay and reward framework has four components: • fixed remuneration including superannuation • short-term performance incentives • long-term incentives through participation in the TranShare Executive Performance Awards Plan (which is otherwise known as Performance Awards and issued by Transfield Services Limited) and/or Transfield Services Infrastructure Fund Notional Securities Scheme (which is otherwise known as the Scheme), and • other benefits. The combination of these elements comprises the executive’s total remuneration. Cash salary and fees The fixed remuneration component is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non‑financial benefits at the executive’s discretion. Executives are offered a competitive base pay package that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure fixed base pay is set to reflect the relevant market for comparable roles in peer companies. Fixed remuneration for senior executives is reviewed annually to ensure the executive’s pay remains aligned to policy and competitive with the market in which they operate. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in executives’ contracts. Other benefits Executives may receive benefits including executive health management, householder insurance and salary continuance insurance. Post-employment benefits Retirement benefits are delivered under the Transfield Services Superannuation Plan (or another complying plan of the executive’s choice) which provide

defined contribution benefits. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 27 Directors’ Report

Short-term incentives The short-term performance incentive (STI) component of remuneration is provided to nominated executives via an annual cash bonus. Participation is restricted to executives and selected individuals who can materially impact TSI Funds’ financial performance. Cash incentives (bonuses) are payable following audit clearance of the annual financial statements each year. Each executive has a target STI opportunity depending on the accountabilities of the role and impact on TSI Fund. The target opportunity of total fixed remuneration for the CEO is 100%, CFO is 40% and General Manager Assets is 20%. Each year, Transfield Services Human Resources Committee, following consultation with the TSI Fund Board, oversees the targets and key performance indicators (KPIs) for the CEOs’ STI plan and the level of payout for achievement of targets. This includes setting any maximum payout under the STI plan for out-performance, and minimum levels of financial performance required to trigger payment of STI. 100% of the STI opportunity of employees seconded to TSI Fund are based on TSI Fund related performance targets. The STI target annual payment is reviewed annually. For the year ended 30 June 2008, the STI plan KPIs were based on TSI Fund’s financial and strategic objectives. The KPIs included achieving specific targets in relation to earnings before interest, tax, depreciation and amortisation expense (EBITDA), TSI Fund growth and distributions, as well as other key, strategic and non‑financial measures linked to drivers of performance in future reporting periods. The KPIs for Seconded Employees reflected a majority weighting towards specific financial outcomes of TSI Fund. TransfieldS ervices’ Human Resources Committee has oversight of performance outcomes against the KPIs for the CEO. To help make this assessment, the Transfield Services’ Human Resources Committee receives detailed reports on performance against the KPIs. Long-Term Incentive (LTI) structure for Seconded Employees The CEO and the CFO are the only Seconded Employees to participate in the LTI. The vesting conditions and performance hurdles of the Seconded Employees’ LTIs are measured 50/50 against the achievement of both TSI Fund’s and Transfield Services respective business objectives. In addition, the award of TSI Fund notional securities and TransfieldS ervices shares are proportioned 50/50. The Transfield Services shares awarded to the CEO and CFO are issued under the TransShare Executive Performance Awards Plan and TSI Fund notional securities awarded to the CEO and CFO are issued under the TSI Fund Notional Securities Scheme. Long-Term Incentive – TranShare Executive Performance Awards Plan The TranShare Executive Performance Awards Plan provides Performance Awards to the CEO and CFO of TSI Fund. Performance Awards for shares in Transfield Services are granted annually and generally vest no earlier than three years from grant date. The performance conditions of each grant of Awards are subject to Transfield Services’ Board review and assessed against its business plan and cycle. Transfield Services has determined that relative total shareholder return (TSR) combined with absolute earnings per share (EPS) growth are the most appropriate hurdles for its executives at this time. These performance conditions were chosen to ensure that executives are only rewarded when profit grows in real terms and Transfield Services achieves superior shareholder growth relative to the performance of the S&P ASX 200 Industrials index. Long-Term Incentive – Transfield Services Infrastructure Fund Notional Securities Scheme The TSI Fund Notional Securities Scheme (Scheme) offers the CEO and CFO a notional investment in securities of TSI Fund. This Scheme is offered by the Manager. The incentive provided under the Scheme can be delivered either in cash or in TSI Fund securities once vesting conditions have been met. The Scheme is used, because under current Australian tax law, TSI Fund securities issued under a TSI Fund executive remuneration regime can only be provided to TSI Fund direct employees, whereas both the CEO and the CFO are seconded from the Manager. This notional investment in securities in TSI Fund is a structure that replicates the performance, in respect of total securityholder return of TSI Fund securities. B. Details of remuneration Amounts of remuneration Details of the remuneration of the Directors and the key management personnel of the Company are set out in the tables below. The key management personnel of Transfield Services Infrastructure Limited and TSI Fund are those persons having authority and responsibility for planning, directing and controlling the activities of Transfield Services Infrastructure Limited, directly or indirectly and includes the Directors and the following executive officers which include the five highest paid executives of the entity: Steve MacDonald chief Executive Officer Charles Mott chief Financial Officer Geoff Dutton*** General Manager Assets Darce Corsie* Transitional Chief Financial Officer Fred Bidwell** General Manager Special Projects and Company Secretary

* retired 9 February 2008

** ronly use personal For etired 28 February 2008 *** appointed 3 March 2008

The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed Short-term incentives above and the LTIs do not vest unless performance conditions are met. All other elements of remuneration are not directly related to Company performance.

28 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Directors of Transfield Services Infrastructure Limited Group and the Company Short-term Post-employment Share-based benefits benefits payments Cash non‑ deferred salary cASh monetary Super‑ Retirement Share and feeS BonuS BenefitS Annuation BenefitS Purchase Scheme total Name $ $ $ $ $ $ $ $ Non‑executive Directors Peter Young AM 139,897 - - 15,171 - 47,143 - 202,211 2007 32,676 - - 2,941 - - - 35,617 David Mathlin 67,183 - - 6,630 - 18,857 - 92,670 2007 13,070 - - 1,176 - - - 14,246 Kate Spargo 35,221 - - 6,087 - 53,036 - 94,344 2007 13,070 - - 1,176 - - - 14,246 Anthony Shepherd1 ------2007 ------Peter Watson2 ------2007 ------Sub‑total non‑executive 242,301 - - 27,888 - 119,036 - 389,225 Directors 58,816 - - 5,293 - - - 64,109 Total Directors 242,301 - - 27,888 - 119,036 - 389,225 2007 58,816 - - 5,293 - - - 64,109 Total for each category 242,301 27,888 119,036 389,225 2007 58,816 5,293 - 64,109

1. anthony Shepherd is paid $88,000 by Transfield Services to represent Transfield Services on the TSI Fund Board 2. Peter Watson, who is an executive officer of Transfield Services, is not paid a fee for serving as a Director of TSI Fund

Other key management personnel and five most highly remunerated officers of theT ransfield ServicesI nfrastructure Limited Group and the Company Post- termin- long- employment Ation term Share-based Short-term benefitS Benefits Payment Benefits payments cash Settled Cash non‑ Restraint long Share notional Perfor- salary cASh monetary Super‑ of Service BASed Securities mance and feeS BonuS BenefitS Annuation trade leave PAymentS Scheme AWARdS total5 Name $ $ $ $ $ $ $ $ $ $ $

Steve MacDonald* 511,882 390,075 15,657 13,129 - - 21,946 - 56,667 178,394 1,187,750 2007 144,832 106,458 - 3,163 - - 6,330 - - - 260,783 Charles Mott 321,107 104,720 - 9,633 - - 8,450 - 17,000 57,778 518,688 2007 53,518 ------53,518 Geoff Dutton1 70,338 13,892 - 6,330 - - 1,594 - - - 92,154 2007 ------Darce Corsie2, 4 386,612 - - 36,370 133,400 - - 86,584 - - 642,966 2007 68,620 29,020 - 6,176 - - 4,573 - - - 108,389 Fred Bidwell3, 4 324,226 - 100,000# 113,129 - 140,000 5,237 - - - 682,592 2007 68,640 23,284 - - - - 2,055 - - - 93,979 Totals for each 1,614,165 508,687 115,657 178,591 133,400 140,000 37,227 86,584 73,667 236,172 3,124,150 component 335,610 158,762 - 9,339 - - 12,958 - - - 516,669

For personal use only use personal For Total for each 2,238,509 311,991 140,000 37,227 396,423 3,124,150 category 494,372 9,339 - 12,958 - 516,669

1 appointed 3 March 2008 – 100% of total remuneration from the Manager is attributable to TSI Fund 2 retired 9 February 2008 – 100% of total remuneration from the Manager is attributable to TSI Fund 3 retired 28 February 2008 – 100% of total remuneration from the Manager is attributable to TSI Fund 4 remuneration for Darce Corsie and Fred Bidwell reflects attributable payments for annual and long service leave in addition to service agreement payments on retirement 5 The Manager makes available its employees to TSI Fund, on a dedicated or as needed basis. Their remuneration is paid by TSI Fund as part of a management fee, which is an agreed estimate of certain expenses incurred by the Manager in performance of its obligations for providing the services. This is known as the Expense Amount * steve MacDonald received additional deferred remuneration components which relate to his prior role as Chief Strategy Officer of Transfield Services (note 31) # This amount is for a bonus payable under the STI, which Fred Bidwell elected to receive in Transfield Services shares

Transfield Services INFRASTRUCTURE FUND 29 Directors’ Report

C. Service agreements

Remuneration and other terms of employment for the CEO and the other key management personnel are formalised in service agreements. Each of these agreements provides for the provision of performance‑related cash bonuses, other benefits including executive health management, householder insurance, salary continuance insurance and participation, when eligible, in the TranShare Executive Performance Awards Plan and the TSI Fund Notional Securities Scheme. Other major provisions of the agreements are: termination % of total Benefit (amount Remuneration of annual (including 100% of notice period SAlary) on early All share-based Required for the termination by A Rolling three Remuneration) that employee to the Company, Restrictive years term is performance terminate the other than for covenant Name of agreement related contract gross misconduct APPlies Steve MacDonald 1 April 2007 53% 6 months 12 months 12 months Chief Executive Officer Charles Mott 1 May 2007 35% 3 months 6 months 6 month Chief Financial Officer Geoff Dutton 3 March 2008 12% 1 month 1 month - General Manager Assets Darce Corsie 9 February 2005 - 3 months 12 months 12 months Transitional Chief Financial Officer Fred Bidwell 1 June 2007* 15% 3 months 3 months 12 months General Manager Special Projects and Company Secretary

* fixed term agreement until 28 February 2008.

D. Performance Awards provided as remuneration The terms and conditions of each grant of Performance Awards affecting remuneration in this or future reporting periods are set out below: vAlue per Performance first Date eXercise Price Award at number Name Expiry Date exercisable A$ grant date Granted Steve MacDonald 31 May 2013 31 May 2010 nil $11.35 28,750 Chief Executive Officer 31 May 2013 31 May 2010 nil $7.26 28,750 Charles Mott 31 August 2013 31 August 2010 nil $12.18 9,550

Chief Financial Officer 31 August 2013 31 August 2010 nil $9.60 9,550 For personal use only use personal For

30 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

E. Share‑based compensation for Performance Awards The table below lists vesting schedules and performance hurdles for Performance Awards granted under TranShare Executive Performance Awards Plan at different dates: Expiry eXercise vAlue at Grant date date PRice grant date Performance Criteria 31 May 2007 13 May 2013 - Tranche 1 $nil $11.35 Transfield Services Limited’s EPS growth of 10% to 15% - Tranche 2 $nil $7.26 Transfield Services Limited’s TSR growth 50th to 75th percentile 31 August 2007 31 August 2013 - Tranche 1 $nil $12.18 Transfield Services Limited’s EPS growth of 10% to 15% - Tranche 2 $nil $9.60 Transfield Services Limited’s TSR growth 50th to 75th percentile

F. Transfield Services Infrastructure Fund Notional Securities Scheme provided as remuneration The CEO has been granted a long term incentive equivalent to 333,334 notional securities in TSI Fund and the CFO has been granted a long-term incentive equivalent to 100,000 notional securities in TSI Fund. The vesting date for these notional securities is 30 June 2010. At 30 June 2008, the fair value of the CEO’s notional securities was $56,667 and the fair value of the CFO’s notional securities was $17,000. The table below lists vesting schedules and performance hurdles for notional securities granted under the Scheme: Vesting Schedule Allocation Performance vesting Grant Date Tranche Percentage hurdles of awards Performance conditions 15 November 2007 A 50% TSI Fund return 20%# TSI Fund return* > Benchmark return** by $350,000; 80% TSI Fund return > Benchmark return by > $1,750,000; 15 November 2007 B 50% TSI Fund market 100% TSI Fund market capitalisation doubles from capitalisation listing to 30 June 2010

# Pro-rata vesting will apply up to 100% once the primary performance hurdle for Tranche A has been achieved. * TSI Fund return is the cumulative return of TSI Fund for 30 June financial years ending 2008, 2009, and 2010. ** Benchmark return is the average market capitalisation of TSI Fund over the last 20 trading days of the previous financial year multiplied by the average daily closing value of the benchmark rate during the relevant financial year, plus the time weighted aggregate values of all new securities paid during the relevant financial year multiplied by a rate equivalent to the average daily closing value of the benchmark rate.

The terms and conditions of each grant of the Scheme affecting remuneration in the previous, this or future reporting periods are set out below: Value per Lapsing first Date eXercise Price notional security number Name Tranche entitlement eXercisable $ At 30 June 2008 gRAnted Steve MacDonald A The earlier of ceasing 30 June 2010 N/A $0.33 166,667 Chief Executive Officer employment and 180 days after the First Date Exercisable. B The earlier of ceasing 30 June 2010 N/A $0.01 166,667 employment and 180 days after the First Date Exercisable. Charles Mott A The earlier of ceasing 30 June 2010 N/A $0.33 50,000 Chief Financial Officer employment and 180 days after the First Date Exercisable. B The earlier of ceasing 30 June 2010 N/A $0.01 50,000 employment and

For personal use only use personal For 180 days after the First Date Exercisable.

Transfield Services INFRASTRUCTURE FUND 31 Directors’ Report

G. Additional information Principles used to determine the nature and amount of remuneration: relationship between remuneration and Company performance. The Company’s profit after tax, securityholder wealth and executive remuneration will be measured progressively over the next five years. Details of remuneration: at-risk remuneration For each cash bonus, grant of Performance Awards and Notional Securities Scheme, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. The Performance Awards vest over three to five years provided the vesting conditions are met. No Performance Awards will vest if the conditions are not satisfied, hence the minimum value of the Performance Award yet to vest is nil. The maximum value of the Performance Awards yet to vest has been determined based on the fair value at grant date. The Notional Securities Scheme vests over three years provided the vesting conditions are met. No Notional Securities will vest if the conditions are not satisfied, hence the minimum value of the Notional Securities Scheme yet to vest is nil. The maximum value of the Notional Securities Scheme yet to vest has been determined based on the fair value at 30 June 2008. Notional Cash Bonus Performance Awards Securities Scheme year year year Name Paid forfeited granted Paid forfeited granted Paid forfeited granted % % % % % % Steve MacDonald 74 26 2008 ------Chief Executive Officer 87 13 2007 - - 2007 - - 2007 Charles Mott 75 25 2008 ------Chief Financial Officer - - 2007 - - 2007 - - 2007 Geoff Dutton 91 9 2008 n/a n/a n/a n/a n/a n/A General Manager Assets - - 2007 n/a n/a n/a n/a n/a n/A Darce Corsie - - 2008 - - - n/a n/a n/A Transitional Chief Financial Officer 90 10 2007 - - - n/a n/a n/A Fred Bidwell 100 - 2008 - - - n/a n/a n/A General Manager Special 87 13 2007 - - - n/a n/a n/A Projects and Company Secretary

Share‑based compensation: Performance Awards Further details relating to Performance Awards are set out below. A B C D Remuneration consisting of Value at Performance vAlue at exercise Value at Name Awards grant date date lapse date % $ $ $ Steve MacDonald 15% - - - Chief Executive Officer Charles Mott 11% 57,778 - - Chief Financial Officer

A = The percentage of the value of remuneration consisting of Awards, based on the value at grant date set out in column B. B = The value at grant date calculated in accordance with AASB 2 Share‑based Payment of Awards granted during the year as part of remuneration. C = The value at exercise date of Performance Awards that were granted as part of remuneration and were exercised during the year.

D = The value at lapse date of Performance Awards that were granted as part of remuneration and that lapsed during the year. For personal use only use personal For

32 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Shares under Performance Award Unissued ordinary shares of Transfield Services Limited under the Performance Award at the date of this report are as follows: Date Performance Number under Awards granted Expiry Date iSSue price of shares Performance Awards 31 May 2007 31 May 2013 $nil 57,500 31 August 2007 31 August 2013 $nil 19,100 76,600

No Performance Award holder has any right under the Performance Awards Plan rules to participate in any other share issue of the Company or any other entity. Security‑based compensation: Notional Securities Scheme Further details relating to the Notional Securities Scheme are set out below. A B C D Remuneration consisting of Notional vAlue at Value at Value at Name Securities Scheme 30 June 2008 exercise date lapse date % $ $ $ Steve MacDonald 5% 56,667 - - Chief Executive Officer Charles Mott 3% 17,000 - - Chief Financial Officer

A = The percentage of the value of remuneration consisting of the Notional Securities Scheme, based on the value at balance date set out in column B. B = The value at balance date calculated in accordance with AASB 2 Share‑based Payment of Awards granted during the year as part of remuneration. C = The value at exercise date of Notional Securities that were granted as part of remuneration and were exercised during the year. D = The value at lapse date of Notional Securities that were granted as part of remuneration and that lapsed during the year.

Notional Securities Scheme Unissued ordinary securities of TSI Fund under the Notional Securities Scheme at the date of this report are as follows: Date Notional Securities Issue price of Number under Scheme granted Expiry Date notional securitieS notional Securities 15 November 2007 The earlier of ceasing employment $nil 333,334 and 180 days after 30 June 2010. 15 November 2007 The earlier of ceasing employment $nil 100,000 and 180 days after 30 June 2010. 433,334

Insurance of officers During the financial year, Transfield Services Infrastructure Limited paid a premium of $136,879 to insure the Directors and Secretaries of the Company and its controlled entities. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Proceedings on behalf of the Company No person has applied to a court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. For personal use only use personal For No proceedings have been brought or intervened in on behalf of the Company with leave of a court under section 237 of the Corporations Act 2001. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important. PricewaterhouseCoopers were paid $231,259 during the year for non-audit services. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out in note 26.

Transfield Services INFRASTRUCTURE FUND 33 Directors’ Report

The Board of Directors has considered the position and, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in note 26, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor. • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of Corporations Act 2001 is set out on page 35. Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor PricewaterhouseCoopers continues in office in accordance withS ection 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Directors.

Peter Young Am kate Spargo Director director at Sydney

18 September 2008 For personal use only use personal For

34 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited auditor’s independence

declaration For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 35 Income Statements For the year ended 30 June 2008

Consolidated Parent entity Note 2008 2007 2008 2007 $000 $000 $000 $000 Revenue from continuing operations 4 182,073 142,357 9,525 89,627 Share of net profits of associates accounted for using the equity method 8,888 5,135 - - Operating costs (85,870) (69,270) (9,726) (8,029) Depreciation and amortisation 5 (32,539) (28,209) - - Finance costs 5 (33,538) (37,291) (54,344) (33,806) Other expenses (6,533) (2,437) (2,364) -

Profit before income tax 32,481 10,285 (56,909) 47,792 Income tax (expense) / benefit 6 (6,781) (8,751) 15,462 11,074

Net profit attributable to stapled securityholders of Transfield Services Infrastructure Fund 25,700 1,534 (41,447) 58,866

Attributable to: Unitholders of Transfield Services Infrastructure Trust and shareholders of TSI International Limited (minority interest) 18,180 2,730 - - Profit / (loss) attributable to shareholders of Transfield Services Infrastructure Limited 7,520 (1,196) (41,447) 58,866

Net profit attributable to stapled securityholders of Transfield Services Infrastructure Fund 25,700 1,534 (41,447) 58,866

Earnings/(loss) per share for profit from continuing operations attributable to the ordinary shareholders of the Company 2008 2007 Note cents cents Basic earnings / (loss) per share 37 2.8 (1.2)

Diluted earnings / (loss) per share 37 2.8 (1.2)

The above income statements should be read in conjunction with the accompanying notes, including note 37 which presents the following earnings per share for profit attributable to stapled securityholders Earnings per share for profit from continuing operations attributable to the ordinary securityholders of the Transfield Services Infrastructure Fund 2008 2007 Note cents cents Basic earnings per share 37 9.6 1.6

Diluted earnings per share 37 9.6 1.6 For personal use only use personal For

36 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited balance sheets as at 30 June 2008

Consolidated Parent entity Note 2008 2007 2008 2007 $000 $000 $000 $000 Current assets Cash and cash equivalents 7 18,970 22,004 12,664 15,889 Trade and other receivables 8 33,487 26,640 695,407 556,904 Prepayments and other current assets 9 19,485 6,091 9,492 3,657 Inventories 10 10,194 11,113 - - Derivative financial instruments 11 8,469 1,906 8,469 1,906

Total current assets 90,605 67,754 726,032 578,356

Non-current assets Receivables 12 37,090 40,170 37,090 40,170 Investments accounted for using the equity method 13 79,075 74,536 45,033 45,033 Available for sale financial assets 14 136,285 136,285 136,285 136,285 Other financial assets 15 - - 368,703 179,258 Property, plant and equipment 16 887,437 570,082 - - Intangible assets 17 199,861 141,566 - - Derivative financial instruments 11 29,762 18,683 29,762 18,683

Total non-current assets 1,369,510 981,322 616,873 419,429

Total assets 1,460,115 1,049,076 1,342,905 997,785

Current liabilities Trade and other payables 18 30,355 22,506 3,460 5,402 Short term borrowings 19 64,350 20,182 430,017 366,104 Current tax liabilities 7,371 5,891 7,371 5,891

Total current liabilities 102,076 48,579 440,848 377,397

Non-current liabilities Long term borrowings 20 708,404 404,861 708,404 404,861 Deferred tax liabilities 21 136,430 96,074 14,181 6,432 Provisions 22 2,969 1,221 - -

Total non-current liabilities 847,803 502,156 722,585 411,293

Total liabilities 949,879 550,735 1,163,433 788,690

Net assets 510,236 498,341 179,472 209,095

Equity Contributed equity 23 130,951 131,476 130,951 131,476 Reserves 24 (a) 30,924 18,753 31,102 18,753 Retained profits 24 (b) 10,650 3,130 17,419 58,866

Parent entity interest 172,525 153,359 179,472 209,095 Minority interest (attributable to equity holders of TSIT and TSIIL) 25 337,711 344,982 - -

Total equity 510,236 498,341 179,472 209,095

The above balance sheets should be read in conjunction with the accompanying notes. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 37 statements of cash flows For the year ended 30 June 2008

Consolidated Parent entity Note 2008 2007 2008 2007 $000 $000 $000 $000 Cash flows from operating activities Receipts from customers 186,446 135,225 - - Payments to suppliers, subcontractors and employees (105,122) (80,721) (7,494) (7,452)

81,324 54,504 (7,494) (7,452) Dividends received 4,200 3,000 - 82,262 Interest received 7,374 4,913 5,898 3,082 Taxation paid (7,118) - (10,542) -

Net cash inflow / (outflow) from operating activities 36 85,780 62,417 (12,138) 77,892

Cash flows from investing activities Net cash (outflow) / inflow on purchase of controlled entities (340,788) 31,828 - - Payment for acquisition of available for sale financial assets - (179,129) - (180,967) Loans to related parties - - (274,370) (372,523) Payments for property, plant and equipment and intangible assets (36,806) (528) - - Investment in subsidiary - - - (5,000) Proceeds from disposal of land and investment 3,568 - - - Redemption of loan notes 2,119 6,270 2,119 -

Net cash (outflow)/inflow from investing activities (371,907) (141,559) (272,251) (558,490)

Cash flows from financing activities Proceeds from issues of shares (net of cost) - 22,458 - 22,458 Proceeds from issue of units (net of costs) - 39,479 - - Equity transaction costs (178) - (66) - Proceeds from Corporate Borrowing Facility 344,543 404,861 344,543 404,861 Proceeds from acquisition bridge debt 220,808 - 75,000 - Repayment of acquisition bridge debt (220,808) - (75,000) - Proceeds from related party borrowings 3,254 180,967 2,548 180,967 Repayment of related party borrowings - (77,993) - (77,993) Repayment of borrowings – project finance borrowings - (449,676) - - Distributions paid (25,339) - - - Finance costs and principal paid on loan from Transfield Services Infrastructure Trust - - (24,344) - Finance costs paid (39,187) (36,254) (41,517) (33,806)

Net cash inflow/(outflow) from financing activities 283,093 83,842 281,164 496,487

Net (decrease) /increase in cash held (3,034) 4,700 (3,225) 15,889 Cash at the beginning of the financial year 22,004 17,304 15,889 -

Cash at the end of the financial year 7 18,970 22,004 12,664 15,889

The above statements of cash flows should be read in conjunction with the accompanying notes. For personal use only use personal For

38 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited Statements of Changes in Equity For the year ended 30 June 2008

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Total equity at the beginning of the financial year 498,341 1,276 209,095 -

Change in fair value of cash flow hedge (net of tax) 12,171 17,464 12,350 18,753 Change in the fair value of available for sale financial assets (net of tax) - 4,341 - -

Net income recognised directly in equity 12,171 21,805 12,350 18,753

Profit for the year 25,700 1,534 (41,447) 58,866

Total recognised income and expense for the year 37,871 23,339 (29,097) 77,619

Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs (66) 131,476 (66) 131,476 Release of deferred tax asset on float costs (459) - (459) - Distributions paid or provided for (25,339) - - - Minority interest on acquisition of subsidiary - 342,250 - - Minority interest in contributions of equity, net of transaction costs (112) - - -

(25,976) 473,726 (525) 131,476

Total equity at the end of the financial year 510,236 498,341 179,473 209,095

Total recognised income for the year is attributable to: Shareholders of Transfield Services Infrastructure Limited 19,691 20,609 (29,097) 77,619 Unitholders of Transfield Services Infrastructure Trust and shareholders of TSI International Limited 18,180 2,730 - -

37,871 23,339 (29,097) 77,619

The above statements of changes in equity should be read in conjunction with the accompanying notes. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 39 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note NUmber Page Note 1. summary of significant accounting policies 41 Note 2. financial risk management 45 Note 3. critical accounting judgements 48 Note 4. revenue 49 Note 5. expenses 49 Note 6. income tax 50 Note 7. current assets – Cash and cash equivalents 51 Note 8. current assets – Trade and other receivables 51 Note 9. current assets – Prepayments and other current assets 52 Note 10. current assets – Inventories 52 Note 11. derivative financial instruments 52 Note 12. non-current assets – Receivables 53 Note 13. non-current assets – Investments accounted for using the equity method 53 Note 14. non-current assets – Available for sale financial assets 53 Note 15. non-current assets – Other financial assets 54 Note 16. non-current assets – Property, plant and equipment 54 Note 17. non-current assets – Intangible assets 55 Note 18. current liabilities – Trade and other payables 55 Note 19. current liabilities – Short-term borrowings 56 Note 20. non-current liabilities – Long-term borrowings 56 Note 21. non-current liabilities – Deferred tax liabilities 58 Note 22. non-current liabilities – Provisions 59 Note 23. contributed equity 59 Note 24. reserves and retained profits 60 Note 25. Minority Interest 61 Note 26. remuneration of auditors 61 Note 27. contingent liabilities 61 Note 28. Operating Leases 62 Note 29. commitments for expenditure 62 Note 30. related party transactions 62 Note 31. Key management personnel 66 Note 32. Business combinations 68 Note 33. investments in controlled entities 72 Note 34. deed of cross guarantee 72 Note 35. investments in associates 74 Note 36. reconciliation of operating profit after income tax to net cash flow from operating activities 75 Note 37. earnings per share 76 Note 38. events occurring after balance sheet date 76

Note 39. segment information 76 For personal use only use personal For

40 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 1. Summary of significant accounting Investments in subsidiaries are accounted for at cost in the individual policies financial statements of Transfield Services Infrastructure Limited.

The principal accounting policies adopted in the preparation of this Application of AASB Interpretation 1002 Post date of transition financial report are set out below. These policies have been consistently stapling arrangements applied to all the periods presented, unless otherwise stated. The For the purposes of AASB Interpretation 1002 Post date of transition financial report includes separate financial statements for Transfield stapling arrangements, Transfield Services Infrastructure Limited has Services Infrastructure Limited as an individual entity and the been identified as the Parent entity in relation to the stapling event that consolidated entity consisting of TransfieldS ervices Infrastructure Limited took place on 7 June 2007. In accordance with AASB Interpretation 1002 and its subsidiaries and controlled entities as defined in note 1(b). the results and equity of entities, not directly owned by Transfield Services Infrastructure Limited have been treated and disclosed as (a) Basis of preparation minority interest. The stapled securityholders of Transfield Services This general purpose financial report has been prepared in accordance Infrastructure Limited are the same as the stapled securityholders of with Australian Accounting Standards, other authoritative Transfield Services Infrastructure Trust and TSI International Limited. pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Associates Associates are all entities over which the Group has significant influence Compliance with International Financial Reporting Standards (IFRS) but not control, generally accompanying a shareholding of between 20% Australian Accounting Standards include Australian Equivalents to and 50% of the voting rights. Investments in associates are accounted for International Financial Reporting Standards (AIFRS). Compliance with AIFRS in the Parent entity financial statements using the cost method and in the ensures that the consolidated financial statements and notes of Transfield consolidated financial statements using the equity method of accounting, Services Infrastructure Limited and its controlled entities comply with IFRS. after initially being recognised at cost. The Group’s investment in The Parent entity financial statements and notes also comply with IFRS. associates includes goodwill identified on acquisition (net of any accumulated impairment loss), refer note 35. Historical cost convention The Group’s share of its associates’ post-acquisition profits or losses is These financial statements have been prepared under the historical cost recognised in the income statement, and its share of post-acquisition convention as modified by the revaluation of derivative financial movements in reserves is recognised in reserves. The cumulative instruments at fair value through equity and revaluation of available for post-acquisition movements are adjusted against the carrying amount of sale financial assets. the investment. Dividends receivable from associates are recognised in the Parent entity’s income statement, while in the consolidated financial Critical accounting estimates statements they reduce the carrying amount of the investment. The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires When the Group’s share of losses in an associate equals or exceeds its management to exercise its judgement in the process of applying the interest in the associate, including any other unsecured receivables, the Group’s accounting policies. The areas involving a higher degree of Group does not recognise further losses, unless it has incurred judgement or complexity, or areas where assumptions and estimates are obligations or made payments on behalf of the associate. significant to the financial statements are disclosed in note 3. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. (b) Principles of consolidation Unrealised losses are also eliminated unless the transaction provides Subsidiaries evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency The consolidated financial statements incorporate the assets and liabilities with the policies adopted by the Group. of Transfield Services Infrastructure Limited (Company or Parent entity) as at 30 June 2008 and the results of all subsidiaries for the year then ended. (c) Segment reporting Transfield Services Infrastructure Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. A business segment is a group of assets and operations engaged in providing products or a service that are subject to risk and returns that are Subsidiaries are all those entities (including special purpose entities) over different to those of the other business segments. A geographical segment which the Group has the power to govern the financial and operating is engaged in providing products or services within a particular economic policies, generally accompanying a shareholding of more than one half of environment and is subject to risks and returns that are different from those the voting rights. The existence and effect of potential voting rights that of segments operating in other economic environments. are currently exercisable or convertible are considered when assessing whether the Group controls another entity. (d) foreign currency transactions Subsidiaries are fully consolidated from the date on which control is Functional and presentation currency transferred to the Group. They are deconsolidated from the date that Items included in the financial statements of each of the Group’s entities control ceases. are measured using the currency of the primary economic environment in The purchase method of accounting is used to account for acquisition of which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is the For personal use only use personal For subsidiaries by the Group, refer note 1(i). Group’s functional and presentation currency. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses Transactions and balances are also eliminated unless the transaction provides evidence of the Foreign currency transactions are translated into the functional currency impairment of the asset transferred. Accounting policies of subsidiaries using the exchange rates prevailing at the dates of the transactions. have been changed where necessary to ensure consistency with the Foreign exchange gains and losses resulting from the settlement of such policies adopted by the Group. transactions and from the translation at year-end exchange rates of Minority interests in the results and equity of subsidiaries are shown monetary assets and liabilities denominated in foreign currencies are separately in the consolidated income statements and balance sheets recognised in the income statement, except when deferred in equity as respectively. qualifying cash flow hedges.

Transfield Services INFRASTRUCTURE FUND 41 Notes to and forming part of the financial statements For the year ended 30 June 2008

(e) Revenue recognition The head entity, Transfield Services Infrastructure Limited, and the Amounts disclosed as revenue are net of returns, trade allowances and controlled entities in the tax consolidation group continue to account for duties and taxes paid. Revenue is recognised for the major business their own current and deferred tax amounts. These tax amounts are activities as follows: measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. – Revenue In addition to its own current and deferred tax amounts, Transfield Services Power supply contract revenue Infrastructure Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax Power supply contract revenue is recognised and measured at the fair credits assumed from controlled entities in the tax consolidated group. value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the consolidated entity Assets or liabilities arising under tax funding agreements with the and the revenue can be reliably measured. tax-consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding Revenue from power supplied is recognised once there has been delivery agreement are disclosed in note 6(e). to the customer and is measured through a regular review of usage meters and in accordance with individual contracts as appropriate. Any differences between the amounts assumed and amounts receivable or payable under the tax funding agreements are recognised as a contribution – other revenue to (or distribution from) wholly–owned tax consolidated entities. Interest income (h) leases Interest income is recognised on a time proportion basis using the Leases in which a significant portion of the risks and rewards of effective interest rate method. ownership are retained by the lessor are classified as operating leases, Dividends lease revenue is recognised in accordance with the schedules contained in the contractual agreements. Payments made under operating leases Dividends are recognised as revenue when the right to receive payment (net of any incentives received from the lessor) are charged to the income is established. statement on a straight-line basis over the period of the lease. (f) income tax (i) Business Combinations The income tax expense or benefit for the period is the tax payable on the The purchase method of accounting is used for all business combinations current period’s taxable income based on the national income tax rate regardless of whether equity instruments or other assets are acquired. adjusted by changes in deferred tax assets and liabilities attributable to Cost is measured at the fair value of the assets given, liabilities incurred temporary differences between the tax bases of assets and liabilities and or assumed at the date of the acquisition plus incidental costs directly their carrying amounts in the financial statements, and to unused tax losses. attributable to the acquisition. Deferred income tax is provided in full, using the liability method, on Identifiable assets acquired and liabilities and contingent liabilities temporary differences arising between the tax bases of assets and assumed in a business combination are measured initially at their fair liabilities and their carrying amounts in the consolidated financial values at the acquisition date, irrespective of the extent of any minority statements. However, the deferred income tax is not accounted for if it interest. The excess of cost of acquisition over the fair value of the arises from initial recognition of an asset or liability in a transaction other Group’s share of identifiable net assets acquired is recorded as goodwill. than a business combination that at the time of the transaction affects If the cost of acquisition is less than the fair value of the net assets of the neither accounting nor taxable profit or loss. subsidiary acquired the difference is recognised directly in the income Deferred income tax is determined using tax rates (and laws) that have statement, but only after a reassessment of the identification and been enacted or substantially enacted by the balance sheet date and are measurement of the net assets acquired. expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. (j) impairment of assets Goodwill and intangible assets that have an indefinite useful life are not Deferred tax assets are recognised for deductible temporary differences subject to amortisation and are tested annually for impairment, or more and unused tax losses only if it is probable that future taxable amounts frequently if events in circumstances indicate that they might be will be available to utilise those temporary differences and losses. impaired. Other assets are tested for impairment whenever events or Deferred tax liabilities and assets are not recognised for temporary changes in circumstances indicate that the carrying value may not be differences between the carrying amount and tax bases of investments in recoverable. Assets that are subject to amortisation are reviewed for controlled entities where the parent entity is able to control the timing of impairment whenever events or changes in circumstances indicate that the reversal of the temporary differences and it is probable that the the carrying amount may not be recoverable. An impairment loss is differences will not reverse in the foreseeable future. recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an Deferred tax assets and liabilities are offset when there is a legally asset’s fair value less costs to sell and value in use. For the purpose of enforceable right to offset current tax assets and liabilities and when the assessing impairment, assets are grouped at the lowest levels for which deferred tax balances relate to the same taxation authority. Current tax there are separately identifiable cash flows (cash generating units). assets and current tax liabilities are offset where the Group has a legally Non-financial assets that have previously suffered impairment are enforceableonly use personal For right to offset and intends either to settle on a net basis, or reviewed for possible reversal of the impairment at each reporting date. to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised (k) Receivables directly in equity are also recognised directly in equity. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. g) tax consolidation legislation Collectibility of trade debtors is reviewed on an ongoing basis. Debts, which Transfield Services Infrastructure Limited and its wholly-owned are known to be uncollectible, are written off. A provision for impairment is Australian controlled entities implemented the tax consolidation raised when there is objective evidence that the Group will not be able to legislation as of 12 June 2007. The Australian Taxation Office has been collect all amounts due according to the original terms of the receivables. notified of this decision and confirmation has been received. The amount of the provision is recognised in the income statement.

42 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(l) inventories hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Consumables and stores Consumables and stores are stated at the lower of cost (assigned on the Amounts accumulated in equity are recycled in the income statement in the first-in-first-out basis) and net realisable value. Net realisable value is the periods when the hedged item will affect profit or loss. The gain or loss estimated selling price in the ordinary course of business less estimated relating to the effective portion of interest rate swaps hedging variable rate costs of completion and the estimated costs necessary to make the sale. borrowings is recognised in the income statement within finance costs. The gain or loss relating to the effective portion of forward foreign exchange Raw materials – Liquid Fuel contracts hedging transactions is recognised in the income statement. Liquid fuel holdings are stated at the lower of cost and net realisable However, when the forecast transaction that is hedged results in the value. Net realisable value is the estimated selling price in the ordinary recognition of a non-financial asset or a non-financial liability, the gains course of business less estimated costs of completion and the estimated and losses previously deferred in equity are transferred from equity and costs necessary to make the sale. included in the measurement in the initial cost or carrying amount of the asset or liability. (m) cash and cash equivalents When a hedging instrument expires or is sold or terminated, or when a For cash flow statement presentation purposes, cash and cash hedge no longer meets the criteria for hedge accounting, any cumulative equivalents includes cash on hand, deposits held at call with financial gain or loss existing in equity at that time remains in equity and is institutions, other short-term, highly liquid investments with original recognised when the forecast transaction is ultimately recognised in the maturities of three months or less that are readily convertible to known income statement. When a forecast transaction is no longer expected to amounts of cash and which are subject to an insignificant risk of changes occur, the cumulative gain or loss that was reported in equity is in value, net of bank overdrafts. Bank overdrafts are shown within immediately transferred to the income statement. interest bearing liabilities in current liabilities in the balance sheet. (p) fair value estimation (n) other financial assets The fair value of financial assets and financial liabilities must be Loans and receivables estimated for recognition and measurement or for disclosure purposes. Loans and receivables are non-derivative financial assets with fixed or The fair value of financial instruments that are not traded in an active determinable payments that are not quoted in an active market. They market (for example, over-the-counter derivatives) is determined using arise when the Group provides money, goods or services directly to a valuation techniques. The Group uses a variety of methods and makes debtor with no intention of selling the receivable. They are included in assumptions that are based on market conditions existing at each current assets, except for those with maturities greater than 12 months balance date. Quoted market prices or dealer quotes for similar after the balance sheet date, which are classified as non-current assets. instruments are used for long-term debt instruments held. Other Loans and receivables are included in receivables in the balance sheet. techniques, such as estimated discounted cash flows, are used to Available for sale financial assets determine fair value for the remaining financial instruments. Available for sale financial assets are non-derivatives that are either The fair value of interest rate swaps is calculated as the present value of designated in this category or not classified in any of the other categories. the estimated future cash flows. They are included in non-current assets unless management intends to The nominal value less estimated credit adjustments of trade receivables dispose of the investment within 12 months of the balance sheet date. and payables are assumed to approximate their fair values. The fair value The fair values of investments utilised the most recent transaction price of financial liabilities for disclosure purposes is estimated by discounting established on the acquisition of the additional interest in available for the future contractual cash flows at the current market interest rate that sale assets. is available to the Group for similar financial instruments. (o) derivatives (q) Property, plant and equipment Derivatives are initially recognised at fair value on the date a derivative Power generation plant contract is entered into and are subsequently remeasured to their fair Power generation assets comprise land and buildings, the plant, value. The method of recognising the resulting gain or loss depends on equipment, fixtures and fittings of the Group’s wholly-owned power whether the derivative is designated as a hedging instrument, and if so, stations and wind farms. In the opinion of the Directors, these assets the nature of the item being hedged. The Group designates certain comprise a separate class of assets. derivatives as either: Power generation assets are stated at historical cost less accumulated • hedges of the fair value of recognised assets or liabilities or a firm depreciation. Historical cost includes expenditure that is directly commitment (fair value hedges), or attributable to the acquisition of the items. Cost may also include • hedges of highly probable forecast transactions (cash flow hedges). transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment as well as The Group documents at the inception of the transaction the relationship borrowing costs capitalised on qualifying assets. between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge Subsequent costs are included in the asset’s carrying amount or

For personal use only use personal For transactions. The Group also documents its assessment, both at hedge recognised as a separate asset, as appropriate, only when it is probable inception and on an ongoing basis, of whether the derivatives that are that future economic benefits associated with the item will flow to the used in hedging transactions have been and will continue to be highly Group and the cost of the item can be measured reliably. effective in offsetting changes in fair values or cash flows of hedged Land is not depreciated. Depreciation is calculated on a straight-line basis to items. The fair value of various derivative financial instruments used for allocate the net cost of each item of plant over its expected useful life to the hedging purposes is disclosed in note 11. Movements in the hedging Group. Estimates of remaining useful lives are made on a regular basis of all reserve in shareholders equity are shown in note 24. classes of assets, with annual reassessments for major items. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the

Transfield Services INFRASTRUCTURE FUND 43 Notes to and forming part of the financial statements For the year ended 30 June 2008

The power generation assets have been componentised in the following difference between the proceeds (net of transaction costs) and the categories and are being depreciated over their estimated useful lives as redemption amount is recognised in the income statement over the follows: period of the borrowings using the effective interest rate method. – gas, steam and wind turbines 20 - 30 years Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 – electrical interface 20 - 30 years months after the balance sheet date. – instrument and control systems 15 years (u) Provision for employee benefits – ancillary systems 20 - 30 years Equity-based compensation benefits – civil works 20 - 45 years Share-based compensation disclosed in the remuneration report relates – short-lived assets 4 - 12 years to equity granted in Transfield Services Limited, the holding company of – buildings 20 - 40 years the Manager and to notional securities of TSI Fund at the expense of the Manager Power generation assets of the Group are required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical Superannuation maintenance program. The costs of this maintenance are charged as Contributions to defined contribution superannuation funds are charged expenses as incurred, except where they relate to the replacement of a as an expense as the contributions are paid or become payable. component of an asset, in which case the costs are capitalised and depreciated in accordance with the component classifications above. (v) Provisions Other routine operating maintenance, repair costs and minor renewals Provisions for legal claims and service warranties are recognised when: are also charged as expenses as incurred. the Group has a present legal or constructive obligation as a result of All repair and maintenance expenses are charged to the income past events; it is probable that an outflow of resources will be required to statement during the financial period in which they are incurred. settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Where there are a number of similar obligations, the likelihood that an outflow will be required on settlement is determined by considering the An assets’ carrying amount is written down immediately to its class of obligations as a whole. A provision is recognised even if the recoverable amount if the asset’s carrying amount is greater than its likelihood of an outflow with respect to any one item included in the estimated recoverable amount, note 1(j). same class of obligations may be small. Gains and losses on disposals are determined by comparing proceeds Provisions are measured at the present value of management’s best with carrying amount. These are included in the income statement. estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present Restoration, rehabilitation and environmental expenditure value reflects current market assessments of the time value of money The estimated costs of dismantling and removing an asset and restoring and the risks specific to the liability. The increase in the provision due to the site are included in the cost of the asset as the obligation arose the passage of time is recognised as interest expense. during the course of construction. (w) Borrowing costs The provision is reviewed at each balance sheet date and the liability is measured at the amount required to settle the present obligation at the Borrowing costs are recognised as an expense in the period in which they reporting date, discounted to net present value where material. are incurred (except where they are incurred in the cost of qualifying assets, refer note 1(q), and include: (r) intangible assets • interest on bank overdraft and short-term and long-term borrowings Contract intangible • amortisation of discounts or premium relating to borrowings Contract intangibles have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. • amortisation of ancillary costs incurred in connection with the arrangement of borrowings, and Amortisation is calculated using the straight-line method to allocate the cost of contract intangibles over their estimated useful lives of based on • finance lease charges the contract period generally 20-25 years. Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and Computer software and licences prepare the asset for its intended use. The capitalisation rate used to Computer software is either purchased or developed by the operation and determine the amount of borrowing costs to be capitalised is the maintenance provider and is recorded at cost less accumulated weighted average interest rate applicable to the entity’s outstanding amortisation and impairment losses. Amortisation is calculated using the borrowings during the year, in this case 7.74% (2007: 6.64%). straight-line method over the effective useful lives of three years for application software to 10 years for licenses and other items. (x) contributed equity For personal use only use personal For Ordinary shares are classified as equity. (s) trade and other payables These amounts represent liabilities for goods and services provided to Incremental costs directly attributable to the issue of new shares are the Group prior to the end of financial period, which are unpaid. The shown in equity as a deduction, net of tax, from the proceeds. amounts are unsecured and are usually paid within 30 days of (y) dividends recognition. Provision is made for the amount of any dividend declared on or before (t) Borrowings the end of the year but not distributed at balance date. Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any

44 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(z) earnings per share (ii) revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123. The Basic earnings per share revised AASB 123 is applicable to annual reporting periods Basic earnings per share is calculated by dividing the profit attributable to commencing on or after 1 January 2009. It has removed the option to shareholders of the Company, excluding any costs of servicing equity expense all borrowing costs and – when adopted – will require the other than ordinary shares, by the weighted average number of ordinary capitalisation of all borrowing costs directly attributable to the shares outstanding during the year, adjusted for bonus elements in acquisition, construction or production of a qualifying asset. There ordinary shares issued during the year. will be no impact to the financial report of the Group, as the Group already capitalises borrowing costs on qualifying assets. Diluted earnings per share (iii) revised AASB 101 Presentation of Financial Statements and AASB Diluted earnings per share adjusts the figures used in the determination of 2007-8 Amendments to Australian Accounting Standards arising from basic earnings per share to take into account the after income tax effect of AASB 101. A revised AASB 101 was issued in September 2007 and is interest and financing costs associated with dilutive potential ordinary applicable for annual reporting periods beginning on or after 1 January shares and the weighted average number of shares assumed to have been 2009. It requires the presentation of a statement of comprehensive issued for no consideration in relation to dilutive potential ordinary shares. income and makes changes to the statement of changes in equity, but (aa) Earnings per stapled security will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment, or has reclassified items As the stapling is a business combination by contract alone, the total in the financial statements, it will need to disclose a third balance sheet, ownership interest in Transfield Services Infrastructure Trust and TSI this one being at the beginning of the comparative period. The Group International Limited is presented as minority interest in these intends to apply the revised standard from 1 July 2009. consolidated financial statements. Transfield Services Infrastructure Limited, Transfield Services Infrastructure Trust and TSI International (iv) revised AASB 3 Business Combinations effective for reporting Limited have common equity holders with the effect that total equity and periods commencing 1 July 2009. The main impact that this standard total earnings belong to securityholders. will have on the Group is that it limits the circumstances where transaction costs may be capitalised to goodwill. The Group intends (ab) Financial instrument transaction costs to apply the revised standard from 1 July 2009. Transaction costs relating to financial instruments are capitalised to the carrying amounts of the financial instrument. Note 2. Financial risk management (ac) Goods and Services Tax (GST) The Group’s activities expose it to a variety of financial risks; market risk, Revenues, expenses and assets are recognised net of the amount of credit risk, liquidity risk and cash flow interest rate risk. The Group’s associated GST, unless the GST incurred is not recoverable from the overall risk management program focuses on the unpredictability of taxation authority. In this case it is recognised as part of the cost of financial markets and seeks to minimise potential adverse effects on the acquisition of the asset or as part of the expense. financial performance of the Group. The Group uses derivative financial Receivables and payables are stated inclusive of the amount of GST instruments namely interest rates swaps to hedge certain risk exposures. receivable or payable. The net amount of GST recoverable from, or The Group does not enter into trade financial instruments, including payable to, the taxation authority is included with other receivables or derivative financial instruments, for speculative reasons. payables in the balance sheet. (a) capital risk management Cash flows are presented on a gross basis. The GST components of cash flows The Group manages its capital to ensure than entities in the Group will arising from investing or financing activities, which are recoverable from, or be able to continue as a going concern while maximising the return to payable to the taxation authority, are presented as operating cash flow. stakeholders though the optimisation of the debt and equity balance. The (ad) Rounding of amounts Group’s overall strategy remained unchanged from 2007. The Company is of a kind referred to in Class Order 98/0100 issued by the The capital structure of the Group consists of debt, which includes the Australian Securities and Investments Commission, relating to the borrowings disclosed in notes 19 and 20, cash and cash equivalents, and ‘rounding off’ of amounts in the financial report. Amounts in the financial equity. report have been rounded in accordance with that Class Order to the The Group’s operating cash flows are used primarily for working capital, nearest thousand dollars, or in certain cases, the nearest dollar capital maintenance purposes, funding distributions and interest payments. (ae) New accounting standards and Urgent Issues Group (UIG) The Group has a borrowing facility at the Parent entity level to meet interpretations funding requirements. Certain new accounting standards and interpretations have been Gearing ratio published that are not mandatory for 30 June 2008 reporting periods. The Group’s assessment of the impact of these new standards and The Group’s Chief Financial Officer reviews the capital structure on a interpretations is set out below. regular basis. As a part of this review the Chief Financial Officer considers the funding needs of the Group in light of the Group’s current (i) aasB 8 Operating Segments and AASB 7-3 Amendments to Australian capital structure. The Group has a target debt to capital ratio of 50-65% For personal use only use personal For Accounting Standards arising from AASB 8 which are effective for which is considered to be line with the sector norm. annual reporting periods commencing on or after 1 January 2009. AASB 8 advocates a change in the approach to Segment Reporting as it requires the adoption of a ‘management approach’ to reporting on financial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and how to allocate resources to business segments. The Group intends to apply the new standard on 1 July 2009, however, management do not consider that the standard will result in significant change to the existing reporting which is currently adopted in the financial report.

Transfield Services INFRASTRUCTURE FUND 45 Notes to and forming part of the financial statements For the year ended 30 June 2008

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Debt (i) 749,404 404,861 749,404 404,861 Total capital (ii) 1,259,640 903,202 928,876 613,956 Total debt to total capital ratio 59.5% 44.8% 80.7% 65.9%

(i) debt is defined as the long and short-term borrowings, as detailed in Notes 19 and 20, excluding loans from associates, and loans from entities that are within the wholly-owned group. (ii) Total capital is comprised of debt (as described above) and equity (which includes all capital and reserves). The Group is subject to external capital requirements as a result of its Corporate Borrowing Facility which is described in note 20. The Group is required to maintain a certain Debt Service Coverage Ratio (DSCR). DSCR represents the amount of cash flow available to meet annual interest and principal payments on debt. In order to be in compliance with its Corporate Borrowing Facility, the Group is required to maintain a total DSCR that is greater than 1.3 times its annual interest and principal payments on its debt. The Group’s DSCR at 30 June 2008 was 2.01. (b) categories of financial instruments Balance Sheet 2008 2007 $000 $000 Consolidated Financial assets Cash and cash equivalents 18,970 22,004 Derivative instruments in designated hedge accounting relationships 38,231 20,589 Loans and receivables 90,254 66,810 Available for sale financial assets 136,285 136,285

283,740 245,688

Financial liabilities Loans and receivables 802,968 453,440 Derivative instruments in designated hedge accounting relationships - -

802,968 453,440

Parent Entity Financial assets Cash and cash equivalents 12,664 15,889 Derivative instruments in designated hedge accounting relationships 38,231 20,589 Loans and receivables 718,151 597,074 Available for sale financial assets 136,285 136,285

905,331 769,837

Financial liabilities Loans and receivables 1,141,810 782,258

(c) credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has concentrations of credit risk since most of its revenues are contracted under long-term agreements with a small number of parties. However counterparties are generally large companies or government authorities and the risk perceived is low. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The maximum credit risk exposure on receivables is limited to the amount of the receivables booked. The credit risk on cash and cash equivalents and

derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. For personal use only use personal For

46 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(d) liquidity risk management Liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group has managed its liquidity risk by negotiating a corporate debt facility which provides flexibility to manage the Group’s cash position. A description of the Corporate Borrowing Facility is provided in note 20. The following tables detail the Company’s and the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Less than 3 months 1 month 1-3 months to 1 year 1-5 years 5+ years $000 $000 $000 $000 $000 Consolidated 2008 Non-interest bearing - 30,355 7,371 - - Variable interest rate instruments 32,850 - 55,080 309,524 1,353,223 2007 Non-interest bearing - 22,506 5,891 - - Variable interest rate instruments - - - 5,136 404,800 Parent 2008 Non-interest bearing - 3,460 7,371 - - Variable interest rate instruments 32,850 - 55,080 309,524 1,353,223 2007 Non-interest bearing - 5,402 5,891 - - Variable interest rate instruments - - - 5,136 404,800

(e) other price risks The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than for trading purposes. The Group does not actively trade these investments.

Equity price sensitivity The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. At reporting date, if the equity prices had been 1% per annum higher or 1% per annum lower: • net profit for the year ended 30 June 2008 would have been unaffected as the equity investments are classified as available for sale and no investments were disposed of or impaired, and • other equity reserves would decrease by $3,616,000 and increase by $3,797,000 for both the Group and the Company, mainly as a result of the changes in fair value of available for sale shares. The Group’s sensitivity to equity prices has not changed significantly from the prior year. (f) fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows: • the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices • the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions • the fair value of derivative instruments, are calculated using quoted prices. Where such prices are not available use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives • the fair value of financial guarantee contracts is determined using option pricing models where the main assumptions are the probability of default by

the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default. For personal use only use personal For Derivatives Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

Transfield Services INFRASTRUCTURE FUND 47 Notes to and forming part of the financial statements For the year ended 30 June 2008

Unlisted equity shares The financial statements include holdings in unlisted shares which are measured at fair value using the policies described in note 1(n). Fair value is estimated using a discounted cash flow model, which includes some assumptions that are not directly observable. In determining the fair value, the Group utilises earnings forecasts as provided by the investee entity’s management. These earnings forecasts typically include an earning growth rate equivalent to the growth of the consumer price index. The risk adjusted discount factor utilised are in the range of 8-16% (2007: 8-16%) Except as detailed in other notes, the Directors consider that the carrying amounts of the financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values. (g) cash flow and fair value interest rate risk The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. Under the Corporate Borrowing Facility the Parent entity is required to fix the rates for a minimum 75% its net borrowings over the next ten years. As at 30 June 2008 the Group has hedged 87% of its exposure to interest rates by utilising amortising interest rate swaps matching the drawn profile of the Corporate Borrowing Facility which reduces the exposure to interest rates as a means of managing the Group’s exposure to prevailing levels of interest rates. The Group manages its cash flow interest-rate risk by using floating-to-fixed amortising interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest-rate swaps, the Group agrees with other parties to exchange, at specified intervals (annually or semi-annually), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amortising principal amounts. The interest rate swap contracts require settlement of net interest receivable or payable every six months. The floating rate on the interest rate swaps is the bank bill swap bid rate (BBSY). All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount deferred in equity is recognised in profit or loss over the period that the floating interest payments on debt impact profit or loss.

Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group’s: • net profit would increase by $610,321 and decrease by $610,321 (2007: net profit would increase by $671,461 and decrease by $671,461); • other equity reserves would increase by $36,609,400 and decrease by $42,217,905 (2007: other equity reserves would increase by $3,427,021 and decrease by $3,841,231).

Note 3. Critical accounting judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the consolidated entity and that are believed to be reasonable under the circumstances. (a) critical judgements in applying the entity’s accounting polices Fair value of available for sale financial assets. The investment in Loy Yang A has been designated for accounting purposes as available for sale. The revaluation of the interest has been reflected in the

carrying value of the investment with a revaluation adjustment to the available for sale investments revaluation reserve in shareholders’ equity. For personal use only use personal For

48 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 4. Revenue

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Revenue from continuing operations Power supply contract revenue 155,272 135,606 - - Power supply operating lease revenue 10,994 - - -

166,266 135,606 - -

Other revenue Interest 10,723 6,751 9,525 4,921 Other 5,084 - - - Dividends - - - 84,706

15,807 6,751 9,525 89,627

Total revenue 182,073 142,357 9,525 89,627

Note 5. Expenses

Depreciation Property, plant and equipment 29,749 23,122 - -

Total depreciation 29,749 23,122 - -

Amortisation intangible assets 2,790 5,087 - -

Total amortisation 2,790 5,087 - -

Total depreciation and amortisation 32,539 28,209 - -

Manager fees and costs 9,561 586 9,561 586

Finance costs interest and finance charges paid/payable 33,538 29,867 54,344 33,806 interest rate swap closing charges (net) - 7,424 - -

finance cost expensed 33,538 37,291 54,344 33,806

Rental expense relating to operating leases

Minimum lease payments 273 2 - - For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 49 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 6. Income tax

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000

(a) income tax expense attributable to continuing operations current tax 8,630 4,654 (19,177) (11,653) deferred tax (2,484) 4,157 1,685 579 Prior year under / (over) provision 635 (60) 2,030 -

6,781 8,751 (15,462) (11,074)

deferred income tax (benefit) expense included in income tax expense comprises: decrease/(increase) in deferred tax assets (note 21) (152) 1,180 51 (51) (Decrease)/increase in deferred tax liabilities (note 21) (2,332) 2,977 1,634 630

(2,484) 4,157 1,685 579

(b) numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense 32,481 10,285 (56,909) 47,792

Income tax calculated at the Australian tax rate of 30% (2007: 30%) 9,744 3,086 (17,073) 14,338 Deductible interest paid to Transfield Services Infrastructure Trust (5,454) (819) - - Non-deductible interest 3,256 3,122 - - Rebateable dividends - - - (25,412) Deductible float costs (459) - (459) - Share of net profits of associates (1,402) (390) - - Tax consolidation adjustments - 3,812 - - Other 461 - 40 -

Income tax expense adjusted for other non-taxable items: 6,146 8,811 (17,492) (11,074) Over provision in previous year 635 (60) 2,030 -

Income tax expense 6,781 8,751 (15,462) (11,074)

(c) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity net deferred tax debited directly to equity (note 21) 5,752 6,196 5,752 6,196

(d) unrecognised temporary differences There are no deferred tax assets or liabilities that have not been recognised. (e) tax consolidation legislation Transfield Services Infrastructure Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 12 June 2007. The accounting policy in relation to this legislation is set out in note 1(g). On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement, which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Transfield Services Infrastructure Limited. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Transfield Services Infrastructure Limited for any current tax payable assumed and are compensated by Transfield Services Infrastructure Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Transfield Services Infrastructure Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.

The amountsonly use personal For receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of the financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current inter company receivables or payables (refer notes 8 and 19).

50 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 7. Current assets – Cash and cash equivalents

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Cash at bank and on hand 18,970 22,004 12,664 15,889

The above figures are reconciled to cash at the end of the financial year as shown in the statements of cash flows as follows: Balances per statement of cash flows 18,970 22,004 12,664 15,889

Cash at bank Cash at bank bears floating interest rates between 6.15% and 7.15% (2007: 5.31% and 5.88%) per annum. $30,000 (2007: $ nil) is restricted cash used to obtain Letters of Credit (refer note 27).

Note 8. Current assets – Trade and other receivables

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Trade receivables (i) 16,321 15,125 - 2,444 Loan notes (ii) 5,721 4,643 5,721 4,643 Other receivables (iii) 9,825 5,415 4,426 -

31,867 25,183 10,147 7,087

Related party receivables** 658 1,365 - - Loans to associates (iv) 962 92 712 92 Loans to controlled entities * - - 684,548 549,725

1,620 1,457 685,260 549,817

33,487 26,640 695,407 556,904

* The terms of these receivables are set out in note 30. ** These receivables are interest free and have no fixed repayment terms

(i) The average credit period on the rendering of services is 30 days. No interest is charged on trade receivables. Due the nature of the business and the Group’s past experience, no allowance has been made for estimated irrecoverable trade receivable amounts arising from the past rendering of services. The Group’s customer base is largely comprised of Australian government entities and large private corporations. As such the Group believes that it will recover 100% of its receivables balance. Before accepting any new customers, the Group assesses the prospective customer’s credit rating. The Group’s concentration of credit risk is limited due to the customer base being diverse and unrelated. (ii) The loan notes represent part of the investment in Great Energy Alliance Corporation Pty Ltd which owns the Loy Yang A Power Station. The loan notes attract an interest rate of 10% with interest being paid on a semi-annual basis. Interest income earned on the loan notes is recognised on an effective interest rate basis and is classified within other revenue. Interest income on the loan notes is not affected by the performance of Loy Yang A. (iii) These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the term of repayment exceeds six months. Collateral is not normally obtained. For the Parent entity, these include receivables from tax consolidated entities under the tax funding agreement. (iv) This loan represents part of the investment in Yan Yean Water Treatment Plant. The loan attracts interest based on a set amortisation profile, the

interest is classified within other revenue. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 51 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 9. Current assets – Prepayments and other current assets

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Prepayments 18,779 4,852 9,304 3,657 Deposits 706 1,239 188 -

19,485 6,091 9,492 3,657

Note 10. Current assets – Inventories

Raw materials and stores – at cost 10,194 8,950 - - Fuel reserves - 2,163 - -

10,194 11,113 - -

Note 11. Derivative financial instruments

Cash flow hedges Current assets Interest rate swap contracts 8,469 1,906 8,469 1,906 Non-current assets Interest rate swap contracts 29,762 18,683 29,762 18,683

38,231 20,589 38,231 20,589

(a) instruments used by the Group and fair values The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to interest rates in accordance with the Group’s financial risk management policies, refer to note 2.

(i) Interest rate swap contracts – cash flow hedges It is policy to protect the Group’s loans from exposure to increasing interest rates. Accordingly, the Group has entered into interest rate swap contracts under which it receives interest at variable rates to pay interest at fixed rates. The contracts are settled on a net basis and the net amount receivable or payable at the reporting date is separately disclosed on the face of the balance sheet. The contracts require settlement of net interest receivable or payable every six months. The settlement dates coincide with the dates on which interest is payable on the underlying debt. Swaps currently in place hedge 87% of the outstanding loan principals and are timed to expire as each loan repayment falls due. The average contracted fixed interest swap rate is 6.60% per annum (2007: 6.15%). The variable rate is AUD-BBR-BBSY plus a margin based on 180 day rollovers. As at balance date the average variable rate was 7.55% per annum (2007: 6.44%). The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at reporting date:

Cash flow hedges Outstanding floating Average contracted notional principal for fixed contracts fixed interest rate amount Fair value 2008 2007 2008 2007 2008 2007 % % $000 $000 $000 $000 Consolidated Less than 1 year ------1 to 5 years ------5 years + 6.60% 6.15% 670,811 314,338 38,231 20,589 Parent entity Less than 1 year ------1 to 5only use personal For years ------5 years + 6.60% 6.15% 670,811 314,338 38,231 20,589

52 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

The gain or loss from re-measuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and re-classified into profit and loss when the hedging interest expense or income is recognised. The ineffective portion is recognised in the income statement immediately. In the year ended 30 June 2008 there was no impact to profit or loss. At balance date for the Group and Parent entity these contracts were in an asset position with a fair value of $38,231,000 (2007: $20,589,000) (included in current and non-current derivative financial instruments). In the year ended 30 June 2008 the Group before tax gain from the increase in fair value was $17,464,000 (2007: $20,589,000) and the Parent entity before tax gain from the increase in fair value was $17,642,000 (2007: $20,589,000), these amounts were recognised in equity. (b) interest risk exposures It is a requirement under the Corporate Borrowing Facility that borrowings are hedged. Specifically, hedge agreements must be entered into for interest payable such that not less than 75% of principal outstanding is hedged.

Note 12. Non-current assets – Receivables

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Loan notes (i) 37,090 40,170 37,090 40,170

Movements: At the beginning of year 40,170 - 40,170 - Additions - 46,442 - 46,442 Reallocation to current receivables (3,080) (6,272) (3,080) (6,272)

At end of year 37,090 40,170 37,090 40,170

(i) The loan notes represent part of the investment in Great Energy Alliance Corporation Pty Ltd which owns the Loy Yang A Power Station. The loan notes attract an interest rate of 10% with interest being paid on a semi-annual basis subject to cash availability. Interest income earned on the loan notes is recognised on an effective interest rate basis and is classified within other revenue. Interest income revenue recognition on the loan notes is not affected by the performance of Loy Yang A. Fair values The fair values are consistent with their carrying values and have been calculated using market interest rates where applicable.

Note 13. Non-current assets – Investments accounted for using the equity method

Consolidated Parent entity note 2008 2007 2008 2007 $000 $000 $000 $000 Investments in associates 35 79,075 74,536 45,033 45,033

Note 14. Non-current assets – Available for sale financial assets

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 At the beginning of year 136,285 - 136,285 - Additions - 130,085 - 130,085 Fair value adjustment through equity - 6,200 - 6,200

At end of year 136,285 136,285 136,285 136,285

The available for sale financial asset represents unquoted shares in General Energy Alliance Corporation Pty Limited which owns the Loy Yang A Power Station. It is the Group’s policy to reassess the carrying value on a regular basis and adjust its value to fair value through equity when there is firm evidence

For personal use only use personal For of a change in fair value.

Transfield Services INFRASTRUCTURE FUND 53 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 15. Non-current assets – Other financial assets Consolidated Parent entity note 2008 2007 2008 2007 $000 $000 $000 $000 Investments in controlled entities – at cost 33 - - 368,703 179,258

Movements: Investments in controlled entities – at cost At the beginning of year - - 179,258 - Additions - - 189,445 179,258

At end of year - - 368,703 179,258

Note 16. Non-current assets – Property, plant and equipment

Short-lived gAS, instrument ASSets Rehabil- Steam, And And capital Land and itation And wind civil electrical control Ancillary Work in buildingS PRovision turbineS Works interface System SystemS PRogreSS total $000 $000 $000 $000 $000 $000 $000 $000 $000

Consolidated Year ended 30 June 2008 Opening net book amount 6,780 896 371,875 32,454 50,688 23,468 59,304 24,617 570,082 Additions and transfers from work in progress - - 25,973 15 466 - 315 3,594 30,363 Additions through acquisition of subsidiary 5,391 - 212,282 15,565 15,073 17,524 164 50,742 316,741 Depreciation charge (58) (52) (18,320) (1,029) (2,565) (1,668) (1,102) (4,955) (29,749) Closing net book amount 12,113 844 591,810 47,005 63,662 39,324 58,681 73,998 887,437

At 30 June 2008 Cost 13,400 939 684,010 52,526 76,064 46,446 64,256 88,703 1,026,344 Accumulated depreciation (1,287) (95) (92,200) (5,521) (12,402) (7,122) (5,575) (14,705) (138,907)

Net book amount 12,113 844 591,810 47,005 63,662 39,324 58,681 73,998 887,437

Borrowing costs of $15.84 million were capitalised in 2008 (2007: $5.65 million). The Parent entity had no property, plant and equipment assets during the year (2007: $nil) gAS, instrument Rehabil- Steam, And Land and itation And wind civil electrical control Ancillary Short-lived buildingS PRovision turbineS Works interface System SystemS ASSetS total $000 $000 $000 $000 $000 $000 $000 $000 $000

Consolidated At 1 July 2006 Cost 1,325 - 146,200 9,743 30,268 7,248 19,706 19,559 234,049 Accumulated depreciation - - (3,237) (144) (673) (322) (1,095) (434) (5,905) Net book amount 1,325 - 142,963 9,599 29,595 6,926 18,611 19,125 228,144

Year ended 30 June 2007 Opening net book amount 1,325 - 142,963 9,599 29,595 6,926 18,611 19,125 228,144 Additions and transfers

from workonly use personal For in progress - - 82 - - 189 104 152 527 Additions through acquisition of subsidiary 5,558 939 241,430 23,564 22,814 17,991 42,652 9,585 364,533 Depreciation charge (103) (43) (12,600) (709) (1,721) (1,638) (2,063) (4,245) (23,122) Closing net book amount 6,780 896 371,875 32,454 50,688 23,468 59,304 24,617 570,082

At 30 June 2007 Cost 8,009 939 445,755 36,946 60,525 28,922 63,777 34,367 679,240 Accumulated depreciation (1,229) (43) (73,880) (4,492) (9,837) (5,454) (4,473) (9,750) (109,158) Net book amount 6,780 896 371,875 32,454 50,688 23,468 59,304 24,617 570,082

54 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 17. Non-current assets – Intangible assets

Power purchase coal supply development agreementS Agreement Software RightS goodwill Total $000 $000 $000 $000 $000 $000

Consolidated Year ended 30 June 2008 Opening net book amount 118,583 22,608 375 - - 141,566 Exchange differences ------Additions ------Additions through acquisition of subsidiary - - - 3,000 61,128 64,128 Disposals and transfers out - - (9) (3,000) (34) (3,043) Correction to fair values under AASB 3 (36,845) (7,024) - - 43,869 - Amortisation charge (2,311) (441) (38) - - (2,790) Closing net book amount 79,427 15,143 328 - 104,963 199,861 At 30 June 2008 Cost 84,438 16,392 447 - 104,963 206,240 Accumulated amortisation (5,011) (1,249) (119) - - (6,379) Net book amount 79,427 15,143 328 - 104,963 199,861 At 1 July 2006 Cost - - 261 - - 261 Accumulated amortisation - - (13) - - (13) Net book amount - - 248 - - 248 Year ended 30 June 2007 Opening net book amount - - 248 - - 248 Additions - - 172 - - 172 Additions through acquisition of subsidiary 122,817 23,416 - - - 146,233 Amortisation charge (4,234) (808) (45) - - (5,087) Closing net book amount 118,583 22,608 375 - - 141,566 At 30 June 2007 Cost 122,817 23,416 456 - - 146,689 Accumulated amortisation (4,234) (808) (81) - - (5,123) 118,583 22,608 375 - - 141,566

Note 18. Current liabilities – Trade and other payables

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Trade payables* 17,288 15,163 2,663 576 Other payables 13,067 7,343 797 4,826

30,355 22,506 3,460 5,402

* The average credit period on purchases of goods is 30 days. The Group has financial risk management policies in place to ensure that all payables are paid within the credit

timeframe. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 55 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 19. Current liabilities – Short-term borrowings

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Unsecured Loans from associates (i) 23,350 20,182 23,350 20,182 Loans from related parties* - - 365,667 345,922 Corporate Borrowing Facility 41,000 - 41,000 -

Total current borrowings 64,350 20,182 430,017 366,104

Further information on the bank loans as well as interest rate risk, maturity dates and fair values are set out in note 20. * The terms of these loans are set out in note 30 (j). (i) represents loan from Macarthur Water Filtration Plant in lieu of distribution payments. The loan is interest free, it has no fixed maturity date and will be reduced by future distribution payments when received.

Note 20. Non-current liabilities – Long-term borrowings

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Unsecured Corporate Borrowing Facility 708,404 404,861 708,404 404,861

(a) fair values and carrying values Set out below is a comparison, by category, of carrying amounts and fair values of the Group’s borrowings recognised in the financial statements. The fair value of the Corporate Borrowing Facility is estimated using an equivalent market interest rate for a similar instrument. The fair values of borrowings have been calculated by discounting the expected future cash flows at prevailing interest rates. The fair values of loan notes and other financial assets have been

calculated using market interest rates. For personal use only use personal For

56 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

2008 2007 cARRying fAiR cARRying fAir amount value amount value $000 $000 $000 $000 Consolidated Non-interest bearing loans and borrowings: Loans from associates 23,350 23,350 20,182 20,182 Interest bearing loans and borrowings: Corporate Borrowing Facility 749,404 749,404 404,861 404,861 772,754 772,754 425,043 425,043

Parent Non-interest bearing loans and borrowings: Loans from associates 23,350 23,350 20,182 20,182 Interest bearing loans and borrowings: Loans from related parties 365,667 365,667 345,922 345,922 Corporate Borrowing Facility 749,404 749,404 404,861 404,861 1,138,421 1,138,421 770,965 770,965

Where applicable, the fair values are based on cash flows discounted using a current lending rate of 7.74% (2007: 6.64%). (b) corporate Borrowing Facility In May 2008 the Company expanded its Facility to include the wind farm short-term acquisition funding (refer note 33). The enhanced $800,000,000 Corporate Borrowing Facility is unsecured and is on similar terms to the original Facility entered into prior to listing on 12 June 2007. The major changes include an increase in the annual margin payable from 0.90% to 1.20% and an opportunity to vary the applicable margin in line with semi annual cover ratio testing. The full limit of the Corporate Borrowing Facility is available to complete the acquisition of the remaining wind farm which is subject to consent. In May 2008 the Company also entered into a $83,000,000 Corporate Borrowing Facility (Junior Debt Facility). The full limit of the Junior Debt Facility is available to complete the acquisition of the remaining wind farm asset which is subject to consent. This facility is committed to $83,000,000. The Company at the time of the wind farm acquisition obtained a secured facility for $30,000 to provide three guarantees to National Electricity Market Management Company (NEMMCO) in relation to three wind farms. (c) financing arrangements Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Access was available at balance date to the following: Corporate Borrowing Facility - unrestricted 883,000 450,000 883,000 450,000

Used at balance date 749,404 404,861 749,404 404,861 Unused at balance date 133,596 45,139 133,596 45,139

883,000 450,000 883,000 450,000

(d) unsecured liabilities Total unsecured liabilities (current and non-current) are:

Corporate Borrowing Facility 749,404 404,861 749,404 404,861 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 57 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 21. Non-current liabilities – Deferred tax liabilities

Consolidated Parent entity note 2008 2007 2008 2007 $000 $000 $000 $000 Gross deferred tax liabilities 141,207 99,308 15,594 8,667 Set off deferred tax assets within common jurisdictions (4,777) (3,234) (1,413) (2,235)

Net deferred tax liabilities 136,430 96,074 14,181 6,432

Gross deferred tax liabilities comprises temporary differences attributable to: Depreciation and amortisation temporary differences on property, plant and equipment and intangibles 124,536 85,960 - - Inventories 848 677 - - Interest accrual 484 823 255 631 Amortised interest 2,009 - 2,009 - Tax consolidation adjustment on acquisition - 3,812 - -

127,877 91,272 2,264 631 Amounts recognised directly in equity Cash flow hedges 11,470 6,176 11,470 6,176 Available for sale financial asset 1,860 1,860 1,860 1,860

Gross deferred tax liabilities 141,207 99,308 15,594 8,667

Movements in gross deferred tax liabilities Opening balance at 1 July 99,308 8,284 8,667 - Charged to equity 5,293 6,834 5,293 8,037 (Credited)/charged to the income statement 6 (2,332) 2,977 1,634 630 Acquisition of subsidiary 38,938 81,213 - -

Closing balance at 30 June 141,207 99,308 15,594 8,667

Deferred tax liabilities to be settled after more than 12 months 137,866 98,736 13,330 8,095 Deferred tax liabilities to be settled within 12 months 3,341 572 2,264 572

141,207 99,308 15,594 8,667

Gross deferred tax assets comprises temporary differences attributable to: Tax losses* - 344 - 344 Depreciation temporary differences 1,846 1,730 - - Restoration obligations and other provisions 665 366 - - Cash flow hedge adjustment - (1,097) - - Accruals 854 - - - Other - 51 - 51

3,365 1,394 - 395

Amounts recognised directly in equity Share issue expenses 1,412 1,840 1,413 1,840

Gross deferred tax assets 4,777 3,234 1,413 2,235

Movements in gross deferred tax assets: Opening balance at 1 July 3,234 1,307 2,235 - Tax losses (derecognised) / recognised (234) 344 (312) 344 (Charged)/credited to equity (459) (2,160) (459) 1,840 Credited/(charged) to the income statement 6 152 (1,180) (51) 51

Acquisition of subsidiary 2,084 4,923 - - For personal use only use personal For Closing balance at 30 June 4,777 3,234 1,413 2,235

Deferred tax assets to be recovered after more than 12 months 4,318 3,234 954 2,235 Deferred tax assets to be recovered within 12 months 459 - 459 -

4,777 3,234 1,413 2,235

* The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

58 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 22. Non-current liabilities – Provisions

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Rehabilitation of site 2,969 1,221 - -

Rehabilitation Provision is made for the estimated rehabilitation of the leasehold property upon which the Group operates the Townsville Power Station and the Windy Hill, Toora, Starfish Hill and Mt Millar wind farms. The lease expires at the completion of the plant’s useful life at which time the lessee is required to perform works on the site under agreement with the lessor. Based on current environmental conditions, a provision for rehabilitation has been recognised using discounted cash flows. Provisions are also made for each wind farm site on a similar basis. Management reassesses this provision annually. Movements in provisions Movements in each class of provision during the financial year are set out below: Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Consolidated – 2008 Non-current Carrying amount at start of year 1,221 - - - Provision gained through acquisition of entity 1,632 1,105 - - Finance cost 116 116 - -

Carrying amount at end of year 2,969 1,221 - -

Note 23. Contributed equity

Ordinary shares – fully paid 130,951 131,476 130,951 131,476

Movements in ordinary share capital: Consolidated and Parent entity Price per Number of share Date Details shares issued $ $000 2008 1 July 2007 Opening balance 266,725,000 - 131,476 30 June 2008 release of deferred tax asset on float costs - - (459) 30 June 2008 Transaction costs (net of tax) - - (66) 266,725,000 - 130,951

2007 1 July 2006 Opening balance 10 - - 8 June 2007 share split 87,740,762 - - 8 June 2007 conversion of debt to equity 139,399,571 0.77 106,719 12 June 2007 shares issued on Initial Public Offering 39,584,657 0.77 30,304 12 June 2007 Transaction costs net of tax - - (5,547)

266,725,000 - 131,476 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 59 Notes to and forming part of the financial statements For the year ended 30 June 2008

(a) ordinary shares Ordinary shares (which have no par value) entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (b) Stapling Pursuant to a stapling deed dated 7 June 2007, shares in Transfield Services Infrastructure Limited are stapled with shares in TSI International Limited and units in Transfield Services Infrastructure Trust and together they comprise Transfield Services Infrastructure Fund (TSI Fund). TSI Fund was listed on the Australian Securities Exchange on 12 June 2007.

Note 24. Reserves and retained profits

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000

(a) Reserves Hedging reserve – cash flow hedges 26,584 14,413 26,762 14,413 Available for sale investments 4,340 4,340 4,340 4,340

30,924 18,753 31,102 18,753

Movements: Hedging reserve - cash flow hedges (interest rate swaps) Balance at 1 July 14,413 (3,050) 14,413 - Share of cash flow hedge reserve in associates - 184 - - Cash flow hedge revaluation (gross) 17,464 20,589 17,642 20,589 Deferred tax (5,293) (6,176) (5,293) (6,176) Transfer to net profit - (7,425) - - Cash flow hedges on acquisition (gross) - 10,291 - -

Balance at 30 June 26,584 14,413 26,762 14,413

Available for sale investments revaluation reserve Balance at 1 July 4,340 - 4,340 - Revaluation (gross) - 6,200 - 6,200 Deferred tax - (1,860) - (1,860)

Balance at 30 June 4,340 4,340 4,340 4,340

Nature and purpose of reserves (i) Hedging reserve – cash flow hedges (interest rate swaps) The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(o). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

(ii) Available for sale investment revaluation reserve The fair value reserve records changes in fair value of non-quoted available for sale financial instruments when there is evidence of a change in fair value by reference to a market transaction. Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000

(b) Retained profits / (accumulated losses) Retained profits/(accumulated losses) at the beginning of the financial year 3,130 4,326 58,866 -

Net profitonly use personal For attributable to shareholders of Transfield Services Infrastructure Limited 7,520 (1,196) (41,447) 58,866

Balance at the end of the financial year 10,650 3,130 17,419 58,866

60 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Note 25. Minority interest

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Balance at 1 July 344,982 - - - Equity contribution, net of transaction costs and tax (112) 342,252 - - Net profit attributable to unitholders of Transfield Services Infrastructure Trust and shareholders of TSI International Limited 18,180 2,730 - - Distribution paid (25,339) - - -

Balance at 30 June 337,711 344,982 - -

Note 26. Remuneration of auditors

Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ During the year the following amounts were paid to the auditor of the Parent entity, its related practices and non-related audit firms. 1. Audit services Fees paid to PricewaterhouseCoopers Audit and review of financial reports and other work under the Corporations Act 2001 291,259 180,000 280,666 180,000 2. Other assurance services Transaction and support services 231,259 20,000 224,682 20,000

Total remuneration for audit services 522,518 200,000 505,348 200,000

Note 27. Contingent liabilities

Details and estimates of maximum amounts of contingent liabilities are as follows: Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Letters of Credit 8,300 - 8,300 - Insurance bond - 3,300 - 3,300

8,300 3,300 8,300 3,300

The Company has entered into an unsecured Corporate Borrowing Facility agreement under which bank guarantees and letters of credit are provided. The consolidated entity, in the normal course of business, may be called upon to give guarantees and indemnities in respect of the performance by controlled entities of their contractual obligations. These guarantees and indemnities only give rise to a liability where the respective entity fails to perform its contractual obligations. The Directors are not aware of any material claims on the Parent entity or consolidated entity. No material losses are anticipated in respect of any issued guarantees and indemnities in respect of performance by controlled entities of their contractual obligations. During the year, the Group acquired four wind farms from the Queensland Government. The acquisition of a 50% share in Emu Downs wind farm was scheduled for completion in early 2008, but completion is subject to the Queensland Government receiving necessary approval. This condition is yet to be

satisfied. The Queensland Government has until December 2008 to satisfy this condition. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 61 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 28. Operating Leases

Operating lease receivables Leasing arrangements Operating lease revenue relates to the wind farms owned by the Group. The duration of lease terms remaining vary between 6 months and 8 years. The lessees do not have an option to purchase the wind farms at the expiry of the lease period. Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Non-cancellable operating lease receivable No longer than one year 29,244 - - - Longer than one year and not longer than five years 93,333 - - - Longer than five years 5,297 - - -

Total 127,874 - - -

Operating lease payables Leasing arrangements The lease expenses include royalty payments on land leased by the Group. The term of these leases vary between 25 and 99 years. No longer than one year 155 2 - - Longer than one year and not longer than five years 620 7 - - Longer than five years 2,619 42 - -

Total 3,394 51 - -

Note 29. Commitments for expenditure

Capital commitments Commitments for the acquisition of power generation equipment and construction costs contracted for at reporting date but not recognised as liabilities, payable within one year 13,756 884 - -

Note 30. Related party transactions

(a) Parent entity The parent entity within the Group is Transfield Services Infrastructure Limited. (b) controlled entities Interests in controlled entities are set out in note 33. (c) key management personnel Disclosures relating to key management personnel are set out in note 31. (d) Remuneration and retirement benefits Disclosures relating to remuneration and retirement benefits are set out in the Remuneration Report on pages 26 to 33. (e) directors and Director-related entities The following were Directors and shareholders of TransfieldS ervices Limited, a related party and beneficial owner of shares in Transfield Services Infrastructure Limited. • Anthony Shepherd, and • Peter Watson.

Anthonyonly use personal For Shepherd and Peter Watson hold 0.78% and 0.94% respectively in Transfield Services Limited which itself owns 49% of the shares of Transfield Services Infrastructure Limited. This means in addition to the shareholdings described above they each indirectly own a further 1,019,423 and 1,228,535 shares in Transfield Services Infrastructure Limited. David Mathlin also holds 4,400 shares in Transfield Services Limited. TSI Fund is managed under a Management Services Agreement (MSA) with Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited to source new investments and provides management, corporate, administrative and operations and maintenance services in relation to TSI Fund under normal commercial terms and conditions. The wholly-owned power stations within the Group are also operated and maintained by Transfield Services (Australia) Pty Limited under a separate agreement.

62 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Prior to its listing, Transfield Services Infrastructure Limited was a fellow subsidiary of Transfield Services (Australia) Pty Limited and during that time Transfield Services (Australia) Pty Limited provided management, operations and maintenance services to the power stations. Aggregate amounts of each of the above types of other transactions with Directors and their Director-related entities recognised as expenses: Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ Management services provided by Transfield Services (Australia) Pty Limited 9,561,026 586,555 9,561,026 586,555 Operations and maintenance services provided by Transfield Services (Australia) Pty Limited 24,406,187 1,644,515 - - Management and operation services prior to IPO - 15,364,759 - -

Aggregate amounts of each of the above types of other transactions with Directors and their Director-related entities capitalised: Success and development fees and major works costs associated with Kemerton Power Station upgrade, wind farm acquisition and other capital projects 9,339,000 - 9,339,000 -

The following amounts are payable to/(receivable from) Director related entities at 30 June 2008: Transfield Services Limited - 5,890,559 - - Transfield Services (Australia) Pty Limited 6,352,974 4,181,880 - - Transfield Services Limited* (658,000) (1,365,000) - -

* This relates to monies payable to TSI Fund incorrectly deposited into Transfield Services Limited’s bank account, the monies were repaid post 30 June 2008.

(f) loans to Directors and Director-related entities There were no loans to Directors of entities in the consolidated entity or their personally related entities during the year or outstanding at the end of the year. (g) loans to executives and executive-related entities There were no loans to executives of entities in the consolidated entity or their personally related entities during the year or outstanding at the end of the year. (h) transactions of Directors and Director-related entities concerning shares of Transfield Services Infrastructure Limited Aggregate numbers of shares of Transfield Services Infrastructure Limited acquired or disposed of by the Directors or their Director-related entities from the Company: Parent entity and Consolidated entity 2008 2007 number number Acquisitions 497,881 443,614

Aggregate acquisition of ordinary shares includes: Consultancy fees to Peter Young AM for services prior to appointment as a Director - 87,494

Disposals - 96,445,093

(i) other transactions with Directors and Director-related entities

There have been no other transactions entered into between the consolidated entity and Directors and/or Director related entities since 1 July 2007. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 63 Notes to and forming part of the financial statements For the year ended 30 June 2008

(j) Wholly-owned group The wholly-owned group consists of Transfield Services Infrastructure Limited and its wholly-owned controlled entities which are set out in note 33. Transactions between Transfield Services Infrastructure Limited and other entities in the wholly-owned group during the years ended 30 June 2008 and 2007 consisted of: (i) loans advanced by Transfield Services Infrastructure Limited, and (ii) loans repaid to Transfield Services Infrastructure Limited, and (iii) loan advanced by Infrastructure Fund Management Limited, and (iv) dividends and distributions paid to Transfield Services Infrastructure Limited, and (v) transactions between Transfield Services Infrastructure Limited and its wholly-owned Australian controlled entities under the tax sharing and tax funding agreement. With the exception of the loan advanced by: (i) Transfield Services Infrastructure Trust which bears interest at 6% per annum, and (ii) infrastructure Fund Management Limited, which bears interest at 6% per annum loans advanced to and by Transfield Services Infrastructure Limited to its controlled entities are interest free and repayable on demand. Parent entity note 2008 2007 $ $ Aggregate amounts included in the determination of operating profit before income tax that resulted from transactions with entities in the wholly-owned group - - Aggregate amounts receivable from entities in the wholly-owned group at balance date: Current receivables (loans) 8 684,548,000 549,725,000 Aggregate amounts payable to entities in the wholly-owned group at balance date: Current payables (loans) 19 365,667,000 345,921,997 Tax consolidation legislation Current tax payable assumed from wholly-owned tax consolidated entities 26,724,000 -

The terms of the tax sharing and tax funding agreements are set out in note 6(e). Amounts owing to/from the Parent entity to/from members of the tax-consolidated group are included in current loans receivable/payable respectively. (k) other related parties Aggregate amounts included in the determination of operating profit before income tax that resulted from transactions with each class of other related parties: Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ Interest expense - - 18,876,289 2,718,646 Dividend revenue and cash distributions - - 4,200,000 84,706,389

Transactions relating to dividends were on the same terms and conditions that applied to other shareholders. Other transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties. The interest rate on the interest-bearing loans during the year was 6%. Aggregate amounts receivable from, and payable to, each class of other related parties at balance date: Consolidated Parent entity note 2008 2007 2008 2007 $ $ $ $ Current receivables Associates 8 961,561 91,561 712,000 91,561

Currentonly use personal For payables Associates 19 23,350,000 20,182,500 23,350,000 20,182,500

No provision for impairment has been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

64 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $

Reconciliation of loans to/from related parties Loans to subsidiaries/controlled entities Beginning of the year - - 549,725,000 - Loans advanced (net) - - 134,823,000 549,725,000

End of year - - 684,548,000 549,725,000

Loans from subsidiaries/controlled entities Beginning of the year - - 345,921,997 - Loans (received) (net) - - 19,745,003 345,921,997

End of year - - 365,667,000 345,921,997

Loans to associates Beginning of the year 91,561 - 91,561 - Loans gained on acquisition of associate - 1,027,561 - 1,027,561 Loan (repayments) received - (936,000) - (936,000) Loan advanced 870,000 - 620,439 - Interest charged - - - - Interest (received) - - - -

End of year 961,561 91,561 712,000 91,561

Loans from associates Beginning of the year 20,182,500 - 20,182,500 - Loan gained on acquisition of associate - 18,667,500 - 18,667,500 Loan (repayments) received 3,167,500 - 3,167,500 - Loan advanced - 1,515,000 - 1,515,000

End of year 23,350,000 20,182,500 23,350,000 20,182,500

No provisions for impairment have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties. (l) guarantees The Parent entity provides performance guarantees from time to time on behalf of wholly-owned subsidiaries, associates, related parties and joint venture entities and partnerships. (m) ownership interests in related parties Interest held in the following classes of related parties are set out in the follow notes: (i) controlled entities note 33

(ii) associates note 35 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 65 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 31. Key management personnel

(a) directors The following persons were Directors of Transfield Services Infrastructure Limited during the financial year and up to the date of this report: Peter Young AM (Chairman) David Mathlin Kate Spargo Anthony Shepherd Peter Watson (b) other key management personnel Steve MacDonald chief Executive Officer Charles Mott Chief Financial Officer Geoff Dutton*** General Manager Assets Darce Corsie* Transitional Chief Financial Officer Fred Bidwell** General Manager Special Projects and Company Secretary

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

All key management personnel are employed by Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited and are those persons having authority and responsibility for planning, directing and controlling the activities of TSI Fund, directly or indirectly, including any Director of TSI Fund. (c) key management personnel compensation Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ Short-term employee benefits (cash salary and fees, cash bonuses and non-monetary benefits) 2,480,810 553,188 2,480,810 553,188 Termination payment 140,000 - 140,000 - Long-term employee benefits 37,227 12,958 37,227 12,958 Post-employment benefits 339,879 14,632 339,879 14,632 Share-based payments 515,459 - 515,459 -

3,513,375 580,778 3,513,375 580,778

instruments are only available to the CEO and CFO, who are employed by the Manager and seconded to TSI Fund. For personal use only use personal For

66 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(i) LTI holdings No Performance Awards or notional securities under the Scheme have vested in the current year.

(ii) Shareholdings The number of shares in the Company held during the financial year by each Director of Transfield Services Infrastructure Limited and other key management personnel of the Group, including their personally related parties, are set out below. The Directors’ compensation includes semi-annual on-market share acquisition in lieu of cash remuneration. 2008 other changes Balance at during the year Balance at Name the start of Acquisitions/ the end of the year (disposals) the year Ordinary shares Directors Peter Young AM 182,494 111,034 293,528 David Mathlin 95,000 104,413 199,413 Kate Spargo 23,500 12,413 35,913 Anthony Shepherd 95,120 50,000 145,120 Peter Watson 47,500 220,021 267,521 443,614 497,881 941,495

Other key management personnel of the Group Steve MacDonald 101,896 100,000 201,896 Chief Executive Officer Charles Mott 47,500 7,500 55,000 Chief Financial Officer Geoff Dutton*** - - - General Manager Assets Darce Corsie* 95,000 - 95,000 Transitional Chief Financial Officer Fred Bidwell** 95,000 75,000 170,000 General Manager Special Projects and Company Secretary 339,396 182,500 521,896

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

2007 other changes Balance at during the year Balance at Name the start of Acquisitions/ the end of the year (disposals) the year Ordinary shares Directors Peter Young AM - 182,494 182,494 David Mathlin - 95,000 95,000 Kate Spargo - 23,500 23,500 Anthony Shepherd - 95,120 95,120 Peter Watson - 47,500 47,500 - 443,614 443,614

Other key management personnel of the Group Steve MacDonald - 101,896 101,896 Charles Mott - 47,500 47,500 Geoff Dutton*** - 0 0

For personal use only use personal For Darce Corsie* - 95,000 95,000 Fred Bidwell** - 95,000 95,000 - 339,396 339,396

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

Transfield Services INFRASTRUCTURE FUND 67 Notes to and forming part of the financial statements For the year ended 30 June 2008

Other transactions with Directors and key management personnel Steve MacDonald, the CEO of TSI Fund received additional deferred remuneration components from his prior role as Chief Strategy Officer of Transfield Services. The additional deferred remuneration components received from Transfield Services during year ended 30 June 2008 are as follows: Long-term benefits Share-based payments Total Executive Special Transfield Performance $ Scheme Services Options Awards $ $ $ 150,000 139,197 81,392 370,589

Distributions and/or dividends received by Directors and key management personnel during the year ended 30 June 2008 amounted to $50,707 (2007 $nil).

Note 32. Business combinations

(a) Summary of acquisitions On 20 December 2007, TSI Fund acquired 100% ownership interest in four wind farms at Windy Hill, Toora, Starfish Hill and Mt Millar (together the Wind Farm Portfolio) as well as land and wind farm development rights. The value of the transaction is as follows: total $000 Purchase consideration – refer to (b) below: Cash paid 333,400 Direct costs relating to the acquisition 7,388 340,788 Fair value of net identifiable assets acquired (refer to (c) below): (279,660) Goodwill 61,128

The Wind Farm Portfolio, together with an intermediate holding company, TSI (Wind Farms) Pty Limited incorporated to facilitate the business combination, contributed revenue to the Group of $11.1 million and a net loss of $2.8 million. Had the acquisition occurred on 1 July 2007, consolidated revenue would have increased by $9.6 million and consolidated net profit would have increased by $1.4 million. (b) Purchase consideration Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration (inclusive of costs) (340,788) - - - Less: Balances acquired - 31,828 ------

(Outflow) / inflow of cash (340,788) 31,828 - - For personal use only use personal For

68 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(c) Assets and liabilities acquired * Land and Windy Hill toora Starfish hill mt Millar development Wind Farm Wind Farm Wind Farm Wind Farm rights** Pty Limited Pty Limited Pty Limited Pty Limited total $000 $000 $000 $000 $000 $000 Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- ee’S Sional ee’S Sional ee’S Sional ee’S Sional ee’S Sional ee’S Sional carrying fair carrying fair carrying fair carrying fair carrying fair carrying fair amount value amount value amount value amount value amount value amount value $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Trade and other receivables - - 50 50 120 120 - 84 - - 170 254 Prepayments ------834 834 - - 834 834 Property, plant and equipment 1,167 1,167 6,428 17,414 27,335 34,076 56,097 65,084 122,892 199,000 213,919 316,741 Deferred tax asset - - - 442 - 272 - 496 - 874 - 2,084 Development rights 3,000 3,000 ------3,000 3,000 Inventory and WIP - - - - 373 1,427 - - 357 357 730 1,784 Trade payables - - (45) (45) (4) (4) (11) - (4,419) (4,419) (4,479) (4,468) Derivative (liabilities)/assets - - (2,696) - (4,484) - - - - - (7,180) - Provisions - - (704) (704) (602) (602) (176) (176) (149) (149) (1,631) (1,631) Deferred tax liability - - - (2,122) (32) (3,055) (2,297) (6,188) (8,663) (27,573) (10,992) (38,938) Net identifiable assets acquired 4,167 4,167 3,033 15,035 22,706 32,234 54,447 60,134 110,018 168,090 194,371 279,660

* interim values previously reported at 31 December 2007 have been revised as at 30 June 2008. ** The land and wind farm development rights were sold at cost price to the Transfield Services group immediately after acquisition.

(d) changes to provisional fair values Transfield tRAnsfield tRAnsfield Services ServiceS townsville Collinsville collinsville Pty Pty Limited BV Limited Total $000 $000 $000 $000 Goodwill provisionally recognised at 30 June 2007 - - - - Adjustment to fair values: Power purchase agreement 3,475 3,475 29,895 36,845 Coal purchase agreement 3,512 3,512 - 7,024 Goodwill 6,987 6,987 29,895 43,869

The increase in goodwill is a result of the finalisation of the valuation of the intangible assets relating to Townsville Power Station and Collinsville Power Station. (e) Stapling arrangement (2007) Under AASB 3 Business Combinations the stapling of shares in Transfield Services Infrastructure Limited to units in Transfield Services Infrastructure Trust and shares in TSI International Limited is a business combination by contract alone. For the purposes of AASB Interpretation 1002 Post date of transition stapling arrangements, Transfield Services Infrastructure Limited has been identified as the parent entity in relation to the stapling event that took place on 7 June 2007. In accordance with AASB Interpretation 1002 the results and equity, not directly owned by Transfield Services Infrastructure Limited have been treated and disclosed as minority interest, however the stapled securityholders of Transfield Services Infrastructure Limited are the same as the stapled securityholders of Transfield Services Infrastructure Trust and TSI International Limited. The Australian Securities Exchange reserves the right (but

For personal use only use personal For without limiting its absolute discretion) to remove one or more entities with stapled securities from the official list if any of their securities cease to be ‘stapled’ together, or any equity securities are issued by one entity which are not stapled to equivalent securities in the other entity or entities.

Transfield Services INFRASTRUCTURE FUND 69 Notes to and forming part of the financial statements For the year ended 30 June 2008

(f) Summary of acquisitions (2007) Revenue net profit Revenue net profit contribution contribution contribution contribution Controlled entity % dAte from from from 1 July from 1 July acquired Acquired acquisitionS Acquisitions 2006 2006 $000 $000 $000 $000 Transfield Services Collinsville Pty Limited 100% 11/9/2006 21,851 1,061 25,526 1,137 Transfield Services Collinsville BV 100% 11/9/2006 21,850 1,448 25,527 1,611 Collinsville 43,701 2,509 51,053 2,748 Transfield Energy Fund No 2 Pty Limited 100% 24/8/2006 - - - - Transfield Townsville Pty Limited 100% 24/8/2006 30,348 13,959 36,483 15,333 Townsville 30,348 13,959 36,483 15,333 Transfield Services Kwinana Pty Limited 100% 24/8/2006 - - - - Transfield Services Energy Kwinana Pte Limited 100% 24/8/2006 - 2,315 - 2,667 Kwinana - 2,315 - 2,667 Infrastructure Fund Management Limited 100% 28/02/2007 675 472 675 472 74,724 19,255 88,211 21,220

(g) Purchase consideration (2007) transfield transfield transfield infrastructure serviceS ServiceS townsville Fund Collinsville collinsville Pty ltd mAnagement Pty ltd Bv And *TEF 2 kWinana** limited total $000 $000 $000 $000 $000 $000 Purchase consideration (refer to (f) below): Intercompany loan 29,619 43,735 97,255 3,601 50 174,260 Total purchase consideration 29,619 43,735 97,255 3,601 50 174,260 Fair value of net identifiable assets acquired (refer to (h) below): (29,619) (43,735) (97,255) (3,601) (50) (174,260) Goodwill ------

* Transfield Energy Fund (No.2) Pty Limited

** Transfield Services Kwinana Pty Limited and Transfield Services Energy Kwinana Pte Limited For personal use only use personal For

70 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(h) Assets and liabilities acquired (2007)

transfield transfield transfield infrastructure services Services Townsville and Fund Collinsville Collinsville Transfield Energy Management Pty Limited Bv Fund (No.2) Pty Ltd Kwinana** limited Total $000 $000 $000 $000 $000 $000 Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- Acquir- Provi- ee’S Sional ee’S Sional ee’S Sional ee’S Sional ee’S Sional ee’S Sional carrying fair carrying fair carrying fair carrying fair carrying fair carrying fair amount value amount value amount value amount value amount value amount value $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 Investment in Perth Power Partnership ------25,308 28,909 - - 25,308 28,909 Cash 2,248 2,248 2,357 2,357 27,223 27,223 - - - - 31,828 31,828 Receivables and other current assets 917 917 734 734 9,527 9,527 - - 50 50 11,228 11,228 Plant and equipment 66,373 80,608 50,672 80,604 211,904 203,380 - - - - 328,949 364,592 Deferred tax asset 1,347 1,347 3,244 3,244 332 332 - - 4,923 4,923 Intangibles - 23,290 - 23,291 - 99,652 - - - - - 146,233 Other non-current assets 322 322 322 322 ------644 644 Borrowings (42,277) (42,277) (42,277) (42,277) (155,377) (155,377) - - - - (239,931) (239,931) Derivatives (4,488) (4,488) (4,488) (4,488) 4,013 4,013 - - - - (4,963) (4,963) Loans (14,946) (14,946) (2,612) (2,612) (42,210) (42,210) (25,308) (25,308) - - (85,076) (85,076) Trade and other payables (1,438) (1,438) (1,476) (1,476) ------(2,914) (2,914) Deferred tax liability (3,132) (15,964) (76) (15,964) (15,153) (49,285) - - - - (18,361) (81,213) Net identifiable assets acquired* 4,926 29,619 6,400 43,735 40,259 97,255 - 3,601 50 50 51,635 174,260

* The fair value of assets and liabilities acquired are based on discounted cash flow models. No acquisition provisions were created.

** Transfield Services Kwinana Pty Limited and Transfield Services Energy Kwinana Pte Limited For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 71 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 33. Investments in controlled entities

class of equity Holding cost of Country of Shares AS And voting Parent entity’s incorporation APPlicable Rights investment 2008 2007 2008 2007 % % $000 $000 Transfield Services Infrastructure Trust* Australia n/A N/A n/A - - TSI International Limited* Australia n/A N/A n/A - - Transfield Energy Fund (No.2) Pty Limited Australia Ordinary 100 100 97,255 97,255 Transfield Townsville Pty Limited Australia Ordinary 100 100 - - Transfield Collinsville Pty Limited Australia Ordinary 100 100 29,619 29,619 Transfield Services Collinsville BV The Netherlands Ordinary 100 100 43,734 43,734 Transfield Services Kemerton Pty Limited Australia Ordinary 100 100 - - Transfield Services Kwinana Pty Limited Australia Ordinary 100 100 3,600 3,600 Transfield Services Energy (Kwinana) Pte Limited Singapore Ordinary 100 100 - - Infrastructure Fund Management Limited Australia Ordinary 100 100 5,050 5,050 TSI (Wind Farms) Pty Limited Australia Ordinary 100 n/A 189,445 - Tarong Renewable Energy Pty Limited Australia Ordinary 100 n/A - - Windy Hill Wind Farm Pty Limited Australia Ordinary 100 n/A - - Toora Wind Farm Pty Limited Australia Ordinary 100 n/A - - Starfish Hill Wind Farm Pty Limited Australia Ordinary 100 n/A - - Mt Millar Wind Farm Pty Limited Australia Ordinary 100 n/A - - TSI International (Holdings) Limited** Australia Ordinary 100 n/A - - TSI (Cayman Islands) 1 Holdings LTD** Cayman Islands Ordinary 100 n/A - - TSI (Cayman Islands) 2 Holdings LTD** Cayman Islands Ordinary 100 n/A - - Inversiones TSI Chile (Holdings) Limitada** Chile Ordinary 100 n/A - - Inversiones TSI (Chile) Limitada** Chile Ordinary 100 n/A - - 368,703 179,258

* Transfield Services Infrastructure Limited is deemed to have acquired TransfieldS ervices Infrastructure Trust and TSI International Limited at the date of stapling. This acquisition is by contract alone and Transfield Services Infrastructure Limited does not have an equity holding in either entity. ** subsidiaries of TSI International Limited

Note 34. Deed of cross guarantee

The following entities: • Transfield Services Infrastructure Limited • Transfield Services Kemerton Pty Limited • Transfield Energy Fund (No 2) Pty Limited • Transfield Townsville Pty Limited • Transfield Collinsville Pty Limited • Transfield Services Kwinana Pty Limited • TSI (Wind Farms) Pty Limited • Windy Hill Wind Farm Pty Limited • Toora Wind Farm Pty Limited • Tarong Renewable Energy Pty Limited • Starfish Hill Wind Farm Pty Limited • Mt Millar Wind Farm Pty Limited

• Transfieldonly use personal For Services Energy (Kwinana) Pte Limited are parties to a deed of cross guarantee under which each company guarantees the debt of others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by ASIC.

72 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

(a) consolidated income statement and a summary of movements in consolidated retained profits The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that are controlled by Transfield Services Infrastructure Limited, they also represent the ‘Extended Closed Group’. Set out below is a consolidated income statement and a summary of movements in consolidated retained profits for the year ended 30 June 2008 of the Closed Group consisting of: • Transfield Services Infrastructure Limited • Transfield Services Kemerton Pty Limited • Transfield Energy Fund (No 2) Pty Limited • Transfield Townsville Pty Limited • Transfield Collinsville Pty Limited • Transfield Services Kwinana Pty Limited • TSI (Wind Farms) Pty Limited • Windy Hill Wind Farm Pty Limited • Toora Wind Farm Pty Limited • Tarong Renewable Energy Pty Limited • Starfish Hill Wind Farm Pty Limited • Mt Millar Wind Farm Pty Limited • Transfield Services Energy (Kwinana) Pte Limited No comparatives are presented as the deed was entered into during the 2008 financial year. The income statement is presented for the full financial year as if the deed had been entered into on 1 July 2007. 2008 $000 Income statement Revenue from continuing operations 90,718 Share of net profits of associates accounted for using the equity method 4,461 Operating costs (39,652) Depreciation and amortisation (19,637) Finance costs (52,013) Other expenses (5,160) Loss before income tax (21,283) Income tax benefit 4,650 Loss from continuing operations after income tax expense (16,633) Net loss (16,633) Summary of movements in consolidated retained profits Retained profits at the beginning of the financial year 22,762 Loss for the year (16,633) Dividends provided or paid - Retained profits at the end of the financial year 6,129

(b) Balance Sheet Set out overleaf is a consolidated balance sheet as at 30 June 2008 of the Closed Group consisting of: • Transfield Services Infrastructure Limited • Transfield Services Kemerton Pty Limited • Transfield Energy Fund (No 2) Pty Limited • Transfield Townsville Pty Limited

• Transfield Collinsville Pty Limited For personal use only use personal For • Transfield Services Kwinana Pty Limited • TSI (Wind Farms) Pty Limited • Windy Hill Wind Farm Pty Limited • Toora Wind Farm Pty Limited • Tarong Renewable Energy Pty Limited • Starfish Hill Wind Farm Pty Limited • Mt Millar Wind Farm Pty Limited • Transfield Services Energy (Kwinana) Pte Limited

Transfield Services INFRASTRUCTURE FUND 73 Notes to and forming part of the financial statements For the year ended 30 June 2008

2008 $000 Current assets Cash and cash equivalents 12,841 Trade and other receivables 72,917 Inventories 7,394 Prepayments and other current assets 18,903 Derivative financial instruments 8,469 Total current assets 120,524 Non-current assets Receivables 37,091 Investments in associates 72,971 Available for sale financial assets 136,285 Other financial assets 41,726 Property, plant and equipment 593,235 Intangible assets 176,627 Deferred tax assets 4,777 Derivative financial instruments 29,762 Total non-current assets 1,092,474 Total assets 1,212,998 Current liabilities Trade and other payables 16,597 Short-term borrowings 41,000 Related party payables 165,890 Current tax liabilities 87 Total current liabilities 223,574 Non-current liabilities Long-term borrowings 708,404 Deferred tax liabilities 113,189 Provisions 2,968 Total non-current liabilities 824,561 Total liabilities 1,048,135 Net assets 164,863 Equity Contributed equity 130,951 Reserves 27,783 Retained profits 6,129 Parent entity interest 164,863

Note 35. Investments in associates

Consolidated Parent entity Name of Country of Principal Ownership carrying carrying Company incorporation Activity interest amount amount 2008 2007 2008 2007 2008 2007 % % $000 $000 $000 $000 Yan Yean Water (Holdings) Pty Limited # australia Water filtration plant 50 50 2,372 1,425 964 964 Macarthur Water

(Holdings)only use personal For Pty Limited # australia Water filtration plant 50 50 48,765 45,285 44,069 44,069 Perth Power Partnership (Kwinana)* australia Power station 30 30 27,938 27,826 - - 79,075 74,536 45,033 45,033

# reporting date 31 March * reporting date 31 December

74 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Consolidated 2008 2007 $000 $000 Movements in carrying amounts of investments in associates Carrying amount at the beginning of the financial year 74,536 - Share in associate cash flow hedge equity reserve (149) 184 Share of operating profits after income tax 8,888 5,135 Distributions received (4,200) (3,000) Acquisitions - 72,217

Carrying amount at the end of the financial year 79,075 74,536

Share of profits of associates Operating profits before income tax 10,785 7,336 Income tax expense (1,897) (2,201)

Operating profits after income tax 8,888 5,135

Share of associates assets and liabilities Current assets 34,538 10,639 Non-current assets 70,842 94,542

Total assets 105,380 105,181

Current liabilities 10,544 5,772 Non-current liabilities 52,349 43,594

Total liabilities 62,893 49,366

Net assets 42,487 55,815

The associates do not have expenditure commitments or contingent liabilities at 30 June 2008.

Note 36. Reconciliation of operating profit after income tax to net cash flow from OPERATing activities

Consolidated Parent entity 2008 2007 2008 2007 $000 $000 $000 $000 Operating profit/(loss) after income tax 25,700 1,534 (41,447) 58,866 Finance costs (classified as financing activities) 33,538 37,291 54,344 33,806 Depreciation and amortisation 32,539 28,209 - - Effective interest income on financial asset - (1,838) - (1,838) Prepaid insurance expense and other non-cash items 2,806 - 677 - Share of profits of associates and joint ventures not received as dividends or distributions (4,688) (2,135) - - Change in operating assets and liabilities, net of effects from purchase of controlled entities: (Increase)/decrease in trade and other receivables (5,469) (9,334) (2,099) (14,118) (Increase)/decrease in prepayments and other current assets (3,472) - (186) - Decrease/(increase) in inventories 1,292 (8,680) - - (Increase)/decrease in deferred tax assets 3,175 3,340 1,776 - Increase/(decrease) in trade and other payables 3,381 12,598 105 577 Increase/(decrease) in provision for income tax payable 1,480 5,988 (25,529) - (Decrease)/increase in provision for deferred tax liabilities (4,371) 9,811 221 599 (Decrease)/increase in provisions 118 - - -

(Decrease)/increase in related party loans (249) (14,367) - - For personal use only use personal For Net cash inflow/(outflow) from operating activities 85,780 62,417 (12,138) 77,892

Transfield Services INFRASTRUCTURE FUND 75 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 37. Earnings per share 2008 2007 centS cents (a) Basic and diluted earnings/(loss) per share Earnings per share from continuing operations attributable to the equity holders of the Fund 9.6 1.6 Earnings/(loss) per share for profits/(loss) attributable to the ordinary equity holders of the company 2.8 (1.2) 2008 2007 $000 $000 (b) Reconciliations of earnings used in calculating earnings per share Basic and diluted additional earnings per share Net profit/(loss) attributable to shareholders of the Company used in calculating basic earnings per share 7,520 (1,196) Net profit from continuing operations attributable to the equity holders of TSI Fund used in calculating basic earnings per share 25,700 1,534 There were no potentially dilutive transactions during the year (c) Weighted average number of shares used as the denominator numbeR number Weighted average number of ordinary securities used as the denominator in calculating basic and diluted earnings per security for the Company and TSI Fund 266,725,000 98,585,426

Note 38. Events occurring after balance sheet date On 22 August 2008, the Directors of Infrastructure Fund Management Limited, as responsible entity for Transfield Services Infrastructure Trust declared a final distribution of 9.0 cents per unit to be paid to stapled securityholders of TSI Fund on 17 September 2008. No other significant events have occurred since balance date and prior to signing the financial statements.

Note 39. Segment information

Business segments (i) Power stations The Company owns or part owns infrastructure investments which comprise interests in the Townsville, Kemerton, Collinsville, Kwinana and Loy Yang A power stations. (ii) Wind Farms The Company owns infrastructure investments which comprise interests in the Windy Hill, Toora, Starfish Hill and Mt Millar wind farms. (iii) Water Filtration Plants The Company part owns the Macarthur and Yan Yean water filtration plants. (iv) Intersegment pricing Intersegment pricing is on an “arms-length” basis and transactions are eliminated on consolidation. (v) Geographical segments The Company operates in one geographical segment - Australia Primary Reporting – Business Segments Power Wind Water 2008 Stations FarmS filtration PlantS consolidated $000 $000 $000 $000 Sales to external customers 155,272 10,994 - 166,266 Total sales revenue 155,272 10,994 - 166,266 Other revenue 10,302 76 249 10,627 Segment revenue 165,574 11,070 249 176,893 Sharesonly use personal For of net profits of associates 4,461 - 4,427 8,888 Total 170,035 11,070 4,676 185,781 Segment result 75,013 (4,051) 4,676 75,638 Unallocated revenue less unallocated expenses (43,157) Profit from ordinary activities before income tax expense 32,481 Income tax expense (6,781) Profit from ordinary activities after income tax expense 25,700

76 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE limited

Power Wind Water 2008 Stations FarmS filtration PlantS consolidated $000 $000 $000 $000 Segment assets 952,970 385,971 51,387 1,390,328 Unallocated assets - - - 69,787 Total assets 1,460,115 Segment liabilities 131,179 46,783 23,351 201,313 Unallocated liabilities - - - 748,566 Total liabilities 949,879 Investments in associates 27,938 - 51,137 79,075 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 23,155 7,208 - 30,363 Depreciation and amortisation expense 25,976 6,563 - 32,539 Power Wind Water 2007 Stations FarmS filtration PlantS consolidated $000 $000 $000 $000 Sales to external customers 142,357 - - 142,357 Total sales revenue 142,357 - - 142,357 Other revenue and other income - - - - Segment revenue 142,357 - - 142,357 Shares of net profits of associates 3,457 - 1,678 5,135 Total 145,814 - 1,678 147,492 Segment result 8,607 - 1,678 10,285 Unallocated revenue less unallocated expenses - - - - Profit from ordinary activities before income tax expense - - - 10,285 Income tax expense (8,751) Profit from ordinary activities after income tax expense - - - 1,534 Segment assets 1,004,043 - 45,033 1,049,076 Unallocated assets - - - - Total assets 1,004,043 - 45,033 1,049,076 Segment liabilities 530,644 - 20,091 550,735 Unallocated liabilities - - - - Total liabilities 530,644 - 20,091 550,735 Investments in associates 27,826 - 46,710 74,536 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 528 - - 528 Depreciation and amortisation expense 28,209 - - 28,209

The Group operates in one geographical segment – Australia. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 77 directors’ declaration for the year ended 30 june 2008

In the Directors’ opinion: (a) the financial statements and notes set out on pages 36 to 77 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance, and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, (c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in note 34 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 34.

The Directors have been given the declaration by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors.

Peter Young Am kate Spargo Director director at Sydney

18 September 2008 For personal use only use personal For

78 Transfield Services INFRASTRUCTURE FUND independent auditor’s report Transfield Services INFRASTRUCTURE limited to the members of transfield

services infrastructure limited For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 79 independent auditor’s report to the members of transfield services infrastructure limited

Independent auditor’s report to the members of Transfield Services Infrastructure Limited (continued)

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit. 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 sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of Transfield Services Infrastructure Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(a).

Report on the Remuneration Report We have audited the Remuneration Report included in pages 26 to 33 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion

In our opinion, the Remuneration Report of Transfield Services Infrastructure Limited for the year ended 30 June 2008 complies with section 300A of the Corporations Act 2001.

For personal use only use personal For PricewaterhouseCoopers

B K Hunter Sydney Partner 19 September 2008

Liability limited by a scheme approved under Professional Standards Legislation

80 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust FINANCIAL REPORT 30 june 2008

Transfield Services Infrastructure Trust ARSN 125 010 531

Directors’ Report (including Remuneration Report) 82 Auditor’s Independence Declaration 94 Income Statement 95 Balance Sheet 96 Statement of Cash Flows 97 Statement of Changes in Equity 98 Notes to and forming part of the Financial Statements 99 Directors’ Declaration 108 Independent Auditor’s Report to the Members 109

This financial report covers Transfield Services Infrastructure Trust as an individual entity. The Trust did not control any other entities at any time during the year. The financial report is presented in Australian currency. Infrastructure Fund Management Limited (IFML), the Responsible Entity of the Trust, is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Infrastructure Fund Management Limited Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 The financial report was authorised for issue by the Directors on 18 September 2008. IFML has the power to amend and reissue the financial report. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, financial reports and other information are available at our Media and Investor Centre on our website www.tsinfrastructurefund. com.

For queries in relation to our reporting please call (02) 9464 1000 or e-mail [email protected] For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 81 Directors’ Report

The Directors of Infrastructure Fund Management Limited (or the Company) (ABN 70 118 203 731) as the Responsible Entity of Transfield Services Infrastructure Trust (the Trust) (ARSN 125 010 531) present their report on the Trust together with the financial report of the Trust for the period ended 30 June 2008. The Trust was settled on 26 July 2007. Directors The following persons were Directors of IFML during the financial year and up to the date of this report unless otherwise indicated: Peter Young AM (Chairman) David Mathlin Kate Spargo Anthony Shepherd Peter Watson Matthew Irwin (Alternate Director for Peter Watson) Kate Munnings (appointed 22 May 2008 as Alternate Director for Peter Watson) Stapling arrangement Transfield Services Infrastructure Limited shares are stapled to shares in TSI International Limited (TSIIL) and units in Transfield Services Infrastructure Trust (TSIT) and together these are listed on the Australian Securities Exchange as Transfield Services Infrastructure Fund (TSI Fund). Principal activities The Trust was established for the provision of debt financing to Transfield Services Infrastructure Limited and the facilitation of distributions to unitholders comprising interest income and returns of capital. Distributions Distributions paid to members during the financial year were as follows: 2008 2007 $000 $000 Interim distribution paid on 5 March 2008* 25,339 -

2008 2007 cents cents Interim distribution 9.5 -

* the Trust paid distributions for the stub period between listing on 12 June and 30 June 2007 as part of the interim distribution for 2008 financial year was paid on 5 March 2008

A final distribution of 9 cents per unit was announced on 22 August 2008. This distribution was paid on 17 September 2008. Review of operations 2008 2007 $000 $000 Interest income 18,634 2,730

Net profit attributable to unitholders 18,180 2,730

cents cents Basic earnings per unit 6.8 13.8 Diluted earnings per unit 6.8 13.8

Significant changes in the state of affairs There have been no significant changes in the state of affairs of the Trust. Matters subsequent to the end of the financial year There have been no matters or circumstances that have arisen since 30 June 2008 that have significantly affected, or may significantly affect:

(a) the Trust’s operations in future financial years; or For personal use only use personal For (b) the results of those operations in future financial years; or (c) the Trust’s state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Trust and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Trust.

82 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

Environmental regulation The Trust does not conduct any operations that are subject to significant environmental regulation. Meetings of Directors The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2008, and the numbers of meetings attended by each Director were: Risk, Audit and Extra-ordinary Compliance Board Meetings Board Meetings Committee Director Held Attended held Attended held Attended Peter Young AM 9 9 5 5 4 n/A David Mathlin 9 9 5 4 4 4 Kate Spargo 9 9 5 4 4 4 Anthony Shepherd 9 8 5 5 4 n/A Peter Watson 9 9 5 3 4 4

N/A: Not applicable as the Director is not a member of the committee

The Board also formed an Investment Review Committee (IRC). All matters relevant to the IRC were considered at Board or Extra-ordinary Board meetings which were attended by all IRC members. Information on Directors Details of the Directors’ responsibilities, qualifications and unitholdings are set out below. Particulars of Indirect interest Directors’ interests in Transfield Services in units of infrastructure trust Special Transfield Services through Transfield Director responsibilities Infrastructure trust Services Limited Peter Young AM independent Chairman 293,528 - David Mathlin independent Non-Executive Director and member of the Risk, Audit and Compliance Committee 199,413* 2,903 Kate Spargo Independent Non-Executive Director and Chairperson of the Risk, Audit and Compliance Committee 35,913 - Anthony Shepherd Transfield Services’ nominee and member of the Risk, Audit and Compliance Committee 145,120* 1,019,423 Peter Watson Transfield Services’ nominee 267,521* 1,228,535

* includes units that are held by a related party.

Peter Young AM – Independent Chairman Master of Business Administration Bachelor of Science (Geology) Peter was appointed Chairman of TransfieldS ervices Infrastructure Fund in April 2007. He has been a Director of Fairfax Media Limited since September 2005, Chairman of the Federal Government’s Export Finance and Insurance Corporation since 2002 and Chairman of Delta Electricity since 2004. He is a Trustee of the Art Gallery of New South Wales, Director of the Sydney Theatre Company and Director of the Federal Government’s Australian Business Arts Foundation. From 2003 to 2006, Peter was Chairman of Investment Banking for ABN AMRO Group in Australia and New Zealand. In 2006, Peter became Senior Adviser at ABN AMRO Group. Peter commenced his career as a Consulting Petroleum Geologist at Core Laboratories Inc. of Texas, USA, and has held senior positions in a number of banking and financial services organisations. David Mathlin – Independent Non-Executive Director For personal use only use personal For Master of Business Administration Bachelor of Science, Bachelor of Engineering (Honours) David was appointed a Director of TransfieldS ervices Infrastructure Fund in April 2007. David has worked at global consulting services firm, Sinclair Knight Merz (SKM) Group since 1974. During this time, David has held a number of senior positions in the firm, including Director of Sinclair Knight Merz Management Pty Ltd from 1987 to 2006 and Chairman of Sinclair Knight Merz Holdings Ltd from 2001 to 2006. David commenced his career at the Electricity Commission of NSW and was Chairman of landscape, architecture and planning company EDAW Pty Ltd from 1989 to 2000. He is a Fellow of the Institution of Engineers Australia and a Fellow of the Australian Institute of Company Directors.

Transfield Services INFRASTRUCTURE FUND 83 Directors’ Report

Anthony Shepherd – Non-Executive Director Bachelor of Commerce Anthony was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Anthony was appointed Chairman of Transfield Services in 2005, is Chairman of the ConnectEast Group, a Director of The Global Foundation and the Australian Chamber Orchestra, as well as a Trustee of the Sydney Cricket and Sports Ground Trust. He is also a member of the Australian Institute of Company Directors and Patron of Infrastructure Partnerships Australia. Anthony was responsible for the development of many landmark projects, including the Sydney Harbour Tunnel, Melbourne CityLink, a number of other build-own-operate-transfer projects as well as the redevelopment of Walsh Bay. He was an inaugural Director of Transurban Limited. Kate Spargo – Independent Non-Executive Director Bachelor of Laws (Honours) Bachelor of Arts Kate was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Kate is Chairperson of the Accounting Professional and Ethical Standards Board. She has been a Non-Executive Director of IOOF Holdings Ltd since 1999, Pacific Hydro Pty Ltd since 2004, and Investec Bank (Australia) Ltd since 2005. Kate also serves on the Boards of Colnvest Ltd and NeuroSciences Victoria Ltd. In July 2008, Kate was selected for the Board of the Australian Energy Market Operator (AEMO), which commences operations on 1 July 2009. Kate was a Non-Executive Director of I00F Ltd from1999 to 2002, Non-Executive Director of Fulton Hogan Ltd from 2003 to 2007, Chairman of HomeStart Finance for seven years to 2002 and Chairman of PrimeGro Ltd from 2002 to 2003. Kate began her career as a Barrister and Solicitor with the South Australia Attorney General’s Department in the Crown Solicitor’s Office. She is a Fellow of the Australian Institute of Company Directors, and a Member of its Victorian Council. Peter Watson – Non-Executive Director Diploma of Engineering (Civil) Peter was appointed a Director of Transfield Services Infrastructure Fund in April 2007. He was appointed Managing Director and Chief Executive Officer (CEO) of Transfield Services in 2002. Peter has played an integral role in the successful development of Transfield Services since its inception in 1993 and led the organisation as CEO through its successful public listing in 2001. Peter has guided the international expansion of Transfield Services into North America through the acquisitions of US Maintenance, TIMEC and VMS as well as a major contract win with Suncor Energy in Canada. He is a member of the Institution of Engineers Australia and the Australian Institute of Company Directors. He is an alumnus of The Wharton School of Executive Education. Peter is a founding sponsor of the Australian Sustainable Industry Research Centre and a Fellow of the Australian Academy of Technological Sciences and Engineering. Marianne Suchanek – Company Secretary Bachelor of Laws Bachelor of Arts Marianne is the Company Secretary for the Company and the other stapled entities comprising TSI Fund. Marianne has legal counsel, corporate governance and compliance responsibilities and works in the Legal and Company Secretarial Department of the Manager. Marianne is currently studying the Graduate Diploma in Applied Corporate Governance at Chartered Secretaries Australia Ltd.

The Remuneration Report

84 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

In the 2008 financial year, the Manager was entitled to an Expense Amount of $5.1 million. This will increase to $5.3 million in the 2009 financial year. F rom the end of the 2009 financial year onwards, the Manager and TSI Fund will review the Expense Amount to reflect actual and anticipated costs incurred by the Manager in the performance of its duties under the MSA. The Chief Executive Officer (CEO), Chief Financial Officer (CFO) and General Manager Assets (GM Assets) are employed by the Manager and seconded to TSI Fund (Seconded Employees). Those employees seconded to TSI Fund are dedicated to meeting the business requirements of TSI Fund and in performing their functions must act in the best interests of securityholders in TSI Fund. TSI Fund does not have employees and relies on the executive staff under the MSA to implement operational decisions and carry out and ensure administration functions are discharged. A. Principles used to determine the nature and amount of remuneration The executive remuneration framework detailed below sets out the policies of the Manager as they refer to the Seconded Employees. The amount of remuneration is calculated based on the total remuneration awarded by the Manager from the date of secondment to TSI Fund. The Independent Non-Executive Directors (NEDs) are appointed directly by TSI Fund, and their remuneration is set by the TSI Fund Board with reference to external peers. The objective of the Manager’s executive remuneration framework is to ensure reward for performance is competitive in the markets where it competes to recruit executives, and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic business objectives to create value for TSI Fund securityholders, and conforms with market best practice for delivery of reward. The executive reward framework is: • market competitive and reasonable • performance linked, and • transparent. In consultation with external remuneration consultants, the Manager has structured an executive remuneration framework that aligns executive performance with securityholders’ interests. Alignment to securityholders’ interests is achieved through the following performance measures: • financial measures including growth, earnings and distributions, and • strategic and non-financial drivers of value. Alignment to executives’ interests to ensure it attracts and retains high calibre executives is achieved by offering rewards that: • are commensurate with the contributions made • are sufficient to provide appropriate recognition • are competitive in respective executive employment markets, and • are earned within a clear and well communicated structure. The framework provides a mix of fixed and variable pay, including short-term and long-term incentives. Not all the Manager’s employees participate in the short-term and long-term incentive programs. Participation in both plans is selectively applied to people in positions more able to influence the business performance. The proportion of variable or ‘at risk’ remuneration is higher for the more senior executives. Independent Non-Executive Directors’ fees Fees and payments to NEDs reflect the demands which are made on, and the responsibilities of, the Directors. NEDs’ fees and payments are reviewed annually by the Board. The Board has also taken advice from independent remuneration consultants to ensure NEDs’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of NEDs based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. NEDs do not receive equity based remuneration under the Transfield Services Infrastructure Fund Notional Securities Scheme. NEDs receive a minimum 20 per cent of their remuneration in TSI Fund units, which are acquired prospectively on‑market in January and July each year and held in the Transfield Services Infrastructure Fund Tax Deferred Plan. NEDs receive a Directors’ fee inclusive of superannuation. The Directors’ fee was set with effect from 26 April 2007, and will be reviewed annually thereafter. NEDs who chair or serve on a committee receive additional annual fees. Directors’ fees NEDs’ fees are determined within the aggregate Directors’ fee pool limit of $750,000. The current Directors’ fee is $80,000 per Director per annum and the Chairman’s fee is $200,000 per annum. Committee members currently each receive $8,000 per annum per committee and the Committee Chairs each receive $15,000 per annum per committee. Transfield Services Nominee Directors Peter Watson who is an executive officer of Transfield Services, is not paid a fee for serving as a director of TSI Fund. Anthony Shepherd is paid by Transfield Services to represent Transfield Services on the TSI Fund Board.

For personal use only use personal For Retirement allowances for Directors Retirement allowances are not paid to Directors.

Transfield Services INFRASTRUCTURE FUND 85 Directors’ Report

Executive reward The executive pay and reward framework has four components: • fixed remuneration including superannuation • short-term performance incentives • long-term incentives through participation in the TranShare Executive Performance Awards Plan (which is otherwise known as Performance Awards and issued by Transfield Services Limited) and/or Transfield Services Infrastructure Fund Notional Securities Scheme (which is otherwise known as the Scheme), and • other benefits. The combination of these elements comprises the executive’s total remuneration. Cash salary and fees The fixed remuneration component is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non‑financial benefits at the executive’s discretion. Executives are offered a competitive base pay package that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure fixed base pay is set to reflect the relevant market for comparable roles in peer companies. Fixed remuneration for senior executives is reviewed annually to ensure the executive’s pay remains aligned to policy and competitive with the market in which they operate. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in executives’ contracts. Other benefits Executives may receive benefits including executive health management, householder insurance and salary continuance insurance. Post-employment benefits Retirement benefits are delivered under the Transfield Services Superannuation Plan (or another complying plan of the executive’s choice) which provide defined contribution benefits. Short-term incentives The short-term performance incentive (STI) component of remuneration is provided to nominated executives via an annual cash bonus. Participation is restricted to executives and selected individuals who can materially impact TSI Fund’s financial performance. Cash incentives (bonuses) are payable following audit clearance of the annual financial statements each year. Each executive has a target STI opportunity depending on the accountabilities of the role and impact on TSI Fund. The target opportunity of total fixed remuneration for the CEO is 100%, CFO is 40% and General Manager Assets is 20%. Each year, TransfieldS ervices’ Human Resources Committee, following consultation with the TSI Fund Board, oversees the targets and key performance indicators (KPIs) for the Seconded Employees’ STI plan and the level of payout for achievement of targets. This includes setting any maximum payout under the STI plan for out-performance, and minimum levels of financial performance required to trigger payment of STI. 100% of the STI opportunity of employees seconded to TSI Fund are based on TSI Fund related performance targets. The STI target annual payment is reviewed annually For the year ended 30 June 2008, the STI plan KPIs were based on TSI Fund’s financial and strategic objectives. The KPIs included achieving specific targets in relation to earnings before interest, tax, depreciation and amortisation expense (EBITDA), TSI Fund growth and distributions, as well as other key, strategic and non‑financial measures linked to drivers of performance in future reporting periods. The KPIs for Seconded Employees reflected a majority weighting towards specific financial outcomes of TSI Fund. Transfield Services’ Human Resources Committee has oversight of performance outcomes against the KPIs for the CEO. To help make this assessment, the Transfield Services’ Human Resources Committee receives detailed reports on performance against the KPIs. Long-Term Incentive (LTI) structure for Seconded Employees The CEO and the CFO are the only Seconded Employees to participate in the LTI. The vesting conditions and performance hurdles of the Seconded Employees’ LTIs are measured 50/50 against the achievement of both TSI Fund’s and Transfield Services respective business objectives. In addition, the award of TSI Fund notional securities and TransfieldS ervices shares are proportioned 50/50. The Transfield Services shares awarded to the CEO and CFO are issued under the TransShare Executive Performance Awards Plan and TSI Fund notional securities awarded to the CEO and CFO are issued under the TSI Fund Notional Securities Scheme. Long-Term Incentive - TranShare Executive Performance Awards Plan The TranShare Executive Performance Awards Plan provides Performance Awards to the CEO and CFO of TSI Fund. Performance Awards for shares in Transfield Services are granted annually and generally vest no earlier than three years from grant date. The performance conditions of each grant of Awards are subject to Transfield Services’ Board review and assessed against its business plan and cycle. Transfield Services has determined that relative total

shareholderonly use personal For return (TSR) combined with absolute earnings per share (EPS) growth are the most appropriate hurdles for its executives at this time. These performance conditions were chosen to ensure that executives are only rewarded when profit grows in real terms and Transfield Services achieves superior shareholder growth relative to the performance of the S&P ASX 200 Industrials index. Long-Term Incentive - Transfield Services Infrastructure Fund Notional Securities Scheme The TSI Fund Notional Securities Scheme (Scheme) offers the CEO and CFO a notional investment in securities of TSI Fund. This Scheme is offered by the Manager. The incentive provided under the Scheme can be delivered either in cash or in TSI Fund securities once vesting conditions have been met. The Scheme is used, because under current Australian tax law, TSI Fund securities issued under a TSI Fund executive remuneration regime can only be provided to TSI Fund direct employees, whereas both the CEO and the CFO are seconded from the Manager. This notional investment in securities in TSI Fund is a structure that replicates the performance, in respect of total securityholder return of TSI Fund securities.

86 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

B. Details of remuneration Amounts of remuneration Details of the remuneration of the Directors and the key management personnel of the Company are set out in the tables below. The key management personnel of the Company and TSI Fund are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly and includes the Directors and the following executive officers which include the five highest paid executives of the entity: Steve MacDonald chief Executive Officer Charles Mott Chief Financial Officer Geoff Dutton*** General Manager Assets Darce Corsie* Transitional Chief Financial Officer Fred Bidwell** General Manager Special Projects and Company Secretary

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed Short-term incentives on page 86 and the LTIs do not vest unless performance conditions are met. All other elements of remuneration are not directly related to Company performance. Directors of Infrastructure Fund Management Limited Short-term benefits Post-employment Share-based benefits payments non‑ deferred Cash salary cASh monetary Super- Retirement Share Name and feeS BonuS BenefitS Annuation BenefitS Purchase Scheme total $ $ $ $ $ $ $ $ Non‑executive Directors Peter Young AM 139,897 - - 15,171 - 47,143 - 202,211 2007 32,676 - - 2,941 - - - 35,617 David Mathlin 67,183 - - 6,630 - 18,857 - 92,670 2007 13,070 - - 1,176 - - - 14,246 Kate Spargo 35,221 - - 6,087 - 53,036 - 94,344 2007 13,070 - - 1,176 - - - 14,246 Anthony Shepherd 1 ------2007 ------Peter Watson 2 ------2007 ------Sub‑total non‑executive 242,301 - - 27,888 - 119,036 - 389,225 Directors 58,816 - - 5,293 - - - 64,109 Total Directors 242,301 - - 27,888 - 119,036 - 389,225 2007 58,816 - - 5,293 - - - 64,109 Total for each category 242,301 27,888 119,036 389,225 2007 58,816 5,293 - 64,109

1. anthony Shepherd is paid $88,000 by Transfield Services to represent Transfield Services on the TSI Fund Board

2. Peter Watson, who is an executive officer of Transfield Services, is not paid a fee for serving as a Director of TSI Fund For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 87 Directors’ Report

Other key management personnel and five most highly remunerated officers Post- termin- long- Short-term benefits employment Ation term Share-based benefits Payment benefits payments cASh Cash non‑ long Settled notional Perfor- salary cASh monetary Super Restraint Service Share-based Securities mance Name And feeS BonuS BenefitS Annuation of trade leave PAymentS Scheme AwardS total5 $ $ $ $ $ $ $ $ $ $

Steve MacDonald* Chief Executive Officer 511,882 390,075 15,657 13,129 - - 21,946 - 56,667 178,394 1,187,750 2007 144,832 106,458 - 3,163 - - 6,330 - - - 260,783 Charles Mott Chief Financial Officer 321,107 104,720 - 9,633 - - 8,450 - 17,000 57,778 518,688 2007 53,518 ------53,518 Geoff Dutton1 General Manager Assets 70,338 13,892 - 6,330 - - 1,594 - - - 92,154 2007 ------Darce Corsie2, 4 Transitional Chief Financial Officer 386,612 - - 36,370 133,400 - - 86,584 - - 642,966 2007 68,620 29,020 - 6,176 - - 4,573 - - - 108,389 Fred Bidwell3, 4 General Manager Special Projects and Company Secretary 324,226 - 100,000# 113,129 - 140,000 5,237 - - - 682,592 2007 68,640 23,284 - - - - 2,055 - - - 93,979 Totals for each 1,614,165 508,687 115,657 178,591 133,400 140,000 37,227 86,584 73,667 236,172 3,124,150 component 335,610 158,762 - 9,339 - - 12,958 - - - 516,669 Total for each 2,238,509 311,991 140,000 37,227 396,423 3,124,150 category 494,372 9,339 - 12,958 - 516,669

# This amount is for a bonus payable under the STI, which Fred Bidwell elected to receive in TransfieldS ervices shares For personal use only use personal For

88 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

C. Service agreements Remuneration and other terms of employment for the CEO and the other key management personnel are formalised in service agreements. Each of these agreements provides for the provision of performance‑related cash bonuses, other benefits including executive health management, householder insurance, salary continuance insurance and participation, when eligible, in the TranShare Executive Performance Awards Plan and the TSI Fund Notional Securities Scheme. Other major provisions of the agreements are: termination % of total Benefit (amount Remuneration of annual (including 100% of notice period SAlary) on early All share based Required for the termination by A Rolling three Remuneration) that employee to the Company, Restrictive years term is performance terminate the other than for covenant Name of agreement related contract gross misconduct APPlies Steve MacDonald 1 April 2007 53% 6 months 12 months 12 months Chief Executive Officer Charles Mott 1 May 2007 35% 3 months 6 months 6 month Chief Financial Officer Geoff Dutton 3 March 2008 12% 1 month 1 month - General Manager Assets Darce Corsie 9 February 2005 - 3 months 12 months 12 months Transitional Chief Financial Officer Fred Bidwell 1 June 2007* 15% 3 months 3 months 12 months General Manager Special Projects and Company Secretary

* fixed term agreement until 28 February 2008.

Expiry eXercise vAlue at Grant date date PRice grant date Performance Criteria 31 May 2007 13 May 2013 - Tranche 1 $nil $11.35 Transfield Services Limited’s EPS growth of 10% to 15% - Tranche 2 $nil $7.26 Transfield Services Limited’s TSR growth 50th to 75th percentile 31 August 2007 31 August 2013 - Tranche 1 $nil $12.18 Transfield Services Limited’s EPS growth of 10% to 15%

- Tranche 2 $nil $9.60 Transfield Services Limited’s TSR growth 50th to 75th percentile For personal use only use personal For F. transfield Services Infrastructure Fund Notional Securities Scheme provided as remuneration The CEO has been granted a long-term incentive equivalent to 333,334 notional securities in TSI Fund and the CFO has been granted a long-term incentive equivalent to 100,000 notional securities in TSI Fund. The vesting date for these notional securities is 30 June 2010. At 30 June 2008, the fair value of the CEO’s notional securities was $56,667 and the fair value of the CFO’s notional securities was $17,000. The table below lists vesting schedules and performance hurdles for notional securities granted under the Scheme:

Transfield Services INFRASTRUCTURE FUND 89 Directors’ Report

vesting Schedule Allocation Performance vesting Grant Date Tranche Percentage hurdles of awards Performance conditions 15 November 2007 A 50% TSI Fund return 20%# TSI Fund return* > Benchmark return** by $350,000; 80% TSI Fund return > Benchmark return by > $1,750,000; 15 November 2007 B 50% TSI Fund market 100% TSI Fund market capitalisation doubles from capitalisation listing to 30 June 2010

G. Additional information Principles used to determine the nature and amount of remuneration: relationship between remuneration and Trust performance The Trust’s profit, unitholder wealth and executive remuneration will be measured progressively over the next five years. Details of remuneration: at-risk remuneration For each cash bonus, grant of Performance Awards and Notional Securities Scheme, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. The Performance Awards vest over three to five years provided the vesting conditions are met. No Performance Awards will vest if the conditions are not satisfied, hence the minimum value of the Performance Award yet to vest is nil. The maximum value of the Performance Awards yet to vest has been determined based on the fair value at grant date. The Notional Securities Scheme vests over three years provided the vesting conditions are met. No Notional Securities will vest if the conditions are not satisfied, hence the minimum value of the Notional Securities Scheme yet to vest is nil. The maximum value of the Notional Securities Scheme yet to vest

has been determined based on the fair value at 30 June 2008. For personal use only use personal For

90 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

Notional Cash Bonus Performance Awards Securities Scheme year year year Name Paid forfeited granted Paid forfeited granted Paid forfeited granted % % % % % % Steve MacDonald 74 26 2008 ------Chief Executive Officer 87 13 2007 - - 2007 - - 2007 Charles Mott 75 25 2008 ------Chief Financial Officer - - 2007 - - 2007 - - 2007 Geoff Dutton 91 9 2008 n/a n/a n/a n/a n/a n/A General Manager Assets - - 2007 n/a n/a n/a n/a n/a n/A Darce Corsie - - 2008 - - - n/a n/a n/A Transitional Chief Financial Officer 90 10 2007 - - - n/a n/a n/A Fred Bidwell 100 - 2008 - - - n/a n/a n/A General Manager Special 87 13 2007 - - - n/a n/a n/A Projects and Company Secretary

Share‑based compensation: Performance Awards Further details relating to Performance Awards are set out below. A B C D Remuneration consisting of performance vAlue at Value at Value at Name awards grant date exercise date lapse date % $ $ $ Steve MacDonald 15% - - - Chief Executive Officer Charles Mott 11% 57,778 - - Chief Financial Officer

No Performance Award holder has any right under the Performance Awards Plan rules to participate in any other share issue of the Company or any other

entity. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 91 Directors’ Report

Security‑based compensation: Notional Securities Scheme Further details relating to the Notional Securities Scheme are set out below. A B C D Remuneration consisting of Notional vAlue at Value at Value at Name Securities Scheme 30 June 2008 exercise date lapse date % $ $ $ Steve MacDonald 5% 56,667 - - Chief Executive Officer Charles Mott 3% 17,000 - - Chief Financial Officer

Insurance of officers During the financial year, TSI Fund paid a premium of $136,879 to insure the Directors and Secretaries of the stapled entities. It is not possible to allocate a precise amount to IFML or the Trust. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Trust. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Fees paid to and interest held in the Trust by the responsible entity or its associates Fees of $75,000 (2007: $nil) were paid to the responsible entity out of Trust property during the year. There were no fees paid out of Trust property to the Directors of the responsible entity during the year. Interests in the Trust The movement in units on issue in the Trust during the year is disclosed in note 6 of the financial statements. The value of the Trust’s assets and liabilities is disclosed on the balance sheet and derived using the basis set out in note 1 of the financial statements. Proceedings on behalf of the Trust No person has applied to a court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Trust, or to intervene in any proceedings to which the Trust is a party, for the purpose of taking responsibility on behalf of the Trust for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Trust with leave of a court under section 237 of the Corporations Act 2001.

Non-auditonly use personal For services The Trust may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Trust and/or the Fund are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below. Total audit fees of the Trust were $103,320 and total fees for other assurance services were $nil.

92 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

The Board of Directors has considered the position and, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor, and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Trust, acting as advocate for the Trust or jointly sharing economic risk and rewards. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of Corporations Act 2001 is set out on page 94. Rounding of amounts The Trust is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor PricewaterhouseCoopers continue in office in accordance with Section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Directors.

Peter Young Am kate Spargo Director director at Sydney

18 September 2008 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 93 auditor’s independence

declaration For personal use only use personal For

94 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust Income Statement For the year ended 30 June 2008

Note 2008 2007 $000 $000 Revenue from continuing operations Interest income 3 18,634 2,730 Directors’ fees (139) - Auditor’s remuneration (103) - Consulting fees (192) - Other expenses (20) -

Profit for the period 18,180 2,730

Earnings per unit for profit attributable to the ordinary unitholders of the trust Basic earnings per unit – cents 13 6.8 13.8 Diluted earnings per unit – cents 13 6.8 13.8

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

Comparative information is for the 11 month period ended 30 June 2007. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 95 balance sheet as at 30 June 2008

Note 2008 2007 $000 $000 Current assets Cash and cash equivalents 4 133 72 Receivables 5 338,045 344,907

Total assets 338,178 344,979

Current liabilities Trade and other payables 392 - Related party payables 75 -

Total liabilities 467 -

Net assets 337,711 344,979

Unitholders’ funds Units on issue 6 342,140 342,249 Retained profits 7 (4,429) 2,730

Total unitholders’ funds 337,711 344,979

The above balance sheet should be read in conjunction with the accompanying notes. For personal use only use personal For

96 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust statement of cash flows for the year ended 30 June 2008

Note 2008 2007 $000 $000 Cash flows from operating activities Payment to suppliers (62) - Refund / (payment) of GST on float costs 12 1,000 (1,334)

Net cash inflow / (outflow) from operating activities 938 (1,334)

Cash flows from investing activities Loan advanced to related party - (38,073) Interest received 11,358 - Receipt of principal repayment on related party loan 13,138

Net cash inflow / (outflow) from investing activities 24,496 (38,073)

Cash flows from financing activities Proceeds from issues of units on Initial Public Offering - 52,823 Payment of float costs (109) (13,344) Loan from related party 75 - Distribution to unitholders (25,339) -

Net cash (outflow) / inflow from financing activities (25,373) 39,479

Net increase in cash and cash equivalents 61 72 Cash and cash equivalents at beginning of the financial year / establishment 72 -

Cash and cash equivalents at the end of the financial year 4 133 72

The above statement of cash flows should be read in conjunction with the accompanying notes.

Comparative information is for the 11 month period ended 30 June 2007. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 97 statement of changes in equity for the year ended 30 June 2008

Note 2008 2007 $000 $000 Total equity at the beginning of the financial period 344,979 -

Net income recognised directly in equity - - Profit for the period 18,180 2,730

Total recognised income and expense for the period 18,180 2,730 Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs (109) 342,249 Distributions to unitholders (25,339) -

(25,448) 342,249

Total equity at the end of the financial period 337,711 344,979

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Comparative information is for the 11 month period ended 30 June 2007 For personal use only use personal For

98 Transfield Services INFRASTRUCTURE FUND Notes to and forming part of Transfield Services INFRASTRUCTURE trust the financial statements For the year ended 30 June 2008

Note NUmber Page Note 1. summary of significant accounting policies 100 Note 2. financial risk management 101 Note 3. revenue 101 Note 4. cash and cash equivalents 101 Note 5. receivables 102 Note 6. Units on issue 102 Note 7. retained profits 103 Note 8. remuneration of auditors 103 Note 9. contingent liabilities and commitments 103 Note 10. related party transactions 103 Note 11. Key management personnel 104 Note 12. reconciliation of operating profit after income tax to net cash flow from operating activities 106 Note 13. earnings per unit 107 Note 14. events occurring after balance sheet date 107 Note 15. stapling arrangement 107

Note 16. segment information 107 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 99 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 1. Summary of significant accounting (h) income tax policies Under current income tax legislation Transfield Services Infrastructure Trust is not liable for income tax, provided that the taxable income is fully (a) Basis of preparation of the financial report distributed each year including any taxable capital gain derived from the This general purpose financial report has been prepared in accordance sale of an asset. with Australian Accounting Standards, other authoritative (i) Segment reporting pronouncements of the Australian Accounting Standards Board, Urgent Issues Group (UIG) Interpretations and the Corporations Act 2001 in A business segment is identified for a group of assets and operations Australia. engaged in providing products or a service that are subject to risk and returns that are different to those of the other business segments. A These policies have been consistently applied to all the periods geographical segment is engaged in providing products or services within presented, unless otherwise stated. a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic Compliance with International Financial Reporting Standards (IFRS) environments. Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with (j) Rounding of amounts AIFRS ensures that the financial report and notes thereto of Transfield The Trust is of a kind referred to in Class order 98/0100 issued by the Services Infrastructure Trust complies with IFRS. Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial report. Amounts in the financial Historical cost convention report have been rounded in accordance with that Class Order to the These financial statements have been prepared under the historical cost nearest thousand dollars, or in certain cases, the nearest dollar. convention as modified by the use of the effective interest rate method to measure certain loans and receivables. (k) new accounting standards and interpretations Certain new accounting standards and UIG interpretations have been (b) Revenue recognition published that are not mandatory for 30 June 2008 reporting periods. The Revenue is recognised as follows: Trust’s assessment of the impact of these new standards and interpretations is set out below. Interest income AASB 8 Operating Segments and AASB 7-3 Amendments to Australian Interest income is recognised on a time proportion basis using the Accounting Standards arising from AASB 8 which are effective for effective interest rate method. annual reporting periods commencing on or after 1 January 2009. AASB (c) Receivables 8 advocates a change in the approach to Segment Reporting as it requires the adoption of a ‘management approach’ to reporting on Loan receivables being amounts due from related parties are recognised financial performance. The information being reported will be based on initially at fair value and subsequently measured at amortised cost using what the key decision makers use internally for evaluating segment the effective interest rate. performance and how to allocate resources to business segments. Interest and other receivables that are expected to be received within 12 There will be no impact to the financial report of the Trust as it months of recognition are recognised at nominal value which operates in one segment. approximates fair value. Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to (d) cash and cash equivalents Australian Accounting Standards arising from AASB 123. Cash and cash equivalents includes cash on hand, deposits held at call The revised AASB 123 is applicable to annual reporting periods with financial institutions, other short-term, highly liquid investments commencing on or after 1 January 2009. It has removed the option to with original maturities of three months or less that are readily expense all borrowing costs and – when adopted – will require the convertible to known amounts of cash and which are subject to an capitalisation of all borrowing costs directly attributable to the insignificant risk of changes in value, net of bank overdrafts. acquisition, construction or production of a qualifying asset. There will be no impact to the financial report of the Trust, as the Trust has no (e) unitholders’ funds significant borrowings. Ordinary units are classified as unitholders’ funds. Revised AASB 101 Presentation of Financial Statements and AASB Incremental costs directly attributable to the issue of new units are 2007-8 Amendments to Australian Accounting Standards arising from shown in unitholders’ funds as a deduction from the proceeds. AASB 101. A revised AASB 101 was issued in September 2007 and is applicable (f) distributions for annual reporting periods beginning on or after 1 January 2009. It In accordance with the Trust constitution, the Trust fully distributes its requires the presentation of a statement of comprehensive income and distributable (taxable) income, and any other amounts determined by the makes changes to the statement of changes in equity, but will not Responsible Entity, to unitholders. affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment, or has reclassified items in

Provisiononly use personal For is made for the amount of any distribution approved on or before the end of the year but not paid at balance date. the financial statements, it will need to disclose a third balance sheet, this one being at the beginning of the comparative period. The Trust (g) earnings per unit intends to apply the revised standard from 1 July 2009. Basic and diluted earnings per unit Basic and diluted earnings per unit are calculated by dividing the profit attributable to unitholders of the Trust, by the weighted average number of ordinary units outstanding during the year. There are currently no dilutive potential ordinary units.

100 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

Note 2. Financial risk management The Trust’s activities expose it to a variety of financial risks; market risk, credit risk and liquidity risk. The Trust does not trade financial instruments, including derivative financial instruments, for speculative reasons. Financial risk is managed by the Chief Financial Officer of SIT Fund under policies approved by the Manager. The Chief Financial Officer in conjunction with the Manager identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. (a) capital risk management IFML as responsible entity of the Trust manages the Trust’s capital to ensure that it will be able to continue as a going concern while maximising the return to unitholders though the optimisation of the debt and equity balance. The Trust’s overall strategy remained unchanged from 2007. The capital structure of the Trust consists of equity and nominal amounts of cash and cash equivalents. The Trust’s cash flows are used primarily for funding distributions to unitholders. The Trust is ungeared. (b) categories of financial instruments Balance Sheet 2008 2007 $000 $000 Financial assets Cash and cash equivalents 133 72 Loans and receivables 338,045 344,907

338,178 344,979

Financial liabilities Loans and receivables 467 -

(c) credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Trust. The Trust has concentrations of credit risk since most of its revenues are generated from a related party loan with Transfield Services Infrastructure Limited The maximum credit risk exposure on receivables is limited to the amount of the receivables booked. The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. (d) liquidity risk management Liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Trust has few liabilities, most of which are to related parties and this is considered a low risk. (e) fair value of financial instruments The Directors consider that the carrying amounts of the financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values. (f) interest rate sensitivity analysis No sensitivity analysis has been prepared as the Trust has no external debt and its loan to Transfield Services Infrastructure Limited bears interest at a fixed rate of 6% per annum. 2008 2007 $000 $000

Note 3. RevenuE

Interest received from related parties 18,476 2,716 Bank interest received 158 14

18,634 2,730

Note 4. Cash and cash equivalents For personal use only use personal For 2008 2007 $000 $000 Cash at bank 133 72

The above figures are reconciled to cash at the end of the financial year as shown in the statements of cash flows as follows:

Balances per statement of cash flows 133 72

The bank account earns interest at an average rate of 5.59% per annum.

Transfield Services INFRASTRUCTURE FUND 101 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 5. ReceivablES

2008 2007 $000 $000 Loan to related party (Transfield Services Infrastructure Limited)* 338,034 341,176 Interest receivable - 2,730 GST receivable 11 1,001

338,045 344,907

* The terms of these loans are set out in note 10.

(a) effective interest rates The related party loan to Transfield Services Infrastructure Limited is at call and bears interest at 6% per annum. (b) credit risk The Trust considers its exposure to credit risk to be low. There is significant concentration of credit in the related party loan, however, the loan is with an entity that is part of the Fund and the risk of losses is minimal. (c) fair values The nominal and fair values of the above receivables are the same.

Note 6. Units on issue

2008 2007 $000 $000 Ordinary units - authorised 342,249 342,249

Ordinary units – issued and fully paid 342,249 342,249

Movements in unitholders’ funds: 2008 number of unitS eXercise Number of Acquired PRice Date details units issued on market $ $000 26 July 2006 settlement 1 - 1 - 8 June 2007 issue of new units 122,611,263 - 1 122,611 8 June 2007 consolidation of units (30,728,905) - - - 8 June 2007 issue of new units 135,257,984 - 1.33 180,493 12 June 2007 issue of new units in Initial Public Offering 39,584,657 - 1.33 52,823 12 June 2007 Transaction costs (13,678) 30 June 2007 266,725,000 342,249 Transaction costs (109) 30 June 2008 266,725,000 342,140

(a) ordinary units Ordinary units entitle the holder to participate in distributions and the proceeds on winding up of the Trust in proportion to the number of and amounts paid on the units held. On a show of hands every holder of ordinary units present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each unit is entitled to

one vote.only use personal For (b) Stapling Each ordinary unit is stapled to a share in Transfield Services Infrastructure Limited and a share in TSI International Limited. These are traded together as Transfield Services Infrastructure Fund and listed on the Australian Securities Exchange.

102 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

Note 7. Retained profits

2008 2007 $000 $000

Retained profits Retained profits at the beginning of the financial year 2,730 - Net profit attributable to members of Transfield Services Infrastructure Trust 18,180 2,730 Less: Distribution paid (25,339) -

Retained profits at the end of the financial year (4,429) 2,730

Note 8. Remuneration of auditors

The auditor of Transfield Services Infrastructure Trust is PricewaterhouseCoopers. Total audit fees of the Trust were $103,000. In the 2007 financial year audit fees were paid by a related party, Transfield Services Infrastructure Limited as parent entity of TSI Fund. Total audit fees were $180,000 and fees for other assurance services were $20,000 it was not possible to allocate a specific amount to the Trust.

Note 9. Contingent liabilities and commitments

Transfield Services Infrastructure Trust currently has no contingent liabilities or expenditure commitments.

Note 10. Related party transactions

(a) Parent entity The parent entity is deemed to be Transfield Services Infrastructure Limited, under the stapling deed dated 7 June 2007. (b) key management personnel Disclosures relating to key management personnel are set out in note 11. (c) Remuneration and retirement benefits Disclosures relating to remuneration and retirement benefits are set out in the tables on pages 84 to 92. (d) directors and Director-related entities The following were Directors and shareholders of Transfield Services Limited, a related party and beneficial owner of units in Transfield Services Infrastructure Trust. • Anthony Shepherd, and • Peter Watson. Anthony Shepherd and Peter Watson hold 0.78% and 0.94% respectively in Transfield Services Limited which itself owns 49% of the units of Transfield Services Infrastructure Trust. This means in addition to the unitholdings described above they each indirectly own a further 1,019,423 and 1,228,535 units in Transfield Services Infrastructure Trust. David Mathlin also holds 4,400 shares in Transfield Services Limited. TSI Fund is managed under a Management Services Agreement (MSA) with Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited. Fees under the MSA are paid by Transfield Services Infrastructure Limited, the fee for the 2008 financial year was $9,561,026. It is not possible to allocate a more precise amount to the Trust. There are no unpaid amounts owing to Directors or their Director related entities. (e) loans to Directors and Director-related entities There were no loans to Directors of IFML in the Trust or their personally related entities during the year or outstanding at the end of the year. (f) loans to executives and executive-related entities

There were no loans to executives of the Trust or their personally related entities during the year or outstanding at the end of the year. For personal use only use personal For (g) transactions of Directors and Director-related entities concerning units or Performance Awards Aggregate numbers of units, and Performance Awards of Transfield Services Infrastructure Trust acquired or disposed of by the Directors or their Director- related entities from the Company:

Transfield Services INFRASTRUCTURE FUND 103 Notes to and forming part of the financial statements For the year ended 30 June 2008

2008 2007 number number Acquisitions Ordinary units - 443,614

Aggregate acquisition of ordinary units includes: Units issued by Transfield Services Limited to Peter Young AM for consultancy services prior to the Initial Public Offering - 87,494

No Performance Awards have been granted. (h) other transactions with Directors and Director-related entities There have been no other transactions entered into between the Trust and Directors and/or Director related entities during the year. (i) Stapled group (TSI Fund) The stapled group consists of Transfield Services Infrastructure Limited and its wholly-owned controlled entities as well as Transfield Services Infrastructure Trust and TSI International Limited. The responsible entity of the Trust, Infrastructure Fund Management Limited, is a wholly-owned subsidiary of Transfield Services Infrastructure Limited. Transactions between the Trust and other entities in TSI Fund during the years ended 30 June 2008 consisted of: (a) loans advanced to Transfield Services Infrastructure Limited (this loan bears interest at 6% per annum and is repayable on demand), (b) loans advanced by Infrastructure Fund Management Limited (this loan is interest free and payable on demand). 2008 2007 $000 $000 Aggregate amounts included in the determination of operating profit before income tax that resulted from transactions with entities in the stapled group 18,476 2,719

Aggregate amounts receivable from entities in the wholly-owned group at balance date: Current receivables 338,034 341,176

Current payables 75 -

Note 11. Key management personnel

(a) directors The following persons were Directors of IFML during the financial year and up to the date of this report: Peter Young AM (Chairman) David Mathlin Kate Spargo Anthony Shepherd Peter Watson Matthew Irwin (Alternate Director for Peter Watson) Kate Munnings (Appointed 22 May 2008 as Alternate Director for Peter Watson) (b) other key management personnel Steve MacDonald chief Executive Officer Charles Mott Chief Financial Officer Geoff Dutton*** General Manager Assets Darce Corsie* Transitional Chief Financial Officer Fred Bidwell** General Manager Special Projects and Company Secretary

* ronly use personal For etired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

104 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

(c) key management personnel compensation 2008 2007 $ $ Short-term employee benefits (cash salary and fees, cash bonuses and non-monetary benefits) 2,480,810 553,188 Termination payment 140,000 - Long-term employee benefits 37,227 12,958 Post-employment benefits 339,879 14,632 Share-based payments 515,459 -

3,513,375 580,778

(i) LTI holdings No Performance Awards or notional securities under the Scheme have vested in the current year.

(ii) Unitholdings The number of units in the Trust held during the financial year by each Director of Infrastructure Fund Management Limited and other key management personnel of the Fund, including their personally related parties, are set out below. 2008 other changes Balance at during the year Balance at the start of acquisitions/ the end of Name the year (disposals) the year Ordinary units Directors Peter Young AM 182,494 111,034 293,528 David Mathlin 95,000 104,413 199,413 Kate Spargo 23,500 12,413 35,913 Anthony Shepherd 95,120 50,000 145,120 Peter Watson 47,500 220,021 267,521 443,614 497,881 941,495

Other key management personnel of the Trust Steve MacDonald Chief Financial Officer 101,896 100,000 201,896 Charles Mott Chief Financial Officer 47,500 7,500 55,000 Geoff Dutton*** General Manager Assets - - - Darce Corsie* Transitional Chief Financial Officer 95,000 - 95,000 Fred Bidwell** General Manager Special Projects and Company Secretary 95,000 75,000 170,000 339,396 182,500 521,896

* retired 9 February 2008 For personal use only use personal For ** retired 28 February 2008 *** appointed 3 March 2008

Transfield Services INFRASTRUCTURE FUND 105 Notes to and forming part of the financial statements For the year ended 30 June 2008

2007 other changes Balance at during the year Balance at the start of acquisitions/ the end of Name the year (disposals) the year Ordinary units Directors Peter Young AM - 182,494 182,494 David Mathlin - 95,000 95,000 Kate Spargo - 23,500 23,500 Anthony Shepherd - 95,120 95,120 Peter Watson - 47,500 47,500 - 443,614 443,614

Other key management personnel of the Trust Steve MacDonald Chief Financial Officer - 101,896 101,896 Charles Mott Chief Financial Officer - 47,500 47,500 Geoff Dutton*** General Manager Assets - - - Darce Corsie* Transitional Chief Financial Officer - 95,000 95,000 Fred Bidwell** General Manager Special Projects and Company Secretary - 95,000 95,000 - 339,396 339,396

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

Distributions and/or dividends received by Directors and key management personnel during the year ended 30 June 2008 amounted to $50,707 (2007 $nil).

Note 12. Reconciliation of operating profit after income tax to net cash flow from OPERATing activities

2008 2007 $000 $000 Operating profit after income tax 18,180 2,730 Interest received (classified as investing activities) (18,634) (2,730) Increase in trade and other payables 392 -

GST refunded / (paid) on float costs 1,000 (1,334) For personal use only use personal For Net cash inflow/(outflow) from operating activities 938 (1,334)

106 Transfield Services INFRASTRUCTURE FUND Transfield Services INFRASTRUCTURE trust

Note 13. Earnings per unit

2008 2007 cents cents

(a) Basic earnings per unit Profit from continuing operations attributable to the ordinary unitholders of the Trust 6.8 13.8

(b) diluted earnings per unit Profit from continuing operations attributable to the ordinary unitholders of the Trust 6.8 13.8

2008 2007 $000 $000

Earnings used in calculating basic and diluted earnings per unit 18,180 2,730

2008 2007 number number

(d) Weighted average number of shares used as the denominator Weighted average number of ordinary units used as the denominator in calculating basic and diluted earnings per unit 266,725,000 19,847,921

Note 14. Events occurring after balance sheet date

On 22 August 2008, the Directors of IFML as the responsible entity for Transfield Services Infrastructure Trust declared a final dividend of 9 cents per unit to be paid to securityholders of TSI Fund on 17 September 2008.

Note 15. Stapling arrangement

Under AASB 3 Business Combinations the stapling of shares in Transfield Services Infrastructure Limited to units in Transfield Services Infrastructure Trust and shares in TSI International Limited is a business combination by contract alone. For the purposes of AASB Interpretation 1002 Post date of transition stapling arrangements, Transfield Services Infrastructure Limited has been identified as the parent entity in relation to the stapling event that took place on 7 June 2007. In accordance with AASB Interpretation 1002 the results and equity, not directly owned by Transfield Services Infrastructure Limited have been treated and disclosed as minority interest, the stapled securityholders of Transfield Services Infrastructure Limited are the same as the stapled securityholders of Transfield Services Infrastructure Trust and TSI International Limited. The Australian Securities Exchange reserves the right (but without limiting its absolute discretion) to remove one or more entities with stapled securities from the official list if any of their securities cease to be ‘stapled’ together, or any equity securities are issued by one entity which are not stapled to equivalent securities in the other entity or entities.

Note 16. Segment information

Transfield Services Infrastructure Trust operates in one business segment being the provision of debt finance and in one geographical segment namely

Australia consequently, no segment report is provided in the Trust’s financial report. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 107 directors’ declaration For the year ended 30 June 2008

In the Directors’ opinion: (a) the financial statements and notes set out on pages 95 to 107 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the Trust’s financial position as at 30 June 2008 and of their performance, and

(b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable.

Peter Young Am kate Spargo Director director at Sydney

18 September 2008 For personal use only use personal For

108 Transfield Services INFRASTRUCTURE FUND INDEPENDENT AUDITor’s REPORT Transfield Services INFRASTRUCTURE trust TO THE MEMBERS OF transfield services

infrastructure trust For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 109 INDEPENDENT AUDITor’s REPORT TO THE MEMBERS OF transfield services infrastructure trust

Independent auditor’s report to the members of Transfield Services Infrastructure Trust (continued)

For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit. 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 sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion on the financial report In our opinion: (a) the financial report of Transfield Services Infrastructure Trust is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the trust’s financial position as at 30 June 2008 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a).

Report on the Remuneration Report We have audited the Remuneration Report included in pages 84 to 92 of the directors’ report for the year ended 30 June 2008. The directors of the Responsible Entity are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion

In our opinion, the Remuneration Report of Transfield Services Infrastructure Trust for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

PricewaterhouseCoopers For personal use only use personal For

B K Hunter Sydney Partner 19 September 2008

Liability limited by a scheme approved under Professional Standards Legislation

110 Transfield Services INFRASTRUCTURE FUND Tsi international limited FINANCIAL REPORT 30 june 2008

TSI international limited acn 124 582 547

Directors’ Report (including Remuneration Report) 112 Auditor’s Independence Declaration 124 Income Statements 125 Balance Sheets 126 Statements of Cash Flows 127 Statements of Changes in Equity 128 Notes to and forming part of the Financial Statements 129 Directors’ Declaration 137 Independent Auditor’s Report to the Members 138

The financial report is presented in Australian currency. TSI International Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: TSI International Limited Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 The financial report was authorised for issue by the Directors on 18 September 2008. The Company has the power to amend and reissue the financial report. A description of the nature of the Company’s operations and its principal activities is included in the review of operations and activities and in the Directors’ Report. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, financial reports and other information are available at our Media and Investor Centre on our website www.tsinfrastructurefund.com

For queries in relation to our reporting please call (02) 9464 1000 or e-mail [email protected] For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 111 Directors’ Report

Your Directors present their report together with the financial statements of TSI International Limited for the year ended 30 June 2008. Directors The following persons were Directors of TSI International Limited during the financial period and up to the date of this report unless otherwise indicated: Peter Young AM (Chairman) David Mathlin Kate Spargo Peter Watson Anthony Shepherd Mathew Irwin (Alternate Director for Peter Watson) Kate Munnings (Appointed 22 May 2008 as Alternate Director for Peter Watson) Stapling arrangement Transfield Services Infrastructure Limited shares are stapled to shares in TSI International Limited (TSIIL) and units in Transfield Services Infrastructure Trust (TSIT) and together these are listed on the Australian Securities Exchange as Transfield Services Infrastructure Fund (TSI Fund). Principal activities The Company was established to be the investor in any offshore acquisitions of Transfield Services Infrastructure Fund. At present, the Company is dormant. Dividends No dividends were declared during the year (2007: $nil) Review of operations The Company was dormant during the period. Earnings per Security 2008 2007 cents cents Basic and diluted earnings per share - -

Significant changes in the state of affairs The Company has incorporated various subsidiaries to support the potential future growth of the business. All Group companies are currently dormant. Matters subsequent to the end of the financial year There have been no matters or circumstances that have arisen since 30 June 2008 that have significantly affected, or may significantly affect: (a) the Company’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the Company’s state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Company and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Company. Environmental regulation

As a dormant company TSI International Limited is not subject to any significant environmental regulation. For personal use only use personal For

112 Transfield Services INFRASTRUCTURE FUND Tsi international limited

Meetings of Directors The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2008, and the numbers of meetings attended by each Director were: Risk, Audit and Extra-ordinary Compliance Board Meetings Board Meetings Committee Director Held Attended held Attended held Attended Peter Young AM 9 9 5 5 4 n/A David Mathlin 9 9 5 4 4 4 Kate Spargo 9 9 5 4 4 4 Anthony Shepherd 9 8 5 5 4 n/A Peter Watson 9 9 5 3 4 4

N/A: Not applicable as the Director is not a member of the committee

The Board also formed an Investment Review Committee (IRC). All matters relevant to the IRC were considered at Board or Extra-ordinary Board meetings which were attended by all IRC members. Information on Directors Details of the Director’s responsibilities, qualifications and shareholdings are set out below. Particulars of Indirect Directors’ interests interest in Tsi in units of international limited Special Tsi international through Transfield Director responsibilities limited Services Limited Peter Young AM independent Chairman 293,528 - David Mathlin independent Non-Executive Director and member of the Risk, Audit and Compliance Committee 199,413* 2,903 Kate Spargo Independent Non-Executive Director and Chairperson of the Risk, Audit and Compliance Committee 35,913 - Anthony Shepherd Transfield Services’ nominee and member of the Risk, Audit and Compliance Committee 145,120* 1,019,423 Peter Watson Transfield Services’ nominee 267,521* 1,228,535

* includes shares that are held by a related party.

Bachelor of Science, Bachelor of Engineering (Honours) For personal use only use personal For David was appointed a Director of TransfieldS ervices Infrastructure Fund in April 2007. David has worked at global consulting services firm, Sinclair Knight Merz (SKM) Group since 1974. During this time, David has held a number of senior positions in the firm, including Director of Sinclair Knight Merz Management Pty Ltd from 1987 to 2006 and Chairman of Sinclair Knight Merz Holdings Ltd from 2001 to 2006. David commenced his career at the Electricity Commission of NSW and was Chairman of landscape, architecture and planning company EDAW Pty Ltd from 1989 to 2000. He is a Fellow of the Institution of Engineers Australia and a Fellow of the Australian Institute of Company Directors.

Transfield Services INFRASTRUCTURE FUND 113 Directors’ Report

Anthony Shepherd – Non-Executive Director Bachelor of Commerce Anthony was appointed a Director of Transfield Services Infrastructure Fund in April 2007. Anthony was appointed Chairman of Transfield Services in 2005, is Chairman of the ConnectEast Group, a Director of The Global Foundation and the Australian Chamber Orchestra, as well as a Trustee of the Sydney Cricket and Sports Ground Trust. He is also a member of the Australian Institute of Company Directors and Patron of Infrastructure Partnerships Australia. Anthony was responsible for the development of many landmark projects, including the Sydney Harbour Tunnel, Melbourne CityLink, a number of other build- own-operate-transfer projects as well as the redevelopment of Walsh Bay. He was an inaugural Director of Transurban Limited. Kate Spargo – Independent Non-Executive Director Bachelor of Laws (Honours) Bachelor of Arts Kate was appointed a Director of TransfieldS ervices Infrastructure Fund in April 2007. Kate is Chairperson of the Accounting Professional and Ethical Standards Board. She has been a Non-Executive Director of IOOF Holdings Ltd since 1999, Pacific Hydro Pty Ltd since 2004, and Investec Bank (Australia) Ltd since 2005. Kate also serves on the Boards of Colnvest Ltd and NeuroSciences Victoria Ltd. In July 2008, Kate was selected for the Board of the Australian Energy Market Operator (AEMO), which commences operations on 1 July 2009. Kate was a Non-Executive Director of I00F Ltd from1999 to 2002, Non-Executive Director of Fulton Hogan Ltd from 2003 to 2007, Chairman of HomeStart Finance for seven years to 2002 and Chairman of PrimeGro Ltd from 2002 to 2003. Kate began her career as a Barrister and Solicitor with the South Australia Attorney General’s Department in the Crown Solicitor’s Office. She is a Fellow of the Australian Institute of Company Directors, and a Member of its Victorian Council. Peter Watson – Non-Executive Director Diploma of Engineering (Civil) Peter was appointed a Director of Transfield Services Infrastructure Fund in April 2007. He was appointed Managing Director and Chief Executive Officer (CEO) of Transfield Services in 2002. Peter has played an integral role in the successful development of Transfield Services since its inception in 1993 and led the organisation as CEO through its successful public listing in 2001. Peter has guided the international expansion of Transfield Services into North America through the acquisitions of US Maintenance, TIMEC and VMS as well as a major contract win with Suncor Energy in Canada. He is a member of the Institution of Engineers Australia and the Australian Institute of Company Directors. He is an alumnus of The Wharton School of Executive Education. Peter is a founding sponsor of the Australian Sustainable Industry Research Centre and a Fellow of the Australian Academy of Technological Sciences and Engineering. Marianne Suchanek – Company Secretary Bachelor of Laws Bachelor of Arts Marianne is the Company Secretary for the Company and the other stapled entities comprising TSI Fund. Marianne has legal counsel, corporate governance and compliance responsibilities and works in the Legal and Company Secretarial Department of the Manager. Marianne is currently studying the Graduate Diploma in Applied Corporate Governance at Chartered Secretaries Australia Ltd.

The Remuneration Report

e sonly use personal For hare-based compensation for Performance Awards F Transfield Services Infrastructure Fund Notional Securities Scheme provided as remuneration G additional information Under the Management Services Agreement (MSA), the Manager sources new investment opportunities and provides management, corporate and operations and maintenance services (Services) to TSI Fund. The Manager makes available its employees to TSI Fund, on a dedicated or as needed basis. Their remuneration is paid by TSI Fund as part of a management fee, which is an agreed estimate of certain expenses incurred by the Manager in performing of its obligations for providing the Services (Expense Amount). In the 2008 financial year, the Manager was entitled to an Expense Amount of $5.1 million. This will increase to $5.3 million in the 2009 financial year. From the end of the 2009 financial year onwards, the Manager and TSI Fund will review the Expense Amount to reflect actual and anticipated costs incurred by the Manager in the performance of its duties under the MSA.

114 Transfield Services INFRASTRUCTURE FUND Tsi international limited

The Chief Executive Officer (CEO), Chief Financial Officer (CFO) and General Manager Assets (GM Assets) are employed by the Manager and seconded to TSI Fund (Seconded Employees). Those employees seconded to TSI Fund are dedicated to meeting the business requirements of TSI Fund and in performing their functions must act in the best interests of securityholders in TSI Fund. TSI Fund does not have employees and relies on the executive staff under the MSA to implement operational decisions and carry out and ensure administration functions are discharged. A. Principles used to determine the nature and amount of remuneration The executive remuneration framework detailed below sets out the policies of the Manager as they refer to the Seconded Employees. The amount of remuneration is calculated based on the total remuneration awarded by the Manager from the date of secondment to TSI Fund. The Independent Non- Executive Directors (NEDs) are appointed directly by TSI Fund, and their remuneration is set by the TSI Fund Board with reference to external peers. The objective of the Manager’s executive remuneration framework is to ensure reward for performance is competitive in the markets where it competes to recruit executives, and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic business objectives to create value for TSI Fund securityholders, and conforms with market best practice for delivery of reward. The executive reward framework is: • market competitive and reasonable, • performance linked, and • transparent. In consultation with external remuneration consultants, the Manager has structured an executive remuneration framework that aligns executive performance with securityholders’ interests. Alignment to securityholders’ interests is achieved through the following performance measures: • sustained growth in total securityholders return (TSR) (growth in security price plus distributions), and • strategic and non-financial drivers of value. Alignment to executives’ interests to ensure it attracts and retains high calibre executives is achieved by offering rewards that: • are commensurate with the contributions made • are sufficient to provide appropriate recognition • are competitive in respective executive employment markets, and • are earned within a clear and well communicated structure. The framework provides a mix of fixed and variable pay, including short-term and long-term incentives. Not all the Manager’s employees participate in the short-term and long-term incentive programs. Participation in both plans is selectively applied to people in positions more able to influence the business performance. The proportion of variable or ‘at risk’ remuneration is higher for the more senior executives. Independent Non-Executive Directors’ fees Fees and payments to NEDs reflect the demands which are made on, and the responsibilities of, the Directors. NEDs’ fees and payments are reviewed annually by the Board. The Board has also taken advice from independent remuneration consultants to ensure NEDs’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of NEDs based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. NEDs do not receive equity based remuneration under the Transfield Services Infrastructure Fund Notional Securities Scheme. NEDs receive a minimum 20 per cent of their remuneration in TSI Fund units, which are acquired prospectively on‑market in January and July each year and held in the Transfield Services Infrastructure Fund Tax Deferred Plan. NEDs receive a Directors’ fee inclusive of superannuation. The Directors’ fee was set with effect from 26 April 2007, and will be reviewed annually thereafter. NEDs who chair or serve on a committee receive additional annual fees. Directors’ fees NEDs’ fees are determined within the aggregate Directors’ fee pool limit of $750,000. The current Directors’ fee is $80,000 per Director per annum and the Chairman’s fee is $200,000 per annum. Committee members currently each receive $8,000 per annum per committee and the Committee Chairs each receive $15,000 per annum per committee. Transfield Services Nominee Directors Peter Watson who is an executive officer of Transfield Services, is not paid a fee for serving as a director of TSI Fund. Anthony Shepherd is paid by Transfield Services to represent Transfield Services on the TSI Fund Board. Retirement allowances for Directors Retirement allowances are not paid to Directors.

Executive reward For personal use only use personal For The executive pay and reward framework has four components: • fixed remuneration including superannuation • short-term performance incentives • long-term incentives through participation in the TranShare Executive Performance Awards Plan (which is otherwise known as Performance Awards and issued by Transfield Services Limited) and/or Transfield Services Infrastructure Fund Notional Securities Scheme (which is otherwise known as the Scheme), and • other benefits. The combination of these elements comprises the executive’s total remuneration.

Transfield Services INFRASTRUCTURE FUND 115 Directors’ Report

Cash salary and fees The fixed remuneration component is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non‑financial benefits at the executive’s discretion. Executives are offered a competitive base pay package that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure fixed base pay is set to reflect the relevant market for comparable roles in peer companies. Fixed remuneration for senior executives is reviewed annually to ensure the executive’s pay remains aligned to policy and competitive with the market in which they operate. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in executives’ contracts. Other benefits Executives may receive benefits including executive health management, householder insurance and salary continuance insurance. Post-employment benefits Retirement benefits are delivered under the Transfield Services Superannuation Plan (or another complying plan of the executive’s choice) which provide defined contribution benefits. Short-term incentives If TSI Fund achieves a pre‑determined profit target set by Transfield Services’ Human Resources Committee, a short-term incentive (STI) is available to executives subject to their achievement of individual targets. Cash incentives (bonuses) are payable following audit clearance of the annual financial statements each year. The use of a profit target ensures variable reward is only available when value has been created for securityholders and when profit is consistent with the business plan. The target is leveraged for performance above a predetermined profit threshold to provide an incentive for executive out performance. Each executive has a target STI opportunity depending on the accountabilities of the role and impact on TSI Fund. The target opportunity of total fixed remuneration for the CEO is 100%, CFO is 40% and General Manager Assets is 20%. Each year, Transfield Services’ Human Resources Committee, following consultation with the TSI Fund Board, oversees the appropriate targets and key performance indicators (KPIs) for the STI plan and the level of payout if targets are met. This includes setting any maximum payout under the STI plan, and minimum levels of financial performance required to trigger payment of STI. 100% of STI entitlements of employees seconded to TSI Fund are based on TSI Fund related performance targets. The STI target annual payment is reviewed annually. For the year ended 30 June 2008, the STI plan KPIs were based on TSI Fund’s financial and strategic objectives. The KPIs included achieving specific targets in relation to earnings before interest, tax, depreciation and amortisation expense (EBITDA) and economic profit, as well as other key, strategic and non‑financial measures linked to drivers of performance in future reporting periods. The KPIs for Seconded Employees reflected a majority weighting towards specific financial outcomes of TSI Fund. Transfield Services’ Human Resources Committee is responsible for assessing performance against the KPIs. To help make this assessment, the Transfield Services’ Human Resources Committee receives detailed reports on performance against the KPIs. Transfield Services’ Human Resources Committee, following consultation with the TSI Fund Board, has discretion to adjust the short-term bonus payments up or down in line with under or over achievement against the target performance levels. Long-Term Incentive (LTI) structure for seconded employees The CEO and the CFO are the only Seconded Employees to participate in the LTI. The vesting conditions and performance hurdles of the Seconded Employees’ LTIs are measured 50/50 against the achievement of both TSI Fund’s and Transfield Services respective business objectives. In addition, the award of TSI Fund notional securities and TransfieldS ervices shares are proportioned 50/50. The Transfield Services shares awarded to the CEO and CFO are issued under the TransShare Executive Performance Awards Plan and TSI Fund notional securities awarded to the CEO and CFO are issued under the TSI Fund Notional Securities Scheme. Long-Term Incentive - TranShare Executive Performance Awards Plan The TranShare Executive Performance Awards Plan provides Performance Awards to the CEO and CFO of TSI Fund. Performance Awards for shares in Transfield Services are granted annually and generally vest no earlier than three years from grant date. The performance conditions of each grant of Awards are subject to Transfield Services’ Board review and assessed against its business plan and cycle. Transfield Services has determined that relative total shareholder return (TSR) combined with absolute earnings per share (EPS) growth are the most appropriate hurdles for its executives at this time. These performance conditions were chosen to ensure that executives are only rewarded when profit grows in real terms and Transfield Services achieves superior shareholder growth relative to the performance of the S&P ASX 200 Industrials index. Long-Term Incentive - Transfield Services Infrastructure Fund Notional Securities Scheme The TSI Fund Notional Securities Scheme (Scheme) offers the CEO and CFO a notional investment in securities of TSI Fund. This Scheme is offered by the Manager. The incentive provided under the Scheme can be delivered either in cash or in TSI Fund securities once vesting conditions have been met. The Scheme is used, because under current Australian tax law, TSI Fund securities issued under a TSI Fund executive remuneration regime can only be provided

to TSI Fund direct employees, whereas both the CEO and the CFO are seconded from the Manager. This notional investment in securities in TSI Fund is a For personal use only use personal For structure that replicates the performance, in respect of total securityholder return of TSI Fund securities.

116 Transfield Services INFRASTRUCTURE FUND Tsi international limited

B. Details of remuneration Amounts of remuneration Details of the remuneration of the Directors and the key management personnel of the Company are set out in the tables below. The key management personnel of TSI International Limited and TSI Fund are those persons having authority and responsibility for planning, directing and controlling the activities of TSI International Limited, directly or indirectly and includes the Directors and the following executive officers which include the five highest paid executives of the entity: Steve MacDonald chief Executive Officer Charles Mott Chief Financial Officer Geoff Dutton*** General Manager Assets Darce Corsie* Transitional Chief Financial Officer Fred Bidwell** General Manager Special Projects and Company Secretary

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed Short-term incentives on page 116 and the LTIs do not vest unless performance conditions are met. All other elements of remuneration are not directly related to Company performance. Directors of TSI International Limited Short-term benefits Post-employment Share-based benefits payments non‑ deferred Cash salary cASh monetary Super- Retirement Share Name and feeS BonuS BenefitS Annuation BenefitS Purchase Scheme total $ $ $ $ $ $ $ $ Non‑executive Directors Peter Young AM 139,897 - - 15,171 - 47,143 - 202,211 2007 32,676 - - 2,941 - - - 35,617 David Mathlin 67,183 - - 6,630 - 18,857 - 92,670 2007 13,070 - - 1,176 - - - 14,246 Kate Spargo 35,221 - - 6,087 - 53,036 - 94,344 2007 13,070 - - 1,176 - - - 14,246 Anthony Shepherd 1 ------2007 ------Peter Watson 2 ------2007 ------Sub‑total non‑executive 242,301 - - 27,888 - 119,036 - 389,225 Directors 58,816 - - 5,293 - - - 64,109 Total Directors 242,301 - - 27,888 - 119,036 - 389,225 2007 58,816 - - 5,293 - - - 64,109 Total for each category 242,301 27,888 119,036 389,225 2007 58,816 5,293 - 64,109

1. anthony Shepherd is paid $88,000 by Transfield Services to represent Transfield Services on the TSI Fund Board

2. Peter Watson, who is an executive officer of Transfield Services, is not paid a fee for serving as a Director of TSI Fund For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 117 Directors’ Report

Other key management personnel and five most highly remunerated officers of TSI International Limited Post- termin- long- Short-term benefits employment Ation term Share-based benefits Payment benefits payments cASh Cash non‑ long Settled notional Perfor- salary cASh monetary Super Restraint Service share-based Securities mance Name And feeS BonuS BenefitS Annuation of trade leave PAymentS Scheme AwardS total5 $ $ $ $ $ $ $ $ $ $

# This amount is for a bonus payable under the STI, which Fred Bidwell elected to receive in Transfield Services shares For personal use only use personal For

118 Transfield Services INFRASTRUCTURE FUND Tsi international limited

* fixed term agreement until 28 February 2008.

- Tranche 2 $nil $9.60 Transfield Services Limited’s TSR growth 50th to 75th percentile For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 119 Directors’ Report

F. Transfield Services Infrastructure Fund Notional Securities Scheme provided as remuneration The CEO has been granted a long-term incentive equivalent to 333,334 notional securities in TSI Fund and the CFO has been granted a long-term incentive equivalent to 100,000 notional securities in TSI Fund. The vesting date for these notional securities is 30 June 2010. At 30 June 2008, the fair value of the CEO’s notional securities was $56,667 and the fair value of the CFO’s notional securities was $17,000. The table below lists vesting schedules and performance hurdles for notional securities granted under the Scheme:

Vesting Schedule Allocation Performance vesting Grant Date Tranche Percentage hurdles of awards Performance conditions 15 November 2007 A 50% TSI Fund return 20%# TSI Fund return* > Benchmark return** by $350,000; 80% TSI Fund return > Benchmark return by > $1,750,000; 15 November 2007 B 50% TSI Fund market 100% TSI Fund market capitalisation doubles from capitalisation listing to 30 June 2010

First Date Exercisable. For personal use only use personal For

120 Transfield Services INFRASTRUCTURE FUND Tsi international limited

G. Additional information Principles used to determine the nature and amount of remuneration: relationship between remuneration and Company performance The Company’s profit after tax, securityholder wealth and executive remuneration will be measured progressively over the next five years. Details of remuneration: at-risk remuneration For each cash bonus, grant of Performance Awards and Notional Securities Scheme, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. The Performance Awards vest over three to five years provided the vesting conditions are met. No Performance Awards will vest if the conditions are not satisfied, hence the minimum value of the Performance Award yet to vest is nil. The maximum value of the Performance Awards yet to vest has been determined based on the fair value at grant date. The Notional Securities Scheme vests over three years provided the vesting conditions are met. No Notional Securities will vest if the conditions are not satisfied, hence the minimum value of the Notional Securities Scheme yet to vest is nil. The maximum value of the Notional Securities Scheme yet to vest has been determined based on the fair value at 30 June 2008. Notional Cash Bonus Performance Awards Securities Scheme year year year Name Paid forfeited granted Paid forfeited granted Paid forfeited granted % % % % % % Steve MacDonald 74 26 2008 ------Chief Executive Officer 87 13 2007 - - 2007 - - 2007 Charles Mott 75 25 2008 ------Chief Financial Officer - - 2007 - - 2007 - - 2007 Geoff Dutton 91 9 2008 n/a n/a n/a n/a n/a n/A General Manager Assets - - 2007 n/a n/a n/a n/a n/a n/A Darce Corsie - - 2008 - - - n/a n/a n/A Transitional Chief Financial Officer 90 10 2007 - - - n/a n/a n/A Fred Bidwell 100 - 2008 - - - n/a n/a n/A General Manager 87 13 2007 - - - n/a n/a n/A Special Projects and Company Secretary

Shares under Performance Award Unissued ordinary shares of Transfield Services Limited under the Performance Award at the date of this report are as follows:

For personal use only use personal For Date Performance Number under Awards granted Expiry Date iSSue price of shares Performance Awards 31 May 2007 31 May 2013 $nil 57,500 31 August 2007 31 August 2013 $nil 19,100 76,600

No Performance Award holder has any right under the Performance Awards Plan rules to participate in any other share issue of the Company or any other entity.

Transfield Services INFRASTRUCTURE FUND 121 Directors’ Report

Insurance of officers During the financial year, TSI Fund paid a premium of $136,879 to insure the Directors and Secretaries of the stapled entities. It is not possible to allocate a precise amount to TSI International Limited. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Proceedings on behalf of the Company No person has applied to a court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of a court under section 237 of the Corporations Act 2001. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important. PricewaterhouseCoopers were paid $231,259 during the year for non-audit services. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out in note 5. The Board of Directors has considered the position and, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in note 5, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor. • noneonly use personal For of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

122 Transfield Services INFRASTRUCTURE FUND Tsi international limited

Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of Corporations Act 2001 is set out on page 124. Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor PricewaterhouseCoopers continues in office in accordance with Section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Directors.

Peter Young Am kate Spargo Director director at Sydney

18 September 2008 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 123 AUDITor’s independence

declaration For personal use only use personal For

124 Transfield Services INFRASTRUCTURE FUND Tsi international limited Income Statements For the year ended 30 June 2008

Consolidated Parent 2008 2007 2008 2007 $ $ $ $ Revenue from continuing operations - - - -

Profit before income tax - - - - Income tax (expense) / benefit - - - -

Profit for the period - - - -

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the Company Basic earnings per share – cents - - - - Diluted earnings per share – cents - - - -

The above income statement should be read in conjunction with the accompanying notes. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 125 balance sheets as at 30 June 2008

Consolidated Parent note 2008 2007 2008 2007 $ $ $ $ Current assets Receivables 2 264 264 262 264

Total current assets 264 264 262 264

Non-current assets Investment in controlled entities 3 - - 2 -

Total non-current assets - - 2 -

Net assets 264 264 264 264

Equity Contributed equity 4 264 264 264 264

The above balance sheets should be read in conjunction with the accompanying notes. For personal use only use personal For

126 Transfield Services INFRASTRUCTURE FUND Tsi international limited statements of cash flows For the year ended 30 June 2008

Consolidated Parent 2008 2007 2008 2007 $ $ $ $ Cash flows from operating activities - - - -

Net cash inflow from operating activities - - - -

Cash flows from investing activities Loan to related party (24) (264) (22) (264) Investment in subsidiaries - - (2) -

Net cash (outflow) from investing activities (24) (264) (24) (264)

Cash flows from financing activities Proceeds from issues of shares - - - 264 Loan repaid by related party 24 - 24 -

Net cash inflow from financing activities 24 - 24 264

Net increase/(decrease) in cash held - - - - Cash and cash equivalents at incorporation - - - -

Cash and cash equivalents at the end of the financial period - - - -

The above statement of cash flows should be read in conjunction with the accompanying notes.

Comparative information is for the three month period ending 30 June 2007 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 127 statements of changes in equity For the year ended 30 June 2008

Consolidated Parent note 2008 2007 2008 2007 $ $ $ $ Total equity at the beginning of the financial period 264 - 264 -

Net income recognised directly in equity - - - - Profit for the period -

Total recognised income and expense for the period - - - - Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs 4 - 264 - 264

- 264 - 264

Total equity at the end of the financial period 264 264 264 264

This statement of changes in equity should be read in conjunction with the accompanying notes.

Comparative information is for the three month period ended 30 June 2007. For personal use only use personal For

128 Transfield Services INFRASTRUCTURE FUND Notes to and forming part of Tsi international limited the financial statements For the year ended 30 June 2008

Note NUmber Page Note 1. summary of significant accounting policies 130 Note 2. receivables 131 Note 3. investment in controlled entities 131 Note 4. contributed equity 131 Note 5. remuneration of auditors 132 Note 6. contingent liabilities and expenditure commitments 132 Note 7. related parties transactions 132 Note 8. Key management personnel 133 Note 9. earnings per share 136 Note 10. events occurring after balance sheet date 136 Note 11. segment information 136

Note 12. financial and capital risk management 136 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 129 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 1. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of this financial report are set out below. (a) Basis of preparation of the financial report This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001 in Australia. These policies have been consistently applied to all the periods presented, unless otherwise stated. Compliance with International Financial Reporting Standards (IFRS) Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report and notes thereto of TSI International Limited comply with IFRS. Historical cost convention These financial statements have been prepared under the historical cost convention. (b) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of TSI International Limited (Company or Parent entity) as at 30 June 2008 and the results of all subsidiaries for the year then ended. TSI International Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for acquisition of subsidiaries by the Group. 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. Investments in subsidiaries are accounted for at cost in the individual financial statements of TSI International Limited. (c) Receivables Receivables represent amounts due from related parties and are recognised initially at fair value and subsequently measured at amortised cost. (d) contributed equity Ordinary shares are classified as equity. (e) income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. (f) earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for

no consideration in relation to dilutive potential ordinary shares. For personal use only use personal For (g) new accounting standards and Urgent Issues Group (UIG) interpretations Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101. A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment, or has reclassified items in the financial statements, it will need to disclose a third balance sheet, this one being at the beginning of the comparative period. The Group intends to apply the revised standard from 1 July 2009.

130 Transfield Services INFRASTRUCTURE FUND Tsi international limited

Note 2. Receivables

Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ Loans to related party – Transfield Services Infrastructure Limited 264 264 262 264 Loans to related party – TSI International (Holdings) Pty Limited - - 2 -

264 264 264 264

These loans are interest free and repayable on demand.

Note 3. Investments in controlled entities

class of Cost of Country of Shares AS equity Parent entity’s incorporation APPlicable holding investment 2008 2007 2008 2007 % % $000 $000 TSI International (Holdings) Pty Limited Australia Ordinary 100 - 2 - TSI (Cayman) Holdings 1 Ltd1 Cayman Islands Ordinary 100 - - - TSI (Cayman) Holdings 2 Ltd1 Cayman Islands Ordinary 100 - - - Inversions TSI Chile (Holdings) Limitada1 Chile Ordinary 100 - - - Inversions TSI (Chile) Limitada1 Chile Ordinary 100 - - - 2 -

1 Owned by TSI International (Holdings) Pty Limited

All controlled entities are dormant.

Note 4. Contributed equity

Consolidated and Parent entity 2008 2007 $ $ Ordinary shares – fully paid 264 264

Movements in ordinary share capital: number of shares exercise Number of Acquired PRice Date Details shares issued on market $ $ 23 March 2007 incorporation 10 - 1 10 8 June 2007 share split 10,000,000 - * - 8 June 2007 new shares issued 217,140,333 - * 217 12 June 2007 new share issued in IPO 39,584,657 - * 37 30 June 2007 266,725,000 - 264

30 June 2008 266,725,00 - - 264 For personal use only use personal For * exercise prices are not disclosed as they are below 1/1000th cent.

Transfield Services INFRASTRUCTURE FUND 131 Notes to and forming part of the financial statements For the year ended 30 June 2008

(b) Stapling Each ordinary share is stapled to a share in Transfield Services Infrastructure Limited and a unit in Transfield Services Infrastructure Trust. These are traded together as Transfield Services Infrastructure Fund and listed on the Australian Securities Exchange on 12 June 2007.

Note 5. Remuneration of auditors

The auditor of TSI International Limited is PricewaterhouseCoopers. Audit fees for the Company are paid by Transfield Services Infrastructure Limited as parent entity of TSI Fund. Total audit fees of TSI Fund were $245,800 (2007: $180,000). Non-audit services $231,259 (2007: $20,000). No amounts are allocated to TSI International Limited as it is dormant.

Note 6. Contingent liabilities and expenditure commitments

TSI International Limited currently has no contingent liabilities or commitments for expenditure.

Note 7. Related party transactions

(a) Parent entity The parent entity is TSI International Limited. The ultimate parent entity is deemed to be Transfield Services Infrastructure Limited, under the stapling deed dated 7 June 2007. (b) key management personnel Disclosures relating to key management personnel are set out in note 8. (c) Remuneration and retirement benefits Disclosures relating to remuneration and retirement benefits are set out in the Remuneration Report on pages 114 to 122 (d) directors and Director -related entities The following were Directors and shareholders of TransfieldS ervices Limited, a related party and beneficial owner of shares in TSI International Limited. • Anthony Shepherd, and • Peter Watson. Anthony Shepherd and Peter Watson hold 0.78% and 0.94% respectively in Transfield Services Limited which itself owns 49% of the shares of Transfield Services Infrastructure Limited. This means in addition to the shareholdings described above they each indirectly own a further 1,019,423 and 1,228,535 shares in Transfield Services Infrastructure Limited. David Mathlin also holds 4,400 shares in Transfield Services Limited. TSI Fund is managed under a Management Services Agreement (MSA) with Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited. No amounts are payable to directors or director related entities at 30 June 2008. (e) loans to Directors and Director-related entities There were no loans to Directors or their personally related entities during the year or outstanding at the end of the year. (f) loans to executives and executive-related entities There were no loans to executives of the Company or their personally related entities during the year or outstanding at the end of the year. (g) transactions of Directors and Director-related entities concerning shares of TSI International Limited Aggregate numbers of shares of TSI International Limited acquired or disposed of by the Directors or their Director-related entities from the Company: 2008 2007 numbeR number Acquisitions 497,881 443,614

Aggregateonly use personal For acquisition of ordinary shares includes: Consultancy fees to Peter Young AM for services prior to appointment as a Director - 87,494

Disposals - 96,445,093

132 Transfield Services INFRASTRUCTURE FUND Tsi international limited

(h) other transactions with Directors and Director-related entities There have been no other transactions entered into between the Company and Directors and/or Director related entities since 1 July 2007. (i) Stapled group (TSI Fund) The stapled group consists of Transfield Services Infrastructure Limited and its wholly-owned controlled entities as well as Transfield Services Infrastructure Trust and TSI International Limited. Transactions between TSI International Limited and other entities in the Fund during the years ended 30 June 2008 consisted of: (i) loans advanced to Transfield Services Infrastructure Limited. This loan is interest free, and is repayable on demand. consolidated 2008 2007 $ $ Aggregate amounts receivable from entities in the stapled group at balance date: Current receivables 264 264

Note 8. Key management personnel

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

All key management personnel are employed by Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited and are those persons

having authority and responsibility for planning, directing and controlling the activities of TSI Fund, directly or indirectly, including any Director of TSI Fund. For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 133 Notes to and forming part of the financial statements For the year ended 30 June 2008

(c) key management personnel compensation Consolidated Parent entity 2008 2007 2008 2007 $ $ $ $ Short-term employee benefits (cash salary and fees, cash bonuses and non-monetary benefits) 2,480,810 553,188 2,480,810 553,188 Termination payment 140,000 - 140,000 - Long-term employee benefits 37,227 12,958 37,227 12,958 Post-employment benefits 339,879 14,632 339,879 14,632 Share-based payments 515,459 - 515,459 -

3,513,375 580,778 3,513,375 580,778

(d) equity instrument disclosures relating to key management personnel Details of Performance Awards and the Scheme provided as remuneration in Transfield Services Limited shares and TSI Fund notional securities respectively, issued on the exercise of such Performance Awards and notional securities under the Scheme, together with terms and conditions of the Performance Awards and notional securities under the Scheme, can be found in section D of the Remuneration Report on page 119. These equity instruments are only available to the CEO and CFO, who are employed by the Manager and seconded to TSI Fund. (i) LTI holdings No Performance Awards or notional securities under the Scheme have vested in the current year. (ii) Shareholdings The number of shares in the Company held during the financial year by each Director of TransfieldS ervices Infrastructure Limited and other key management personnel of the Group, including their personally related parties, are set out below. The Directors’ compensation includes semi-annual on-market share acquisition in lieu of cash remuneration. 2008 other changes Balance during the year Balance at the start acquisitions/ At the end Name of the year (disposals) of the year Ordinary shares Directors Peter Young AM 182,494 111,034 293,528 David Mathlin 95,000 104,413 199,413 Kate Spargo 23,500 12,413 35,913 Anthony Shepherd 95,120 50,000 145,120 Peter Watson 47,500 220,021 267,521 443,614 497,881 941,495

Other key management personnel of the Group Steve MacDonald Chief Executive Officer 101,896 100,000 201,896 Charles Mott Chief Financial Officer 47,500 7,500 55,000 Geoff Dutton*** General Manager Assets - - - Darce Corsie* Transitional Chief Financial Officer 95,000 - 95,000 Fred Bidwell** General Manager Special Projects and Company Secretary 95,000 75,000 170,000 339,396 182,500 521,896

* retired 9 February 2008 ** ronly use personal For etired 28 February 2008 *** appointed 3 March 2008

134 Transfield Services INFRASTRUCTURE FUND Tsi international limited

2007 other changes Balance during the year Balance at the start acquisitions/ At the end Name of the year (disposals) of the year Ordinary shares Directors Peter Young AM - 182,494 182,494 David Mathlin - 95,000 95,000 Kate Spargo - 23,500 23,500 Anthony Shepherd - 95,120 95,120 Peter Watson - 47,500 47,500 - 443,614 443,614

Other key management personnel of the Group Steve MacDonald Chief Executive Officer - 101,896 101,896 Charles Mott Chief Financial Officer - 47,500 47,500 Geoff Dutton*** General Manager Assets - - - Darce Corsie* Transitional Chief Financial Officer - 95,000 95,000 Fred Bidwell** General Manager Special Projects and Company Secretary - 95,000 95,000 - 339,396 339,396

* retired 9 February 2008 ** retired 28 February 2008 *** appointed 3 March 2008

Distributions and/or dividends received by Directors and key management personnel during the year ended 30 June 2008 amounted to $50,707 (2007 $nil). For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 135 Notes to and forming part of the financial statements For the year ended 30 June 2008

Note 9. Earnings per share

Consolidated 2008 2007 centS cents

(a) Basic earnings per share Profit from continuing operations attributable to the ordinary equity holders of the Company - -

(b) diluted earnings per share Profit from continuing operations attributable to the ordinary equity holders of the Company - -

2008 2007 $ $

Earnings used in calculating basic and diluted earnings per stapled security - -

numbeR number

(d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share 266,725,000 68,043,809

Note 10. Events occurring after balance sheet date

No significant events have occurred since balance date and prior to signing the financial statements.

Note 11. Segment information

TSI International Limited presently operates in one business segment being investment in infrastructure assets and the Group has subsidiaries incorporated in the Cayman Islands and in Chile. All entities in the Group are dormant, consequently no segment report is provided in the Group’s financial report.

Note 12. Financial and capital risk management

The Company and the Group do not employ any particular financial and capital risk management policies as both the Parent entity and the consolidated

entity are dormant. For personal use only use personal For

136 Transfield Services INFRASTRUCTURE FUND Tsi international limited directors’ declaration For the year ended 30 June 2008

In the Directors’ opinion: (a) the financial statements and notes set out on pages 126 to 136 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance, and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors.

Peter Young Am kate Spargo Director director

at Sydney

18 September 2008 For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 137 independent auditor’s report to the members of TSI

international limited For personal use only use personal For

138 Transfield Services INFRASTRUCTURE FUND Independent auditor’s report to the members of TSI International Limited (continued)

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit. 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 sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of TSI International Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(a). Report on the Remuneration Report

We have audited the Remuneration Report included in pages 114 to 122 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the Remuneration Report of TSI International Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

PricewaterhouseCoopers For personal use only use personal For

B K Hunter Sydney Partner 19 September 2008

Liability limited by a scheme approved under Professional Standards Legislation

Transfield Services INFRASTRUCTURE FUND 139 SECURITYHOLDER INFORMATION

THE SECURITYHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 30 SEPTEMBER 2008 (a) distribution of equity securities RANGE TOTAL % OF ISSUED HOLDERS UNITS CAPITAL 1-1000 601 516,533 0.19% 1,001 – 5,000 3,453 10,177,197 3.82% 5,001 – 10,000 1,400 11,358,504 4.26% 10,001 – 100,000 1,504 37,137,244 13.92% 100,001 and over 66 207,535,522 77.81% Total 7,024 266,725,000 100.00%

(b) equity security holders Top 20 largest holders of quoted equity securities:

NAME UNITS AS % OF ISSUED AT 30/09/08 CAPITAL RANK Transfield Services Ltd 130,607,756 48.98 1 J P Morgan Nominees Australia Limited 12,880,429 4.83 2 Transfield (TSL) Pty Limited 8,600,001 3.23 3 National Nominees Limited 7,907,725 2.97 4 HSBC Custody Nominees (Australia) Limited 6,314,330 2.37 5 Citicorp Nominees Pty Limited 5,884,931 2.21 6 ANZ Nominees Limited 5,249,424 1.97 7 Citicorp Nominees Pty Limited 5,022,676 1.88 8 UBS Wealth Management Australia Nominees Pty Ltd 3,362,354 1.26 9 The Australian National University 3,050,000 1.14 10 Custodial Services Limited 1,860,318 0.70 11 Argo Investments Limited 1,500,000 0.56 12 UBS Nominees Pty Ltd 1,450,601 0.54 13 Netwealth Investments Limited 1,245,412 0.47 14 Cogent Nominees Pty Limited 958,576 0.36 15 RBC Dexia Investor Services Australia Nominees Pty Limited 871,009 0.33 16 RBC Dexia Investor Services Australia Nominees Pty Limited 725,064 0.27 17 Citicorp Nominees Pty Limited 637,403 0.24 18 Spectrok Pty Ltd 500,000 0.19 19 HSBC Custody Nominees (Australia) Limited - A/C 2 462,257 0.17 20 Total 199,090,266 74.67

NAME UNITS AS % OF ISSUED AT 30/09/08 CAPITAL RANK Transfield Services Ltd 130,607,756 48.98 1

(d) Stapled securities and voting rights

Each of TSI Fund’s stapled securities consist of: For personal use only use personal For • one ordinary share in Transfield Services Infrastructure Limited • one ordinary share in TSI International Limited, and • one ordinary unit in Transfield Services Infrastructure Trust. All stapled securities carry one vote per stapled security.

140 Transfield Services INFRASTRUCTURE FUND CORPORATE DIRECTORY

Directors Peter Young AM – Chairman David Mathlin Kate Spargo Anthony Shepherd* Peter Watson* Secretary Marianne Suchanek ** Executive managers Steve MacDonald – Chief Executive Officer *** Charles Mott – Chief Financial Officer *** Geoff Dutton – General Manager Assets *** Principal registered office in Australia Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 Share and debenture registers Computershare Investor Services Pty Limited Level 3, 60 Carrington Street SYDNEY NSW 2000 Auditors PricewaterhouseCoopers Chartered Accountants Darling Park Tower 2 201 Sussex Street SYDNEY NSW 2000 Securities exchange listing Transfield Services Infrastructure Limited shares are stapled to shares in TSI International Limited and units in TransfieldS ervices Infrastructure Trust and together these are listed on the Australian Securities Exchange as Transfield Services Infrastructure Fund (ASX Code: TSI). Website address www.tsinfrastructurefund.com

* nominee of Transfield Services Limited (Transfield Services) ** employed by Transfield Services (Australia) Pty Limited (Manager), a subsidiary of Transfield Services *** employed by Transfield Services (Australia) Pty Limited (Manager), a subsidiary of

Transfield Services, and seconded to TSI Fund For personal use only use personal For

Transfield Services INFRASTRUCTURE FUND 141 For personal use only