ASX RELEASE / MEDIA RELEASE Macquarie Media

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Macquarie Media Management Limited A Member of the Macquarie Group of Companies ABN 16 115 524 019 AFS Licence No. 292297

Macquarie Media Holdings Limited ABN 91 116 024 536

Macquarie Media International Limited EC 37694, ARBN 118 577 423

No. 1 Martin Place Telephone +61 2 8232 9440 SYDNEY NSW 2000 Facsimile +61 2 8232 4713 GPO Box 4294 Internet www.macquarie.com/mmg SYDNEY NSW 1164 AUSTRALIA

= 2 March 2009

ASX RELEASE / MEDIA RELEASE

Macquarie Media Group TM1 – Buy-Back Program

Macquarie Media Group advises that it is proposing to call an Extraordinary General Meeting to enable security holders to vote on a buy-back program of up to approximately A$50m of MMG securities. The buy-back program will comprise both an off-market tender buy-back and an on- market buy-back.

Attached is the proposed form of explanatory material to accompany the notices of meeting, including an independent expert’s report prepared by Ernst & Young Transaction Advisory Services Limited.

Regulatory relief has been sought in respect of the off-market component of the buy-back. It is expected that the final meeting documentation will be released to the market by 5 March 2009.

For further information, please contact:

Mark Dorney Karen Halbert Chief Executive Officer Public Affairs Manager Tel: 02 8232 6958 Tel: 02 8232 6755 Mob: 0412 119 389 Email: [email protected] Email: [email protected]

1 Trade mark of Macquarie Group Limited None of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

This document is not an offer or invitation for subscription or purchase of or a recommendation of securities. The information in this document does not take into account the investment objectives, financial situation and particular needs of investors. Before making an investment in MMG an investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary.

MACQUARIE MEDIA GROUP™1 EXPLANATORY MATERIALS ACCOMPANYING NOTICES OF GENERAL MEETING

The meetings will be held at 3pm on Tuesday, 14 April 2009 at Macquarie Auditorium, Level 3, No.1 Martin Place, Sydney, NSW 2000

None of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

1. Trade mark of Macquarie Group Limited

2009 Feb MMG EGM (short form).indd 1 2/03/2009 8:01:46 AM CONTENTS

1. CHAIRMAN’S LETTER ...... 3

2. ABOUT MACQUARIE MEDIA GROUP ...... 4

3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING ...... 5 3.1 ABOUT THE BUY-BACK PROGRAM ...... 5 3.1.1 Overview ...... 5 3.1.2 MMG independent directors’ report on the Buy-Back Program ...... 6 3.1.2.1 Key rationale for the Buy-Back Program ...... 6 3.1.2.2 Possible advantages and disadvantages of the Buy-Back Program ...... 8 3.1.2.3 An illustration of the potential impact of the Combined Buy-Back on MMG ...... 9 3.1.3 Details of the Buy-Back Program ...... 11 3.1.3.1 Details of the Buy-Back Tender ...... 11 3.1.3.2 Details of the On-Market Buy-Back ...... 15 3.2 ADDITIONAL INFORMATION ...... 16 3.2.1 ASIC relief ...... 16 3.2.2 Australian tax considerations for the Buy-Back Program ...... 16 3.2.2.1 Australian tax considerations for the Buy-Back Tender ...... 16 3.2.2.2 Australian tax considerations for the On-Market Buy-Back ...... 18 3.2.3 Additional information about MMG ...... 19 3.2.3.1 Security price information ...... 19 3.2.3.2 Security holder spread ...... 19 3.2.3.3 Directors’ interests in MMG securities ...... 20 3.2.3.4 Broadcasting Services Act 1992 ...... 21 3.2.3.5 Recent ASX announcements ...... 21

4. DEFINITIONS ...... 22

5. INDEPENDENT EXPERT’S REPORT ...... 24

2 Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting

2009 Feb MMG EGM (short form).indd Sec1:2 2/03/2009 8:01:51 AM 1. CHAIRMAN’S LETTER

2 March 2009

Dear security holder

These notices of meeting and explanatory notes contain information regarding the resolutions we will ask you to consider at the Macquarie Media Holdings Limited and Macquarie Media Trust security holder meetings to be held on 14 April 2009.

Speciﬁ cally, we will ask you to consider a buy-back program capped at the lesser of 86,956,521 MMG securities and approximately $50,000,000 worth of MMG securities (the Buy-Back Program). The Buy-Back Program will comprise an off-market buy-back tender targeting approximately $25,000,000 worth of MMG securities, followed by an on-market buy-back.

The Buy-Back Program is in addition to the on-market buy-back of up to 10% of MMG securities announced on 17 December 2008 (the Existing Buy-Back). Accordingly, the Buy-Back Program requires security holder approval because it will involve the repurchase of more than 10% of the smallest number of MMG securities on issue in the last 12 months. From its commencement on 13 January 2009 to 27 February 2009, 3,965,370 MMG securities have been bought back under the Existing Buy-Back. The MMG independent directors unanimously recommend that security holders vote in favour of all the resolutions set out in these notices of meeting. A report from the MMG independent directors which includes the reasons for their recommendation and their assessment of the possible advantages and disadvantages of the Buy-Back Program is set out in section 3.1.2.

The independent directors have engaged Ernst & Young Transaction Advisory Services Limited to prepare an independent expert’s report providing a valuation of MMG securities and an independent analysis of the advantages and disadvantages of the Buy-Back Program. The report is enclosed with these notices of meeting.

I look forward to seeing you at the security holder meetings on 14 April 2009.

Max Moore-Wilton AC Chairman Macquarie Media Holdings Limited and Management Media Management Limited

Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting 3

2009 Feb MMG EGM (short form).indd Sec1:3 2/03/2009 8:01:51 AM 2. ABOUT MACQUARIE MEDIA GROUP

Macquarie Media Group (MMG) is a A summary of the group structure of American Consolidated Media stapled structure and comprises the MMG is illustrated in the fi gure below. (ACM) is the fi fth largest specialty following three entities: community newspaper group in MMG has two wholly owned regional the USA focused on population Macquarie Media Holdings media businesses: Limited (ACN 116 024 536) areas of less than 15,000 people. (MMHL); Macquarie Southern Cross With approximately 100 titles, Media (MSCM) was formed in spread across 18 regional areas, Macquarie Media Trust (ARSN November 2007 through the in 10 States, ACM’s portfolio is MMT Trust 116 151 467) ( or the ); combination of MMG’s existing diversifi ed across a range of local and regional radio operations communities each with their own Macquarie Media International and the regional free-to-air underlying economic drivers. Limited (ARBN 118 577 423) television operations acquired (MMIL). through MMG’s acquisition of The MMG independent directors are: Southern Cross Broadcasting Leon Pasternak (MMML and Macquarie Media Management in November 2007. MSCM MMHL) Limited (ACN 115 524 019) is Australia’s largest regional (Responsible Entity or MMML) is Chris de Boer (MMML and broadcaster with the ability to MMHL) the responsible entity of the Trust and reach a potential audience of manager of MMHL and of MMIL. approximately 7.5 million people, Tony Bell (MMML and MMHL) or 95% of Australia’s population The issued ordinary units of MMT and Michael Hamer (MMIL) outside the mainland state the issued ordinary shares of MMHL Michael Leverock (MMIL) capital cities. MSCM is the only and MMIL are stapled together regionally focused broadcaster Bob Richards (MMIL) and quoted jointly on the Australian able to provide customers a Securities Exchange (ASX) and are comprehensive large scale referred to as stapled securities or integrated advertising creative MMG securities. As a result each solution across radio and such ordinary unit and ordinary share television. cannot be traded separately.

MMG stapled security

ShareUnit Share Manager Responsible Manager Entity MMML

MMHL MMT MMIL

100% 100%

Macquarie American Southern Consolidated Cross Media Media Group of Group of Companies Companies

4 Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting

2009 Feb MMG EGM (short form).indd Sec2:4 2/03/2009 8:01:51 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING

3.1 ABOUT THE BUY-BACK PROGRAM 3.1.1 Overview

What is the Buy- The Buy-Back Program is an initiative that follows from MMG’s capital management Back Program? program announced on 17 December 2008. The Buy-Back Program will comprise an off-market buy-back tender (the Buy-Back Tender), followed by an on-market buy-back (the On-Market Buy-Back). The Buy-Back Program will be capped at the lesser of 86,956,521 MMG securities and approximately $50,000,000 worth of MMG securities. By way of illustration: — If 86,956,521 MMG securities are bought back, this would imply an average price paid of $0.575 per stapled security, and would represent approximately 41.2% of MMG securities on issue at 27 February 2009. — If $50,000,000 worth of MMG securities are bought back at an average price of more than $0.575 per stapled security, then a lesser percentage of MMG securities will be acquired. For example, if the average price paid is $0.601, this would represent approximately 83,333,333 or 39.5% of MMG securities on issue at 27 February 2009. While the Buy-Back Program will be capped as set out above, a lesser number of MMG securities may actually be bought back under the Buy-Back Program at MMG’s discretion. This will depend on a range of factors including prevailing equity market and credit market conditions. See section 3.1.3 for further details. The Buy-Back Program may be open for a period of up to 12 months from the date of approval, but may be terminated earlier at the discretion of the MMG boards. Is the Buy-Back Yes. The Buy-Back Program is in addition to the on-market buy-back of up to 10% of Program in addition MMG securities announced on 17 December 2008 (the Existing Buy-Back), which to the Existing Buy- commenced on 13 January 2009. Back? In the period to 27 February 2009, MMG has bought back 3,965,370 MMG securities under the Existing Buy-Back at an average price of $0.865. By way of illustration, if the Buy-Back Program and the remainder of the Existing Buy-Back are completed at an average price of $0.601, MMG will have bought back approximately 48.5% of MMG securities on issue at 17 December 2008 when MMG’s capital management program was announced. MMG may continue with the Existing Buy-Back before and after the Tender Period for the Buy-Back Tender (see section 3.1.3.1 for details) but will suspend the Existing Buy-Back during that period. What are the Buy- MMHL and MMML are required by the Corporations Act to obtain security holder Back Resolutions? approval by way of an ordinary resolution to conduct the Buy-Back Program (the Buy- Back Resolutions). For the Buy-Back Resolutions to be approved, more than 50% of the votes cast by security holders must be in favour of the Buy-Back Resolutions. Neither MMML nor any other Macquarie Group entities will vote any MMG securities which they hold in a personal or principal capacity on the Buy-Back Resolutions. If security holders do not approve the Buy-Back Resolutions, MMG will not be able to proceed with the Buy-Back Program. While this will not affect MMG’s ability to continue with the Existing Buy-Back, MMG will be limited to buying back a further 16,992,098 stapled securities under the Existing Buy-Back for the period to 12 January 2010.

1 This price is for illustrative purposes only.

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2009 Feb MMG EGM (short form).indd Sec2:5 2/03/2009 8:01:51 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

What is the potential If the Macquarie Group does not participate in the Buy-Back Program or the remainder of impact of the Buy- the Existing Buy-Back, and the maximum number of stapled securities are bought back, its Back Program on the voting power in MMG would increase from 25.1% to 49.5%. voting power of the Having regard to the potential for the Buy-Back Program to increase the voting power of Macquarie Group? the Macquarie Group if it does not participate in the Buy-Back Program, neither MMML nor any other Macquarie Group entities will vote any MMG securities which they hold in a personal or principal capacity on the Buy-Back Resolutions. What do the MMG The MMG independent directors unanimously recommend that MMG security independent directors holders vote in favour of the Buy-Back Program. recommend? As the independent directors are not aware of the individual ﬁ nancial circumstances of individual security holders, the MMG independent directors make no recommendation as to whether individual security holders should participate in the Buy-Back Program.

3.1.2 MMG independent directors’ report on the Buy-Back Program 3.1.2.1 Key rationale for the Buy-Back Program

Why are the MMG The MMG independent directors have concluded that the Buy-Back Program is in the best independent directors interests of security holders, because: recommending that — MMG has available capital from retaining approximately $329 million cash on hand MMG security holders at the Fund Level and also from having revised its distribution policy, with the MMG vote in favour of the boards determining the distribution for each six month period based on the speciﬁ c Buy-Back Program? needs of the business at that time. The MMG independent directors consider that the Buy-Back Program represents the best use of some of this available capital at this time. — For selling security holders, the Buy-Back Program has the potential to increase their ability to sell MMG securities. — For continuing security holders, the Buy-Back Program has the potential to increase: • Proportionate Earnings per Security (PEPS); • Cash Backing per Security; and • Fair Market Value per Security2. — An increase in these factors would represent an increase in the underlying value of the remaining MMG securities, which may lead to an increase in the market price of MMG securities. See section 3.1.2.2 for a detailed assessment of the possible advantages and disadvantages of the Buy-Back Program. See section 3.1.2.3 for an illustration of the potential impact of the Buy-Back Program and the remainder of the Existing Buy-Back (together the Combined Buy-Back) on MMG.

2 As assessed by Ernst & Young Transaction Advisory Services Limited in the independent expert’s report accompanying these notices of meeting (Independent Expert’s Report or IER). The Fair Market Value per Security in the IER is in a range of $1.90 to $2.39 on a non-controlling basis.

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2009 Feb MMG EGM (short form).indd Sec2:6 2/03/2009 8:01:51 AM Did the MMG Yes. The independent directors considered a number of other uses for the available capital. independent directors Based on this review they determined that: consider other uses — The Buy-Back Program has the potential to provide returns to MMG and its continuing for the available security holders which are at least equivalent to those available from current media capital, such as acquisition opportunities, and has an inherently lower due diligence risk. The use acquisitions or debt of MMG’s available capital to implement the Buy-Back Program reinforces MMG’s pre-payment? investment discipline. — In the context of current market conditions, the terms of MMG’s asset-level debt facilities are attractive, with no maturities until June 2010 for ACM and November 2010 for MSCM. On this basis, pre-payment of these facilities is not the best use of MMG’s available capital at this present time. — MMG will have signifi cant cash reserves available following completion of the Buy-Back Program, ensuring that capital fl exibility and liquidity are preserved. Did the MMG Yes. The MMG independent directors considered a number of other ways to return independent directors available capital to security holders, including capital returns and special distributions, and consider other concluded that the Buy-Back Program offers advantages which are not available from methods of returning other methods of returning capital at this time. available capital to For example, under the Buy-Back Program security holders would have the option to security holders? choose whether to participate, at what price and for what portion of their security holding, which would not occur with a capital return or a special distribution. In addition, the Buy- Back Program has the potential to increase PEPS, Cash Backing per Security and Fair Market Value per Security for continuing security holders which would not occur with a capital return or special distribution to all security holders. Is MMG’s distribution No. On 17 December 2008, MMG announced that it had revised its distribution policy, policy affected by the with the MMG boards determining the distribution for each six month period based on the Buy-Back Program? specifi c needs of the business at that time. This has made available capital to fund buy- backs and provides for the build-up of further cash at the Fund Level after completion of the Combined Buy-Back. There is no current intention to change this distribution policy. MMG’s distribution per security did reduce considerably as a result of the revised distribution policy. Accordingly, security holders will need to participate in the Buy-Back Program to access the additional capital made available by the change in the distribution policy, as it is unlikely that MMG would in the short or medium term resume the previous policy of distributing to security holders all of the operating earnings of the business. The distribution for the period to 31 December 2008 approximated the interest income earned on cash deposits held by MMG less corporate overheads. How will MMG To date, the Existing Buy-Back has been funded from Fund Level cash. fund the Buy Back Similarly, the Buy-Back Program and the remainder of the Existing Buy-Back will be funded Program? from Fund Level cash.

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2009 Feb MMG EGM (short form).indd Sec2:7 2/03/2009 8:01:52 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

3.1.2.2 Possible advantages and disadvantages of the Buy-Back Program

What are the The MMG independent directors believe that the Buy-Back Program offers the following possible advantages possible advantages to security holders: of the Buy-Back For the Buy Back Tender: Program? all eligible security holders have an equal opportunity to participate; a tender process: — allows security holders to tailor their participation to suit their own circumstances. Security holders can choose whether to participate, how many of their MMG securities to tender, and the price or prices within a range at which to tender their MMG securities; — reduces the risk of setting a buy-back price which is too low and a buy-back being unsuccessful through a low take-up; — is expected to allow MMG to buy back a signifi cant number of stapled securities within a shorter period (compared to an on-market buy-back); — is expected to provide a mechanism for security holders to sell a large volume of MMG securities without negatively impacting the market price of MMG securities; and security holders should not have to pay brokerage or appoint a stockbroker to sell their stapled securities in the Buy-Back Tender. For the On-Market Buy Back: purchases under the On-Market Buy-Back can be tailored to react to changing market conditions; MMG has the fl exibility to adjust the volume of stapled securities bought back and the On- Market Buy-Back can be suspended at any time if circumstances change; and implementation of the On-Market Buy-Back is very simple. What are The MMG independent directors do not believe that the Buy-Back Program poses any the possible signifi cant disadvantage to security holders. However, in making their decision security holders disadvantages of the should consider the following factors: Buy-Back Program? the Fair Market Value per Security as assessed in the IER is in a range of $1.90 to $2.39 on a non-controlling basis. Whilst the highest price within the Tender Range for the Buy- Back Tender (see section 3.1.3.1 for details) will exceed the closing price of $0.545 on 27 February 2009, it will nevertheless be signifi cantly below the bottom of the assessed Fair Market Value per Security range; the Buy-Back Program will result in a reduction in MMG’s Fund Level cash. However, this is mitigated by the fact that MMG’s distribution policy has been revised, as outlined above; by implementing the Buy-Back Program, MMG will incur some expenses relating to printing, mailing and registry costs. In addition, MMG will incur execution costs payable to the Macquarie Group for fi nancial services, as it was engaged by the MMG independent directors on terms at least equal to or more favourable to MMG than market terms, and benchmarked against relevant precedents. These expenses are not considered material; the voting power of the Macquarie Group will increase if it does not participate in the Buy- Back Program (see below); successfully participating security holders may have their tenders scaled back (see below);

8 Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting

2009 Feb MMG EGM (short form).indd Sec2:8 2/03/2009 8:01:52 AM What are security holders who successfully participate in the Buy-Back Program will not beneﬁ t from the possible any future increase in the market price of MMG securities or be entitled to receive future disadvantages of the distributions on those MMG securities which are bought back; and Buy-Back Program? the Buy-Back Program may result in a decrease in the relative index weightings of MMG (continued) and potentially the removal of MMG from one or more indices. MMG currently represents approximately 0.02% of the S&P/ASX 200 Index. Given the very small proportion of this index MMG represents, any decrease is also expected to be proportionately small. Regardless, this may result in lower liquidity for MMG securities.

3.1.2.3 An illustration of the potential impact of the Combined Buy-Back on MMG

In the period to 27 February 2009, MMG has bought back 3,965,370 MMG securities under the Existing Buy-Back for $3,429,642.

Assuming (by way of illustration only) that the Combined Buy-Back (being the Buy-Back Program and the remainder of the Existing Buy-Back) is completed at an average price of $0.603: 83,333,333 MMG securities would be bought back under the Buy-Back Program for approximately $50,000,000 (being the applicable cap); 16,992,098 MMG securities would be bought back under the remainder of the Existing Buy-Back for $10,195,259; and in aggregate, 100,325,431 MMG securities would be bought back for a total of $60,195,259 (in addition to the 3,965,370 securities already acquired as at 27 February 2009 under the Existing Buy-Back for $3,429,642).

On this basis, by way of illustration, the potential impact of the Combined Buy-Back on MMG would be as follows:

Proportionate The Combined Buy-Back has the potential to increase PEPS on a pro-forma basis by up to Earnings per 85.5%. See section 9.1.2 of the IER. Security Fair Market Value If the Combined Buy-Back is conducted at below Fair Market Value per Security as per Security assessed in the IER, it has the potential to increase the Fair Market Value per Security of the remaining MMG securities from the mid-point of the valuation range for a non-controlling interest from $2.15 to $3.65. See section 9.1.1 of the IER. Cash Backing per The Combined Buy-Back has the potential to increase Cash Backing per Security by 55.8% Security from $1.56 to $2.43. See section 9.1.3 of the IER. Distributions to As announced on 17 December 2008, MMG’s distribution policy has been revised, with the security holders MMG boards determining the distribution for each six month period based on the speciﬁ c needs of the business at that time. There is no current intention to change this distribution policy. Fund Level cash The Combined Buy-Back will result in a reduction in MMG’s total Fund Level cash balance, and also reduce MMG’s interest income on this cash balance. This would mean that, without the reduction in the distribution payout ratio, MMG would otherwise have had less cash available for other potential initiatives such as acquisitions, capital expenditure or pre- payment of asset-level bank facilities. See section 9.2.2 of the IER.

3 This price is for illustrative purposes only.

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2009 Feb MMG EGM (short form).indd Sec2:9 2/03/2009 8:01:52 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

MMG securities on As at 27 February 2009, MMG had 210,961,404 stapled securities on issue. Following issue completion of the Combined Buy-Back, MMG would have 110,635,973 stapled securities on issue. Inclusion in indices The relative index weightings of MMG may decrease and MMG may be removed from one or more indices such as the S&P/ASX 200 Index. Assuming the Macquarie Group did not participate in the Combined Buy-Back, MMG’s ‘free fl oat’ (that is MMG’s market capitalisation excluding relevant holdings of more than 5% of MMG securities on issue) would fall from 74.9% to 52.2% and its ‘free fl oat’ market capitalisation, based on an illustrative price of $0.60, would fall from $95 million to $35 million. A decrease in the relative index weightings of MMG and/or removal of MMG from one of more indices may result in lower liquidity for MMG securities. See 9.2.4.2 of the IER. Voting power of the The Macquarie Group (including MMML) has a relevant interest in 53,010,0094 MMG Macquarie Group securities representing 25.1% of MMG’s securities on issue at 27 February 2009. MMML is the registered holder of 45,413,4534 or 85.7% of those MMG securities in a personal or principal capacity. If the Macquarie Group did not participate in the Combined Buy-Back and the maximum dollar value of stapled securities are bought back under the Combined Buy- Back at the illustrative price of $0.60, its voting power in MMG would increase from 25.1% to 47.9%, being a difference of 22.8%. If, however, the Macquarie Group did not participate in the Combined Buy-Back and the maximum potential number of stapled securities are bought back under the Combined Buy-Back at the minimum price of $0.575, its voting power in MMG would increase from 25.1% to 49.5%, being a difference of 24.4%. Such an increase in voting power would be expected to give the Macquarie Group the practical capacity to pass ordinary and possibly also special resolutions at security holder meetings (where the Macquarie Group is not excluded or prohibited from voting by the Corporations Act or the related party rules of the ASX Listing Rules). See section 9.2.1 of the IER. Having regard to the potential for the Buy-Back Program to increase the voting power of the Macquarie Group if it does not participate in the Buy-Back Program, neither MMML nor any other Macquarie Group entities will vote any MMG securities which they hold in a personal or principal capacity on the Buy-Back Resolutions. MMML and its associates (being Macquarie Group entities) who hold MMG securities in a personal or principal capacity have indicated that they do not currently intend to participate in the Buy-Back Program. Should MMML or any such associate decide to do so, MMML will provide seven days notice via an ASX release. Associates of MMML who act as fi duciaries by holding MMG securities for the benefi t of others (such as Macquarie Investment Management Limited and Macquarie Life Limited) may participate in the Buy-Back Program. Such associates held 68,373 or approximately 0.03% of MMG securities on issue at 19 February 2009. Existing bank MMG’s existing bank facilities are provided for and secured against the asset level operations facilities of MSCM and ACM. These facilities do not have market capitalisation covenants which would be triggered as a result of the Combined Buy-Back. Whilst approximately $329 million of cash is held at the Fund Level, there are no guarantees at the Fund Level granted to external lenders to MSCM and ACM. Business operations The Combined Buy-Back would not have any impact on the underlying business operations of MMG’s media businesses. Asset level debt facilities are available in relation to working capital and capital expenditure requirements for meeting their business plan objectives, including the fi nalisation of the roll-out of digital and high defi nition digital television services in Australia.

4 Based on latest substantial holding notices received by MMG at 27 February 2009.

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2009 Feb MMG EGM (short form).indd Sec2:10 2/03/2009 8:01:52 AM Management fees MMML is entitled to base and performance fees for acting as responsible entity of MMT and manager of MMHL and MMIL. — The base fee is calculated as 1.5% of the Net Investment Value of MMG at the end of each quarter. Base fees have not been payable since the September 2008 quarter as MMG’s Fund Level cash has exceeded its market capitalisation. The Combined Buy- Back is not expected to have a practical impact on base fees as MMG’s expected Fund Level cash after completion of the Combined Buy-Back is expected to exceed the market capitalisation post-completion of the Combined Buy-Back. — A performance fee is only payable in the event that the performance of MMG securities, based on the accumulated total return to security holders since the original IPO issue in November 2005, exceeds 6% per annum plus the annual Australian consumer price index (CPI) change in any quarter, having made up for any underperformance in previous quarters. No performance fee has been payable since June 2006. The Combined Buy- Back would not have a practical impact on performance fees, because even if the price of MMG securities increased to the highest point in the Fair Market Value per Security range as a result of the Combined Buy-Back, no material performance fee would be payable. Franking credits The Buy-Back Program will not result in any reduction of MMHL’s franking account.

3.1.3 Details of the Buy-Back Program 3.1.3.1 Details of the Buy-Back Tender

Detailed information on the Buy-Back Tender will be provided in the Buy-Back Tender documentation (the Buy-Back Booklet) which is expected to be sent to security holders on or about 15 April 2009. A summary of this information is provided overleaf.

When will the Buy- If security holders approve the Buy-Back Resolutions, the Buy-Back Tender is expected to Back Tender take open on or about 15 April 2009 and close at 7.00pm on or about 1 May 2009 (the Tender place? Period) in accordance with the indicative timetable below. While MMG does not currently anticipate changing any of the dates and times set out in the timetable, it reserves the right to do so by announcement to ASX.

MMG securities trade ex entitlement to participate in the Buy-Back 2 April 2009 Tender Record Date for determination of entitlements to participate in the 8 April 2009 Buy-Back Tender Extraordinary General Meetings 14 April 2009 Completion of dispatch of Buy-Back Tender documentation to 15 April 2009 security holders Tender Period 15 April 2009 - 1 May 2009 Acceptances must be received by 7.00pm 1 May 2009 Completion of calculation of acceptances and possible scale-back 2-3 May 2009 Announcement of the Buy-Back Price and scale-back (if any) 4 May 2009 Dispatch of sale proceeds by 8 May 2009

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2009 Feb MMG EGM (short form).indd Sec2:11 2/03/2009 8:01:52 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

How many stapled The indicative target size of the Buy-Back Tender is approximately $25,000,000 worth of securities will be stapled securities, however MMG may decide to buy back more or less than this amount. bought back under The key considerations for MMG in determining the size of the Buy-Back Tender will be the Buy-Back the volume and price levels of tenders received, an assessment of the benefi t to MMG Tender? and security holders of buying back stapled securities at the tendered prices, and an assessment of the capital requirements of the MMG business at the time. The decision as to the Buy-Back Price (and therefore the total value of securities bought back under the Buy-Back Tender) will be made by the MMG independent directors and the exercise of this discretion appropriately documented. Even if the Buy-Back Resolutions are approved, MMG may determine not to proceed with the Buy-Back Tender or, if it decides to proceed, amend or terminate the Buy-Back Tender at any time prior to the completion of the Buy-Back Tender, by making an announcement to that effect to ASX. Who will be able to MMG will set the date for determining entitlements to participate in the Buy-Back Tender participate in the (expected to be on or about 8 April 2009) (the Record Date). MMG will invite eligible Buy-Back Tender? security holders on its register on the Record Date to participate in the Buy-Back Tender. Certain excluded foreign security holders will not be eligible to participate in the Buy- Back Tender. This is expected to include those security holders to whom MMG would be prohibited by law from paying money and/or who have a registered address in a jurisdiction where it is not lawful or, in the opinion of MMG, reasonable, to make invitations to participate. At this stage, MMG has determined that security holders with registered addresses in the United States and Canada will not be invited to participate. Will security holders No. Participation in the Buy-Back Tender will be voluntary. Security holders will also have have to participate the right to amend or withdraw tenders during the Tender Period. in the Buy-Back Tender? How will the tender Each security holder eligible to participate in the Buy-Back Tender may submit a tender on process work? a specifi ed form (Tender Form) if they wish to sell some or all of their stapled securities. The Tender Form will be required to specify: — the number of stapled securities tendered, which may be up to 100% of the security holder’s holding as at the Record Date; and — the nominated price or prices within a range of specifi ed prices (Tender Range) at which each parcel of stapled securities is offered to be sold. Security holders may also submit a “Final Price Tender” (see below for more information on the Tender Range and Final Price Tenders). Eligible security holders who hold more than 1,800 stapled securities will be able to tender portions of their security holding for different prices within the Tender Range and/or as a Final Price Tender. For example, such security holders may tender half of their security holding for a specifi ed price per stapled security and the other half for a different specifi ed price per stapled security. Eligible security holders who hold 1,800 stapled securities or fewer will be required to tender all their stapled securities at a single price in the Tender Range or as a Final Price Tender if they wish to participate.

12 Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting

2009 Feb MMG EGM (short form).indd Sec2:12 2/03/2009 8:01:52 AM At what price will Eligible security holders will be invited to tender some or all of their stapled securities at security holders be speciﬁ ed prices within the Tender Range. In addition, security holders wishing to increase able to tender their the likelihood that their tender will be successful may submit a Final Price Tender, which is MMG securities a tender in which the security holder elects to be paid the Buy-Back Price (deﬁ ned below), in the Buy-Back whatever that price is determined to be under the tender process. Tender? These notices of meeting and the accompanying IER include a number of illustrations and illustrative tables which set out examples of possible outcomes of the Combined Buy-Back. The range of average prices in these tables has been selected by the independent expert for illustrative purposes only and should not be construed as the actual Tender Range that will be announced on or before the issue of the Buy-Back Booklet. It is not possible at this point in time to determine what the Tender Range will be, other than: — the Tender Range will be narrower than the ranges set out in the illustrative tables in the IER; and — the Tender Range will not include prices that fall outside the ranges set out in the illustrative tables in the IER.

How much will MMG On the close of the Tender Period, the MMG independent directors will determine the pay for each MMG lowest price in the Tender Range at which MMG will be able to buy back the number of security bought back stapled securities it determines to buy back (the Buy-Back Price). under the Buy-Back All security holders submitting successful tenders will be paid the same Buy-Back Price for Tender? stapled securities bought back (even if they tendered stapled securities below the Buy- Back Price). How will successful Stapled securities that are tendered at or below the Buy-Back Price and/or as a Final Price tenders be Tender will be bought back, subject to the scale-back mechanism set out below. determined? Stapled securities that are tendered above the Buy-Back Price will not be bought back. If more stapled securities are tendered at or below the Buy-Back Price (including Final Price Tenders) than MMG wishes to buy back, then a scale-back will be applied as follows: If the Buy-Back Price is above the lowest price in the Tender Range: Tenders below the Buy-Back Price and Final Price Tenders will be accepted in full; Tenders at the Buy-Back Price (excluding Final Price Tenders) will be treated as follows: — the Priority Allocation (deﬁ ned below) will be bought back from each security holder (or the number of stapled securities tendered at the Buy-Back Price if this is less than the Priority Allocation); — Small Residual Holdings (deﬁ ned below) will be bought back; and — the remaining tenders will be scaled back on a pro rata basis.

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2009 Feb MMG EGM (short form).indd Sec2:13 2/03/2009 8:01:52 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

How will successful If the Buy-Back Price is the lowest price in the Tender Range: tenders be All tenders at the Buy-Back Price (including Final Price Tenders) will be treated as follows: determined? (continued) — the Priority Allocation will be bought back from each security holder (or the number of stapled securities tendered at the Buy-Back Price and/or as a Final Price Tender if this is less than the Priority Allocation); — Small Residual Holdings will be bought back; and — the remaining tenders will be scaled back on a pro rata basis. The “Priority Allocation” will be $2,000 worth of stapled securities (the number of stapled securities to be based on the market price of MMG securities on or about the date the Buy-Back Booklet is ﬁ nalised for printing), or such lesser number of stapled securities as is required to ensure that MMG is able to buy back only the number of securities it determines to buy back under the Buy-Back Tender. A “Small Residual Holding” will occur if a security holder submits tenders in respect of 100% of their stapled securities at or below the Buy-Back Price, and would otherwise be left with a security holding of $500 worth of stapled securities (the number of stapled securities to be based on the market price of MMG securities on or about the date the Buy- Back Booklet is ﬁ nalised for printing), or fewer, as a result of the scale-back. MMG will announce to ASX the results of the Buy-Back Tender, including the total number of stapled securities to be bought back, the Buy-Back Price and any scale-back after the close of the Tender Period. Will participation in No. Security holders will be entitled to vote (in accordance with the voting rights attached to the Buy-Back Tender their stapled securities) at the extraordinary general meeting of MMHL and general meeting affect voting rights? of MMT on 14 April 2009 and at any other meeting of the security holders of MMG that is held prior to the date on which MMG enters into a buy back agreement with security holders (the Buy-Back Date), even if they have lodged or will lodge a tender under the Buy-Back Tender. Will participation in No. Tendering security holders will be entitled to any distributions (in accordance with the Buy-Back Tender the distribution rights attached to their stapled securities) where the record date for the affect distribution distribution occurs prior to the Buy-Back Date. It should be noted, however, that MMHL rights? and MMIL have not previously paid, and are not expected to pay, any distributions for the year ending 30 June 2009. Distributions to security holders are typically paid as trust distributions out of MMT and the next record date for an MMT distribution is expected to fall after the Buy-Back Date.

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2009 Feb MMG EGM (short form).indd Sec2:14 2/03/2009 8:01:52 AM 3.1.3.2 Details of the On-Market Buy-Back

Following completion of the Buy-Back Tender, MMG may, in its discretion, proceed with the On-Market Buy-Back.

How will MMG MMG has appointed Macquarie Securities (Australia) Limited as its broker to purchase conduct the On- MMG securities on-market in the ordinary course of trading on ASX if the On-Market Buy- Market Buy-Back? Back is conducted. For each day on which MMG wishes to purchase stapled securities on-market, MMG will issue the broker with instructions to buy back stapled securities at a price which is not more than 5% above the average of the market price (as defi ned in the ASX Listing Rules) for MMG securities over the fi ve previous trading days. The price cap is imposed by ASX Listing Rule 7.33. How will MMG In formulating the instructions to the broker, MMG will have regard to its buy-back determine the discretion policy which will be made available to MMG security holders upon request. The volume and price buy-back discretion policy sets out the factors that MMG is to take into account when of MMG securities formulating instructions to the broker regarding the price and volume of stapled securities bought back? purchased under the On-Market Buy-Back and includes factors such as: — the best interests of security holders; — prevailing market conditions; — fi nancial considerations; — economic factors; — reputational factors; — advice on market information provided by its advisers; — whether, during the period of buy-back activity, the market is fully informed of price sensitive information to ensure compliance with insider trading laws; — minimising the risk that in standing in the market MMG will be leading the market in pricing; — the volumes of MMG securities traded on the market generally; — the volatility of price movements in the market generally; and — the market price of MMG securities.

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2009 Feb MMG EGM (short form).indd Sec2:15 2/03/2009 8:01:52 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

3.2 ADDITIONAL The Buy-Back Tender does provisions of the Corporations Act INFORMATION not technically comply with the relating to withdrawal rights and requirements for an equal access withdrawal offers; 3.2.1 ASIC relief buy-back scheme and, accordingly, the obligation to treat members is treated as a selective buy-back for who hold interests of the same Section 257A of the Corporations the purposes of the Corporations Act. class equally; Act authorises an Australian However, application has been made the acquisition of interests on company such as MMHL to buy to ASIC to grant MMHL an exemption favourable terms; and back its own shares if the buy-back under section 257D(4) of the does not materially prejudice the Corporations Act to permit MMHL: the takeovers provisions in company’s ability to pay its creditors to conduct the Buy-Back Tender Chapter 6 of the Corporations and it follows the procedures set similarly to the conduct of an Act to the extent that the voting out in Division 2 of Part 2J.1 of the equal access scheme; power of each of MMML and its Corporations Act. Division 2 of Part associates increases as a result to utilise the scale-back 2J.1 of the Corporations Act permits of the Buy-Back Tender of MMT mechanism described under the a company to conduct an equal units. heading “How will successful access buy-back scheme if each of tenders be determined” above; the following conditions set out in 3.2.2 Australian tax considerations subsection 257B(2) are satisfi ed: to invite all eligible security holders for the Buy-Back Program to offer for sale any number of the offers under the scheme relate their ordinary shares to MMHL only to ordinary shares; 3.2.2.1 Australian tax rather than MMHL offering to buy considerations for the Buy- the offers are to be made to every back such ordinary shares; and person who holds ordinary shares Back Tender to seek approval by ordinary to buy back the same percentage resolution of its security holders of of their ordinary shares; The following discussion is intended the purchase of ordinary shares only as a general summary of the all of those persons have a under the Buy-Back Program Australian income tax implications of reasonable opportunity to accept (including the Buy-Back Tender) participating in the Buy-Back Tender. the offers made to them; of up to 86,956,521 MMG buy-back agreements are not securities. The income tax implications can entered into until a specifi ed time vary depending on the nature and Under the terms of such relief, MMHL for acceptances of offers has characteristics of participating would not be required to approve the closed; security holders and their specifi c Buy-Back Tender in accordance with circumstances. If a security holder the terms of all the offers are the section 257D of the Corporations Act decides to participate in the Buy- same. (which requires approval of the terms Back Tender, their particular tax of a selective buy-back by a special treatment will accordingly depend An equal access buy-back in excess resolution on which no votes are on their own circumstances. It is of the 10/12 Limit also requires cast by persons whose shares are therefore important that security approval under section 257C of the proposed to be bought back or their holders seek professional tax advice Corporations Act by an ordinary associates). to take into account their particular resolution passed at a general circumstances. meeting of the company. Application has been made to ASIC to grant MMML as responsible entity of MMT relief to conduct the Buy- Back Tender on the terms described in these explanatory notes. This ASIC relief includes relief in respect of:

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2009 Feb MMG EGM (short form).indd Sec2:16 2/03/2009 8:01:52 AM Unless otherwise specifi ed, this an “off-market” buy-back of a Capital gains tax - disposal of discussion is based on income tax share in MMHL; securities legislation and administrative practice an “off-market” buy-back of a The following discussion does not as at 27 February 2009. Participating share in MMIL; security holders should be aware apply to security holders who hold that the ultimate interpretation of the a disposal (for consideration) of a their MMG securities on revenue taxation law rests with the courts, unit in MMT. account (i.e. as trading stock or and that the law, and the way the revenue assets) or who are not the MMG will need to allocate the ATO administers the law, may change benefi cial owners of their stapled Buy-Back Price of an MMG stapled over time. securities. security under the Buy-Back Tender MMG has requested a Class Ruling among the three transactions. It will An MMG security holder participating from the ATO for security holders who do so in a manner consistent with the in the Buy-Back Tender will generally participate in the Buy-Back Tender. methodology it has been following be taken, for capital gains tax (CGT) The ATO will not issue the Class for allocations needed for other purposes, to have disposed of their Ruling in a form that is binding until purposes. MMG expects that this will MMHL and MMIL shares and their after completion of the Buy-Back lead to allocation of the Buy-Back MMT units when MMG accepts Tender. Although it is not anticipated Price as to a nominal percentage to their tender. This is anticipated to be to be the case, when the binding the share in MMHL, as to 10%-15% on 4 May 2009. Australian resident Class Ruling is issued by the ATO, it to the share in MMIL, and as to 85%- taxpayers will be required to take any is possible that it may express views 90% to the unit in MMT. net capital gains or losses on these contrary to those set out below. shares and units into account for In its accounts MMG will debit these purposes of their tax returns for the The information below is not allocated amounts wholly against year ending 30 June 2009. intended to represent an authoritative paid up share capital (in the case of or a complete analysis of all of the shares in MMHL and MMIL) and An MMG security holder will generally the potential Australian taxation against contributed capital (in the make a capital gain on the disposal consequences applicable to the case of the unit in MMT). of a share in MMHL, a share in MMIL particular circumstances of each or a unit in MMT if the CGT cost No dividend component MMG stapled security holder. The base of the share or unit is less than the capital proceeds received on its information is not intended to be In the Buy-Back Tender, MMG disposal. advice and should not be relied expects that no part of the Buy- upon. Security holders should obtain Back Price received by a security independent professional advice in An MMG security holder will generally holder in respect of a share in MMHL make a capital loss on such a share relation to their own circumstances. In or a share in MMIL will need to be particular, security holders who hold and/or unit if the capital proceeds treated as a dividend for Australian received on its disposal are less than their stapled securities on revenue tax purposes. MMG has requested a account should discuss their taxation the security holder’s CGT reduced Class Ruling from the ATO to confi rm cost base of the share or unit. position with their own advisers. this. Once issued, the Class Ruling will be published on the ATO website Elements of Buy-Back Tender A security holder participating in (http://law.ato.gov.au/atolaw). the Buy-Back Tender in respect of The Buy-Back Tender will constitute an MMG security will generally be No assessable income distribution three separate transactions for tax deemed for CGT purposes to have will be included in the part of the purposes in relation to each MMG disposed of each of the share in Buy-Back Price referable to the unit in stapled security bought back MMHL, the share in MMIL and the MMT in the Buy-Back Tender. Rather, under it: unit in MMT for capital proceeds that part will be wholly a capital equal to part of the Buy-Back Price payment by MMT. allocated to it.

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2009 Feb MMG EGM (short form).indd Sec2:17 2/03/2009 8:01:53 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

Generally, the CGT cost base for a Non-resident security holders 3.2.2.2 Australian tax share in MMHL, a share in MMIL or a considerations for the On- unit in MMT will be the amount paid It should not be necessary for MMG Market Buy-Back to acquire it together with certain to withhold any amount on account incidental costs of acquisition (for of any Australian tax from payment The sale of MMG stapled securities example stamp duty and brokerage) of any part of the Buy-Back Price to into the On-Market Buy-Back is and certain incidental costs of an MMG stapled security holder who treated as an ordinary on-market disposal, but reduced (in the case is not a resident of Australia for tax sale of stapled securities for taxation of the unit in MMT) by tax-deferred purposes. purposes. distributions received by the security Important notice holder. The reduced cost base will MMG expects that no part of the Buy-Back Price should be liable to generally be the same as the CGT The tax information above Australian tax as a dividend when cost base. has been reviewed by paid to an MMG stapled security PricewaterhouseCoopers, which is holder who is not a resident of Where security holders have held not required to hold an Australian Australia for tax purposes. their stapled securities for greater Financial Services Licence than 12 months and have not held Under Australian CGT rules, a capital (AFSL) under the Corporations such stapled securities on revenue Act to provide that information. account, generally any capital gain gain or loss is disregarded for foreign tax residents where the CGT asset The information is conﬁ ned to is reduced by a discount of 50% tax issues and is only one of the in the case of individuals and most is not taxable Australian property. As none of a share in MMHL, a share matters that must be considered trusts and 33.33% for complying when making a decision about superannuation entities. in MMIL or a unit in MMT is taxable Australian property, a foreign tax participating in the Buy-Back No discount is available to resident who holds MMG stapled Tender. Investors should consider companies. Capital losses must be securities on capital account should taking advice from a holder of an offset against any capital gain before not be subject to any Australian CGT AFSL before making a decision the discount is applied to the capital on receipt of the Buy-Back Price. about participating in the Buy- gain. If a security holder disposes Back Tender. of their MMG securities under the Different consequences might Buy-Back Tender within 12 months arise if a foreign tax resident held of the acquisition of those stapled MMG stapled securities as part securities, no CGT discount would be of a business conducted through available. a permanent establishment in Australia, or if a foreign resident held Any capital loss realised on the such stapled securities on revenue disposal of the shares in MMHL, account. Speciﬁ c Australian taxation shares in MMIL or units in MMT may advice should be obtained in those be offset against any capital gains cases. realised in the year ending 30 June 2009 (including any such gains on Stamp duty and GST shares in MMHL, shares in MMIL or There will be no stamp duty or GST units in MMT). Any capital losses that payable by participating security are not used in the year ending 30 holders in relation to the Buy-Back June 2009 may generally be carried Tender. forward to be used in a subsequent year.

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2009 Feb MMG EGM (short form).indd Sec2:18 2/03/2009 8:01:53 AM 3.2.3 Additional information about MMG

3.2.3.1 Security price information

On 27 February 2009, the closing stapled security price of MMG was $0.545. Over the six months to 27 February 2009, MMG’s highest and lowest closing security prices were $3.70 and $0.545 respectively. In the period to 27 February 2009, MMG has bought back stapled securities on market for prices between $0.825 and $0.92 per stapled security. The table below shows the trading price and volumes of MMG securities for the 12 months to 27 February 2009. MMG Security Price and Volumes for 12 months to 27 February 2009

5.00 15

4.00 12

3.00 9

2.00 6 Volume Traded ( millions) Stapled Security Price ($)

1.00 3

0.00 - 27/02/08 27/05/08 27/08/08 27/11/08 27/02/09 Source; IRESS

3.2.3.2 Security holder spread

MMG had 210,961,404 stapled securities on issue at the close of trading on 27 February 2009.

Details of the relevant interests of substantial security holders as at 27 February 2009 are shown in the table below:

Security holder No of MMG securities5 % Capital6

Macquarie Group Limited 53,010,009 25.1%

5 Based on latest substantial holding notices received by MMG at 27 February 2009. 6 Based on MMG’s issued capital at 27 February 2009.

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2009 Feb MMG EGM (short form).indd Sec2:19 2/03/2009 8:01:53 AM 3. EXPLANATORY NOTES TO THE NOTICES OF GENERAL MEETING (CONTINUED)

The twenty largest security holders as at 31 January 2009 are shown in the table below:

Rank Security holder No of MMG securities % Capital7 1 Macquarie Media Management Limited 42,252,123 19.79% 2 HSBC Custody Nominees (Australia) Limited 15,619,766 7.32% 3 ANZ Nominees Limited 14,713,474 6.89% 4 Neweconomy Com Au Nominees Pty Limited 9,767,613 4.57% 5 Brispot Nominees Pty Ltd 8,252,274 3.86% 6 J P Morgan Nominees Australia Limited 7,592,770 3.56% 7 CS Fourth Nominees Pty Ltd 6,218,796 2.91% 8 Pan Australian Nominees Pty Limited 5,556,244 2.60% 9 Citicorp Nominees Pty Limited 5,068,751 2.37% 10 National Nominees Limited 4,437,231 2.08% 11 Citicorp Nominees Pty Limited 3,999,746 1.87% 12 Macquarie Media Management Limited 3,161,330 1.48% 13 Mr Nicholas Moore 2,531,935 1.19% 14 Knipple Pty Ltd 2,411,645 1.13% 15 HSBC Custody Nominees (Australia) Limited 2,171,738 1.02% 16 Smallco Investment Manager Ltd 1,935,000 0.91% 17 Carinya Media Management Pty Ltd 1,690,981 0.79% 18 UBS Nominees Pty Limited 1,681,147 0.79% 19 Argo Investments Limited 1,680,211 0.79% 20 Citicorp Nominees Pty Limited 1,561,677 0.73%

3.2.3.3 Directors’ interests in MMG securities The relevant interest of each MMG director in MMG securities as at 27 February 2009, as notiﬁ ed by the directors to ASX is: Director MMG securities Tony Bell 70,000 Chris de Boer 40,000 Michael Carapiet 250,000 Max Moore-Wilton 340,000 Leon Pasternak 308,928 John Roberts (alternate director) 500,000 Michael Hamer Nil Michael Leverock Nil Bob Richards Nil

7 Based on MMG’s issued capital at 31 January 2009.

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2009 Feb MMG EGM (short form).indd Sec2:20 2/03/2009 8:01:53 AM 3.2.3.4 Broadcasting Services 3.2.3.5 Recent ASX Act 1992 announcements

The Broadcasting Services Act MMG entities are listed on ASX. 1992 (Broadcasting Services Announcements by MMG and Act) imposes additional regulation MMG’s most recent Annual Report on the control of media licences in are available from the ASX website. Australia. The regulatory agency Some recent announcements made which administers the Broadcasting to ASX by MMG include: Services Act is the Australian 2009 Interim Results Presentation Communications and Media Authority – 24 February 2009; (ACMA). The Broadcasting Services Act restricts the ability of a person to 2009 Interim Results exercise control of certain commercial Management Information Report media licences, and provides – 24 February 2009; ACMA with the ability to approve 2009 Interim Results transactions which would otherwise Announcement – 24 February be restricted. ACMA may or may 2009; not approve such a transaction. Appendix 4D and Half Year A relevant type of control for MMG Accounts – 24 February 2009; security holders is deemed control by virtue of company interests ASIC advice re ordinary share (as deﬁ ned in the Broadcasting cancellation – 20 February 2009; Services Act) exceeding 15% in a Notice of 2009 Interim Results company. Although a person who Presentation – 17 February 2009; comes to control more than 15% of MMG securities on issue after Appendices 3E – 16 January the Buy-Back Program, may not 2009– 10 February 2009; by reason of this alone, breach the Appendix 3D – 23 December Broadcasting Services Act, there may 2008; be consequences if that person were Appendix 3C – 17 December otherwise in a position to control 2008; other media assets. Interim distribution and signiﬁ cant buy-back – 17 December 2008; 2008 AGM results – 29 October 2008; Review of capital management strategy – 29 October 2008; and 2008 Annual Report - 23 September 2008.

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2009 Feb MMG EGM (short form).indd Sec2:21 2/03/2009 8:01:53 AM 4. DEFINITIONS

10/12 Limit means the limit defi ned Buy-Back Program means the Final Price Tender means a tender by section 257B(4) and (5) of the proposed buy-back program in which a security holder elects to be Corporations Act as 10% of the capped at the lesser of 86,956,521 paid the Buy-Back Price, whatever smallest number of votes attaching to MMG securities and approximately that price is determined to be under voting shares that a company had on $50,000,000 worth of MMG the tender process for the Buy-Back issue in the previous 12 months. securities, as further described in the Tender. notices of meeting and explanatory $ means Australian Dollars. notes. Fund Level means the entities comprising MMG, namely MMHL, ACM means the American Buy-Back Resolutions means the MMT and MMIL, excluding their Consolidated Media group of resolutions to be voted on by security respective subsidiaries. companies. holders to enable MMG to conduct the Buy-Back Program, as set out in IER or Independent Expert’s AFSL means Australian Financial the notices of meeting. Report means the independent Services Licence. expert’s report prepared by Ernst & Buy-Back Tender means the Young Transaction Advisory Services ASX means ASX Limited (ACN 008 proposed off-market buy-back tender Limited enclosed with these notices 624 691). of MMG securities to be undertaken of meeting. ASX Listing Rules means the offi cial as part of the Buy-Back Program, Macquarie Group means Macquarie listing rules of ASX. as further described in the notices of meeting and explanatory notes. Group Limited (ACN 122 169 279) ATO means the Australian Taxation and its associates. Cash Backing per Security Offi ce. means the Fund Level cash on hand divided MMG means Macquarie Media Buy-Back Booklet means the Buy- by the number of MMG securities on Group, comprising MMHL, MMT and Back Tender documentation pursuant issue. MMIL. to which MMG will invite eligible CGT MMHL means Macquarie Media security holders to tender some or all means capital gains tax. Holdings Limited (ABN 91 116 024 of their stapled securities under the Combined Buy-Back means 536). Buy-Back Tender. the Buy-Back Program and the MMIL means Macquarie Media Buy-Back Date means the date on remainder of the Existing Buy-Back. International Limited (EC 37694) which MMG enters into a buy-back Corporations Act means (ARBN 118 577 423). agreement with security holders Corporations Act 2001 (Cth). under the Buy-Back Tender. MMML means Macquarie Media Existing Buy-Back means the on- Management Limited (ABN 16 Buy-Back Price means the lowest market buy-back announced on 17 115 524 019) (AFSL 292297) as price in the Tender Range at which December 2008 of up to 10% of the responsible entity of MMT. MMG will be able to buy back the smallest number of MMG securities amount of stapled securities it on issue in the preceding 12 months. MMT or Trust means Macquarie determines to buy back under the Media Trust (ARSN 116 151 467). Buy-Back Tender. Fair Market Value per Security means the fair market value per MMG MSCM means the Macquarie security as assessed by Ernst & Southern Cross Media group of Young Transaction Advisory Services companies. Limited in the Independent Expert’s Report.

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2009 Feb MMG EGM (short form).indd Sec2:22 2/03/2009 8:01:53 AM Net Investment Value for a quarter Proportionate Earnings means the Record Date means the date set by means: aggregation of the fi nancial results MMG for determining entitlements to the volume weighted average of MMG’s relevant media operations participate in the Buy-Back Tender. market capitalisation of MMG over in the relevant proportions that MMG holds benefi cial ownership Tender Period means the period the last 15 trading days of the during which eligible security holders quarter; plus interests. It is calculated as media operations’ revenues less media may offer to sell some or all of their the amount of any external operations’ expenses, media eligible stapled securities under the borrowings of MMG and its operations’ maintenance capital Buy-Back Tender. wholly-owned entities (but not expenditure, media operations’ net Tender Range means the range including borrowings by or on interest expense, media operations’ of prices at which MMG will invite behalf of operating or project net tax expense, corporate expenses eligible security holders to tender entities controlled by MMG) at the and corporate net tax expense plus some or all of their stapled securities end of the quarter; plus corporate dividend income, corporate under the Buy-Back Tender. the amount of any fi rm net interest income and net gains/ commitments of MMG to make (losses) on foreign exchange hedge further investments at the end of contracts which relate to media the quarter; less operations’ distributions of current period earnings. amounts invested by MMG (and its wholly-owned entities) Proportionate Earnings per in cash or cash equivalents Security or PEPS means (but not including cash or cash Proportionate Earnings divided by the equivalents held by or on behalf number of MMG securities on issue. of any operating or project entities For these purposes, this number of controlled by MMG). issued securities is calculated by the aggregation of each issue of MMG On-Market Buy-Back means the securities weighted by the number proposed on-market buy-back of of days each security was on issue MMG securities to be undertaken as during the period. part of the Buy-Back Program, as further described in these notices of Responsible Entity means MMML meeting and explanatory notes. as responsible entity of MMT. Priority Allocation means $2,000 worth of stapled securities (the number of stapled securities to be based on the market price of MMG securities on or about the date the Buy-Back Booklet is fi nalised for printing), or such lesser number of stapled securities as is required to ensure that MMG is able to buy back only the number of securities it determines to buy back under the Buy-Back Tender.

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2009 Feb MMG EGM (short form).indd Sec2:23 2/03/2009 8:01:53 AM 5. INDEPENDENT EXPERT’S REPORT

The Independent Expert’s Report of Ernst & Young Transaction Advisory Services Limited follows.

24 Macquarie Media Group - Explanatory Materials Accompanying Notices of General Meeting

2009 Feb MMG EGM (short form).indd Sec2:24 2/03/2009 8:01:53 AM Independent Expert's Report and Financial Services Guide Proposed buy-back of securities of Macquarie Media Group

2 March 2009

PART 1 – INDEPENDENT EXPERT’S REPORT

The Independent Directors 2 March 2009 Macquarie Media Holdings Limited No. 1 Martin Place Sydney NSW 2000

The Independent Directors Macquarie Media Management Limited as responsible entity for Macquarie Media Trust No. 1 Martin Place Sydney NSW 2000

The Independent Directors Macquarie Media International Limited c/- ISIS Fund Services Limited 35 Crow Lane East Broadway Paget HM 20 Bermuda

Dear Independent Directors

Independent expert’s report in relation to the Buy-Back Program of MMG securities

Macquarie Media Group (MMG) is a stapled security structure which owns media assets in Australia and the United States with a market capitalisation of approximately $115.0 million as at 27 February 2009. Each MMG security consists of one share in Macquarie Media Holdings Limited (MMHL), one share in Macquarie Media International Limited (MMIL) and one unit in Macquarie Media Trust (MMT). MMG has two wholly owned media investments and significant cash reserves. The investments are:

► Macquarie Southern Cross Media (MSCM), Australia’s largest regional radio and television broadcaster. MSCM contributed approximately 85% of MMG’s EBITDA in the calendar year ended 31 December 2008.

► American Consolidated Media (ACM), the fifth largest specialty owner of small market community newspapers in the United States. ACM contributed approximately 15% of MMG’s EBITDA in the calendar year ended 31 December 20081.

On 17 December 2008, MMG announced the results of a capital management review, which included the immediate commencement of an on-market buy-back of up to 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities) (the Existing Buy-back) and an intention to seek MMG security holder approval for an additional buy-back of up to approximately $50 million of MMG securities. This report relates to the approval being sought from

1 Based on actual exchange rates during the year

Ernst & Young Transaction Advisory Services Limited, ABN 87 003 599 844 Australian Financial Services Licence No. 240585

MMG security holders for the additional buy-back of up to approximately $50 million of MMG securities only.

In the MMHL Notice of Extraordinary General Meeting 2009 and the MMT Notice of Meeting 2009 (Notices of Meeting) to which this independent expert’s report will be attached, MMG will be seeking MMG security holders’ approval for a buy-back program (the Buy-Back Program) which will comprise an off-market buy- back tender (the Buy-Back Tender) targeting approximately $25 million worth of MMG securities, followed by an On-Market Buy-Back. The Buy-Back Program allows for the buy-back and cancellation of up to 86,956,521 MMG securities. The MMG Boards have announced that they do not intend for the aggregate consideration paid by MMG for securities bought back and cancelled under the Buy-Back Program to exceed approximately $50 million.

Australian Securities & Investments Commission (ASIC) Regulatory Guide 110 Share buy-backs states in RG110.18 that:

“If a company proposes to buy-back a significant percentage of shares or the holdings of a major shareholder, it should consider providing:

► A report by its independent directors about whether shareholders should vote in favour of the buy-back, particularly regarding how much the company is paying for the shares

► An independent expert’s report with a valuation of the shares”

MMG has stated that it will be seeking approval to buy-back up to 86,956,521 of its securities in the Buy-Back Program which represents approximately 40.5% of the MMG securities on issue as at 16 December 2008 (being the day prior to the announcement of the Existing Buy-Back). This does not include the 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities) able to be bought back as part of the Existing Buy-Back. As this is considered ‘a significant percentage’ of the MMG securities outstanding, the independent directors of MMHL, MMIL and MMML have requested an independent expert’s report be prepared.

As at 27 February 2009 3,965,370 MMG securities have been bought back under the Existing Buy-Back. The MMG securities that can be bought back in addition to the MMG securities already acquired to complete the Existing Buy-Back is 16,992,098. For the purposes of this report we have referred to the remaining 16,992,098 as the Remaining Existing Buy-Back.

Ernst & Young Transaction Advisory Services Limited has been appointed by the independent directors of MMHL, MMIL and MMML as responsible entity of MMT to prepare an independent expert’s report providing:

1. A valuation of MMG securities

2. An analysis of the advantages and disadvantages of the Buy-Back Program

Valuation In sections 5 to section 8 of this report we consider the fair market value of MMG securities. We consider the value of MMG securities to fall within the range of $1.90 to $2.39 per MMG security on a non controlling basis. A summary of the components of our valuation is as follows:

Currency: AU$ 000 Low High Controlling equity value - MSCM 170,826 266,826 Controlling equity value - ACM 48,561 83,183 MSCM and ACM controlling equity value 219,387 350,009 less: Capitalised corporate costs (48,000) (48,000) add: Non operating cash 329,114 329,114 Controlling equity value - MMG 500,501 631,123 less: Discount for lack of control 20% (100,100) (126,225) Non controlling equity value - MMG 400,401 504,898 Number of MMG securities on issue 210,961 210,961 Controlling fair market value per security 2.37 2.99 Non controlling fair market value per security 1.90 2.39

Key points to note in relation to the valuation are as follows:

► The equity valuation range is wide because of the relatively high debt levels held within MSCM and ACM. At the enterprise value level (before debt) our valuation range for each investment is not particularly wide.

► We have valued each of MSCM and ACM using the capitalisation of earnings methodology. We have valued each of the investments on a controlling basis given MMG is an investment company and each of the investments is wholly owned. We have then applied a minority discount to arrive at the value of MMG securities on a non controlling basis.

► We note that the United States media industry at the present time is suffering declines in performance as a result of reduced levels of advertising expenditure. This appears to be particularly significant for metropolitan publications and those that rely heavily on classified advertising. A number of media companies also have high debt levels. Consequently in the valuation of the ACM business we have considered that the multiples of many of its most comparable entities are significantly affected by each of their specific circumstances. Accordingly, rather than rely solely on newspaper comparable multiples we have looked more broadly at multiples of media companies. It should be noted that ACM reflects only between 9.7% and 13.2% of our overall valuation of MMG securities.

We note that our valuation is well above current and recent trading prices of MMG securities. We discuss key factors that may be contributing to this position in section 8.5 of this report.

Advantages, disadvantages and other considerations In section 9 we have outlined the advantages, disadvantages and other considerations of the Buy-Back Program. The following is a summary of the considerations outlined in section 9.

Advantages Acquisition of MMG securities at below our assessed fair market value If the Buy-Back Program is approved and implemented it is likely that the buy-back will occur at values that are below our assessed fair market value. This has the potential to increase the value of the remaining MMG securities. The extent of any increase to fair market value will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled. A table setting out potential outcomes are set out in section 9.1.1 of this independent expert’s report.

Increased earnings per MMG security If the Buy-Back Program is approved and implemented it is likely that earnings per MMG security will increase. The extent of any increase will be dependent upon the number of MMG securities bought back and the average price paid for each MMG security. The extent of any increases to earnings per MMG security will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled. A table setting out potential outcomes are set out in section 9.1.2 of this independent expert’s report.

Increased cash backing per MMG security If the Buy-Back Program is approved and implemented it is likely that the cash backing per MMG security will increase if the average price paid for each MMG security for the Remaining Existing Buy-Back and the Buy-Back Program (together the Combined Buy-Back) is less than the current cash backing of $1.56 per MMG security. The cash backing per remaining MMG security is expected to increase further because of the part of the earnings of MSCM that are retained in the future.

The extent of any increases to cash backing per MMG security will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled. A table setting out potential outcomes are set out in section 9.1.3 of this independent expert’s report.

Greater ability to sell MMG securities (and price to be realised) Trading volumes of MMG securities are generally fairly low. The Buy-Back Program including the Buy-Back Tender and the On-Market Buy-Back may improve the ability of MMG security holders seeking to dispose of their MMG securities to do so and may also have a favourable impact on the price that they receive compared to the position if MMG was not acquiring the MMG securities under the Buy-Back Program.

No transaction costs in off-market buy-back The Buy-Back Program includes the Buy-Back Tender which may be followed by an On-Market Buy-Back. An MMG security holder selling via the Buy-Back Tender should not incur transaction costs. In contrast, a MMG security holder selling on the Australian Securities Exchange (ASX), including into the On-Market Buy-Back, may incur transaction costs, in particular brokerage costs. The extent of these costs will vary depending on a MMG security holders’ brokerage arrangements.

Disadvantages Reduction in cash holdings at fund level The Buy-Back Program may reduce MMG’s cash holdings at the fund level by up to approximately $50 million which will be in addition to cash expended pursuant to the Remaining Existing Buy-Back. The extent to which this will occur will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired. In the currently constrained debt markets it may be considered prudent to maintain cash reserves when investee companies have sizable debt refinancings as will occur with both MSCM and ACM within the next two years. Notwithstanding this, even if the Buy-Back Program is completed in full, the remaining cash balance of MMG is expected to be significant. Therefore we do not consider the possible reduction in cash to be a major disadvantage in the context of our overall consideration of the Buy-Back Program.

In this regard it should also be noted that MMG reduced its interim distribution from 24.5 cents per MMG security for the 6 months to 31 December 2007 to 4.5 cents per MMG security for the 6 months to 31 December 2008. This reduction of 20 cents per MMG security, when annualised and applied to total MMG securities on issue as at 27 February 2009 equates to a distribution saving of approximately $84 million. In effect therefore the Combined Buy-Back does not place MMG in a cash position materially different compared to what would have been the case if the distribution payout ratio had not been reduced.

Increase in gearing The level of net debt measured as net debt to net debt plus equity will increase under all scenarios due to cash being used to complete the Combined Buy-Back. While we note the increase, we do not consider this to be a significant increase in the context of our overall assessment. The extent of any increases in gearing will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled. A table setting out potential outcomes are set out in section 9.2.2 of this independent expert’s report.

Reduced market capitalisation and liquidity The Buy-Back Program will result in fewer MMG securities on issue and, in the absence in a change in other factors, a reduced market capitalisation. This may have the following implications:

► It may reduce the liquidity of MMG securities in the future ► It may reduce the representation of MMG securities in relevant ASX indices

Assuming that MGL does not participate in the Combined Buy-Back, the free float is expected to fall from its current level of 74.9% to a minimum of 50.5%.

Other impacts Increase in MMG security holding of and voting power of Macquarie Group As a result of the Buy-Back Program MGL’s relevant security holding2 and voting power in MMG is likely to increase.

An increase in MGL’s security holding from 25.1%3 to less than 50% would not strictly enable MGL to pass an ordinary resolution in its own right as an ordinary resolution requires that votes cast in respect of 50% or more of MMG securities are in favour of the resolution. However in practice many securities are not voted in most circumstances. The higher the MGL interest ultimately becomes; the greater influence that MGL would have in relation to the passing of an ordinary resolution. It would be expected that with a security holding of 40% or higher that MGL could in most cases cause an ordinary resolution to be passed. An increase in MGL’s security holding would also not enable MGL to pass a special resolution in its own right as a special resolution requires that votes in respect of 75% or more of MMG securities are in favour of the resolution. However, again, a holding of greater than 40% could cause or at least be highly influential in the passing of a special resolution.

There are other factors which go some way toward mitigating these impacts on control:

► MMG has a policy that the Board has at least four Directors and that a majority of those are independent.

The extent of any increases to MMG security holding and voting power of the Macquarie Group will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled. A table setting out potential outcomes are set out in section 9.3.1 of this independent expert’s report.

2 MMG securities are not held by MGL directly. Most securities are held by MMML, with other MGL entities also holding MMG securities. 3 Based upon the latest substantial holding notices received by MMG at 27 February 2009.

Off-market and on-market components of the Buy-Back Program In section 9.3.2 of this report we provide analysis of the various elements of the Buy-Back Program, particularly the differences for MMG security holders of participating in either the Buy-Back Tender or the On-Market Buy-Back.

Income tax Ernst & Young has not been appointed to provide tax advice regarding the Buy-Back Program and the following comments are compiled solely on the basis of information which will be contained in the Notices of Meeting. The Notices of Meeting will indicate that the general tax treatment of the Buy-Back Program has been reviewed by the external tax advisers of MMG.

The Notices of Meeting will also indicate that MMG has requested a Class Ruling from the Australian Taxation Office to confirm the tax treatment of aspects of the Buy-Back Program. In addition, the Notices of Meeting will contain a general description of the general tax implications of the Buy-Back Program for resident and non-resident MMG security holders.

Other matters In preparing this independent expert’s report we have considered relevant regulatory guides issued by ASIC, with particular reference to Regulatory Guide 111 Content of expert reports and Regulatory Guide 112 Independence of experts.

It should be noted that our report is being prepared to be provided to MMG security holders to assist them to consider how they vote in relation to the resolution to approve the Buy-Back Program. The report has not been prepared and does not contain any opinion or advice to MMG security holders as to whether or not they should sell their MMG securities into any of the Remaining Existing Buy-Back, the Buy-Back Tender or the On-Market Buy-Back. It is not possible or practicable for us to consider the impact of the Buy-Back Program on individual MMG security holders as their circumstances are not known to us and their decisions as to whether to sell will be based on many factors including their own financial circumstances, risk profiles, liquidity circumstances, investment strategies and tax positions.

MMG security holders should seek their own professional advice in relation to how the Buy-Back Program will apply to their specific circumstances.

We have prepared a Financial Services Guide in accordance with the Corporations Act, 2001. The Financial Services Guide is included as Part 2 to this report.

This report reflects circumstances and conditions as at the date of this report. This letter must be read in conjunction with the full independent expert’s report.

Yours faithfully Ernst & Young Transaction Advisory Services Limited

Stuart Bright Ishwar Madhyastha Director and Representative Director and Representative

Contents

1. Overview...... 1 1.1 Introduction...... 1 1.2 MMG structure...... 1 1.3 Terms of the buy-back...... 2 2. Scope...... 4 2.1 Requirement for the independent expert’s report...... 4 2.2 Our Report...... 5 2.3 MMG security holder decisions...... 5 2.4 Limitation and reliance on information...... 6 3. Industry analysis...... 7 3.1 Australian media industry...... 7 3.2 US newspaper publishing industry...... 18 4. Macquarie Media Group...... 20 4.1 Overview...... 20 4.2 Financial performance...... 23 4.3 Financial position...... 26 4.4 Capital structure and MMG security holders...... 27 4.5 ASX performance...... 29 4.6 Distribution history...... 32 4.7 Capital management review...... 33 5. Valuation methodologies and approach...... 34 5.1 Definition of value...... 34 5.2 Valuation approach...... 34 6. Valuation of MSCM...... 35 6.1 Valuation...... 35 6.2 Assessment of EBITDA...... 35 6.3 Assessment of EBITDA multiples...... 37 6.4 Surplus assets and liabilities...... 39 6.5 Net debt...... 40 6.6 Valuation conclusion...... 40 7. Valuation of ACM...... 41 7.1 Valuation...... 41 7.2 Assessment of EBITDA...... 41 7.3 Assessment of EBITDA multiples...... 43 7.4 Surplus assets and liabilities...... 45 7.5 Net debt...... 45 7.6 Valuation...... 45 8. Valuation of MMG...... 46 8.1 Controlling value of MSCM and ACM...... 46 8.2 Capitalised pro forma corporate costs...... 46 8.3 Non operating cash...... 47 8.4 Discount for a lack of control...... 47 8.5 Valuation...... 48

9. Evaluation of the Buy-Back Program...... 49 9.1 Advantages of the Buy-Back Program...... 52 9.2 Potential Disadvantages of the Buy-Back Program...... 55 9.3 Off-market and on-market components of the Buy-Back Program...... 58 9.4 Income tax...... 60 Appendix A Qualifications and declarations...... 61 Appendix B Sources of information...... 63 Appendix C Valuation methodologies...... 64 Appendix D Comparable companies...... 66 Appendix E Recent transactions...... 72 Appendix F Reconciliation to statutory accounts...... 76 Appendix G Glossary...... 77

1. Overview

1.1 Introduction On 17 December 2008 MMG announced the results of a capital management review which included a decision to commence an on-market buy-back of up to 10.0% of the smallest number of MMG securities on issue in the preceding 12 months (being 20,957,468 MMG securities) (the Existing Buy-Back) and an intention to seek MMG security holder approval for an additional buy-back of up to $50 million of MMG securities. This report relates to the approval being sought from MMG security holders for the buy-back of the additional approximately $50 million of MMG securities as will be outlined in the Notices of Meeting only.

In the Notices of Meeting to which this independent expert’s report is to be attached, MMG is seeking MMG security holders’ approval for a buy-back program (the Buy-Back Program) comprising an off-market buy-back tender (the Buy-Back Tender) which may be followed by an on-market buy-back (the On-Market Buy-Back). The Buy-Back Program will allow for the buy-back and cancellation of up to 86,956,521 MMG securities. The MMG Boards have announced that they do not intend for the aggregate consideration paid by MMG for MMG securities bought back under the Buy-Back Program to exceed approximately $50 million.

For the purpose of this independent expert’s report we have referred to the Remaining Existing Buy-Back and the Buy-Back Program together as the Combined Buy-Back.

1.2 MMG structure MMG is a stapled security structure with investments in media assets in Australia and the United States and significant cash reserves. The MMG stapled security structure includes:

► Macquarie Media Trust (MMT) ► Macquarie Media Holdings Limited (MMHL) ► Macquarie Media International Limited (MMIL)

Each stapled security issued by MMG consists of one share in MMHL, one share in MMIL and one unit in MMT. Macquarie Media Management Limited (MMML) is the responsible entity for MMT and the manager of MMHL and MMIL.

MMG is listed on the Australian Securities Exchange (ASX) with a market capitalisation of $115.0 million as at 27 February 2009. The group’s investments include:

► 100% of Macquarie Southern Cross Media (MSCM), Australia’s largest regional radio and television broadcaster. MSCM contributed approximately 85% of MMG’s EBITDA in the calendar year ended 31 December 2008. ► 100% of American Consolidated Media (ACM), the 5th largest specialty community newspaper group in the USA focused on population areas of less than 15,000 people.

ACM contributed approximately 15% of MMG’s EBITDA in the calendar year ended 31 December 20084.

As at 31 January 2009, on a pro forma basis adjusting for the December 2008 distribution of $9.7 million, cash transferred from MSCM of $18.3 million and cash expended as part of the Existing Buy-Back since its commencement on 13 January 2009 of $3.4 million, MMG held $329.1 million in cash at the fund level. This excludes the cash and debt in the MSCM and ACM businesses. 1.3 Terms of the Buy-Back Program As will be provided in the Notices of Meeting, MMG will propose to conduct the first stage of the Buy-Back Program as an off-market buy-back tender. Following completion of the Buy- Back Tender, or if the MMG Boards determine not to proceed with a Buy-Back Tender the MMG Boards may, if considered appropriate, return any surplus cash to MMG security holders through an on-market buy-back. MMG is seeking approval to buy-back up to 86,956,521 MMG securities under the Buy-Back Program, which equates to 40.5% of MMG securities that were on issue at 16 December 2008 (being the day prior to the announcement of the Existing Buy-Back) and is designed to give MMG flexibility in determining the size of the Buy-Back Program and the timing and size of buy-backs on-market over the next 12 months. The MMG Boards have indicated that the target amount of aggregate consideration to be paid by MMG for securities bought back under any Buy-Back Tender may be set at $25 million. The MMG Boards may increase or decrease any such target amount but do not intend for the aggregate consideration paid by MMG for securities bought back under the overall Buy-Back Program to exceed approximately $50 million. We note that the 86,956,521 is the maximum number of MMG securities that may be bought back under the Buy-Back Program. As the maximum value of MMG securities to be bought back has been capped at approximately $50 million, the actual number of MMG securities to be bought back will in part be dependent on the price paid for the MMG securities. In our independent expert’s report we provide a range of possible outcomes of the Buy-Back Program based on an illustrative range of average prices (the Illustrative Prices). The fixed price range will be determined by the MMG independent directors at the time the tender documents are dispatched, and we understand will be in a narrower range than that set out in the illustrative tables. At this point in time it is not possible to determine where the fixed price tender range will be set other than that the independent directors of MMG have advised us that it will not include prices that are outside the ranges set out in the illustrative tables in section 9. Specific details of any Buy-Back Tender and the On-Market Buy-Back will be provided in the Notices of Meeting and MMG security holders should read this carefully. In summary, we note the following key points in relation to the Buy-Back Program:

► The maximum number and/or value of the Buy-Back Program is intended to be the lesser of 86,956,521 MMG securities or approximately $50 million. ► Any Buy-Back Tender could be conducted prior to the On-Market Buy-Back and could enable all MMG security holders for whom it is both feasible and practical to make a tender offer. ► All MMG security holders submitting successful tenders in a Buy-Back Tender would be paid the same price for MMG securities bought back.

4 Based on actual exchange rates during the year.

► A price or range of prices within which any Buy-Back Tender would be conducted under, will be provided by MMG in the tender documents to be issued (the Fixed Price Range). ► In undertaking the On-Market Buy-Back, MMG will issue their broker with daily trading instructions to buy-back MMG securities for each day on which MMG wishes to purchase MMG securities on market at a price which is not more than 5% above the average of the market price (as defined in the ASX Listing Rules) for MMG securities over the 5 previous trading days. The price cap is imposed by ASX Listing Rule 7.33.

2. Scope

2.1 Requirement for the independent expert’s report This report has been prepared for MMG security holders to assist them in their determination as to whether they should vote in favour of, or against the approval of the Buy-Back Program. The report has also been prepared to meet the following regulatory requirements:

2.1.1 Corporations Act Section 257C(1) of the Corporations Act, 2001 provides that the terms of a buy-back agreement must be approved before it is entered into by a resolution passed at a general meeting of the company where the company proposes to buy-back more than 10.0% of its issued capital in any twelve month period.

Section 257(2) requires the company to include with the notices of meeting a statement setting out all information known to the company that is material to the decision on how to vote on the resolution.

2.1.2 ASIC exemption Section 257A of the Corporations Act authorises an Australian company such as MMHL to buy-back its own shares if the buy-back does not materially prejudice the company’s ability to pay its creditors and it follows the procedures set out in Division 2 of Part2J.1 of the Corporations Act. Division 2 of Part 2J.1 of the Corporations Act permits a company to conduct an equal access buy-back scheme if each of the following conditions set out in subsection 257B(2) is satisfied:

► The offers under the scheme relate only to ordinary shares ► The offers are to be made to every person who holds ordinary shares to buy-back the same percentage of their ordinary shares ► All of those persons have a reasonable opportunity to accept the offers made to them ► Buy-back agreements are not entered into until a specified time for acceptances of offers has closed ► The terms of all the offers are the same

An equal access buy-back in excess of the 10.0% in 12 months limit also requires approval under section 257C of the Corporations Act by an ordinary resolution passed at a general meeting of the company.

The Buy-Back Tender would not technically comply with the requirements for an equal access buy-back scheme and, accordingly, would be treated as a selective buy-back for the purposes of the Corporations Act. However, prior to conducting any Buy-Back Tender, MMHL has applied to the Australian Securities and Investments Commission (ASIC) to grant MMHL an exemption under section 257D(4) of the Corporations Act to permit MMHL:

► To conduct a Buy-Back Tender similarly to the conduct of an equal access scheme ► To utilise a scale-back mechanism to be described in the Notices of Meeting ► To invite all eligible MMG security holders to offer for sale any number of their securities in MMHL rather than MMHL offering to buy-back such securities

► To seek approval by ordinary resolution of its security holders of the purchase of MMHL securities under the Buy-Back Program of up to a maximum of 86,956,521 MMG securities

Accordingly, MMHL would not be required to approve the Buy-Back Tender in accordance with section 257D of the Corporations Act (which requires approval of the terms of a selective buy-back by a special resolution on which no votes are cast by persons whose shares are proposed to be bought back or their associates).

2.1.3 ASIC ASIC Regulatory Guide 110 Share buy-backs requires information to be disclosed to security holders involved in or affected by share buy-backs. RG110.18 provides that if a company proposes to buy-back a significant percentage of shares or the holdings of a significant shareholder, it should consider providing:

► A report by its independent directors about whether shareholders should vote in favour of the buy-back, particularly regarding how much the company is paying for the shares ► An independent expert’s report with a valuation of the shares

In addition, ASIC RG111 Content of expert reports provides discussion regarding information that should be provided to shareholders within expert’s reports. RG111 does not provide specific guidance in relation to the analysis of buy-backs.

2.2 Our Report In our independent expert’s report we provide:

1. A valuation of MMG securities

2. An analysis of the advantages and disadvantages of the Buy-Back Program

We provide our valuation of MMG securities in sections 5 through to section 8 of this report. In section 9 we consider the advantages and disadvantages of the Buy-Back Program.

2.3 MMG security holder decisions This report constitutes general financial product advice only and has been prepared without taking into consideration the individual circumstances of MMG security holders. The decision as to whether or not to approve the Buy-Back Program is a matter for consideration by individual MMG security holders. MMG security holders should consider the advice in the context of their own circumstances and preferences. MMG security holders who are in doubt as to the action they should take in relation to the Buy-Back Program should consult their own financial adviser.

We have prepared a Financial Services Guide in accordance with the Corporations Act. The Financial Services Guide is included as Part 2 to this report.

2.4 Limitation and reliance on information In reaching our conclusions set out in this report, we have considered and relied upon information provided by MMG, MSCM and ACM and information that has been placed on the public record. We note that certain information relied on constitutes internal management information that is not on the public record. In the preparation of this report we have relied upon and considered information believed after due inquiry to be reliable and accurate. We consider reliance on this information reasonable in the circumstances. Our sources of information are set out in appendix B to this independent expert’s report.

We have no reason to believe that any material facts have been withheld from us. We note however, that we have not audited the information provided to us and we do not warrant that our enquiries have disclosed all the matters that an audit or a more extensive examination might have disclosed.

Our report is based on economic, market and other conditions prevailing at the date of this report. This report should be read in conjunction with the declarations outlined in the qualifications and declarations in appendix A.

3. Industry analysis

MMG owns 100% of each of MSCM and ACM. MSCM operates within the media industry in Australia while ACM operates within the media industry in the United States. MSCM is the larger of the two investments and contributed approximately 85% of MMG’s EBITDA from continuing operations in the calendar year ended 31 December 2008. Accordingly, this section focuses more on the Australian media industry, in particular free-to-air (FTA) television and radio broadcasting. 3.1 Australian media industry The Australian media industry comprises of the following segments:

► Television and radio: broadcasting revenue is derived from advertising, licensing, subscriptions and public funding. Television includes metropolitan and regional FTA and subscription television. Radio is separated into metropolitan, regional and community radio.

► Online media: includes general media, online classifieds and online search and directories. Revenue is primarily sourced through advertising and subscriptions.

► Publishing: includes publishing of books, newspapers, and magazines. Publishers generate revenue from the sale of hard and electronic copies of their products as well as advertising within those products.

► Outdoor media: includes large format and poster media, transit media and street furniture. Revenue is generated through sales and advertising.

► Movies and entertainment: includes the production and distribution of movies, music and videos. Revenue is generated through box office admission and sale of products such as CD’s and DVD’s. MSCM operates primarily in the television and radio industry in regional markets in Australia. The majority of revenue generated by these sections of the media industry is through advertising. The following chart shows the breakdown of funds spent on advertising in media in FY08. Australian advertising expenditure in FY08

Cinema, 1% Outdoor, 4%

Online, 13% FTA television, 28%

Radio, 8%

Pay television, 3%

Other publications, 2%

Magazines, 9% Newspapers - metro & regional, 25% Suburban newspapers, 7%

Source: Commercial Economic Advisory Service of Australia (CEASA)

MSCM focuses on regional markets. The major distinctions between media businesses in metropolitan and regional markets are as follows:

► Regional providers derive relatively greater portions of revenue from local advertising, while in metropolitan areas the focus is primarily on national advertising. Consequently regional providers are less reliant on national advertising agencies for revenue.

► Regional markets have fewer participants generally resulting in more concentrated markets.

► There is a lower penetration of subscription television and broadband services in regional markets resulting in less audience fragmentation.

In 2005, the Federal Government merged the Australian Broadcasting Authority and the Australian Communications Authority to form the Australian Communications and Media Authority (ACMA).

ACMA has a wide range of statutory functions in respect of broadcasting5, and such functions are to be exercised in accordance with the objects and regulatory policy set out in the Broadcasting Services Act 1992 (BSA).6

ACMA’s broadcasting functions include the following: to regulate broadcasting services in accordance with the BSA, to plan the broadcasting services bands on an area basis, to allocate, renew, suspend and cancel licences and to take other enforcement action under the BSA, to collect licence fees, to develop program standards and to monitor compliance with those standards, to monitor compliance with codes of practice and to investigate complaints concerning broadcasting services.

The media industry has recently undergone significant changes in ownership and control, largely relating to the ownership and control of commercial television and commercial radio broadcasting licences, resulting from changes to the BSA.

The Broadcasting Services Amendment (Media Ownership) Act 2006 was proclaimed in 2007, and amended the BSA to abolish media-specific foreign ownership and control rules. Cross media ownership and control rules were also amended, allowing a person to be in a position to exercise control over any two of: a commercial television licence, a commercial radio licence or an associated newspaper in the same licence area, so long as the new “diversity” test was satisfied. In summary, the new test provides for a minimum number of “points” which are sometimes simplified as “voices” with the minimum number of voices for regional markets effectively being four, whereas the minimum number of voices for metropolitan markets (the five State capital cities), is effectively five.

Media mergers are still subject to the provisions of the Trade Practices Act and Foreign Investment Review Board approval where required.

The changes in media ownership and control laws have resulted in increased foreign ownership and control and operator consolidation. Recent transactions illustrating operator consolidation and foreign ownership include:

► MMG’s acquisition of Southern Cross Broadcasting (Australia) Limited (SCB) and its subsequent consolidation with its existing regional radio broadcasting operations.

5 Section 10 of the Australian Communications and Media Authority Act 2005 6 Section 3, and regulatory policy in sections 4 and 5 of the BSA.

► The divestment of SCB’s metropolitan radio and television content production businesses to Fairfax Media Limited (Fairfax).

► WIN Corporation’s purchase of Channel 9 in Adelaide and Perth.

► KKR’s and CVC Asia Pacific’s significant investments in Seven Media and PBL Media respectively.

► Seven Network’s acquisition of a major shareholding in West Australian Newspapers Holdings Limited.

► Fairfax’s acquisition of Rural Press Limited.

Currently, the industry is being affected by a slowdown in national and local advertising, as general economic conditions become more demanding.

3.1.1 FTA television in Australia MSCM operates within the regional FTA television market in Australia. FTA television has the highest penetration of any type of media in Australian homes, at approximately 99.7%. The commercial FTA component of this industry derives 92% of the total revenue from advertising and particularly advertising revenue from areas such as retail, telecommunications, motor vehicles, finance and travel.7

FTA television reaches an average of 9.2 million viewers in metropolitan areas and approximately 3.9 million regional viewers8 daily. MSCM operates in regional markets which make up approximately 30% of the total average daily reach of FTA television in Australia and 95% of Australia’s population outside the mainland State capital cities. In the six months ended 31 December 2008, regional television earned approximately 23% of total advertising revenue of FTA television in Australia. The graph below shows half yearly advertising revenue growth of FTA television on prior comparable period (PCP) in Australia, split by regional and metropolitan services. It indicates that FTA advertising revenue in regional areas is generally more stable than FTA advertising revenues in metropolitan areas. 9

Half yearly FTA television advertising revenue growth on PCP

12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 Dec 2007 June2008 Dec 2008

Metropolitan services Regional services

Source: FreeTV Australia

7 FreeTV Australia, Year In Review 2008 8 This figure represents only regional viewers in the four regional aggregated markets (Northern and Southern New South Wales, Queensland and Victoria). 9 FreeTV Australia, Year In Review 2008

Advertising revenue can be segmented into national advertising and local advertising. National revenue stems from advertising by nationwide companies across multiple markets in Australia while local revenue stems from local businesses targeting their specific geographic regions and communities. The breakdown of metropolitan and regional television operators’ advertising revenue between national and local is illustrated below based on FY08 figures. This shows that regional television operators are comparatively less dependent on national advertising revenues.

FTA television advertising revenue breakdown National Local Metropolitan television operators 96% 4%

Regional television operators 64% 36% Source: Reports published by Commercial Economic Advisory Service of Australia National advertising is generally placed by major agencies whereas local advertising is sold directly to local advertisers. Regional broadcasters derive a greater portion of revenue from local markets. The following graph shows total growth of FTA television advertising revenue, indicating that local revenues tend to be less volatile than national revenues.

Yearly FTA television broadcasting revenue growth on PCP

20%

15%

10%

-5%

-10% FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008

National revenue Local revenue

Source: Reports published by Commercial Economic Advisory Service of Australia

The Australian Government has announced that all FTA broadcasters should switch from analogue to digital transmission by the end of 2013. In 2007 approximately 42% of Australian households reported they received digital FTA television.10 Advantages of digital broadcasting include superior image, improved audio quality, and better reception. In addition digital television requires less band-width and offers broadcasters the possibility of providing more digital channels, providing high-definition digital services and other non- television services such as pay-multimedia services or interactive services.

FTA operators may derive additional revenue from digital multi-channelling. No FTA operators who are commercial television broadcasters have yet launched new multi- channels, although Network TEN has announced that its new channel One will commence in March 2009.

The costs of converting to digital broadcasting for television stations are estimated at $460 million.11 In response to this, the Federal Government has provided subsidies to regional FTA television broadcasters (including MSCM) by way of annual licence fee rebates to assist them in installing digital television broadcasting infrastructure.

10 ACMA, Digital Television in Australian Homes, 2007 11 IBISWorld Industry Report, Free to Air Television Services in Australia, 14 October 2008

3.1.1.1 Key trends The commercial FTA television market is characterised by three major networks, Seven Network, Nine Network and Network Ten. Due to regulatory restrictions, no broadcasting licence or licence holder may reach more than 75% of the population. This has resulted in the major commercial networks being restricted to essentially broadcasting in the mainland State capital cities, where most of the population is concentrated. As a result, the regional FTA market is made up of commercial stations which have separate ownership to the metropolitan networks. However, the regional networks are affiliated with the major networks; this means that much of their broadcast content is acquired from the major networks, generally in return for a percentage of advertising revenue or percentage of costs being paid to the major networks. Beginning in 1989, the regional FTA television industry began a process of aggregation which has resulted in each regional television licence area having either two or three commercial stations. In order to promote competition and give a wide range of choice to viewers, each of these stations provide different streams of content, as well as a specified number of hours of local content. In areas where there are three commercial licences, each regional television licence holder will tend to have an affiliation with one of the three major commercial networks, showing predominantly content from that network (as described above). In areas where there are only two licences, any one licence holder can purchase programming from up to two commercial free to air networks (potentially on a program-by- program basis). According to Regional Television Marketing, the regional FTA television market is split into ‘aggregated’ markets and ‘diary’ markets. Aggregated markets are those in which there are three commercial FTA stations, meaning that the broadcast content of any one station predominantly reflects that of a major commercial network. Aggregated markets include Queensland, Northern New South Wales, Southern New South Wales and Victoria. Diary markets are those in which there are only two commercial FTA stations, and content of an operator can therefore include one of more of the three major networks. The map below illustrates the key aggregated and diary markets within which MMG operates through MSCM, and the stations (and network affiliates) in each of those markets. Regional television markets in which MSCM operates

Darwin MSCM (7 / 10) Imparja(9 / 10) Queensland 7 QLD (7) WIN (9) MSCM (10) Central MSCM (7) Imparja(9 / 10)

NNSW Prime (7) WIN (9) MSCM (10)

SNSW Spencer Gulf Prime (7) GTSBKN (7 / 9) WIN (9) MSCM (10) MSCM (10) Victoria Prime (7) WIN (9) Tasmania MSCM (10) WIN (9) MSCM (7 & 10)

Source: Regional TV Marketing

3.1.1.2 Barriers to entry Traditionally, FTA television in Australia has been extensively regulated. This has resulted in high barriers to entry due to the following:

► New entrants have been prevented from entering the market due to tight government control over the number of FTA television licences.

► Establishment costs of a new FTA network would be extremely high, due to high distribution costs, marketing costs, costs of acquiring or producing programming, establishment of news and local content infrastructure and establishment or setup of broadcasting sites.

► There are physical barriers to entry in establishing a new regional analogue or digital network, whereby many of the existing broadcast sites do not have capacity to take on a new station. This means that new sites would have to be established, which may be extremely difficult given the geographically remote location of certain sites in regional areas.

3.1.1.3 Key industry participants Ten Network Holdings (TNH) In March 1998 CanWest undertook a $375 million dollar IPO of TNH, retaining a 57.5% stake in the company. TNH operates five mainland capital city television stations (Sydney, Melbourne, Brisbane, Perth and Adelaide) and Eye Corp Pty Limited, one of the largest out- of-home media operators with businesses in Australia, New Zealand, Asia, Europe and North America. The company primarily operates in Australia.

Seven Network Limited (SNL) In November 2006 SNL sold its television, magazine and online business to Seven Media Group Pty Limited (SMG) in return for shares in SMG. Subsequent to the establishment of SMG by SNL, Kohlberg Kravis Roberts (KKR) invested $690 million for 47.7% of SMG’s assets through a joint venture. SMG also raised $2.5 billion of new debt implying an enterprise value for the company of approximately $4.0 billion. SNL also has interests in Western Australian Newspapers Limited.

PBL Media In October 2006 Publishing and Broadcasting Limited (PBL) divested a significant stake in Nine Network, ninemsn, ACP Magazines and an interest in carsales.com.au for an enterprise value of $4.5 billion to a new company PBL Media, owned 50% by PBL and 50% by CVC Asia Pacific. A further 25% equity interest was sold in PBL Media to CVC for equity value of $515 million in May 2007. In December 2008 PBL Media was recapitalised, with CVC injecting an additional $335 million into the business, resulting in its ownership of PBL Media increasing to above 99%.

PBL Media now owns the Nine Network (ownership of Nine Network in Sydney, Melbourne, Brisbane, Darwin and Newcastle), ACP Magazines, Ticketek, Acer Arena as well as interests in other investments including ninemsn, carsales.com.au and Sky News.

Australian Broadcasting Corporation (ABC) and Special Broadcasting Service Corporation (SBS) ABC and SBS are the two major public television and radio broadcasters, providing a variety of services including: television, radio, magazines, books, recordings, videos, events management, television content sales to other television broadcasters as well as retail shops and centres. The television service is provided on a national basis and focuses on the arts, youth, drama, comedy, documentaries, science and natural history. SBS broadcasts primarily multicultural programs with approximately 52% of its broadcasts in languages other than English. The network is primarily government funded but has been allowed to sell sponsorships and has limited advertising revenue (restricted to 5 minutes every hour). The ABC is exclusively publicly funded. WIN Corporation Pty Limited (WIN) WIN is a large predominantly regional broadcaster operating across New South Wales, Queensland, Tasmania, Western Australia (regional and metropolitan) and South Australia (metropolitan). In 2007 WIN purchased NWS 9 Adelaide and Channel 9 in Perth and has programming and affiliation agreements with Nine Network to operate under the Nine Network brand. WIN has potential audience coverage of approximately 5 million. Prime Media Group Limited (Prime Media) Prime Media is a regional free to air television and radio broadcaster with operations in Australia and New Zealand. Its television broadcast licence covers the regional locations in northern and southern New South Wales, Victoria, the Gold Coast area of eastern Queensland and all of regional Western Australia. The majority of Prime’s content is supplied through an affiliation agreement with the Seven Network. While it owns 10 radio licences in Queensland, the vast majority of Prime’s revenue is derived from regional television operations.

3.1.1.4 Past performance and outlook The industry is facing an increasingly more competitive operating environment, against new digital media, including pay television, but also internet protocol television (IPTV). Total audience has recently been static to declining and it is possible that new standard definition broadcast channels may fragment the existing audience further, with limited increase in advertising revenue, but with increasing costs. The integration of broadcasters with mobile phones and internet sites, as well as podcasts, some of which are on a paid basis for downloads, may expand as the industry seeks to connect with a wider audience. Australian FTA television industry revenue

8,000 7,000 6,000 5,000 n o i l l i 4,000 m

$ 3,000 2,000 1,000 - FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Forecast Historic

Source: IBISWorld Industry Report, Free to Air Television Services in Australia, 14 October 2008

Over the five year period to FY14, IBISWorld expects real industry revenue to increase at an average annual rate of 2.1%. We note these forecasts are dated October 2008. Recent analyst reports and company announcements have indicated industry performance may be lower than the above forecast in the short term. The relatively low growth assumption relates to the further cyclical decline in advertising expenditure in increasingly uncertain economic conditions as well as further developments in new digital media. However, operators argue that FTA television may perform better in times of audience fragmentation as it is the largest aggregator of all forms of media. The ability to aggregate mass audiences is particularly significant for advertisers wishing to build brand image and awareness. This may result in a premium being applied to FTA television compared to other media. 3.1.2 Australian radio The radio services industry in Australia consists of commercial radio broadcasters, community and open narrowcasting radio, and national radio services (such as the ABC and the SBS). Commercial radio stations and narrowcasting radio services are reliant on advertising revenue, while community radio operators are reliant on volunteer effort and local sponsor contributions. Community radio stations have recently shown strong growth within this market. The industry is broken up into the following segments:

► Commercial radio: AM and FM commercial radio broadcasters form the largest segment.

► Public broadcasters: includes the ABC and SBS radio services.

► Community radio broadcasters: largely volunteer operated services, broadcasting to a small local population within a town or a few adjoining suburbs.

► Narrowcasting and aspirant radio stations: include those operators who have been granted temporary radio licences, limited range broadcasters and specific purpose broadcasting. The vast majority of the radio industry’s revenue is sourced from advertising. In FY08 approximately 34% of advertising revenue was sourced from regional broadcasters while approximately 66% was sourced from metropolitan broadcasters. Growth in advertising revenue on half yearly PCP for metropolitan and regional and community broadcasters is illustrated below. The graph tends to indicate that revenue in regional areas is less volatile than in metropolitan areas. Yearly radio advertising revenue growth on PCP

16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008

Metropolitan Regional

Source: Reports published by Commercial Economic Advisory Service of Australia

Radio advertising can again be further classified between local and national. The breakdown of metropolitan and regional radio operators’ advertising revenues into national and local is illustrated below based on FY08 data. This shows that regional radio operators are much less dependent on national advertising revenues than metropolitan radio operators.

Radio broadcasting advertising revenue breakdown National Local Metropolitan radio operators 64% 36% Regional radio operators 29% 71% Source: Reports published by Commercial Economic Advisory Service of Australia

Yearly growth in local and national advertising revenue is illustrated below. The graph also tends to indicate that local advertising revenues are less volatile than national revenues.

Yearly radio advertising revenue growth on PCP

25%

20%

15%

10%

-5%

-10% FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008

National revenue Local revenue

Source: Reports published by Commercial Economic Advisory Service of Australia

3.1.2.1 Key trends The radio industry is mature with moderate growth. The future of radio, especially in metropolitan markets, is likely to be linked to digital media convergence. Many operators are already linking into the digital media revolution by providing radio broadcasts through mobile phones and online.

Digital radio broadcasts are expected to commence during 2009 in metropolitan markets. No date has been set for digital radio broadcasts in regional and rural markets. Digital radio will provide better reception, a higher quality of sound and carry ancillary services in the form of audio, images, data and text. The introduction of this technology will provide new opportunities for the industry.

In 2008 ACMA introduced new rules to ensure that regional commercial radio licensees broadcast “material of local significance”. The imposition of these new licence conditions was a requirement under the BSA that was introduced with the media ownership and control reforms. Such obligations apply to all commercial radio licensees, although those in small markets are required to broadcast less such material.

These new rules have impacted on the cost base for operators.12

12 ACMA, Local Content Levels Investigation Report, June 2007.

3.1.2.2 Competition Competition in the metropolitan radio industry is high, especially with the auctioning of additional FM licences by ACMA in Adelaide, Sydney, Brisbane and Melbourne during 2004. The issuing of new licences led to a greater number of broadcasters and subsequently greater competition in metropolitan markets. However, this trend has not been experienced by the regional radio industry where markets are smaller and no new licences have been issued since 2004. This has provided regional markets with greater stability than the metropolitan markets.

Critical success factors include choosing a target audience and being more attuned to the selected target market's tastes, monitoring changes in these tastes and keeping current the mix of programming, personalities and format to maintain a dominant position among the chosen demographics.

The radio broadcasting industry tends not to directly compete with other electronic media, capturing its audience at home, while travelling in motor vehicles, in shopping centres and in workplaces. Direct internet broadcasting across the globe by radio stations is a potential threat to existing operators. The introduction of digital radio may also increase competition with other media given the ability of this technology to broadcast text and images.

3.1.2.3 Key participants in the Australian radio services industry Austereo Group Limited (Austereo) Austereo operates a commercial FM radio broadcasting network in Australia. The group has two national radio networks, Today FM and Triple M, with stations in all mainland capital cities, as well as joint venture stations in Newcastle with MSCM and in Canberra. It also has a presence in the offshore markets of Malaysia and the UK. Austereo is 52% owned by Village Roadshow Limited.

APN News & Media Limited (APN) APN operates 12 radio stations primarily in State capital cities in two streams, Mix and Classical Hits, and more than 120 stations in New Zealand, in a joint venture with US based Clear Channel Communications. It also has newspaper, magazine publications and outdoor advertising operations.

Fairfax Media Limited (Fairfax) Fairfax is Australia’s largest newspaper publishing group with over 350 titles reaching over 5 million people a day. In 2007 MMG acquired all of SCB, however, agreed to divest several State capital radio stations and television production businesses to Fairfax. Fairfax also holds several regional radio stations as a result of its takeover of Rural Press.

On 20 January 2009 Fairfax announced the sale of the Southern Star television production and distribution business to Endemol conditional on regulatory approvals and other matters. The sale is expected to be completed during 2009.

DMG Radio Holdings (DMG) DMG operates the Nova and Vega networks as well as a number of other popular metropolitan stations and a radio station at Gosford. The company sold the majority of its regional interests (57 stations) to MSCM in 2004. DMG is a subsidiary of Daily Mirror and General Trust in the UK.

ABC ABC, along with SBS, is one of the two national public radio broadcasters (in addition to the Parliamentary News Network). The ABC provides a variety of services including television programs, radio programs and ABC online. It also provides; via Radio Australia a rebroadcast service to Asia Pacific, Europe and North America on 219 radio stations and cable outlets. ABC broadcasts in all capital cities and 44 regional areas.

Western Australian Newspapers (WAN) WAN publishes newspapers and undertakes other printing and publishing. The company also owns RedWave Media which operates regional radio stations in Western Australia and Geraldton Newspapers, which publishes newspapers and operates two FM radio licences.

3.1.2.4 Past performance and outlook 90% of the commercial radio industry revenue is derived from advertising and therefore, is affected by any factor that impacts on advertising expenditure. This is particularly so for expenditures on household goods, houses, motor vehicles, and discretionary areas such as travel, food and drink. A significant portion of advertising expenditure flows from the Federal and State Governments.

FY08 industry revenue totalled $1.28 billion which translates to a growth rate of 2.2% on the prior year, with metropolitan areas growing slightly faster than regional markets. In the half year to 31 December 2008 however, metropolitan radio advertising revenues declined by 3.2%.

For FY09, IBISWorld expects total industry revenue (from advertising as well as other activities and sources) to be $1.30 billion. The commercial radio segment is expected to generate total revenue of $1.17 billion while the rest of the sector (including public, other community and licence aspirant radio stations) is expected to generate approximately $130 million from government grants and other revenue.

Radio broadcasting industry revenue in Australia

1,600 1,400 1,200 1,000 n o i l l i 800 m

$ 600 400 200 - FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Forecast Historic

Source: IBISWorld Industry Report, Radio Services in Australia, 04 December 2008

In metropolitan markets, short term economic volatility is expected to continue into FY09-10, while regional markets (whilst not immune) are expected to show more resilience. Local advertising is also likely to be less volatile as discussed previously in this section. Industry costs will increase from the commencement of digital broadcasting. Competition from all forms of digital media may constrain radio industry revenue growth in the future, as advertising expenditure is allocated to these new media. Over the five year period to FY14 IBISWorld expects real industry revenue to increase at an average annual rate of 2.1%.13 3.2 US newspaper publishing industry ACM is the fifth largest specialist publisher of community newspapers focusing on small markets (population of 15,000 or less) in the US. The US newspaper publishing industry is split between metropolitan and community newspaper publishers. While in this section we provide a discussion regarding the community newspaper publishing industry (in which ACM operates), where information is not specifically available for community newspaper publishing, we have provided data for both metropolitan and community newspaper markets. Newspaper publishing in the US was a US$55.9 billion industry in 2007 down from US$59.7 billion in 2006.14 Newspapers generate revenue principally through advertising and circulation which consist of subscriptions and single-copy sales. Historically revenue has been split approximately 80% advertising and 20% circulation. Some of the major expenses for the industry are labour, distribution and paper costs. According to TNS Media Intelligence, newspapers had a 17.6% share of total media advertising in the US in 2007, down from 18.8% in 2006. Standard & Poors expect advertising and circulation revenue to continue to be adversely impacted as the industry deals with a number of challenges including:

► Significant recent economic weakness in the US ► Publishers being adversely impacted as advertisers switch to other media, such as the internet ► More competition from other traditional media such as broadcast and cable television

These trends are evident in the historic and forecast figures in the graph below. We note the forecasts for 2008-09 are dated August 2008 and recent analyst reports and company announcements have indicated industry performance may be lower than the forecast below.

13 IBISWorld Industry Report, Radio Services in Australia, 04 December 2008. 14 Standard & Poors, Industry Surveys, Publishing, 21 August 2008.

US newspaper publishing industry advertising and circulation revenue

70,000

60,000

50,000 n o i 40,000 l l i m

S 30,000 U

20,000

10,000

A A A F F 04A 05 06 07 08 09 20 20 20 20 20 20

Advertising revenue Circulation revenue

Standard & Poors, Industry Surveys, Publishing, 21 August 2008.

The following graph presents the growth of the various revenue streams generated by the US newspaper industry, showing that of all advertising revenue streams local advertising has been impacted to a lesser extent by the economic slowdown than classified and national advertising. We note that the community newspaper publishing industry is less reliant on classified and national advertising than metropolitan publications.

US newspaper industry advertising revenues

25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0%

0 1 2 3 4 5 6 7 8 9 99 0 00 0 01 0 02 0 03 0 04 0 05 0 06 0 07 0 08 0 c- - c- - c- - c- - c- - c- - c- - c- - c- - c- - e un e un e un e un e un e un e un e un e un e un D J D J D J D J D J D J D J D J D J D J

National Local Classified

Source: Newspaper Association of America Significant cost realignment has been another recent trend amongst newspaper publishers in the US in 2008 in response to the recent uncertainty in economic conditions. Reduction of staff and more efficient newsprint consumption have been common measures to lower costs. According to Newspaper Association of America, in May 2008 US newspaper companies used 16% less paper than in May 2007.

Recently reported results by individual companies in the newspaper publishing industry indicate advertising remains weak and are not expected to improve in the near to medium term. September 2008 quarter figures for advertising revenue in the newspaper industry were 19% down on PCP15. Community newspaper publishers are expected to be more resilient to the deteriorating economic conditions based on their greater exposure to local advertising.

15 Newspaper Association of America (NAA)

4. Macquarie Media Group

4.1 Overview MMG is a triple stapled security, which listed on the ASX on 17 November 2005. The business was established to acquire, own and manage a diversified portfolio of media assets in Australia and internationally.

The stapled security structure of MMG comprises three legal entities:

► Macquarie Media Trust – a managed investment scheme that has been established in the form of a unit trust to provide funding to MMHL and MMIL

► Macquarie Media Holdings Limited – an Australian public company which owns MSCM

► Macquarie Media International Limited – a Bermudan domiciled mutual fund company which owns ACM

Each stapled security issued by MMG consists of one ordinary share in MMHL, one ordinary share in MMIL and one unit in MMT. Shares in MMHL and MMIL and units in MMT are stapled and are not able to be traded independently on the ASX.

MMML is a wholly owned subsidiary of MGL. MMML is the responsible entity of MMT and the manager of MMHL and MMIL. The group structure can be viewed in the diagram below.

MMG stapled security

Share Unit Share Manager Responsible Entity Manager MMML

MMHL MMT MMIL

100% 100% Macquarie Southern American Cross Media Group Consolidated of Companies Media Group of (MSCM) Companies (ACM)

Currently MMG has two wholly owned investments (MSCM & ACM) and significant cash reserves. However since listing MMG has acquired and disposed of economic interests in a number of media assets. The diagram below represents a timeline of the acquisitions and disposals made by MMG since its listing on 17 November 2005.

MMG acquired MMG acquired MMG acquired MSCM sells MSCM sold 35.1% of TDT TBC (60%) ACM $102m SCB (86.2%) 19 radio licenses to WIN and 50% of DDT $416m (May-06) (Feb-07) $1,393m (Oct-07) for $35m (Mar-08) to Prime TV (Jan-09)

Jan / Jan / Oct / Jan / Feb Apr / Jul / Oct / Apr / Jul / Oct / Apr / Jul / Oct / Feb / Feb / Jan Nov / / Mar May Aug / Nov / May / Aug / Nov / May / Aug / Nov / Mar Mar 09 Dec 2006 / Jun Sep Dec Jun Sep Dec Jun Sep Dec 2007 2008

MMG ACM acquired MMG sold SCB radio ACM announces MMG MMG acquired Superior and production acquisition of 33 sold TBC Listed SCB Publishing & assets to Fairfax for publications from (60%) (Nov-05) (13.8%) Grove Sun $522 million Chesapeake (Jan-08) and $390m (Nov-06) $80m (Jun-07) (Nov-07) Brown (Dec-07) for $182m (Jun-08) 4.1.1 Macquarie Southern Cross Media MSCM is Australia’s largest, regional radio and television broadcaster, reaching a potential audience of 7.5 million people or 95% of Australia’s population based outside the mainland State capital cities. MSCM is the only regionally focused broadcaster able to provide customers a comprehensive large scale integrated and creative advertising solutions across both television and radio. For the calendar year ended 31 December 2008 MSCM contributed approximately 85% of MMG’s EBITDA on a pro forma basis (assuming all businesses were owned for the full period). 4.1.1.1 MSCM – Radio MSCM’s radio division is the owner and operator of the largest number of commercial radio licenses in Australia (66 of those stations are wholly owned by MSCM and its subsidiaries). Its portfolio comprises 68 commercial radio stations in 38 licence areas across Queensland, New South Wales, Victoria, Tasmania, South Australia and Western Australia. Over the last calendar year, on a pro forma basis MSCM’s radio division has contributed to approximately 47% of MSCM’s total EBITDA.16 MSCM's radio stations have predominantly music-based formats with two broad programming streams across the portfolio:

► Hit Music Network - Targeted at an 18 to 39 year-old demographic with an emphasis on popular music. Includes the following brands: Star FM which operates in New South Wales, South Australia and Victoria; Hot FM which operates in North Queensland and Western Australia; and Sea FM which operates along the east coast and Tasmania.

► Local Works - Targeted at an over 35 demographic with a mix of talkback and adult contemporary music, brands include Gold FM and Mix FM in Queensland.

16 Unaudited MMG Management Accounts on a pro forma basis as if all businesses were owned for the full period

MSCM - Radio licences Licensee Licence area Licensee Licence area Barrier Reef Broadcasting Pty Limited Mackay Radio 2GZ Pty Ltd Orange Belcap Investments Pty Ltd Albany Radio 2RG Pty Ltd Griffith Belcap Investments Pty Ltd Albany Radio 2RG Pty Ltd Griffith Central Coast Radio Pty Ltd Gosford Radio 3BO Pty Ltd Bendigo Commercial Radio Coffs Harbour Pty Ltd Coffs Harbour Radio 3CV Pty Ltd Bendigo Commercial Radio Coffs Harbour Pty Ltd Coffs Harbour Radio 3MA Pty Ltd Mildura Dubbo FM Radio Pty Ltd Dubbo Radio 3MA Pty Ltd Mildura Elldale Pty Ltd Bridgetown Radio 6AM Pty Ltd Northam Elldale Pty Ltd Bridgetown Radio 6AM Pty Ltd Northam Elldale Pty Ltd Katanning Radio Albury-Wodonga Pty Ltd Albury Elldale Pty Ltd Katanning Radio Newcastle Pty Limited Newcastle Esperance Broadcasters Pty Ltd Esperance Radio Newcastle Pty Limited Newcastle Esperance Broadcasters Pty Ltd Esperance Radio West Broadcasters Pty Ltd Bunbury FNQ Broadcasters Cairns Pty Ltd Cairns Radio West Broadcasters Pty Ltd Bunbury Forsby Pty Ltd Kingaroy Radio West Broadcasters Pty Ltd Narrogin Goulburn and Border Broadcasters Pty Ltd Albury Radio West Broadcasters Pty Ltd Narrogin Goulburn and Border Broadcasters Pty Ltd Shepparton Regional Broadcasters Australia Pty Ltd Emerald Goulburn and Border Broadcasters Pty Ltd Shepparton Regional Broadcasters Australia Pty Ltd Kalgoorlie Gold Coast FM Pty Ltd Gold Coast Regional Broadcasters Australia Pty Ltd Kalgoorlie Gold Radio Service Pty Ltd Toowoomba Regional Broadcasters Australia Pty Ltd Rockhampton Gold Radio Service Pty Ltd Toowoomba Regional Broadcasters Australia Pty Ltd Roma Great Southern Land Broadcasters Pty Ltd Hobart Riverina Broadcasters (Holdings) Pty Ltd Wagga Wagga Great Southern Land Broadcasters Pty Ltd Hobart Riverina Broadcasters (Holdings) Pty Ltd Wagga Wagga Greater Cairns Radio Pty Ltd Cairns Rockhampton Broadcasting Company Pty Ltd Rockhampton Maryborough Broadcasting Company Pty Ltd Bundaberg Sea FM Central Coast Pty Limited Gosford Maryborough Broadcasting Company Pty Ltd Maryborough Sea FM Gold Coast Pty Limited Gold Coast Maryborough Broadcasting Company Pty Ltd Maryborough South Eastern Broadcasters Pty Ltd Mount Gambier Mid-Coast Broadcasters Pty Ltd Kempsey South Eastern Broadcasters Pty Ltd Mount Gambier Mid-Coast Broadcasters Pty Ltd Kempsey Sunshine Coast Broadcasters Pty Ltd Nambour Mid-Districts Radio Pty Ltd Merredin Sunshine Coast Broadcasters Pty Ltd Nambour Mid-Districts Radio Pty Ltd Merredin Tablelands Broadcasting Pty Limited Atherton Nessan Pty Ltd Townsville Townsville Broadcasters Pty Ltd Townsville North Queensland Broadcasting Corporation Mount Isa Votraint No. 691 Pty Ltd Warragul Radio 2GZ Pty Ltd Orange Whitsundays Broadcasters Pty Ltd Mackay Source: MMG Management 4.1.1.2 MSCM - Television MSCM’s television division has controlling interests in 13 TV licences (12 of which are wholly owned by MSCM and its subsidiaries) and jointly owns one other smaller TV licence. These services are provided across 12 licence areas. MSCM’s businesses include Southern Cross Ten and Southern Cross Television which cover the aggregated markets of Queensland, Northern and Southern New South Wales and Victoria as well as Tasmania, Darwin, Spencer Gulf, Broken Hill and Remote Central and Remote Eastern Australia. Over the last calendar year on a pro forma basis MSCM’s television division has contributed to approximately 53% of MSCM’s total EBITDA. MSCM’s main affiliation is with Network Ten, with 9 out of MSCM’s 14 stations covered under affiliation agreements with Network Ten. MSCM also has program supply agreements with the Seven Network in Tasmania, Darwin, Spencer Gulf, Broken Hill and the Remote Central and Remote Eastern region. A small amount of Nine Network programming is also broadcast in the Spencer Gulf and Broken Hill licence areas. MSCM also produces local content in order to meet its local content requirements (contained in its licence conditions). Cross promotion of Southern Cross Ten and Southern Cross Television by MSCM’s radio operations also helps provide support for MSCM’s television ratings performance.

MSCM - Television licences Licensee Licence area Australian Capital Television Pty Limited Southern NSW TV1 Broken Hill Television Limited Broken Hill TV1 (NSW) Broken Hill Television Limited Broken Hill TV1 (NSW) Northern Rivers Television Pty Limited Northern NSW TV1 Regional Television Pty Limited Darwin TV1 Regional Television Pty Limited Remote Central & Eastern Australia TV2 (NT/SA/QLD/NSW) Regional Television Pty Limited Mt Isa TV1 (QLD) Regional Television Pty Limited Regional Queensland TV1 (QLD) Spencer Gulf Telecasters Limited Spencer Gulf TV1 (SA) Spencer Gulf Telecasters Limited Spencer Gulf TV1 (SA) Southern Cross Television (TNT9) Pty Limited Tasmania TV1 Southern Cross Communications Limited Western Victoria TV1 Southern Cross Communications Limited Eastern Victoria TV1 Mildura Digital Television Pty Limited Mildura/Sunraysia TV1 (NSW) Source: MMG Management 4.1.2 American Consolidated Media ACM is the fifth largest specialty owner of small market community newspapers in the US, reaching approximately 2.6 million people through more than 100 local newspaper publications in 18 geographic regions in 10 states. These publications consist of 15 daily newspapers, 44 weekly newspapers and approximately 45 “shopper” and specialty publications and associated websites. For the calendar year ended 31 December 2008 the ACM business contributed approximately 15% of MMG’s EBITDA on a pro forma basis.

ACM’s publications provide key local news and advertising mediums in their respective communities and have strong franchises and long established histories in these markets.

ACM generates almost all of its advertising revenue from its local markets and has been able to take advantage of efficiencies through centralising the majority of its printing and many back office support functions at its daily newspaper operations or its Dallas head office. The ACM business also receives revenue from commercial printing activities, circulation (new subscriptions and single-copy sales) and internet based advertising. 4.2 Financial performance 4.2.1 MMG statutory consolidated financial performance MMG’s consolidated financial performance set out below represents MMG’s operations, inclusive of MSCM’s regional radio operations, MSCM regional FTA television business and the ACM community newspaper business. It excludes TBC operations which were divested in June 2008.

The table below summarises MMG’s EBITDA as per its statutory accounts for the financial years ending 30 June 2007, 30 June 2008 and for the six months to 31 December 2008.

Currency: AU $ 000 MMG FY07A MMG FY08A MMG HY09A Revenue from continuing operations 1 170,738 442,726 280,311 Other income 3,417 8,295 42,814 Employee expenses (65,342) (150,764) (92,146) Broadcast and production costs (16,105) (109,084) (80,359) Management fee expense (14,447) (11,397) (1,332) Occupancy costs (9,766) (15,435) (8,758) Promotions and marketing (4,795) (8,684) (5,001) Administration costs (7,848) (23,633) (13,277) Other expenses from ordinary activities (36,273) (20,032) (7,406) Share of net profits of investments 2 1,584 1,878 311 EBITDA pre impairment charges and discontinued operations 21,163 113,870 115,157 EBITDA margin (pre impairment charges) 12.4% 25.7% 41.1% 1 Excluding interest received 2 Accounted for using the equity method Source: MMG 2008 Annual Report & MMG 2009 Interim Report

In relation to MMG’s reported statutory financial performance for the full year ended 30 June 2008, we note the following:

► Operational revenue of $442.7 million partly comprises income from MSCM (including the acquisition of SCB in November 2007) of $316.1 million and ACM of $88.7 million.17

► Total operational revenues increased by $272.0 million (159.3%) driven by:

► MMG’s acquisition of the remaining 86.2% interest in SCB during October 2007

► MSCM’s key advertising contracts with the Australian Government in regards to the 2007 election campaign

► ACM’s acquisitions of Superior Publishing Corp and publishing assets of Chesapeake Publishing Corporation, Brown Publishing Co. and Grove Sun Newspapers Co.

► An increase in other income of $4.9 million was driven by the gain on sale of some commercial radio broadcast licenses, non-cash fair value gains on the valuation of foreign exchange contracts and realised gains on foreign exchange contracts.

► Employee, broadcasting and production costs contributed to the majority of MMG’s operating expenses. Other expenses of $20.0 million in FY08A include net foreign exchange losses of $18.9 million (FY07A: $30.2 million).

► We note that the FY07A and FY08A financial performance results excludes income from MMG’s 60% economic interest in TBC up until the date of disposal as well as the $255.4 million profit from its disposal in June 2008 (for consideration of $390.2 million).

► Results for FY08A reflected an increase in statutory EBITDA of $92.7 million to $113.9 million over the corresponding period. The successful acquisition of the SCB business and the implementation of a number of cost reduction strategies contributed to EBITDA margin improvement of 13.3% to 25.7%.

17 MMG 2008 Annual Report

In relation to MMG’s financial performance for the six months ended 31 December 2008 (HY09A), we note the following:

► Total operational revenues for HY09A were $280.3 million representing full period impacts of ACM acquisitions (including Chesapeake and Brown), and the SCB acquisition made during FY08.

► Operational revenues for HY09A exclude the revenue from TBC for the full year and 19 radio licences (required as part of the SCB acquisition) from the date of divestment, being early 2008.

► Television licence rebate payments provided to broadcasters in relation to the requirement to broadcast two signals (analogue and digital) during the period of changeover from analogue to digital television dropped from $6.1 million in the half year to 31 December 2007 to $1.1 million in the half year to 31 December 2008.

► Given the more difficult economic environment and especially given that the prior period included higher levels of advertising associated with the Federal election in Australia and other Federal Government programs this appears to be a sound outcome. The Olympic Games in August 2008 also adversely impacted MSCM as advertisers tended to favour Seven Network and Prime Media (Seven Network’s regional affiliate) broadcasts over this period for their coverage of the games.

► ACM has also been adversely affected by the challenging US economy, however almost all of ACM’s revenues come from local communities which are less exposed to economic movements than the more volatile national advertising market.

► Other income of $42.8 million comprises a foreign exchange gain on MMG’s investment in ACM of $43.4 million, realised losses on foreign exchange contracts of $1.3 million and profit from the sale of operating assets of $0.7 million.

► Impairment charges of $127.1 million were recorded in HY09A as a result of the write down of goodwill associated with ACM. For the purposes of our analysis we have not included this in our EBITDA calculation.

► Results for HY09A indicate EBITDA (pre impairment charges) of $115.2 million was earned during the half year.

We note that the above financial information is taken from the statutory accounts and therefore includes various one-off transactions that would be removed on a normalised basis. It also includes part year impacts of businesses acquired and disposed of during the relevant periods. We have analysed financial performance of both MSCM and ACM on a more comparable basis in sections 6.2 and 7.2 below.

4.3 Financial position 4.3.1 MMG statutory consolidated financial position The consolidated financial position of MMG and its consolidated subsidiaries as at 30 June 2008 and 31 December 2008 is presented in the following table.

Currency: AU$ 000 MMG 30 Jun 08 MMG 31 Dec 08 Cash and cash equivalents 453,758 354,635 Receivables 100,337 108,707 Available for sale inventories 2,630 4,180 Current tax assets 1,360 2,627 Derivative financial instruments 2,447 - Non current assets classified as held for sale - 8,000 Other financial assets 8,000 1,182 Current assets 568,532 479,331 Receivables 444 1,083 Investments accounted for using the equity method 20,139 20,285 Property, plant and equipment 176,951 190,033 Intangible assets 1,389,400 1,370,517 Deferred tax assets - 706 Derivative financial instruments 15,440 - Retirement benefit assets 21 - Non-current assets 1,602,395 1,582,624 Total assets 2,170,927 2,061,955

Distribution payable 48,252 9,672 Payables 67,823 53,813 Provisions 7,213 7,006 Borrowings 298 7,878 Current tax liabilities 789 180 Derivative financial instruments - 1,542 Current liabilities 124,375 80,091 Provisions 7,090 7,338 Borrowings 1,056,900 1,045,611 Defrred tax liabilities 14,171 18,386 Retirement benefit obligations - 1,543 Derivative financial instruments 2,595 53,684 Non-current liabilities 1,080,756 1,126,562 Total liabilities 1,205,131 1,206,653 Net assets/(liabilities) 965,796 855,302 Source: MMG 2009 Interim Report and MMG Management We note from the financial position that:

► MMG had cash of $354.6 million as at 31 December 2008. Of this cash, $324.0 million was held at the fund level by MMG, with $24.4 million and $6.2 million representing operating cash held by MSCM and ACM respectively. Fund level cash that is excess to working capital requirements is invested in Australian bank deposits, Australian accepted bills and Australian 90 day commercial paper with A-1 and A-1+ credit ratings.

► Intangible assets of $1,370.5 million represent the identifiable intangible assets and goodwill of the MSCM and ACM businesses. This includes commercial radio/television broadcast licences, mastheads and brand names, customer relationships and goodwill. Increases to intangible assets for the half year to 31 December 2008 included foreign currency exchange differences for masthead valuations ($21.8 million), customer relationships ($17.6 million) and goodwill ($73.2 million). Reductions in intangible

assets arose from an impairment charge of $127.1 million against goodwill and amortisation of other intangibles.

► MMG had debt outstanding to financiers and related parties of $1,053.5 million (net of capitalised establishment costs) as at 31 December 2008. All debt is held in MSCM and ACM and is not guaranteed by MMHL, MMIL or MMT. The asset level debt maturities are as follows:

► June 2010: ACM US$139.2 million drawn

► November 2010: MSCM AU$872.5 million drawn

► MMG’s weighted average interest rate was 8.1% at 31 December 2008.

4.3.2 Net debt In determining the net debt of MMG, MSCM and ACM as at the date of our valuation we have been provided with updated cash and debt balances as at 31 January 2009. The following table provides the calculation of the net debt for the group used in our valuation, being the 31 January 2009 net debt adjusted for the payment of HY09A distribution, payment for MMG securities acquired under the Existing Buy-Back and a transfer of cash between MSCM and MMG (fund level) all of which occurred after 31 January 2009 (pro forma net debt).

AU$ million Fund-Level MSCM ACM Total Cash at 31 January 2009 322.7 37.6 8.9 369.2 Less: Cost of Buyback to from 1 February to 27 February 2009 (2.2) (2.2) HY09A Distribution (9.7) (9.7) MSCM cash distribution to MMG on 3 February 2009 18.3 (18.3) - Pro Forma Cash 329.1 19.3 8.9 357.3 Debt - (872.5) (214.2) (1,086.7) Pro Forma Net Debt 329.1 (853.2) (205.3) (729.4) Securities on issue 211 Cash backing per security 1.56 Source: MMG Management Note: ACM cash and debt have been converted to AU$ at 0.64988, being the exchange rate as at 27 February 2009 4.4 Capital structure and MMG security holders 4.4.1 MMG capital structure as at 31 December 2008 As at 31 December 2008, MMG’s capital comprised 214,926,774 ordinary securities. The only substantial MMG security holder as at 31 December 2008 was MMML (beneficial interest of 21.1%).

Subsequent to 31 December 2008 3,965,370 MMG securities have been bought back under the Existing Buy-Back. At the date of this report 210,961,404 MMG securities remain on issue. Total consideration paid for these MMG securities was approximately $3.43 million for an average price paid of $0.865.

The following table indicates MMG’s top twenty MMG registered security holders as at 31 January 2009 prior to adjustment for the MMG securities bought back subsequently.

Top twenty MMG security holder list as at 31 January 2009 Name of shareholder Share holding % of shares held Macquarie Media Management Limited 42,252,123 19.79% HSBC Custody Nominees (Australia) Limited 15,619,766 7.32% ANZ Nominees Limited 14,713,474 6.89% Neweconomy Com Au Nominees Pty Limited 9,767,613 4.57% Brispot Nominees Pty Limited 8,252,274 3.86% JP Morgan Nominees Australia Limited 7,592,770 3.56% CS Fourth Nominees Pty Limited 6,218,796 2.91% Pan Australian Nominees Pty Limited 5,556,244 2.60% Citicorp Nominees Pty Limited 5,068,751 2.37% National Nominees Limited 4,437,231 2.08% Citicorp Nominees Pty Limited 2 3,999,746 1.87% Macquarie Media Management Limited* 3,161,330 1.48% Mr Nicholas Moore 2,531,935 1.19% Knipple Pty Limited 2,411,645 1.13% HSBC Custody Nominees (Australia) Limited 2,171,738 1.02% Smallco Investment Manager Limited 1,935,000 0.91% Carinya Media Management Pty Limited 1,690,981 0.79% UBS Nominees Pty Limited 1,681,147 0.79% Argo Investments Limited 1,680,211 0.79% Citicorp Nominees Pty Limited 1,561,677 0.73% Total for top 20 shareholders 142,304,452 66.65% * Reinvested performance fees and related securities acquired under the DRP Source: MMG Management's analysis of the share register as at 31 January 2009

4.4.2 Distribution of MMG securities The following table illustrates the distribution of MMG securities as at 19 February 2009. As shown, individuals and entities with holdings of greater than 100,001 MMG securities represent approximately 80% of the total capital base of the entity.

Holding size 19-Feb-09 Total stapled securities % of issued MMG securities 1 - 1,000 915 636,264 0.3% 1,001 - 5,000 3,919 11,320,618 5.4% 10,001 - 100,000 1,340 10,199,802 4.8% 5,001 - 10,000 874 21,005,699 10.0% 100,001 and over 78 167,799,021 79.5% Total 7,126 210,961,404 100.0% Source: Computershare Investor Services Pty Limited as at 19 February 2009

4.5 ASX performance The following graph depicts the trading volume and closing price of MMG securities for the period 2 January 2007 to 27 February 2009. We have analysed MMG’s performance in two parts, being MMG security price movements and trading volumes.

6.000 12,000,000

5.000 10,000,000

4.000 8,000,000

3.000 6,000,000

2.000 4,000,000

1.000 2,000,000

- -

7 7 7 07 7 7 7 7 7 07 7 7 8 8 8 08 8 8 8 8 8 08 8 8 9 9 -0 -0 -0 - 0 -0 -0 -0 -0 t- -0 -0 -0 -0 -0 - 0 -0 -0 -0 -0 t- -0 -0 -0 -0 n b r pr y- n ul g p c v c n b r pr y- n ul g p c v c n b a e a A a u J u e O o e a e a A a u J u e O o e a e J F M M J A S N D J F M M J A S N D J F

Volume MMG Share Price (AU$)

4.5.1 MMG security price movements MMG’s security price showed a decline during the 2007 calendar year from AU$4.90 on 2 January 2007 to AU$4.13 on 31 December 2007. As with most competitors, and global equity markets generally, more substantial declines were experienced during the 2008 calendar year with the MMG security price reaching a low of AU$0.575 on 16 December 2008 recovering to close at AU$0.97 on 31 December 2008. Since the commencement of the 2009 calendar year MMG’s security price has traded between AU$0.510 and AU$1.200. The following diagram illustrates MMG’s security price for the period 2 January 2008 to 27 February 2009 with key company and industry announcements indicated.

HY08 results MSCM sold 19 Capital 60% TBC interest announced radio licenses FY08 results management sold (12/6/08) (27/2/08) (14/3/08) announced (27/8/08) review announced (29/10/08) 4.500 Buyback 4.000 announced 3.500 (17/12/08) 3.000 2.500 2.000 1.500 Final dividend 1.000 22.5 cents Interim dividend 0.500 (18/6/08) 4.5 cents (17/12/08) -

8 8 8 8 9 0 08 08 0 8 0 08 08 08 0 8 08 0 09 - - - r- -0 - l- - - t- -0 - - - n b ar p y n u g p c v c n b a e A a u J u e O o e a e J F M M J A S N D J F

MMG Share Price (AU$)

4.5.2 MMG security price movements versus Australian trading comparables The graph below indicates MMG’s security price performance compared to some of its Australian peers between 2 January 2008 and 27 February 2009.18

8 8 8 8 8 8 8 9 0 8 0 0 8 0 08 8 0 0 8 0 0 09 0 - - r- -0 y- - -0 - - t-0 v- c- - - n eb a pr a n l ug e p c o e n e b Ja F M A M Ju J u A S O N D J a F 20.0%

10.0%

- %

(10.0%)

(20.0%)

(30.0%) Macquarie Media (40.0%)

(50.0%)

(60.0%) Ten Network (70.0%) Prime Media Austereo (80.0%)

(90.0%)

(100.0%)

MMG’s performance up to September 2008 was less volatile than its comparables. However the months of September to November 2008 saw the MMG security price decrease significantly. We understand the primary drivers of this significant decrease in value may be partly attributed to: overall market sentiment (ASX All Ordinaries fell from 5200 to 3983, c.23%, and the S&P/ASX 200 Media Index fell from 1712 to 1295, c.24%); earnings downgrades, particularly surrounding the ACM business, forecast by a number of independent analysts during the period; and investor concerns regarding distribution payout ratios and possible new acquisitions that may be less attractive than a buy-back.

On 29 October 2008 MMG released an announcement to the ASX reporting it would undertake a capital management review. The results of that review were announced on 17 December 2008 and are discussed in section 4.7.

18 Source: Factiva

4.5.3 MMG security price movements versus ASX indices The graph below indicates MMG’s security price performance compared to some of the relevant market indices between 2 January 2008 and 27 February 2009.

8 8 8 8 8 8 8 9 08 0 0 8 0 08 8 0 0 8 0 0 09 0 - - r- -0 y- - -0 - - t-0 v- c- - - n eb a pr a n l ug ep c o e n eb Ja F M A M Ju Ju A S O N D Ja F - %

(10.0%) All Ordinaries

(20.0%) MMG (30.0%)

(40.0%)

(50.0%)

(60.0%) S&P/ASX 200 media (70.0%)

(80.0%)

(90.0%)

4.5.4 Trading volumes MMG’s securities have historically traded with relatively low volumes as illustrated below.

Number of securities traded per day 2007 2008 2009* Low 53,878 71,307 87,700 Mean 597,391 664,618 568,231 Median 471,843 414,738 353,883 High 3,615,250 9,777,290 3,642,240 * 1 January 2009 to 27 February 2009 Source: Factiva

While the table suggests that there has been an increase in trading volumes we note that this has been heavily influenced by significant trading volumes occurring on the day of major announcements and, more recently, by activity under the Existing Buy-Back. This is illustrated as follows:

Share Share Share price Volume price price movement Date traded ASX Company announcement (open) (close) (%) 24-Feb-09 690,893MMG announced its financial results for the six months ended 0.720 0.715 (0.7%) 31 December 2008 with proportionate EPS of 20.4 cents compared to an equivalent 25.2 cents in the PCP, and a net loss of $127.3 million including a $127.1 million non-cash goodwill impairment charge in respect of ACM (in line with the review of carrying values previously indicated to the market on 17 December 2008). 19-Jan-09 3,642,240MMG reported on the decision of the Full Court of the Federal Court 0.855 0.850 (0.6%) of Australia on 12 January 2009, unanimously upholding an appeal by MMG and making declarations to the effect that MMG acquiring control of two digital television JV licensees in Darwin and Tasmania, Darwin Digital Television (DDT) and Tasmanian Digital Television (TDT), as part of the acquisition of Southern Cross Broadcasting did not breach the Broadcasting Services Act. MMG was awarded costs by the Full Court. 17-Dec-08 2,675,280MMG announced the results of its Capital Management Review, 0.575 0.700 21.7% including an on-market buy-back of up to 20.96m stapled securities, being 10% of the smallest number, at any time during the last 12 months, an additional on-market buy-back of up to $50 million of MMG securities which will be subject to security holder approval, retaining AU$325 cash on hand to ensure maximum flexibility for the potential refinancing of asset-level debt facilities and revising the distribution policy to fund the buy-back and build further cash on hand (see section 4.7 for further details). 29-Oct-08 802,667MMG reported that its board and management have decided to 1.190 0.910 (23.5%) accelerate a comprehensive review of available capital management options and the Company is well placed for the review given its $320m cash on hand as well as the strong free cashflows generated by its businesses. 27-Aug-08 692,435MMG reported NPAT of $273.8m for the year ended 3.700 3.700 - % 30 June 2008. Revenue from ordinary activities were $449.11 million. EPS was 47.0 cents compared to 40.9 cents in the prior year. Proportionate cash earnings were $99.3 million, up 18.0% on the prior year. 19-Jun-08 9,777,290 MMG announced a final distribution of 22.5 cents per stapled security 3.430 3.430 - % for the six months to 30 June 2008, bringing the total distribution for the year to 47 cents per stapled security. The record date was 30 June 2008 and the estimated payment date was 19 August 2008.

Source: Factiva & ASX 4.6 Distribution history MMG has distributed an interim and final distribution to MMG security holders every year since listing on 17 November 2005 and up to 30 June 2008. MMG paid an interim distribution of 4.5 cents per MMG security on 17 February 2009 for the half year ended 31 December 2008.

Balance date Dividend type Cents per shareCurrency Franked Books close date Pay date 30-Jun-06 Interim 3.00 AU$ - % 30-Dec-05 16-Feb-06 30-Jun-06 Final 11.50 AU$ - % 30-Jun-06 21-Aug-06 30-Jun-07 Interim 21.00 AU$ - % 29-Dec-06 16-Feb-07 30-Jun-07 Final 24.50 AU$ 8.9% 29-Jun-07 21-Aug-07 30-Jun-08 Interim 24.50 AU$ 17.6% 31-Dec-07 14-Feb-08 30-Jun-08 Final 22.50 AU$ - % 30-Jun-08 19-Aug-08 30-Jun-09 Interim 4.50 AU$ - % 31-Dec-08 17-Feb-09 Source: MMG Website

Management announced on 17 December 2008 as part of its capital management review (discussed below) that it would revise its distribution policy from 31 December 2008 and following to fund the announced buy-backs and build further cash on hand. The distribution for the period was 4.5 cents per MMG security, approximating the interest income earned on cash deposits held by MMG less corporate overheads and significantly less than the 20.4 cents proportionate EPS for MMG for the period.

4.7 Capital management review On 29 October 2008 MMG released an announcement to the ASX reporting that MMG would undertake a capital management review. Subsequently, on 17 December 2008, the outcomes of the review were announced and are summarised as follows: 19

► An on market buy-back of up to 10% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities) and intention to seek MMG security holder approval for an additional buy-back of up to approximately $50 million MMG securities.

► Retaining $325 million cash on hand (then equivalent to $1.51 per stapled security) to ensure maximum flexibility for the potential future re-financing of asset level debt facilities.

► Revising the distribution policy to fund the buy-back and build further cash on hand.

► Using ACM’s current cash on hand and future cash earnings to pay down existing debt ahead of the current maturity dates.

► Funding future MSCM growth as well as maintenance capital expenditure substantially from operating cash flows.

19 Source : ASX Media release dated 17 December 2008

5. Valuation methodologies and approach

5.1 Definition of value We have valued the MMG securities on a fair market value basis. Business valuers typically define fair market value as:

“The price that would be negotiated in an open and unrestricted market between a knowledgeable, willing and not anxious buyer and a knowledgeable, willing and not anxious seller acting at arm’s length”

MMG holds 100% of each of MSCM and ACM and is an investment fund that buys, manages, develops and realises media businesses based on its published investment criteria and strategies. Accordingly we have valued each of the investments on a control basis reflecting the fact that each investment is wholly owned by MMG. As the Buy-Back Program relates to individual MMG securities we then apply a minority discount in order to arrive at the value of MMG securities on a non controlling basis. 5.2 Valuation approach We have selected the capitalisation of earnings methodology as our primary methodology to assess the fair market value of the MMG securities. We have outlined a number of commonly used valuation methodologies in appendix C.

In selecting this methodology as our primary valuation methodology we have considered the following key points:

► The operating businesses of MSCM and ACM are very well established with a track record of profitability.

► There are sufficient comparable listed media operators and historical transactions in the sector to enable the use of this methodology.

► As MSCM and ACM generate sufficient returns on their assets, an asset based approach is not considered appropriate as a primary methodology.

The capitalised earnings methodology requires an assessment of an earnings stream considered to be representative for the business, an assessment of the appropriate multiple to be applied to these earnings and the consideration of any surplus assets which would not be required in the continuing operations of the business. In ascertaining the appropriate capitalisation multiples we considered multiples derived from comparable companies listed on relevant securities markets and recent acquisitions in the sector. In doing so, we relied upon EBITDA multiples as they are typically used in this industry and are not distorted by:

► Potentially differing depreciation policies between comparable companies.

► Amortisation, which is driven by intangible assets recognised on balance sheets, and can be significantly different across companies.

► Differing gearing levels of comparable companies, which impact on interest expense.

► Different tax rates between jurisdictions and tax profiles of comparable entities.

We have also considered how our valuation compares to the trading value of MMG securities.

Our valuation is contained in the following three sections of this report.

6. Valuation of MSCM

6.1 Valuation In applying the capitalised earnings methodology to assess the fair market value of MSCM on a controlling interest basis, we have:

► Considered the normalised EBITDA for MSCM (from continuing operations) having regard to historical operating results, abnormal or non-recurring items of income and expenditure and other factors including key industry risk factors and the general economic outlook.

► Determined an appropriate earnings multiple reflecting the risks inherent in the business and its future growth prospects, including a premium for control as discussed in section 6.3.1.

► Assessed whether any surplus assets and liabilities exist, being those which are not essential to the generation of the normalised earnings.

► Deducted the net debt of MSCM in order to arrive at the value of equity of MSCM.

6.2 Assessment of EBITDA It should be noted that in forming a view about normalised EBITDA we are seeking to identify a level of EBITDA that may be expected to be derived from the business in normal circumstances. It does not represent a forecast or estimate of any particular financial period. We note that in the current difficult economic environment it is quite possible that actual future performance, especially in the short term, could fall below that assumed in our valuation.

MMG does not provide market guidance on forecast EBITDA. As such, our assessed EBITDA for valuation purposes is based on historical financial information, discussions with Management of MMG, consideration of brokers’ coverage of MMG and its competitors and commentary in relation to the industry in general and its relevance to MSCM’s business specifically. Our consideration of these factors and the associated risks has also been considered in our assessment of the appropriate multiple to apply to the normalised EBITDA.

The following table provides historical revenue and EBITDA information for MSCM’s radio and television businesses for recent reporting periods. It should be noted that the information has been adjusted from MMG’s reported financial results to reflect the full year impact of businesses acquired during these periods and to eliminate the impact of businesses disposed of during these periods. A reconciliation between this table and MSCM’s actual reported results is provided in appendix F.

HY HY HY HY Currency: AU$ 000 Jun-07A Dec-07A Jun-08A Dec-08A CY07 FY08 CY08 MSCM - Radio Local 48,320 54,079 52,013 54,359 102,399 106,092 106,372 National 17,817 22,318 17,908 18,404 40,135 40,226 36,313 Total advertising 66,137 76,397 69,921 72,763 142,534 146,319 142,685 Other operations revenues 6,116 6,929 7,252 7,194 13,045 14,181 14,446 Total operations revenues 72,253 83,326 77,174 79,957 155,579 160,500 157,131 EBITDA 27,365 33,187 29,968 32,059 60,552 63,155 62,027 EBITDA margin 37.9% 39.8% 38.8% 40.1% 38.9% 39.3% 39.5% MSCM - TV Local 43,328 52,078 47,005 50,943 95,406 99,082 97,948 National 67,888 78,678 69,386 73,864 146,566 148,064 143,250 Total advertising 111,217 130,756 116,391 124,807 241,972 247,147 241,198 Other operations revenues 9,113 9,431 9,418 10,865 18,544 18,849 20,282 Total operations revenues ex rebates 120,330 140,187 125,809 135,671 260,517 265,996 261,480 EBITDA ex rebates 28,895 39,001 31,675 38,818 67,896 70,676 70,493 Licence fee rebates 5,026 6,119 5,793 1,141 11,145 11,912 6,934 Total operations revenues inc rebates 125,356 146,306 131,601 136,813 271,662 277,907 268,414 EBITDA inc rebates 33,921 45,120 37,468 39,959 79,041 82,588 77,427 EBITDA margin 27.1% 30.8% 28.5% 29.2% 29.1% 29.7% 28.8% MSCM Consolidated Local 91,648 106,157 99,018 105,302 197,805 205,174 204,320 National 85,706 100,996 87,295 92,268 186,702 188,291 179,563 Total advertising 177,354 207,153 186,312 197,570 384,507 393,465 383,883 Other operations revenues 15,229 16,360 16,670 18,058 31,589 33,030 34,728 Total operations revenues ex rebates 192,583 223,513 202,982 215,628 416,096 426,495 418,611 Total operations revenues inc rebates 197,609 229,632 208,775 216,770 427,241 438,407 425,545 EBITDA ex rebates 56,260 72,188 61,643 70,877 128,448 133,831 132,520 EBITDA inc rebates 61,286 78,307 67,436 72,018 139,593 145,743 139,455 Licence fee rebates 5,026 6,119 5,793 1,141 11,145 11,912 6,934 EBITDA margin 31.0% 34.1% 32.3% 33.2% 32.7% 33.2% 32.8% Source: MMG Management

Key points to note include:

► The table includes the impact of licence fee rebates received in relation to the rollout of digital television and the phasing out of the analogue network. As the majority of these licence fees have now been received, our assessments have been formed excluding the impact of these rebates.

► MSCM has estimated that the costs of running both the analogue and digital networks are approximately $6 million per year. These costs are expected to be eliminated between the beginning of the phasing out of the analogue network in 2010 and the cessation of the analogue network in 2013. Consequently, Management estimates that approximately $6 million of savings should be realised once the analogue switch off is complete.

► The half year ended 30 June 2008 generally showed an improvement in both revenue and EBITDA over the corresponding half year ended 30 June 2007.

► The impact of the economic downturn can be seen when comparing the results for the half year ended 31 December 2008 to the half year ended 31 December 2007. On this basis, revenue (excluding rebates) had declined by 3.5% and EBITDA had declined by 1.8%.

Other points to note in relation to the impact of the current downturn are as follows:

► Local advertising revenues (which comprise the majority (53.2% in CY08 on a pro forma basis) of MSCM’s total advertising revenue base) appear to have been less significantly affected than national advertising revenues. This reflects the lower volatility of advertising in local markets where there are relatively fewer contact points within the market than in the major metropolitan markets.

► Under the terms of the majority of MSCM’s television affiliation agreements much of the cost of programming, which represents a substantial proportion of MSCM’s television cost base, is based on an agreed percentage of revenue. Therefore it is substantially a variable cost which reduces as revenue declines. We note that advertising related bonuses and sales commissions also tend to be variable which contributes to a cost base which has a relatively high component of variability in nature. This is an advantage in a time of declining revenues.

► The half year ended 31 December 2007 included a significant level of Federal Government advertising expenditure including the Federal Election. Additionally, the half year ended 31 December 2008 included the Beijing Olympics during which advertising expenditure tended to favour the Seven Network and Prime Media (Seven Network’s regional affiliate), the broadcaster for those Olympic Games. Consequently, the reduction in revenue is less directly attributed to the general economic downturn than may otherwise be assumed.

► MSCM announced in December 2008 that it is on track to deliver $9 million of estimated synergies in FY09. Only part of these synergy savings are reflected in HY09A or CY08.

For the purposes of our valuation we have assessed the normalised EBITDA for MSCM of between $128 million and $140 million.

6.3 Assessment of EBITDA multiples 6.3.1 Trading multiples In forming our assessment of an appropriate capitalisation multiple to apply in our valuation of MSCM we have had regard to the trading multiples of listed companies in Australia and overseas. In relation to Australian entities we have had regard to entities operating in the radio and television industries. Detailed descriptions of the selected companies are provided in appendix D.

The table below summarises the trading multiples of the comparable companies. The multiples have been calculated based on the closing market prices for the relevant peer companies on 27 February 2009 adjusted for a control premium as discussed below.

Country Reporting Market Cap EBITDA (H) EBITDA (1F) Currency: AU$ million headquarters date $million MultipleBasis Multiple Australian TV Ten Network Holdings Limited Australia 31-Aug 763 6.8A 9.8 Prime Media Australia 30-Jun 90 6.9A 6.2 Austar United Australia 31-Dec 1,036 9.4F 8.3 Australian Radio Austereo Group Australia 30-Jun 415 8.0A 8.8 US Radio Citadel Broadcasting Group United States 31-Dec 38 8.6F 13.5 Entercom Communications Group United States 31-Dec 59 5.8A 7.0 Journal Communications United States 28-Dec 80 3.5A 5.1 Cumulus Media United States 31-Dec 110 8.4F 9.6 Cox Radio Inc United States 31-Dec 685 7.3F 8.7 Low 38 3.5 5.1 High 1,036 9.4 13.5 Median 110 7.3 8.7 Average 364 7.2 8.6 Source: Annual Reports, Bloomberg, Reuters Estimates, Capital IQ Note: Where companies have a 31 December year end and had not reported financial results for the year ended 31 December 2008 (indicated by an F in the Basis column) we have determined their historical EBITDA multiples using consensus analyst forecast EBITDA for the year ending 31 December 2008. EBITDA (1F) multiples have been based upon 31 December 2009 EBITDA consensus.

As discussed above we consider the valuation of MSCM and ACM on a controlling basis given MMG is an investment company and holds 100% of each investment. Accordingly, in the table above we have adjusted the share price of each entity to include a premium for control. For the purposes of this analysis we have incorporated a premium for control of 25%. Frequently control premia are quoted to be in the range of 20% to 40%. We have selected 25% based on our analysis of a range of transactions in excess of $50 million that have occurred since 1 January 2008.

While we have used an average control premia of 25% in the above table we note that a number of the above comparable entities have substantial shareholders that significantly restrict the level of investee interest and hence liquidity of their shares. This would be expected to result in discounts in excess of normal control premia. For example:

► Network Ten’s major shareholder, Canwest holds 54% of its listed securities.

► Prime Network’s major shareholder Paul Ramsay holds 40% of its listed securities.

► Austar United’s major shareholder Liberty Global Inc holds 52% of its listed securities.

► Austereo Group’s major shareholder, Village Roadshow Limited holds 52% of its listed securities.

6.3.2 Transaction multiples We also searched for recent acquisitions of media operators, the implied multiples of which are summarised in the following table. The majority of these represent acquisitions of controlling interests, or purchases by existing holders of majority investments.

Date Enterprise EBITDA announced Target Acquiror % acquired Currency value multiple (H) 1 Aug-07 Southern Cross Broadcasting (Australia) MMG 86 AU$ 1,350 12.8 Limited May-07 Channel 9 South Australia Pty Limited WIN 100 AU$ 105 20.2 May-07 NBN Enterprises Pty Limited PBL Media 100 AU$ 250 n/a Nov-06 Seven Media Group Pty Limited KKR 48 AU$ 4,017 12.4 Oct-06 PBL Media Limited CVC Asia Pacific 50 AU$ 5,714 12.0 Low 12.0 High 20.2 Median 12.6 Average 14.3 Note 1: The earnings number used for the Seven Media / KKR transaction is based on forecast consensus information Source: Bloomberg, Megermarket, company annual reports and company press releases

We note that all of the above transactions pre-date the more recent instability in financial markets and in particular the impacts of the credit crisis which has made it very difficult to obtain funding for major transactions. Therefore we have placed limited reliance on these transactions for the purposes of this report.

6.3.3 Assessment of earnings multiples In assessing an appropriate range of earnings multiples to apply in valuing MSCM on a controlling basis, we considered a number of factors:

► B ased on the table set out in section 6.2 above, for the year ended 31 December 2008 MSCM television generated approximately 53% of MSCM EBITDA and MSCM radio generated approximately 47% of MSCM EBITDA. Consequently both television and radio multiples are relevant to our considerations.

► For the comparable television companies, we consider Prime Media and Ten Network to be the most comparable companies. For radio, we consider Austereo to be the most comparable company.

► We have not placed any significant reliance on the transaction multiples given none are particularly recent transactions.

► As noted above a large number of the Australian media companies have substantial shareholders that significantly limit the liquidity in their shares.

► We note that the performance of regional media companies appears to be more resilient than their metropolitan peers in more difficult economic environments.

Based on the foregoing, we consider an appropriate earnings multiple on a control basis for MSCM is 8.0x.

6.4 Surplus assets and liabilities Management of MMG have advised that as at the date of this report MSCM did not have any surplus assets or liabilities excluding cash as referred to in section 6.5 below.

6.5 Net debt In order to arrive at the equity value, it is necessary to deduct the net debt from the value of the enterprise. We have used the pro forma net debt as calculated in section 4.3.2.

6.6 Valuation conclusion Based on the assumptions set out above, the equity value of MSCM on a controlling interest basis is summarised below.

Currency: AU$ 000 Low High Normalised pro forma EBITDA 128,000 140,000 EBITDA multiple 8.0 8.0 Enterprise value 1,024,000 1,120,000 less: Net debt (853,174) (853,174) Equity value 170,826 266,826 Source: EY analysis

We note that this value range implies EBITDA multiples of 7.3x to 8.0x based on its pro forma EBITDA (inclusive of licence fee rebates) for CY08 of $139.5 million.

7. Valuation of ACM

7.1 Valuation In applying the capitalised earnings methodology to assess the fair market value of ACM on a controlling interest basis, we have:

► Considered the normalised EBITDA for ACM (from continuing operations) having regard to historical operating results, abnormal or non-recurring items of income and expenditure and other factors including key industry risk factors and the general USA economic outlook.

► Determined an appropriate earnings multiple reflecting the risks inherent in the business and its future growth prospects, including a premium for control as discussed in section 6.3.1.

► Assessed whether any surplus assets and liabilities exist, being those which are not essential to the generation of the normalised earnings.

► Deducted the net debt of ACM in order to arrive at the value of equity of ACM. 7.2 Assessment of EBITDA It should be noted that in forming a view about normalised EBITDA we are seeking to identify a level of EBITDA that may be expected to be derived from the business in normal circumstances. It does not represent a forecast or estimate of any particular financial period. We note that in the current difficult economic environment it is quite possible that actual future performance, especially in the short term, could fall below that assumed in our valuation. MMG does not provide market guidance on forecast EBITDA. As such, our assessed EBITDA for valuation purposes is based on historical financial information, discussions with Management of MMG, consideration of brokers’ coverage of MMG and its competitors and commentary in relation to the industry in general and its reference to ACM’s business specifically. Our consideration of these factors and the associated risks has also been considered in our assessment of the appropriate multiple to apply to the normalised EBITDA. The following table provides historical revenue and EBITDA information for ACM’s community newspaper business for recent reporting periods. It should be noted that the information has been adjusted from MMG’s reported financial results to reflect the full year impact of businesses acquired during these periods. A reconciliation between this table and ACM’s actual reported results is provided in appendix F. HY HY HY HY Currency: US$ 000 Jun-07A Dec-07A Jun-08A Dec-08A CY07 FY08 CY08 ACM Display Advertising 27,107 28,707 27,054 26,998 55,814 55,761 54,052 Classified Advertising 10,551 10,504 9,377 8,057 21,055 19,881 17,435 Other Revenue 15,244 15,318 15,043 16,793 30,562 30,362 31,837 Total Revenue 52,902 54,529 51,475 51,849 107,431 106,004 103,324 Operating expenditure Total Opex 40,235 40,920 40,642 41,275 81,155 81,562 81,917 EBITDA 12,667 13,609 10,833 10,574 26,276 24,442 21,407 EBITDA margin 23.9% 25.0% 21.0% 20.4% 24.5% 23.1% 20.7% Source: MMG Management

Key points to note include:

► The half year ended 30 June 2008 is reflective of the more difficult economic circumstances already being encountered in the United States at that time with revenue declining approximately 2.7% and EBITDA declining 14.5% over that period compared to the six months ended 30 June 2007.

► The deterioration extended in the next six months with revenue and EBITDA for the six months ended 31 December 2008 declining approximately 4.9% and 22.3% respectively compared to the six months ended 31 December 2007.

► It can be seen that display advertising (52.3% of total revenue in CY08) has been more resilient to the downturn than classified advertising which declined by a greater extent in the six months to 31 December 2008 compared to the six months ended 31 December 2007. In the six months ended 31 December 2008 revenue from display advertising fell by approximately 6.0% compared to classified advertising for which revenue declined approximately 23.3%.

► Declines in classified advertising are mainly attributed to weak car sales and real estate markets which are amongst the largest classified categories. ACM has less reliance on classified advertising than many of the larger media market participants including the major city publications.

► ACM’s other revenue streams include commercial printing, circulation of independent subscriptions and internet based advertising which have collectively showed good growth over the PCP but not enough to offset the other declines.

► We understand that more recently there have been significant declines in the cost of newsprint and petrol which may likely assist in reducing ACM’s cost base in the future. Petrol costs are a significant proportion of ACM’s distribution costs.

► ACM has implemented a number of cost reduction initiatives in May, September and December 2008 to offset reduced revenues. These include significant headcount reductions and reducing the usage and cost of newsprint. The impact of these cannot be seen in the table on the previous page in part because for much of 2008 petrol prices and newsprint prices were increasing which more than offset management’s savings in 2008. The benefit of the cost reduction initiatives and the decline in both petrol prices and news print prices may be more fully seen in the second half of FY09 and in FY10. Management has advised that the full year annualised impact of these cost reduction initiatives is significantly more than US$1.5 million in excess of what is reflected in the CY2008 EBITDA. For the purpose of our assessment we have considered both the full year impact of the cost savings initiatives and the reduction in petrol and newsprint prices. Applying US$1.5 million of cost savings to the EBITDA for FY08 and CY08 provided in the table above would provide pro forma adjusted EBITDA of US$25.9 million for FY08 and US$22.9 million for CY08.

For the purposes of our valuation we have assessed the normalised pro-forma EBITDA for ACM at between US$22 million and US$25 million.

7.3 Assessment of EBITDA multiples 7.3.1 Trading multiples The United States media industry is currently experiencing very difficult circumstances as a result of general economic conditions materially affecting the performance of media companies. The impact has been particularly felt by major metropolitan publications and where there is a significant reliance on classified advertising.

A number of the market participants in the United States have significant levels of debt in part because of recent debt funded acquisitions in the sector conducted during calendar 2006 and 2007 when media company earnings were at cyclical highs and values were more highly priced. As a result investors perceive there to be significant operating and financial risks in this sector at the present time.

As a result of current volatile earnings and these investor concerns, looking solely at United States newspaper companies makes it difficult to form a view on the most appropriate multiple to apply. Accordingly, in order to more broadly assess the market potential we have, in addition to newspaper companies, also considered other US media market participants (e.g. television and radio) to form a view on multiples. Descriptions of these companies are provided in appendix D.

The table below summarises the trading multiples of the comparable companies. The multiples have been calculated based on market prices for relevant securities as at 27 February 2009 and includes a 25% control premium as discussed in section 6.3.1 above.

Country Reporting Market Cap EBITDA (H) EBITDA (1F) Currency: AU$ million headquarters date $million MultipleBasis Multiple US Publishing McClatchy Company United States 28-Dec 63 5.8A 7.4 Lee Enterprises Incorporated United States 28-Sep 27 6.8A na Media General United States 28-Dec 55 6.8A na Gannett Company United States 28-Dec 1,159 3.3A 4.5 New York Times United States 28-Dec 931 5.9A 6.2 US Radio Citadel Broadcasting Group United States 31-Dec 38 8.6F 13.5 Entercom Communications Group United States 31-Dec 59 5.8A 7.0 Journal Communications United States 28-Dec 80 3.5A 5.1 Cumulus Media United States 31-Dec 110 8.4F 9.6 Cox Radio Inc United States 31-Dec 685 7.3F 8.7 US Television Hearst-Argyle Television Inc United States 31-Dec 252 6.6 A 7.2 Gray Television Inc United States 31-Dec 29 7.9 F 12.5 LIN TV Corp United States 31-Dec 53 6.6 F 12.2 Entravision Communications Co United States 31-Dec 52 5.0 F 5.9 Low 27 3.3 4.5 High 1,159 8.6 13.5 Median 61 6.6 7.3 Average 257 6.3 8.3 Source: Annual Reports, Bloomberg, Reuters Estimates, Capital IQ Note: Where companies have a 31 December year end and had not reported financial results for the year ended 31 December 2008 (indicated by an F in the Basis column) we have determined their historical EBITDA multiples using consensus analyst forecast EBITDA for the year ending 31 December 2008. EBITDA (1F) multiples have been based upon 31 December 2009 EBITDA consensus.

We have included in the table above for information a number of entities that operate in the US newspaper sector but for whom the issues discussed above are such that the multiple data does not appear meaningful. We have excluded the impact of these companies in our assessment of an appropriate multiple to apply to ACM. These companies include:

► Journal Communications ► Gannett Company ► New York Times ► Entravision Communications Co

The majority of the US publishing companies mentioned above have a predominantly metropolitan focus and are not directly comparable to ACM. Regional publishers have historically demonstrated lower volatility and greater resilience to economic downturns. This is partially explained through lower reliance on classified advertising revenues, which has been impacted the most by the deteriorating economic conditions in the US (21.5% drop in FY08). ACM derived only 18.8% of its revenue from classified advertising in FY08 compared to an industry average of approximately 31.7%20.

7.3.2 Transaction multiples We also searched for recent acquisitions of newspaper operators, the implied multiples of which are summarised in the following table. The majority of these represent acquisitions of controlling interests, or purchases by existing holders of majority investments.

Date Enterprise EBITDA announced Target Acquiror % acquired Currency value multiple (H) Dec-07 Tribune Company Sam Zell and Tribune 100 US$ 16,816 15.1 employees Nov-07 Chesapeake Publishing Corp and American Consolidated 100 US$ 160 10.3 Brown Publishing Company Media LLC Oct-07 Morris Publishing Group (daily and GateHouse Media, Inc 100 US$ 115 8.2 non-daily productions) Aug-07 Dow Jones & Company Inc The News Corporation 100 US$ 5,516 17.8 Limited Jun-07 Superior Publishing Corporation American Consolidated 100 US$ 67 10.3 Media LLC Jan-07 American Community Newspapers Courtside Acquisition 100 US$ 232 18.0 LLC (unrelated to ACM) Corporations Jan-07 American Consolidated Media LLC Macquarie Media Group 100 US$ 80 11.3 Limited Dec-06 Rural Press Limited Fairfax Media Limited 100 US$ 2,306 15.9 Low 8.2 High 18.0 Median 10.6 Average 12.2 Source: Bloomberg, Meger market, company annual reports and company press releases

We note that the above acquisitions pre-date the recent instability in financial markets that has made more leveraged transactions more difficult to fund or complete. As such, we have not placed significant reliance on the above multiples in our assessment.

20 Newspaper Association of America

7.3.3 Assessment of earnings multiples In assessing an appropriate range of earnings multiples to apply in valuing ACM on a controlling basis we considered a number of factors:

► As noted above, it is difficult to draw conclusions in relation to the multiple from comparable metropolitan newspaper companies due to their current volatile financial performance and in some cases very high debt levels.

► As a result of the above, we have considered the US media sector more generally, including radio and television companies, especially where these operate in regional areas.

► We note that ACM, while its performance has been affected by the economic downturn, continues to be strongly profitable.

► We note the Australian media and television multiples set out in section 6.3.1.

Ultimately, having regard to all of these factors we have selected an EBITDA multiple of 7.5x to apply for the purposes of this valuation.

7.4 Surplus assets and liabilities Management of MMG have advised that as at the date of this report ACM did not have any surplus assets or liabilities excluding cash held as referred to in section 7.5 below.

7.5 Net debt In order to arrive at the equity value, it is necessary to deduct the net debt from the value of the enterprise. We have used the pro forma net debt as calculated in section 4.3.2 and converted to US$ at the exchange rate as at 27 February 2009 of US$:AU$ 0.64988.

7.6 Valuation Based on the assumptions set out above, the equity value of ACM on a controlling interest basis is summarised below.

Currency: US$ 000 Low High Normalised pro forma EBITDA 22,000 25,000 EBITDA multiple 7.5 7.5 Enterprise value 165,000 187,500 less: Net debt (133,441) (133,441) Equity value (US$) 31,559 54,059 Equity value (A$) 48,561 83,183 Note: Equity value has been converted to AU$ at 0.64988, being the exchange rate as at 27 February 2009

We note that our valuation has been undertaken in US$ (as the operations of the business are all within USA) and then converted to Australian dollars using the exchange rate of $0.64988 as at 27 February 2009. We further note that this value range implies EBITDA multiples of 7.7x to 8.8x based on its actual EBITDA for CY08 of US$21.4 million.

8. Valuation of MMG

In determining the fair market value of MMG securities we have:

► Added the controlling values of 100% of the equity of MSCM and ACM

► Deducted capitalised pro forma normalised corporate costs of MMG (that have not been included in the determination of the equity value of MSCM or ACM)

► Added non operating cash held within MMG

► Deducted a discount for lack of control (recognising that most MMG security holders hold non controlling interests in the equity of the entity)

► Determined a fair market value per MMG security on both a control and non control basis

The sections below provide our determination of the above steps to derive our value per MMG security.

8.1 Controlling value of MSCM and ACM As determined in sections 6.6 and 7.6 above, the total of the controlling equity values of MSCM and ACM are provided in the following table.

Currency: AU$ 000 Low High Controlling equity value - MSCM 170,826 266,826 Controlling equity value - ACM 48,561 83,183 MSCM and ACM controlling equity value 219,387 350,009 8.2 Capitalised pro forma corporate costs MMG incurs a range of costs outside of the operations of MSCM and ACM. These include administration costs, the costs of maintaining the listed structure for MMG and various costs in relation to the examination of potential transactions which may or not ultimately proceed.

In addition, where applicable MMG pays management fees to MGL. These include a base fee and a performance fee.

8.2.1 Base Fee The Base Fee payable to MGL is calculated as 1.5% of ‘Net Investment Value’. Net Investment Value is broadly defined as being the MMG market capitalisation plus debt held by MMG (but excluding that held by its investee companies) less cash held by MMG (again excluding that held by investee companies). We note that at the present time no base fee would be expected to be paid as cash held by MMG exceeds its market capitalisation.

8.2.2 Performance Fee A Performance Fee is only payable to MGL in the event that the performance of MMG securities based on movements in the security price and distributions since the original IPO issue in November 2005 exceeds 6% per annum plus the annual Australian Consumer Price Index change in any quarter, having made up for any underperformance in previous quarters (i.e. by achieving returns in excess of the benchmark that exceed carried forward deficits). It should be noted that the MMG security price would need to increase substantially before a Performance Fee would be payable.

8.2.3 Assumption adopted For the purposes of this valuation we have assumed annual corporate costs of approximately $6 million per annum. This is broadly based on the actual current levels of recurring costs being incurred plus an allowance for costs incurred in directly managing the MSCM and ACM investments.

We have capitalised the corporate costs at a multiple of 8.0x which is consistent with the multiple used when valuing the MSCM business.

8.3 Non operating cash In order to arrive at the equity value, it is necessary to deduct the MMG net debt (excluding asset level net debt which has been deducted in the valuation of MSCM and ACM in sections 6 and 7) from the value of the enterprise. We have used the pro forma net debt as calculated in section 4.3.2.

8.4 Discount for a lack of control As discussed in section 6.3.1 above, although MMG has control of its investments in MSCM and ACM through 100% ownership, most MMG security holders who will have the opportunity to approve and participate in the Buy-Back Program will only have a non controlling interest in MMG. As the MMG securities that will be acquired by MMG will be cancelled, and no major MMG security holder is expected to gain majority control of MMG as a result of the Buy-Back Program (as shown below), we have deducted from the controlling equity value of MMG a discount for lack of control, reflecting the fair market value of a portfolio interest in the entity.

As discussed in section 6.3.1 above, we have applied a premium for control of 25% to the 100% interests of MSCM and ACM. Using the same premium, but applying this to the controlling interest rather than the non controlling interest value, we have deducted a discount for lack of control of 20% from the controlling value of MMG.

8.5 Valuation Using all of the above assumptions to determine our range of values for MMG securities, our fair market value range for MMG securities is summarised below:

As shown, we believe that the value of MMG is:

► On a controlling basis – between $2.37 and $2.99 per MMG security

► On a non controlling basis – between $1.90 and $2.39 per MMG security

We note that our assessed value of MMG securities on a non controlling basis is significantly above current and recent trading prices of MMG securities. Our review of media and analyst reports and discussions with MMG Management has highlighted a number of factors that may be contributing to this position which include:

► MMG’s underlying assets may be perceived to have a high level of debt which is currently viewed negatively in the equity markets. This is notwithstanding the significant level of cash held by MMG at the fund level which provides considerable flexibility when it comes to potentially refinancing asset level debt facilities of MSCM and ACM which are not guaranteed by the parent entity.

► MMG recently significantly reduced its distribution payout ratio, to fund the Buy-Back Program and build up further cash at the fund level. Investors interested in dividend yields would now therefore be less interested in MMG securities.

► It is not uncommon for equity market participants to discount the value of significant cash holdings due to uncertainties as to how that cash will ultimately be used (e.g. for asset acquisitions).

► Many media companies are being significantly impacted by current economic circumstances. As a result earnings expectations are reduced, multiples are reduced and investors in general are less likely to invest in their securities.

9. Evaluation of the Buy-Back Program

MMG is seeking the approval of MMG security holders to undertake the Buy-Back Program which if approved and implemented could result in MMG expending up to approximately $50 million of MMG’s fund level cash reserves to acquire and then cancel MMG securities.

The approval being sought is in addition to the Existing Buy-Back involving the buy-back and cancellation of up to 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities). The Existing Buy-Back is currently underway and does not require the approval of MMG security holders.

In announcing the Buy-Back Program on 17 December 2008 the Chairman of MMG stated “The announcement of a buy-back of MMG securities reinforces our belief in the value of MMG’s businesses. Given the level of MMG’s recent security price, acquiring our own stock is an attractive strategy for MMG and reflects our confidence in our Australian operations. It is unlikely that any external acquisitions would offer a level of return at least equivalent to that we believe to be available from a buy-back”.

If MMG security holders approve the Buy-Back Program they will then need to make a decision as to whether they sell their own MMG securities into potentially either a Buy-Back Tender or the On-Market Buy-Back. If they elect to sell their MMG securities they will receive the relevant consideration and cease to own those MMG securities. The remainder of this section focuses on the impact of the Buy-Back Program on MMG and the MMG securities and MMG security holders that remain after the completion of the Buy-Back Program.

If MMG security holders do not approve the Buy-Back Program then MMG may not proceed with it but may continue with the Existing Buy-Back. In such a case MMG security holders could still sell their MMG securities on the ASX including into the Existing Buy-Back but without the Buy-Back Program MMG would be limited to only acquiring the remaining number of MMG securities that it is permitted to acquire under the Existing Buy-Back.

The amount of cash expended on the Combined Buy-Back (being the Buy-Back Program and the Remaining Existing Buy-Back) will depend on the number of MMG securities ultimately acquired and the price paid for those MMG securities as a result of the Combined Buy-Back. As at 27 February 2009 MMG had purchased 3,965,370 MMG securities as part of the Existing-Buyback. As these MMG securities have already been repurchased, our assessment in this section shows various impacts of both the remaining MMG securities able to be bought back under the Remaining Existing Buy-Back (16,992,098) and the MMG securities that could be bought back under the Buy-Back Program. It should be noted that in the event the Buy-Back Program did not proceed, the Existing Buy-Back could continue as it does not require the approval of MMG security holders.

The remainder of the section provides a number of tables which set out examples of possible outcomes of the Combined Buy-Back dependent upon the number of MMG securities bought back pursuant to the Combined Buy-Back and the average price paid for those MMG securities. The range of average prices paid has been selected for illustrative purposes only and should not be construed as any indication as to the fixed price range for the Buy-Back Tender. We understand that if the Buy-Back Program is approved tender documents in relation to the Buy-Back Tender will be sent to MMG security holders in due course and that these documents will provide MMG security holders with a fixed price range that will apply for the Buy-Back Tender.

The fixed price range will be determined by the MMG independent directors at the time the tender documents are dispatched, and we understand will be in a narrower range than that set out in the illustrative tables. At this point in time it is not possible to determine where the fixed price tender range will be set other than that the independent directors of MMG have advised us that it will not include prices that are outside the ranges set out in the following tables.

The following table presents various scenarios of the maximum number of MMG securities that may be acquired and then cancelled pursuant to the Combined Buy-Back. The table below assumes that the Existing Buy-Back is completed in full and various amounts are expended under the Buy-Back Program up to the maximum amount of approximately $50 million.

Total MMG securities (000s) that could be acquired under the Remaining Existing Buy-Back and the Buy-Back Program Average price for remaining Cash expended for the Buy-Back Program Existing Buy-Back and Buy- Back Program AU$ $10 million $20 million $30 million $40 million $50 million $0.575 34,383 51,775 69,166 86,557 103,949 $0.60 33,659 50,325 66,992 83,659 100,325 $0.65 32,377 47,761 63,146 78,531 93,915 $0.70 31,278 45,564 59,849 74,135 88,421 $0.75 30,325 43,659 56,992 70,325 83,659 $0.80 29,492 41,992 54,492 66,992 79,492 $0.90 28,103 39,214 50,325 61,437 72,548 $0.95 27,518 38,045 48,571 59,097 69,624 $1.00 26,992 36,992 46,992 56,992 66,992 $1.05 26,516 36,040 45,564 55,087 64,611 $1.10 26,083 35,174 44,265 53,356 62,447 $1.15 25,688 34,383 43,079 51,775 60,470 $1.20 25,325 33,659 41,992 50,325 58,659 $1.25 24,992 32,992 40,992 48,992 56,992 $1.30 24,684 32,377 40,069 47,761 55,454 $1.35 24,400 31,807 39,214 46,622 54,029 $1.40 24,135 31,278 38,421 45,564 52,706 $1.45 23,889 30,785 37,682 44,578 51,475 $1.50 23,659 30,325 36,992 43,659 50,325 $1.55 23,444 29,895 36,347 42,799 49,250 By way of an illustration from the table above, if the remaining securities to be acquired under the Combined Buy-Back were acquired at an average price of $0.60 per MMG security and MMG acquired the maximum approved number of MMG securities, the number of MMG securities acquired would be:

► 16,992,098 MMG securities as part of the Remaining Existing Buy-Back (10.0% of 209,574,689 MMG securities less the 3,965,370 MMG securities that have been bought back to date under the Existing Buy-Back).

► 83,333,333 MMG securities as part of the Buy-Back Program ($50 million / $0.60 per MMG security).

► In total, the number of MMG securities to be bought back and cancelled would be 100,325,431 MMG securities, (excluding the 3,965,370 MMG securities that have been bought back to date under the Existing Buy-Back).

The above analysis assumes:

► That the remainder of the 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities) proposed to be bought back under the Remaining Existing Buy-Back (being 16,992,098 MMG securities) are acquired in addition to those assumed acquired under the Buy- Back Program as indicated in the table above.

► The minimum MMG security price at which the Buy-Back Program would occur is $0.575 per MMG security; at which price MMG could spend the total approximately $50 million allocated to the Buy-Back Program to acquire the maximum number of MMG securities it has sought approval to buy-back, being 86,956,521.

► The cash expended for the Buy-Back Program will not exceed approximately $50 million.

In the remainder of this section we consider advantages of the Buy-Back Program, disadvantages of the Buy-Back Program and other factors which we bring to the attention of MMG security holders.

9.1 Advantages of the Buy-Back Program 9.1.1 Acquisition of MMG securities at below assessed fair market value In section 8 of this report we assessed the value of each MMG security to be between $2.37 and $2.99 on a control basis and between $1.90 and $2.39 on a non controlling basis. As noted in section 4.5 MMG securities have recently been trading at prices significantly below this level. Since the Existing Buy-Back began as of 27 February 2009 MMG has bought back a total of 3,965,370 MMG securities at an average price of approximately $0.865 per MMG security.

The buy-back and cancellation of MMG securities at below fair market value as part of the Combined Buy-Back has the potential to add value to the MMG securities that remain after the Buy-Back Program. This can be illustrated in the following table where we theoretically adjust the valuation calculations presented in section 8 to reflect various possible Combined Buy-Back outcomes. The table uses as a base the mid-point of the above valuation range on a non controlling basis of $2.15.

Impact on fair market valuation calculation of Combined Buy-Back Average price for remaining Total MMG securities remaining to be acquired under the Existing Buy-Back together with Existing Buy-Back and Buy- the Buy-Back Program Back Program AU$ 40 million 60 million 80 million 100 million 103.9 million $0.575 $ 2.54 $ 2.82 $ 3.18 $ 3.66 $ 3.78 $0.60 $ 2.54 $ 2.81 $ 3.16 $ 3.65 na $0.65 $ 2.53 $ 2.79 $ 3.14 na na $0.70 $ 2.52 $ 2.78 $ 3.11 na na $0.75 $ 2.51 $ 2.76 $ 3.09 na na $0.80 $ 2.50 $ 2.74 na na na $0.90 $ 2.48 $ 2.71 na na na $0.95 $ 2.47 $ 2.70 na na na $1.00 $ 2.46 $ 2.68 na na na $1.05 $ 2.45 $ 2.66 na na na $1.10 $ 2.44 $ 2.65 na na na $1.15 $ 2.43 $ 2.63 na na na $1.20 $ 2.42 na na na na $1.25 $ 2.41 na na na na $1.30 $ 2.40 na na na na $1.35 $ 2.39 na na na na $1.40 $ 2.39 na na na na $1.45 $ 2.38 na na na na $1.50 $ 2.37 na na na na $1.55 $ 2.36 na na na na na - This combination of MMG Securities purchased at the stated average price would exceed the cash available for the Buy-Back Program $0.575 represents the maximum average price at which MMG would be able to undertake the Buy-Back Program and purchase the maximum number of securities (being 86,956,521)

As shown in the table the calculated illustrative fair market value per MMG security has the potential to increase under the scenarios presented above.

9.1.2 Potential enhancement of proportionate earnings per MMG security (PEPS) MMG’s reported proportionate earnings for HY09A was $43.8 million. Based on current MMG securities on issue of 210,961,404 this is equal to an annualised PEPS of $0.415 per MMG security. The following table illustrates how the annualised PEPS would have been impacted if the Combined Buy-Back had been completed as at 1July 2008 assuming different numbers of MMG securities are bought back at a range of average prices under the Combined Buy-Back.

Proportionate earnings per remaining MMG security Average price for remaining Total MMG securities remaining to be acquired under the Existing Buy-Back together with Existing Buy-Back and Buy- the Buy-Back Program Back Program AU$ 40 million 60 million 80 million 100 million 103.9 million $0.575 $ 0.51 $ 0.57 $ 0.65 $ 0.77 $ 0.79 $0.60 $ 0.51 $ 0.57 $ 0.65 $ 0.77 na $0.65 $ 0.51 $ 0.57 $ 0.65 na na $0.70 $ 0.51 $ 0.57 $ 0.65 na na $0.75 $ 0.50 $ 0.57 $ 0.65 na na $0.80 $ 0.50 $ 0.57 na na na $0.90 $ 0.50 $ 0.57 na na na $0.95 $ 0.50 $ 0.56 na na na $1.00 $ 0.50 $ 0.56 na na na $1.05 $ 0.50 $ 0.56 na na na $1.10 $ 0.50 $ 0.56 na na na $1.15 $ 0.50 $ 0.56 na na na $1.20 $ 0.50 na na na na $1.25 $ 0.50 na na na na $1.30 $ 0.50 na na na na $1.35 $ 0.50 na na na na $1.40 $ 0.50 na na na na $1.45 $ 0.50 na na na na $1.50 $ 0.50 na na na na $1.55 $ 0.50 na na na na na - This combination of MMG Securities purchased at the stated average price would exceed the cash available for the Buy-Back Program $0.575 represents the maximum average price at which MMG would be able to undertake the Buy-Back Program and purchase the maximum number of securities (being 86,956,521)

PEPS has been adjusted in the above table to reflect the reduced number of MMG securities on issue under different scenarios as indicated and the reduced level of interest that would be earned (after tax) as a result of spending the differing levels of cash on the Combined Buy-Back.

As shown above, the proportionate CY08 PEPS would increase under any of the above scenarios of MMG securities bought back.

9.1.3 Potential enhancement of cash backing per MMG security The cash backing per MMG security, based on MMG’s pro forma fund level cash as at 31 January 2008 as shown in section 4.3.2 was $1.56. The following table shows the cash backing per MMG security under various scenarios.

Cash backing per MMG security Average price for remaining Total MMG securities remaining to be acquired under the Existing Buy-Back together with Existing Buy-Back and Buy- the Buy-Back Program Back Program AU$ 40 million 60 million 80 million 100 million 103.9 million $0.575 $ 1.79 $ 1.95 $ 2.16 $ 2.45 $ 2.52 $0.60 $ 1.78 $ 1.94 $ 2.15 $ 2.43 na $0.65 $ 1.77 $ 1.92 $ 2.12 na na $0.70 $ 1.76 $ 1.90 $ 2.09 na na $0.75 $ 1.75 $ 1.88 $ 2.05 na na $0.80 $ 1.74 $ 1.86 na na na $0.90 $ 1.71 $ 1.82 na na na $0.95 $ 1.70 $ 1.80 na na na $1.00 $ 1.69 $ 1.78 na na na $1.05 $ 1.68 $ 1.76 na na na $1.10 $ 1.67 $ 1.74 na na na $1.15 $ 1.66 $ 1.72 na na na $1.20 $ 1.64 na na na na $1.25 $ 1.63 na na na na $1.30 $ 1.62 na na na na $1.35 $ 1.61 na na na na $1.40 $ 1.60 na na na na $1.45 $ 1.59 na na na na $1.50 $ 1.57 na na na na $1.55 $ 1.56 na na na na na - This combination of MMG Securities purchased at the stated average price would exceed the cash available for the Buy-Back Program $0.575 represents the maximum average price at which MMG would be able to undertake the Buy-Back Program and purchase the maximum number of securities (being 86,956,521)

The cash backing per remaining MMG security will increase under all scenarios where the average price per MMG security for the Combined Buy-Back is less than the $1.56 before the impact of the completion of the Combined Buy-Back.

The cash backing per remaining MMG security is expected to increase further because of the earnings of MSCM that are to be retained at the fund level in the future.

9.1.4 Greater ability to sell MMG securities (and price to be realised) As noted in section 4.5.4 of this report, MMG trading volumes are relatively low. The Buy-Back Program including the Buy-Back Tender and the On-Market Buy-Back may improve the ability of MMG security holders seeking to dispose of their MMG securities to do so and may also have a favourable impact on the price that they receive compared to the position if MMG was not acquiring the MMG securities under the Combined Buy-Back.

9.1.5 No transaction costs in off-market buy-back The Buy-Back Program includes a potential Buy-Back Tender which, if proceeded with and subject to the discretion of the independent directors of MMG, may be followed by an On- Market Buy-Back.

A MMG security holder selling via the Buy-Back Tender would not incur transaction costs. In contrast, a MMG security holder selling on the ASX including into an on-market buy-back

may incur transaction costs, in particular brokerage costs. The extent of these costs will vary depending on MMG security holders’ personal brokerage arrangements.

9.2 Potential Disadvantages of the Buy-Back Program 9.2.1 Reduction in cash holding at fund level If the Buy-Back Program is approved and implemented in full, MMG’s cash holdings will be reduced by approximately $50 million which would be in addition to the cash expended pursuant to the Remaining Existing Buy-Back. The extent to which this occurs will be dependent upon the price paid for the MMG securities and the number of MMG securities acquired and cancelled.

As shown in section 4.3.2, as at 31 January 2009 MMG had pro forma cash of $329.1 million excluding cash balances held by MSCM and ACM. If the Buy-Back Program is completed in full and in the absence of any other initiatives to preserve cash, this would reduce by approximately $50 million plus the cost of MMG securities acquired and cancelled pursuant to the Remaining Existing Buy-Back. This would still leave MMG with significant remaining cash reserves. In announcing the result of the Capital Management Review on 17 December 2008 it was noted that this cash should “ensure maximum flexibility for the potential future re-financing of debt facilities”.

In the currently constrained credit markets it may be considered prudent to maintain cash reserves when investee companies are facing material debt refinancings as will occur with both ACM and MSCM within the next two years. Notwithstanding the level of cash expected to be expended even if the Buy-Back Program is completed in full, and excluding other initiatives being taken by MMG to preserve cash, the remaining cash balance of MMG is expected to be significant. Therefore we do not consider the reduction in cash to be a major disadvantage in the context of our overall evaluation of the Buy-Back Program.

In this regard it should also be noted that MMG reduced its interim distribution from 24.5 cents per MMG security for the 6 months to 31 December 2007 to 4.5 cents per MMG security for the 6 months to 31 December 2008. This reduction of 20 cents per MMG security, when annualised and applied to total MMG securities on issue as at 27 February 2009 equates to a distribution saving of approximately $84 million. In effect therefore the Combined Buy-Back does not place MMG in a materially different cash position than what would have occurred if the distribution payout ratio had not been reduced.

9.2.2 Increase in gearing The net debt to net debt plus equity ratio for MMG, calculated as at 31 January 2009 (using the pro forma net debt as at 31 January 2009 and the midpoint of our fair market value of MMG on a controlling basis21) as at that date was 56.3%. The following table shows the net debt to net debt plus equity ratio under various scenarios.

Net debt / net debt plus equity Average price for remaining Total MMG securities remaining to be acquired under the Existing Buy-Back together with Existing Buy-Back and Buy- the Buy-Back Program Back Program AU$ 40 million 60 million 80 million 100 million 103.9 million $0.575 58.1% 59.0% 59.9% 60.8% 60.9% $0.60 58.2% 59.1% 60.0% 60.9% na $0.65 58.3% 59.3% 60.3% na na $0.70 58.5% 59.6% 60.6% na na $0.75 58.6% 59.8% 60.9% na na $0.80 58.8% 60.0% na na na $0.90 59.1% 60.5% na na na $0.95 59.2% 60.7% na na na $1.00 59.4% 60.9% na na na $1.05 59.6% 61.2% na na na $1.10 59.7% 61.4% na na na $1.15 59.9% 61.6% na na na $1.20 60.0% na na na na $1.25 60.2% na na na na $1.30 60.3% na na na na $1.35 60.5% na na na na $1.40 60.6% na na na na $1.45 60.8% na na na na $1.50 60.9% na na na na $1.55 61.1% na na na na na - This combination of MMG Securities purchased at the stated average price would exceed the cash available for the Buy-Back Program $0.575 represents the maximum average price at which MMG would be able to undertake the Buy-Back Program and purchase the maximum number of securities (being 86,956,521)

As shown above, the net debt to net debt plus equity will increase under all scenarios due to cash being used to complete the Combined Buy-Back. While we note these increases, we do not consider them to be significant in the context of our overall assessment.

9.2.3 Reduced market capitalisation and liquidity If the Buy-Back Program is approved and implemented MMG will have fewer MMG securities on issue and, in the absence of other factors, a reduced market capitalisation. This may have the following implications:

9.2.3.1 It may reduce the liquidity of MMG securities in the future The Buy-Back Program and cancellation of MMG securities will result in fewer MMG securities being available for sale in the future. This may impact upon the trading volume of MMG securities and hence the liquidity of the market for MMG securities.

21 We have used the valuation on a controlling interest basis for the above analysis as the lenders to MSCM and ACM in effect have security over these businesses as a whole.

9.2.3.2 It may reduce the representation of MMG securities in relevant ASX indices If MMG’s market capitalisation falls as a result of the Buy-Back Program, this may cause a reduction in its representation in key ASX indices. Relative index weightings of MMG may decrease and MMG may be removed from one or more indices, for example the S&P/ASX 200 Index, depending on the number of MMG securities ultimately purchased by MMG and the impact of the Combined Buy-Back on MMG’s ‘free float’ (i.e. MMG securities not held by the Macquarie Group).

Assuming that MGL does not participate in the Combined Buy-Back, the free float22 is expected to fall from its current level of 74.9% as shown in the following table.

MMG securities free float calculation Securities acquired 40 million 60 million 80 million 100 million 103.9 million Free float 69.0% 64.9% 59.5% 52.2% 50.5%

22 Calculated as = Total MMG securities less MGL relevant interest in MMG securities Total MMG securities

9.3 Other impacts of the Buy-Back Program 9.3.1 Increase in MGL security holding and voting power As a result of the Buy-Back Program MGL’s relevant security holding23 and voting power in MMG is likely to increase.

As at 27 February 2009 the Macquarie Group (MGL) had a relevant interest in 53,010,009 MMG securities which represented 25.1% of the 210,961,404 MMG securities on issue24. This could increase to as much as 49.5% of MMG securities on issue as a result of the Buy-Back Program, the Remaining Existing Buy-Back and the Buy Back already completed up to 27 February 2009. The relevant interest that will ultimately be reached will depend upon the number of MMG securities ultimately bought back. The following table sets out examples of the MMG security holding that MGL would hold in MMG based on the examples set out above:

MGL beneficial interest after the Combined Buy-Back Average price for the Buy-Back Cash expended for the Buy-Back Program Program AU$ $10 million $20 million $30 million $40 million $50 million $0.575 30.0% 33.3% 37.4% 42.6% 49.5% $0.60 29.9% 33.0% 36.8% 41.6% 47.9% $0.65 29.7% 32.5% 35.9% 40.0% 45.3% $0.70 29.5% 32.0% 35.1% 38.7% 43.3% $0.75 29.3% 31.7% 34.4% 37.7% 41.6% $0.80 29.2% 31.4% 33.9% 36.8% 40.3% $0.90 29.0% 30.9% 33.0% 35.5% 38.3% $0.95 28.9% 30.7% 32.6% 34.9% 37.5% $1.00 28.8% 30.5% 32.3% 34.4% 36.8% $1.05 28.7% 30.3% 32.0% 34.0% 36.2% $1.10 28.7% 30.2% 31.8% 33.6% 35.7% $1.15 28.6% 30.0% 31.6% 33.3% 35.2% $1.20 28.6% 29.9% 31.4% 33.0% 34.8% $1.25 28.5% 29.8% 31.2% 32.7% 34.4% $1.30 28.5% 29.7% 31.0% 32.5% 34.1% $1.35 28.4% 29.6% 30.9% 32.3% 33.8% $1.40 28.4% 29.5% 30.7% 32.0% 33.5% $1.45 28.3% 29.4% 30.6% 31.9% 33.2% $1.50 28.3% 29.3% 30.5% 31.7% 33.0% $1.55 28.3% 29.3% 30.4% 31.5% 32.8% $0.575 represents the maximum average price at which MMG would be able to undertake the Buy-Back Program and purchase the maximum number of securities (being 86,956,521)

In preparing the above analysis we have assumed that MGL and its associates have not and will not participate in the Combined Buy-Back, or otherwise acquire additional MMG securities or dispose of any of its existing MMG securities. Any such actions would decrease the MGL interest (in the case of a sale of MMG securities) or increase the MGL interest (in the case of an acquisition of MMG securities) relative to the percentages presented in the above table.

An increase in MGL’s security holding from 25.1% to less than 50% would not strictly enable MGL to pass an ordinary resolution in its own right as an ordinary resolution requires that votes cast in respect of 50% or more of MMG securities are in favour of the resolution. However in practice many securities are not voted in most circumstances. The higher the

23 MMG securities are not held by MGL directly. Most securities are held by MMML, with other MGL entities also holding MMG securities. 24 Based upon the latest substantial holding notices received by MMG at 27 February 2009.

MGL interest ultimately becomes the greater influence that MGL would have in relation to the passing of an ordinary resolution. It would be expected that with a security holding of 40% or higher that MGL could in many cases cause an ordinary resolution to be passed. An increase in MGL’s security holding from 25.1% to less than 50% would also not enable MGL to pass a special resolution in its own right as a special resolution requires that votes in respect of 75% or more of MMG securities are in favour of the resolution. However, again, a holding of greater than 40% would be highly influential in the passing of a special resolution.

There are other factors which go some way toward mitigating these impacts on control:

► MMG has a policy that the Board has at least four Directors and that a majority of those are independent.

► It should be noted that various Corporations Act 2001 and ASX requirements frequently act to prevent major security holders from voting on ordinary or special resolutions in respect of transactions or other matters in which they have an interest other than by virtue of their security holding. 9.3.2 Off-market and on-market components of the Buy-Back Program There are three components of the Combined Buy-Back. These are:

1. The Existing Buy-Back under which MMG has already commenced buying back MMG securities and may do so for up to 10.0% of the smallest number of MMG securities at any time during the preceding 12 months 2. Any off-market Buy-Back Tender 3. If the independent directors elect to do so, a further On-Market Buy-Back after the conclusion of any Buy-Back Tender Subject to the following points, the final impact on an MMG security holder of participating in any of these components is the same. That is, the MMG security holder disposes of the MMG securities that they sell and they receive proceeds for the sale of those MMG securities. Potential differences are:

► As noted in section 9.1.5 an MMG security holder selling MMG securities via a Buy-Back Tender would not incur transaction costs. In contrast a MMG security holder selling via an on-market buy-back may incur transaction costs, in particular brokerage costs. The extent of these costs would vary depending on a MMG security holder’s brokerage arrangements.

► The prices to be received may vary depending upon which component of the Combined Buy-Back MMG security holders elect to participate in. Our report is not intended to advise MMG security holders whether to sell their MMG securities as this will be dependent on a range of factors including their views on the value of MMG securities, financial circumstances, risk profiles, liquidity circumstances, investment strategies, and tax positions. We do, however, draw the following points to the attention of MMG security holders who, if they wish to sell their MMG securities may have the option of selling on the ASX (including into the Remaining Existing Buy-back), selling into any Buy-Back Tender or subsequently selling on the ASX which may include a further On-Market Buy-Back at the discretion of the MMG independent directors.

► An On-Market Buy-Back can take a considerable period to complete and the independent directors can decide when and at what price to acquire the MMG securities pursuant to the On-Market Buy-Back and can cancel it at any time. With the very low

trading volumes recently experienced in the trading of MMG securities an On-Market Buy-Back of the size proposed in particular would take a long time to complete. In contrast a Buy-Back Tender runs to a fixed timetable and enables all MMG security holders wishing to sell their MMG securities the opportunity to tender their MMG securities at a nominated price within a published range set out in the tender documents. If a Buy-Back Tender proceeds, MMG security holders who have their tenders accepted would receive at least their tender price for those MMG securities. This can be a benefit to MMG security holders especially those selling larger parcels of MMG securities and it can minimise MMG security price volatility.

► Once a MMG security holder sells their MMG securities on the ASX (including into the On-Market Buy-Back or the Remaining Existing Buy-Back), they have sold their MMG securities. In contrast, under a Buy-Back Tender a MMG security holder will tender their MMG securities at prices that they choose within a specified range. They will have the risk however that no MMG securities may be bought back if the final buy- back price is below their minimum price. 9.3.3 Income tax Ernst & Young has not been appointed to provide tax advice regarding the Buy-Back Program and the below comments are compiled solely on the basis of information to be contained in the Notices of Meeting. The Notices of Meeting will indicate that the general tax treatment of the Buy-Back Program has been reviewed by the external tax advisers of MMG.

MMG security holders should seek their own professional advice in relation to how the Buy-Back Program will apply to their specific circumstances.

Appendix A Qualifications and declarations

Ernst & Young Transaction Advisory Services Limited, which is wholly owned by Ernst & Young Australia, holds an Australian Financial Services License under the Corporations Act, 2001 and its representatives are qualified to provide this independent expert’s report.

Prior to accepting this engagement, Ernst & Young considered its independence with respect to MMG with reference to ASIC Regulatory Guide 112 Independence of experts.

Ernst & Young Transaction Advisory Services Limited and Ernst & Young Australia provide a wide range of professional services and have provided a range of professional services, including independent valuation services to MGL, MMG and related entities. However we have not provided any services in relation to the Buy-Back Program other than the preparation of this report.

It is our opinion that the abovementioned existing and historical relationships do not impact on our ability to provide an independent and unbiased report in the context of the Buy-Back Program. In our opinion, we are independent of MMG and MGL.

This independent expert’s report has been prepared specifically for the independent directors of MMG and the MMG security holders. Neither Ernst & Young Transaction Advisory Services Limited, Ernst & Young Australia, nor any member or employee thereof undertakes responsibility to any person, other than the independent directors and MMG security holders, in respect of this independent expert’s report, including any errors or omissions howsoever caused.

The statements given in this independent expert’s report are given in good faith and the belief that such statements are not false or misleading. In the preparation of this independent expert’s report we have relied upon and considered information believed after due inquiry to be reliable and accurate. We have no reason to believe that any information supplied to us was false or that any material information has been withheld from us. We have evaluated the information provided to us by MMG, their advisors, as well as other parties, through inquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base our independent expert’s report. We do not imply and it should not be construed that we have audited or in any way verified any of the information provided to us, or that our inquiries could have verified any matter which a more extensive examination might disclose.

The information we have had regard to in the preparation of this independent expert’s report is set out in appendix B.

MMHL, MMIL and MMML have provided an indemnity to Ernst & Young Transaction Advisory Services Limited for any claims arising out of any misstatement or omission in any material or information provided to it in the preparation of this independent expert’s report.

We provided draft copies of this report to the independent directors and management of MMG for their comments as to factual accuracy. Changes made to this independent expert’s report as a result of this review have not changed the methodology or conclusions reached by us.

We will receive a professional fee based on time spent in the preparation of this independent expert’s report, estimated at approximately $190,000 (exclusive of GST). We will not be entitled to any other pecuniary or other benefit whether direct or indirect, in connection with the making of this report.

The principal persons responsible for the preparation of this report are Stuart Bright and Ishwar Madhyastha.

Stuart Bright, a director and representative of Ernst & Young Transaction Advisory Services Limited and a partner of Ernst & Young Australia has over 18 years experience in providing financial advice and valuation advice and has professional qualifications appropriate to the advice being offered.

Ishwar Madhyastha, a director and representative of Ernst & Young Transaction Advisory Services Limited and a partner of Ernst & Young Australia has over 14 years experience in providing financial advice and valuation advice and has professional qualifications appropriate to the advice being offered.

In the preparation of this independent expert’s report we have had regard to relevant regulatory guides issued by ASIC, in particular Regulatory Guides 110, 111 and 112. It is not intended that the independent expert’s report should be used for any other purpose other than that to assist MMG security holders to determine how to vote in relation to the resolutions proposed in relation to the Buy-Back Program.

Appendix B Sources of information

In arriving at our views, we have had regard to the following sources of information:

► Financial data provided by MMG

► Results presentations released by MMG

► Financial statements of MMG and comparable companies

► Analyst reports on MMG and comparable companies

► D iscussions with MMG management

► MMG website (www.macquarie.com.au/au/mmg/index.html)

► Draft Notices of Meeting

► ASX announcements for MMG and comparable companies

► SEC announcements for comparable companies

► IBISWorld industry reports

► Standard & Poor's Market Insight

► FreeTV Australia publications

► ACMA website (www.acma.gov.au) and publications

► Bloomberg

► F activa

► NAA

► CEASA, Australian regional radio and television advertising data

► R euters

► Capital IQ

► Comparable company websites

Appendix C Valuation methodologies

There are a number of methodologies available with which to value a project, a business or the securities in a company. The principal methodologies used are:

► c apitalisation of earnings

► d iscounted cash flow

► n et realisable value of assets

► ma rket based assessments.

Each of these methodologies is appropriate in certain circumstances. The decision as to which methodology to utilise generally depends on the methodology most commonly adopted in valuing the asset in question and the availability of appropriate information.

Capitalisation of earnings The capitalisation of earnings methodology involves capitalising the earnings of a project, a business or a company at an appropriate multiple, which reflects the risks underlying the earnings together with growth prospects. This methodology requires consideration of the following factors:

► Estimation of future maintainable earnings having regard to historical and forecast operating results, abnormal or non-recurring items of income and expenditure and other factors. Future maintainable earnings are generally based on net profit after tax, EBIT, EBITA or EBITDA.

► Determination of an appropriate earnings multiple reflecting the risks inherent in the business, growth prospects and other factors.

► Earnings multiples applied to net profit after tax are known as price earnings multiples and are commonly used in relation to listed public companies. Earnings multiples applied to EBIT, EBITA or EBITDA are known, respectively, as EBIT, EBITA or EBITDA multiples, and are commonly used in respect of companies comprising a number of businesses where debt cannot be precisely allocated or in acquisition scenarios where the purchaser is likely to control gearing.

► An adjustment for financial debt, in the event that maintainable earnings are based on EBIT, EBITA or EBITDA.

► An assessment of any surplus assets and liabilities, being those which are not essential to the generation of the future maintainable earnings.

This methodology is appropriate where a company or business is expected to generate a relatively stable record of earnings.

Discounted cash flow The discounted cash flow methodology involves calculating the net present value of cash flows that are expected to be derived from future activities. The forecast cash flows are discounted by a discount rate that reflects the time value of money and the risk inherent in the cash flows.

This methodology is particularly appropriate in valuing projects, businesses and companies that are in a start up phase and are expecting considerable volatility and/or growth in earnings during the growth phase, as well as businesses with a finite life (such as oil and gas fields). The utilisation of this methodology generally requires management to be able to provide long term cash flows for the subject company, asset or business.

Net realisable value of assets The net realisable value of assets methodology involves the determination of the net realisable value of the assets of a business or company, assuming an orderly realisation of those assets. This value includes a discount to allow for the time value of money and for reasonable costs of undertaking the realisation. It is not a valuation on the basis of a forced sale, where assets may be sold at values materially different to their fair market value.

This methodology is appropriate where a project, a business or company is not making an adequate return on its assets or where there are surplus non-operational assets.

Market based assessments Market based assessments relate to the valuation of entities, the securities of which are traded on a stock exchange. While the relevant MMG security price would, prima facie, constitute the market value of the securities, such market prices usually reflect the prices paid for small parcels of securities and as such do not include a control premium relevant to a significant parcel of securities.

Appendix D Comparable companies

This section provides details of comparable companies identified as being comparable to the operations of MSCM and ACM set out in sections 6.3.1 and 7.3.1.

Australian television Ten Network Holdings Limited TNH is the parent company of Network Ten. It also owns Eye Corp Pty Limited, one of the largest out-of-home advertising operations that spans across Australia, New Zealand, Singapore, Indonesia, the United Kingdom, and the United States.

Network Ten engages in commercial television licensing and operates a national network of wholly owned commercial television stations: TVQ-10 Brisbane, TEN-10 Sydney, ATV-10 Melbourne, ADS-10 Adelaide, and NEW-10 Perth. The company also has agreements with Hollywood studios such as 20th Century Fox Television and CBS Paramount International Television, as well as broadcasting agreements and program supply arrangements with regional television networks.

In FY08, the television network contributed over 95% of TNH’s EBITDA. The company is based in Pyrmont, Australia and is a subsidiary of CanWest Global Communications Corp.

Prime Media Group Limited Prime Media is a regional FTA television and radio broadcaster with operations in Australia and New Zealand. Its television broadcast license covers regional New South Wales, Victoria, the Gold Coast and Western Australia, where the broadcast signal is branded as Golden West Network. The majority of the programming is supplied through an affiliation agreement with the Seven Network, which extends to 2016. Prime Media’s media sales and broadcasting segment contributed to almost 93% of total revenues (from continuing operations) in FY08. Prime Media also owns ten regional radio stations in north and south- east Queensland. These radio stations contributed 7% of total revenue in FY08.

Austar United Communications Limited Austar is a provider of subscription television services in regional and rural Australia primarily via satellite digital television services. The company offers over 100 channels, including premier channels, video-on-demand service, and interactivity, such as Box Office, Sports Active, and Sky News Active. In FY07, 96% of total revenue was generated from subscription television services. As of 30 September 2008, Austar had a total of 713,658 subscribers.

Austar is also a significant provider of programming in the Australian television market through its 50% owned joint venture, XYZ Networks, which owns and distributes Nickelodeon, Discovery Channel, Channel [V], MAX, Arena, The Lifestyle Channel, Country Music Channel and The Weather Channel. Additionally, it provides Internet and mobile phone services, and in June 2008 launched its wireless broadband service in regional Australia. The company is based in South Sydney, Australia and is a subsidiary of Liberty Global Inc.

Australian radio Austereo Group Limited Austereo operates a commercial FM radio broadcasting network in Australia. The group has two national radio networks, Today and Triple M, with stations in all mainland capital cities. The Today Network features songs, breakfast shows, promotions and events, and celebrity gossips. The Triple M Network offers music and comedy shows. It also has two joint venture radio stations in Newcastle and Canberra, as well as a presence in offshore markets, including Malaysia and the United Kingdom.

The company is based in South Melbourne, Australia. Austereo is a subsidiary of Village Roadshow Limited.

US radio Citadel Broadcasting Corporation (Citadel) Citadel is a US radio broadcasting company that operates a diversified portfolio of radio stations. It produces and distributes various programs and formats to affiliates, including syndicated talk and music programs. As of 9 November 2008, Citadel owned and operated 165 FM and 58 AM radio stations in 50 markets located in 27 states and the District of Columbia. It is headquartered in Las Vegas, Nevada.

Citadel’s recent announcement that it is acquiring Disney’s ABC Radio and the ABC Radio Network for a total of US$2.7 billion will make Citadel the third largest radio group in the US The company derives virtually all of its revenue from radio markets and radio networks. Due to the recent decline in the advertising industry, US analysts’ consensus estimate lower growth in Citadel’s EBITDA in FY09, despite the company’s cost cutting and debt repayment strategies.

Entercom Communications Corporation (Entercom) Entercom, one of the largest radio broadcasting companies in the US, engages in the acquisition, development, and operation of radio stations. The company’s stations provide various programming formats, such as news, talk, classic rock, adult contemporary, alternative, oldies, and jazz. As of 31 December 2007, it operated a portfolio of 111 radio stations in 23 markets across the US.

Entercom is also the radio broadcast partner of various sporting teams in Boston, Kansas and New Orleans. The company has relatively high levels of debt through numerous acquisitions and has recently initiated a stock repurchase program. However, this has failed to protect the company from recent declines in the advertising industry, with analysts’ consensus estimates indicating a decline in earnings in FY09. The company is based in Bala Cynwyd, Pennsylvania.

Journal Communications Inc. (Journal Communications) Journal Communications is a diversified media and communications company in the US and Canada. The company’s core operating segments are publishing, radio and television broadcasting, and printing services. The publishing segment publishes the Milwaukee Journal Sentinel, the major metropolitan daily in Milwaukee. It also owns and operates 49 community newspapers and shoppers in Wisconsin and Florida, as well as 8 niche publications. These operations contributed to 46% of total revenue in FY07.

The broadcasting segment owns and operates 35 radio stations and 11 television stations in 12 states. These operations contributed 37% of total revenue in FY07. As radio advertising demand is highly sensitive to the weakening economic conditions in the US, analysts’ consensus estimates indicate a decline in earnings in FY09.

Journal Communications also operates a commercial printing services segment. In addition, the company owns and operates a direct marketing service company, as well as various websites that provide editorial and advertising content. The company is headquartered in Milwaukee, Wisconsin.

Cumulus Media Inc. (Cumulus) Cumulus engages in the acquisition, operation, and development of FM and AM radio stations in mid-size radio markets. As of 26 December 2008, the company owned and operated 345 FM and AM radio stations, either directly or through its investment in Cumulus Media Partners. The company also has a network of 5 radio stations in English- speaking regions of the Caribbean. In addition, the company provides sales and marketing services to two local radio stations. The company was founded in 1997 and is based in Atlanta, Georgia.

The company recently announced the cessation of negotiations for a management-led buyout and subsequently initiated a stock repurchase program. As advertising demand is highly sensitive to the weakening economic conditions in the US, analysts’ consensus estimates indicate a decline in earnings for Cumulus in FY09.

Cox Radio Inc (Cox) Cox Radio is one of the largest radio broadcasting companies in the US. The company is engaged in ownership, acquisition and operation of radio stations across geographically diverse markets in the country. As of 31 December 2007, the company owned, operated and provided sales and other services to 86 radio stations, including 71 FM and 15 AM stations. The company was founded in 1934 and is headquartered in Atlanta, Georgia. Cox Radio is a majority-owned subsidiary of Cox Broadcasting Inc.

Approximately 80% of the company’s revenue in FY07 was earned through local advertisements. Analysts’ consensus estimates forecast a decline in the company’s revenue in FY09.

US publishing The McClatchy Company The McClatchy Company is the holding company for McClatchy Newspapers, Inc and Cowles Media Company. It is the third largest newspaper publisher in the US by daily circulation, with 31 daily metropolitan newspapers and around 50 non-daily community newspapers in 29 markets across the US. In addition, the company owns the leading local website in each of its daily newspaper markets.

The company also owns a portfolio of digital assets including investments in online job sites and other classifieds websites, as well as an interactive digital tool called McClatchy Interactive. McClatchy was founded in 1857 and is headquartered in Sacramento, California.

Advertising accounted for 82% of total revenue in FY07. Analysts’ consensus estimates decreased earnings forecasts for FY09 due to the declining advertising industry. McClatchy is also relatively highly geared due to its acquisition of Knight Ridder in 2006.

Lee Enterprises Incorporated Lee Enterprises provides local news, information, and advertising primarily in mid-size markets in the US. It publishes 54 daily newspapers, more than 300 weekly newspapers and speciality publications in 23 states in the US. The company also offers online advertising and publishing services to approximately 1,500 daily and weekly newspapers and shoppers. Further, Lee Enterprises has a joint interest in four newspapers. The company also has a strategic alliance with Yahoo! involving classified employment advertising. Lee Enterprises was founded in 1890 and is based in Davenport, Iowa. In FY08, advertising constituted 76% of the company’s total revenue.

Media General Inc. Media General is a diversified communications company that operates in three segments: newspaper publishing, television broadcast and interactive media. The publishing segment publishes 25 daily newspapers and nearly 275 weekly newspapers and other publications in Virginia, Florida, North Carolina, South Carolina and Alabama. Publishing contributed 56% of Media General’s EBITDA in FY07.

The broadcast segment includes the operations of 19 network-affiliated broadcast television stations. In addition, this segment operates more than 75 online enterprises and provides equipment and studio design services. In FY07, broadcasting contributed 44% of the company’s EBITDA.

The company’s interactive media segment has a strategic alliance with Yahoo! to deliver classified advertising to consumers. Media General was founded in 1879 and is headquartered in Richmond, Virginia.

Gannett Company Inc. (Gannett) Gannett is a diversified media company that operates in two main segments, newspaper publishing and broadcasting. Gannett is the largest newspaper publisher in the US, publishing 102 daily newspapers in the US and UK, approximately 900 non-daily publications in the US and Guam (including USA Today and USA Weekend), as well as approximately 300 titles in the UK. This segment also includes an online advertising business and other digital service businesses. In addition, the company engages in commercial printing, newswire, marketing and data services operations. Newspaper publishing contributed approximately 85% of the company’s EBITDA in FY07.

The broadcasting segment is comprised of 23 television stations that reach approximately 20 million households in the US. The segment also includes the Captivate Network, a national news and entertainment network that delivers programming and advertising to video screens in elevators of select buildings in North America. In FY07, broadcasting contributed approximately 17% of the company’s EBITDA.

Gannett operates in the US, UK, Europe and Asia and is headquartered in McLean, Virginia.

The New York Times Company New York Times is a diversified media company in the US that operates in two main divisions, News Media Group and About Group. The News Media Group comprises the New York Times Media Group (The New York Times, NYTimes.com, The International Herald Tribune, IHT.com, radio station WQXR-FM, Baseline and related businesses), the New England Media Group (the Boston Globe, Boston.com, the Worcester Telegram & Gazette, Telegram.com and related businesses) and Regional Media Group (14 regional daily

newspapers and related print and digital businesses). The News Media Group contributed approximately 88% of EBITDA in FY07.

The About Group consists of the websites About.com, ConsumerSearch.com, UCompareHealthCare.com and Calorie-Count.com. This segment also holds interest in a Canadian newsprint company and a regional cable sports network. The Group contributed approximately 12% of EBITDA in FY07.

The company was founded in 1896 and is headquartered in New York City, New York.

A. H. Belo Corporation (A. H. Belo) A. H. Belo Corp is engaged in the newspaper publishing business. It owns three primary daily newspapers: The Dallas Morning News, The Providence Journal, and The Press- Enterprise. The company also operates and maintains websites associated with daily newspapers and niche publications. In addition, it operates direct mail and commercial printing businesses. Further, the company, through its 6.6% interest in Classified Ventures, operates three principal online businesses, including cars.com, apartments.com, and homegain.com.

US television Hearst-Argyle Television Inc. (Hearst-Argyle) Hearst-Argyle is one of the largest independent television station groups in the US. As of 31 December 2007, the company owned and operated 29 network-affiliated television stations that reach over 20 million households. The company has affiliations with ABC, NBC, CBS and CW networks. In addition, the company produces its own programs (such as local news, weather and sport) and has acquired first-run syndicate programs such as The Oprah Winfrey Show and Entertainment Tonight. Hearst-Argyle also manages 2 radio stations.

The company was founded in 1994 and is headquartered in New York, New York. Hearst- Argyle is a subsidiary of The Hearst Corporation. Analysts’ consensus estimates forecast a decline in earnings in FY09 due to an industry-wide decline in television advertising demand.

Gray Television Inc. (Gray) Gray is a US-based television broadcasting company that offers commercial production services and tower rentals. As of 31 December 2007, the company owned 36 television stations across 30 television markets. These include 17 CBS affiliated, 10 NBC affiliated, 8 ABC affiliated, and 1 affiliated with FOX serving 30 television markets. In addition, the company operates 36 digital second channels, including 1 affiliated with ABC, 5 affiliated with FOX, 8 affiliated with CW, and 16 affiliated with MyNetworkTV, as well as 8 local news/weather channels and 2 independent channels in its existing markets. The company was founded in 1897 and is headquartered in Atlanta, Georgia.

As of 30 January 2009, the company had liquidity concerns, largely due to a decline in local advertisement sales. The share price has decreased substantially in the months leading to February 2009.

LIN TV Corp. (LIN TV) LIN TV Corp is a local television and digital media company that owns and operates 29 television stations in 17 markets across the United States. The company provides FTA broadcasts through these television stations and delivers local news and community stories, as well as sports and entertainment programming. Each station is affiliated with a national broadcast network, namely ABC, CBS, NBC, FOX, CW, MyNetworkTV, Telefutura or Univision. The company also has 2 television stations located in Puerto Rico.

The company, formerly known as Ranger Equity Holdings Corporation, was founded in 1997 and is headquartered in Providence, Rhode Island.

Entravision Communications Corporation (Entravision) Entravision is a diversified public media company that, together with its subsidiaries, utilises a combination of television and radio to reach Hispanic consumers in the US as well as the border markets of Mexico. The company operates in two segments: television broadcasting and radio broadcasting. The television broadcasting segment owns and operates 51 Spanish-language television stations that are affiliated with the Univision network. These television stations are located primarily in the south-western US. This segment also offers an entertainment magazine, a news magazine and national news, as well as local news produced by its television stations. In FY07, television broadcasting accounted for approximately 62% of the company’s EBITDA.

Entravision’s radio broadcasting segment owns and operates 48 radio stations, including 37 FM and 11 AM, in the Hispanic markets in the US, including Arizona, California, Colorado, Florida, Nevada, New Mexico, and Texas. This segment combines network and local programming with local time slots available for advertising, news, traffic, weather, promotions, and community events. In FY07, radio broadcasting accounted for approximately 38% of the company’s EBITDA.

Appendix E Recent transactions

This appendix provides a summary of the transaction multiples referred to in section 6.3.2 and section 7.3.2. Australian transaction multiples SCB / MMG On 3 July 2007 MMG and Fairfax acquired an 86.2% stake in SCB, the Australian listed commercial television and radio production group, for a total cash consideration of $1,393 million.

The transaction was settled on 5 November 2007 with an enterprise value of $1,350 million and an EBITDA multiple of 12.8x.

Channel 9 South Australia / WIN Corporation On 29 May 2007 WIN, the Australian radio and television broadcaster, made an offer to acquire Channel 9 South Australia Pty Limited for a total cash consideration of $105 million.

Channel 9 South Australia is the operator and licensee of Channel 9 Adelaide, the broadcaster of Channel 9 in South Australia with an affiliation agreement with the Nine Network.

The transaction was settled on 23 July 2007 with an implied equity and enterprise value of $105 million and a high EBITDA multiple of 20.2x which may reflect expected earnings improvements following the renegotiation of its program supply agreement in 2007 and synergies potentially available to WIN.

NBN Enterprises Pty Ltd / PBL Media On 1 May 2007, SP Telemedia Limited announced that it had entered into an agreement with PBL Media Pty Limited, to sell NBN Television and its outside broadcasting and production operations, One80 Digital Post, for a total cash consideration of $250 million.

NBN Television broadcasts FTA television in regional centres along the east coast of Australia.

The transaction was settled on 9 May 2007.

Seven Network Limited / KKR In November 2006 SNL announced that KKR would acquire a 47.7% stake in Seven Media Group, the television and magazine joint venture between SNL and KKR, for a total consideration of $3,294 million. The consideration was structured as $690 million of convertible notes and a $2,570 million loan.

The transaction was completed on 29 December 2006 with an implied equity value of $1,447 million, an enterprise value of $4,017 million and a forecast EBITDA multiple of 12.4x.

PBL Media / CVC On 18 October 2006 CVC, the Australasian investment vehicle established by CVC Capital Partners and Citigroup, acquired a 50% stake in PBL Media for a total cash consideration of $4,585 million.

PBL Media holds media interests in Nine Network (owner of Nine Network in Sydney, Melbourne and Brisbane and affiliation with Nine Network Adelaide, Perth and Darwin), Sky News, ACP Magazines, Ticketek, Ninemsn and carsales.com.au.

The transaction was completed on 7 February 2007 with an implied equity value of $1,964 million, an enterprise value of $5,714 million and an EBITDA multiple of 12.0x.

On 1 June 2007 PBL announced it had sold a further 25% in PBL Media to CVC for $515 million. In December 2008 PBL Media was recapitalised, with CVC injecting an additional $335 million into the business, resulting in its ownership of PBL Media increasing to above 99%.

Newspaper transaction multiples Tribune Company / Sam Zell and employees of Tribune Company On 20 December 2007 the Tribune Company announced that it had completed its privatisation transaction by merging with another company, the Tribune Employee Stock Ownership Plan. The major financier behind the transaction was Sam Zell.

Tribune Company operates within the publishing, interactive and broadcasting media sectors in the US. Tribune’s leading daily newspapers include the Los Angeles Times, Chicago Tribune, Newsday (Long Island, NY), The Sun (Baltimore), South Florida Sun- Sentinel, Orlando Sentinel and Hartford Courant. The company’s broadcasting group operates 23 television stations.

The implied equity value of the transaction was US$8,173 million with net debt of US$8,643 million providing an enterprise value of US$16,816 million. Tribune Company’s EBITDA for the period to 30 September 2007 was reported as $1,115 million.

Chesapeake Publishing Corp and Brown Publishing / ACM On 28 November 2007 ACM agreed to acquire 22 publications from Chesapeake Publishing Corp and 11 publications from Brown Publishing for a total cash consideration of US$162 million.

Chesapeake and Brown are regional based newspaper publishers; Chesapeake publishes 22 local publications in Maryland while Brown publishes 11 local publications in Southern Ohio. The transaction represents an opportunity for ACM to cross-sell across publications and reduces newsprint and overhead costs.

The transaction was settled on 8 January 2008 with an implied equity and enterprise value of US$160 million and an EBITDA multiple of 10.3x.

Morris Publishing Group / GateHouse Media Inc. (GateHouse) On 23 October 2007 GateHouse, the publisher of regional print and online media, agreed to acquire the local media operations of Morris Publishing Group LLC (MPG) for a total cash consideration of US$115 million.

Morris Publishing Group is a listed newspaper publisher of both national and local newspapers. This transaction involves the acquisition of 14 daily and 3 non-daily newspapers servicing the local markets of Florida and South Dakota. The transaction allows MPG to repay debt outstanding while GateHouse will increase market share within the two states.

The transaction was settled on 30 November 2007 with an implied enterprise value of US$115 million and an implied forecast EBITDA multiple of 8.2x.

Dow Jones & Company (Dow Jones) / News Corporation Limited (News Corp) On 1 August 2007 News Corp, the listed international media and entertainment company, made an offer to acquire Dow Jones for a total cash consideration US$5,151 million.

Dow Jones comprises of a Consumer Media Group, consisting of national electronic information services and financial and business newspapers and magazines, and a Local Media Group, operating community-based information services.

The transaction was settled on 13 December 2007 with an implied equity value of US$5,151 million, an enterprise value of US$5,516 million and a high EBITDA multiple of 17.8x which may reflect the premium required to overcome shareholder inertia and the synergy opportunities available to News Corp.

Superior Publishing Corporation (SPC) / ACM On 11 June 2007 ACM agreed to acquire SPC and the publishing assets of Grove Sun Newspapers for a total cash consideration of US$67 million.

SPC is the publisher of 19 local newspapers which serve communities in regional areas of northern Minnesota and Wisconsin and one region of Michigan. The transaction was in line with ACM’s strategy of growth and expansion of local community newspapers.

The transaction was settled on 30 June 2007 with an implied equity and enterprise value of US$67 million and an EBITDA multiple of 10.3x.

American Community Newspapers LLC / Courtside Acquisition Corporation On 25 January 2007 Courtside Acquisition Corporation, the listed specific-purpose acquisition company, agreed to acquire American Community Newspapers LLC (ACN) for a total cash consideration of US$180 million.

ACN is a group of 73 publications of which 60 are weekly suburban newspapers in three separate markets.

The transaction was settled on 2 July 2007 with an implied equity value of US$180 million (US$205 million with earn outs), an enterprise value of US$232.4 million (US$257.4 million with earn outs) and a high EBITDA multiple of 18.0x which may reflect Courtside Acquisition Corporation’s specific intention to acquire a media growth platform.

ACM / MMG On 24 January 2007 MMG, the Australian listed media investment platform, agreed to acquire ACM for a total cash consideration of US$80 million.

At the time of acquisition ACM published 40 local community newspapers and related publications. The transaction was part of a broader strategy to acquire and grow a portfolio of community newspaper businesses in the US, having identified these as an asset class which met MMG’s investment criteria.

The transaction was settled on 8 February 2007 with an implied equity and enterprise value of US$80 million and an EBITDA multiple of 11.3x.

Rural Press Limited / Fairfax Media Limited On 6 December 2006 Fairfax, the Australian listed media group, agreed to acquire Rural Press, an Australian company engaged in newspaper and magazine publishing and printing and radio broadcasting, for a total consideration US$282 million cash and US$1,877 million scrip.

Rural Press operates a diverse range of print publishers and radio broadcasters within Australia. The transaction allows Fairfax to leverage on the combined publishing business, accelerate online revenue growth and benefit from potential synergies.

The transaction was settled on 24 April 2007 with an implied equity value of US$2,159 million, an enterprise value of US$2,306 million and an EBITDA multiple of 15.9x.

Appendix F Reconciliation to statutory accounts

The following table provides a reconciliation of the MSCM financial data provided in section 6.2 to the financial data which forms the basis of amounts reported in the statutory accounts for MMG (particularly as disclosed in the segment accounting note).

HY HY HY HY Currency: AU$ 000 Jun-07A Dec-07A Jun-08A Dec-08A CY07 FY08 CY08 Reported EBITDA 29,520 51,827 67,888 72,018 81,347 119,715 139,907 add: Southern Cross earnings pre acqusition 33,921 29,097 - - 63,018 29,097 - less: EBITDA relating to 19 radio licenses (2,155) (2,617) (452) - (4,772) (3,069) (452) divested in March 2008 Normalised pro forma EBITDA 61,286 78,307 67,436 72,018 139,593 145,743 139,455 Source: MMG Management

The following table provides a reconciliation of the ACM financial data provided in section 7.2 to the financial data which forms the basis of amounts reported in the statutory accounts for MMG (particularly as disclosed in the segment accounting note).

HY HY HY HY Currency: AU$ 000 Jun-07A Dec-07A Jun-08A Dec-08A CY07 FY08 CY08 Reported EBITDA 6,726* 7,222 11,060 10,574 13,948 18,282 21,635 less: December half 2006 EBITDA (3,383) - - - (3,383) - - add: Grove & Columbus earnings pre 173 - - - 173 - - acquisition add: Superior earnings pre acquisition 3,074 - - - 3,074 - - add: Brown earnings pre acquisition 1,784 1,791 - - 3,575 1,791 - add: Chesapeake earnings pre acquistiion 4,276 4,569 (243) - 8,845 4,326 (243) Other 17 27 15 - 44 42 15 Normalised pro forma EBITDA 12,667 13,609 10,833 10,574 26,276 24,442 21,407 Source: MMG Management * Full-year EBITDA for the original ACM platform business for the year ended 30 June 2007

Appendix G Glossary

Term Meaning

$ or AU$ All amounts in this report are Australian dollars unless otherwise stated ABC Australian Broadcasting Corporation ACCC Australian Competition & Consumer Commission ACM American Consolidated Media ACMA Australian Communications and Media Authority APN APN News & Media Limited ASIC Australian Securities & Investments Commission ASX Australian Securities Exchange Limited AU$ Australian Dollar Austereo Austereo Group Limited Brown Brown Publishing Company Buy-back and Buy-Back Program An additional buy-back of up to approximately $50 million MMG securities subsequent to the on market buy-back of up to 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468 MMG securities) CEASA Commercial Economic Advisory Service of Australia Chesapeake Chesapeake Publishing Corporation CMH Consolidated Media Holdings Limited CVC CVC Capital Partners Asia Pacific Limited CY0X Calendar year ended 31 December 200X DDT Darwin Digital Television DMG DMG Radio Holdings DRP Dividend reinvestment plan EBITDA Earnings before interest, taxation, depreciation and amortisation

EPS Earnings per security as defined in MMG’s Management Information Report for the Six Months ended 31 December 2008 Ernst & Young Transaction Advisory Ernst & Young Transaction Advisory Services Limited Services, we, our or us Existing Buy-Back On-market buy-back of up to 10.0% of the smallest number of MMG securities at any time during the preceding 12 months (being 20,957,468) Fairfax Fairfax Media Limited FSG Financial Services Guide FTA Free to air FY0XA The twelve months ended 30 June 200X FY0XF Forecast for the twelve months ended 30 June 200X GST Goods and Services Tax HY0XA The six months ended 31 December 200X HY0XF Forecast for the six months ended 31 December 200X Independent directors The independent directors of MMHL, MMIL and MMML IRR Internal rate of return KKR Kohlberg Kravis Roberts MGL Macquarie Group Limited MMG & the Company Macquarie Media Group MMT Macquarie Media Trust MMHL Macquarie Media Holdings Limited MMIL Macquarie Media International Limited

Term Meaning

MMML Macquarie Media Management Limited MPG Morris Publishing Group LLC MSCM Macquarie Southern Cross Media NNSW Northern New South Wales Notices of Meeting Draft MMHL Notice of Extraordinary General Meeting 2009 and MMT Notice of Meeting 2009 OECD Organisation for Economic Co-operation and Development PBL Publishing and Broadcasting Limited PCP Prior corresponding period PEPS Proportionate earnings per security as defined in MMG’s Management Information Report for the Six Months ended 31 December 2008 Remaining Existing Buy-Back MMG securities that can be bought back in addition to the MMG securities already acquired to complete the Existing Buy-Back, being 16,992,098 MMG securities Report This independent Expert’s Report S&P Standard & Poor’s SBS Special Broadcasting Service Corporation SCB Southern Cross Broadcasting (Australia) Limited SNL Seven Network Limited SMG Seven Media Group Limited SNSW Southern New South Wales TBC Taiwan Broadband Communications TDT Tasmanian Digital Television TNH Ten Network Holdings TV Television WIN WIN Corporation Pty Ltd UK United Kingdom US/USA United States of America US$ United States Dollar WAN Western Australian Newspapers

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Ernst & Young Transaction Advisory Services is ultimately owned by Ernst & Young, which is a professional advisory and accounting practice. Ernst & Young may provide professional services, including audit, tax and financial advisory services, to the person who engaged us and receive fees for those services.

Except for the fees and benefits referred to above, Ernst & Young Transaction Advisory Services, including any of its directors, employees or associated entities should not receive any fees or other benefits, directly or indirectly, for or in connection with the provision of a Report.

6. Associations with product issuers Ernst & Young Transaction Advisory Services and any of its associated entities may at any time provide professional services to financial product issuers in the ordinary course of business.

7. Responsibility The liability of Ernst & Young Transaction Advisory Services, if any, is limited to the contents of this Financial Services Guide and the Report.

8. Complaints process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial services. All complaints must be in writing and addressed to the AFS Compliance Manager or Chief Complaints Officer and sent to the address below. We will make every effort to resolve a complaint within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service Limited.

Contacting Ernst & Young Contacting the Independent Dispute Resolution Transaction Advisory Services Scheme: AFS Compliance Manager Financial Ombudsman Service Limited Ernst & Young PO Box 3 680 George Street Melbourne VIC 3001 Telephone: 1300 78 08 08 Sydney NSW 2000

Telephone: (02) 9248 5555

This Financial Services Guide has been issued in accordance with ASIC Class Order CO 04/1572.

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Macquarie Media Group - Notices of General Meeting

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2009 Feb MMG EGM (short form).indd Sec2:25 2/03/2009 8:01:54 AM CORPORATE DIRECTORY

Macquarie Media Group

1 Martin Place Sydney NSW 2000, Australia Telephone: 1800 811 745 (Australia) (612) 8232 9440 (International) Facsimile: (612) 8232 4713 Email: [email protected] Website: www.macquarie.com/mmg Responsible Entity for Macquarie Media Trust and manager for Macquarie Media Holdings Limited and Macquarie Media International Limited: Macquarie Media Management Limited.

Directors

MMML

Tony Bell Chris de Boer Michael Carapiet Max Moore-Wilton (chairman) Leon Pasternak MMHL

Tony Bell Chris de Boer Max Moore-Wilton (chairman) Leon Pasternak MMIL

Michael Hamer (chairman) Michael Leverock Max Moore-Wilton Bob Richards (deputy chairman) Secretaries

Christine Williams (MMHL and MMML) Sally Webb (MMHL and MMML) Dennis Leong (MMML) Lynniece L. Robinson (MMIL) Registry

Computershare Investor Services Pty Ltd GPO Box 2975 Melbourne VIC 3001 Telephone: 1300 766 272 (Australia) (613) 9415 4257 (International) Facsimile: (613) 9473 2555

Financial report

A copy of the MMG consolidated interim ﬁ nancial report for the period ended 31 December 2008 is available on the MMG website: www.macquarie.com/mmg.

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