mitcham-frankston project The Issuer ConnectEast Management Limited

Transcription

1 connecteast mitcham-frankston project Product Disclosure Statement for the Offer of 1,120,000,000 Stapled Units in ConnectEast Investment Trust (ARSN ) and ConnectEast Holding Trust (ARSN ) The Issuer ConnectEast Management Limited Underwriters Macquarie Bank Limited Macquarie Equity Capital Markets Limited ABN AMRO Rothschild Commonwealth Securities Limited

2 RESPONSIBLE ENTITY ConnectEast Management Limited (ACN ) (CEML) is the responsible entity for ConnectEast Investment Trust (ARSN ) and ConnectEast Holding Trust (ARSN ). CEML is the entity making the Offer under this Product Disclosure Statement (PDS). The Offer contained in this PDS is an invitation to apply for Stapled Units comprising one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust, stapled together. CEML s Australian Financial Services Licence number is DATE OF PDS AND LODGEMENT WITH ASIC This PDS is dated 14 October 2004 and was lodged with the Australian Securities and Investments Commission (ASIC) on that date. ASIC and Australian Stock Exchange Limited (ASX) take no responsibility for the contents of this PDS. No person is authorised to provide any information or to make any representation in connection with the Offer described in this PDS which is not contained in this PDS. Any information or representation not so contained may not be relied upon as having been authorised by CEML, the Underwriters (Macquarie Equity Capital Markets Limited, Macquarie Bank Limited, ABN AMRO Rothschild and Commonwealth Securities Limited) or any other person in connection with the Offer. AVAILABILITY AND APPLICATIONS This PDS will be issued in paper form and is also available in electronic form (Electronic PDS). The Electronic PDS can be downloaded from the date of this PDS until the date the Offer closes by going to or and following the instructions. Applicants using the Application Form attached to or accompanying the Electronic PDS must be located in Australia or New Zealand. Persons who receive the Electronic PDS should ensure they download and read the entire PDS. The offer is only available to persons receiving the Electronic PDS within Australia and New Zealand. The Stapled Units will only be issued on receipt of a copy of the Application Form which was issued together with the PDS. The electronic Application Form may be generated by software accessible by the same means as the Electronic PDS. The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to a hard copy of this PDS or the complete and unaltered Electronic PDS. A paper copy of this PDS will be provided free of charge to any person who requests a copy by contacting CEML or the Registry, by mail or in person, during the period that the Offer is open. GENERAL FINANCIAL PRODUCT ADVICE ONLY It is important that you read the entire PDS before making any decision to invest in Stapled Units. This PDS contains general financial product advice only. It has not been personalised for any person. This PDS does not take into account the investment objectives, financial situation and particular needs of any particular investor. Accordingly, nothing in this PDS should be construed as a recommendation by CEML, or any associate of CEML or any other person, concerning an investment in Stapled Units. In particular, when considering the prospects of ConnectEast Group, it is important that you consider the risk factors that could affect the financial performance of ConnectEast Group. You should carefully consider these factors in light of your particular investment needs, objectives and circumstances (including financial and taxation issues) and consider seeking professional advice from your accountant, stockbroker, solicitor or other professional adviser before deciding whether to invest. Some of the risk factors that should be considered by prospective investors are detailed in Section 8. EXPOSURE PERIOD The Corporations Act prohibits the processing of Applications in the seven day period after the date of lodgment of this PDS (the Exposure Period). This period may be extended by ASIC by up to a further seven days. The Exposure Period enables the PDS to be examined by market participants prior to the raising of funds. Applications received by CEML during the Exposure Period will not be processed until after the expiry of that period. No preference will be conferred on Applications received during the Exposure Period. SELLING RESTRICTIONS APPLY The distribution of this PDS in jurisdictions outside Australia and New Zealand may be restricted by law, and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. The Offer to which this PDS relates is only available to persons receiving the PDS (electronically or otherwise) in Australia and New Zealand. This PDS does not constitute an offer in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer outside Australia and New Zealand where, or to any person to whom, it would be unlawful to make such an offer or invitation. A New Zealand Investment Statement has also been prepared and should be considered with this PDS for New Zealand applicants. No action has been taken to register or qualify the Stapled Units of the Offer or otherwise to permit a public offering of the Stapled Units in any jurisdiction outside Australia and New Zealand. Residents of New Zealand should refer to Section 2 of this PDS and the New Zealand Investment Statement. The Stapled Units have not been and will not be registered under the US Securities Act of 1933, as amended (the Securities Act). Subject to certain exceptions, the Stapled Units may not be offered, sold or delivered within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act) except in a transaction exempt from the registration requirements of the Securities Act and applicable US state securities laws. NO COOLING OFF RIGHTS There is no statutory cooling off right for Unitholders in trusts that are listed or are to be listed within three months of the date of the disclosure document. CEML will apply no later than seven days after the date of issue of this PDS to be listed on ASX. Accordingly, there is no cooling off right for Unitholders in the ConnectEast Unit Trusts. UPDATED INFORMATION Information relating to the Stapled Units that is not materially adverse, may change from time to time. This information may be updated and made available to you on our website at or by contacting the ConnectEast Group Offer Hotline on in Australia or in New Zealand. A paper copy of any updated information is available free on request. Applicants will be advised if a supplementary PDS is prepared which will be provided to them free of charge. DEFINITIONS AND ABBREVIATIONS Defined terms and abbreviations used in this PDS are explained in the Glossary or in the Summary of Material Contracts in Section A reference to time in this PDS is a reference to Melbourne, Australia time. All references to $ are to Australian dollars. PHOTOGRAPHS AND DIAGRAMS The assets depicted in photographs in this PDS are not assets of ConnectEast Group unless otherwise stated. Diagrams appearing in this PDS are illustrative only and may not be drawn to scale. PRIVACY NOTIFICATION By filling out the Application Form to apply for Stapled Units, you are providing information to CEML (directly and/or via the Share Registry, ASX Perpetual Registrars Limited) that may constitute personal information for the purposes of the Privacy Act 1988 (the Privacy Act). CEML (and the Registry on its behalf) collects, holds and uses personal information in relation to your Application in order to assess your Application, service your needs as an Investor, provide facilities and services that you request and administer your holding of Stapled Units. If you do not provide the information requested in the Application Form, CEML and the Registry may not be able to process or accept your Application or administer your holding of Stapled Units appropriately. Access to your personal information may be provided to other companies within ConnectEast Group and to CEML s agents and service providers on the basis that they deal with such information in accordance with CEML s privacy policy, a copy of which can be accessed at You can request access to personal information collected in relation to your Application by telephoning the ConnectEast Group Offer Hotline on in Australia or in New Zealand or writing to the Registry at: ASX Perpetual Registrars Limited GPO Box 2785 Melbourne VIC 3001 CAPITAL AND INVESTMENT RETURNS ARE NOT GUARANTEED Investments in Stapled Units are not deposits with or liabilities of Macquarie Bank Limited (ACN ) (Macquarie Bank) or any other entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither CEML nor any member of the Macquarie Bank Group guarantees any particular rate of return on the Stapled Units or the performance of ConnectEast Group, nor do they guarantee the repayment of capital from ConnectEast Group.

3 SECTION 1. SUMMARY OF THE OFFER DETAILS OF THE OFFER IMPORTANCE OF THE MFP CONSTRUCTION AND OPERATION OF THE MFP CORPORATE STRUCTURE AND TAXATION BOARD AND MANAGEMENT FINANCIAL ANALYSIS AND INFORMATION (INCLUDING FEES AND COSTS) RISK FACTORS EXPERTS AND CONSULTANT S REPORTS ADDITIONAL INFORMATION GLOSSARY APPLICATION FORMS 151 CORPORATE DIRECTORY IBC CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 1

4 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 2 OFFER SUMMARY The Offer consists of 1,120 million Stapled Units in the ConnectEast Group at an Issue Price of $1.00 per Stapled Unit. Each Stapled Unit comprises one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust, stapled together to form a single Stapled Unit. The Issue Price is payable in two instalments an Initial Instalment of $0.55 per Stapled Unit which will be payable with the application for Stapled Units and a Final Instalment of $0.45 per Stapled Unit which will be payable 12 months following Allotment Date. CEML intends to apply to have the Stapled Units quoted on ASX. While the Stapled Units are quoted on ASX, units in ConnectEast Investment Trust and units in ConnectEast Holding Trust will be stapled and not able to be separately traded. The Offer is fully underwritten by the Underwriters.

5 KEY STATISTICS Initial Instalment per Stapled Unit $0.55 Final Instalment per Stapled Unit $0.45 Issue Price per Stapled Unit $1.00 Number of Stapled Units available under the Offer 1,120 million Market Capitalisation of the Initial Instalment $616 million Market Capitalisation at the Issue Price $1,120 million IMPORTANT DATES Offer opens 22 October 2004 Offer closes 4 November 2004 Allotment of Stapled Units 10 November 2004 Expected despatch of transaction confirmation statements 11 November 2004 Stapled Units commence trading on ASX (deferred settlement basis) 11 November 2004 Stapled Units expected to begin trading on a normal settlement basis 16 November 2004 Final Instalment Payment Date 12 months following Allotment Date These dates are indicative only. CEML reserves the right to vary the dates and times of the Offer, which includes closing the Offer early, without prior notice.

6 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 4 Anthony Shepherd Chairman CONNECTEAST GROUP

7 Dear Investor It is my pleasure to invite you to become an investor in ConnectEast Group which was recently awarded the Concession by the State of Victoria to finance, design, construct and operate the Mitcham-Frankston Project (MFP) for a Concession Period of approximately 39 years. The MFP will be a new 39 kilometre multi-lane toll road (including twin 1.5 kilometre tunnels) that uses electronic free-flow tolling technology. The MFP is one of the largest privately financed toll road projects undertaken in Australia. It will run from the Eastern Freeway in the eastern suburbs of Melbourne to the Frankston Freeway in Melbourne s south-east and is expected to become a major commuter road and a key intracity arterial route. The toll road will link the commercial, industrial and residential centres of Melbourne s eastern and fast growing south-eastern suburbs, reducing travel times and improving travel time reliability. ConnectEast Group provides an opportunity to invest in the MFP through the subscription for Stapled Units at an issue price of $1.00 each. Stapled Units are being offered on a partly-paid basis, with $0.55 payable on subscription and the balance of $0.45 payable 12 months following Allotment Date. The Offer has been fully underwritten by Macquarie Bank Limited, Macquarie Equity Capital Markets Limited, ABN AMRO Rothschild and Commonwealth Securities Limited. The MFP will be designed and constructed by a joint venture between Thiess and John Holland under a Fixed Time, Fixed Price Contract. It is expected that the MFP will take approximately 49 months to construct. Both Thiess and John Holland have extensive experience in the design and construction of road infrastructure, including tunnels, and their construction commitments for MFP are backed by a parent company performance guarantee from Leighton Holdings, the largest project development and contracting group in Australia. ConnectEast Group intends to make Distributions to Unitholders equivalent to 6.5 cents per Stapled Unit per annum for approximately 5.5 years from Allotment Date. For the first 12 months, this provides Unitholders with an annualised distribution yield of 11.8% on their Initial Instalment of $0.55. I encourage you to read this PDS carefully in its entirety before making an investment decision as it contains detailed information about ConnectEast Group, the MFP and the Offer. On behalf of my fellow Directors, I commend the Offer to you and look forward to welcoming you as a Unitholder in ConnectEast Group. Yours sincerely CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 5 Anthony Shepherd Chairman CONNECTEAST GROUP

8 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 6 One of the largest toll road projects undertaken in Australia

9 Low risk construction > Highly experienced contractors > Well proven construction techniques CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 7

10 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 8 Electronic free-flow tolling technology is well accepted in Australia > The tolling system for the Mitcham-Frankston Project is designed to be fully interoperable with all other electronic tolling systems in Australia

11 Competing routes are highly congested > Key to Melbourne s future transport needs > Land has been reserved for over 30 years CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 9 Estimated travel time from Heidelberg to Endeavour Hills* Estimated travel time from Wantirna South to Doncaster* Middleborough Road and Princes Highway MFP Burwood Highway and Springvale Road MFP * AM peak, 2011 (projected) Trip time (minutes) Trip time (minutes)

12 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 10 Single purpose investment vehicle > ConnectEast Group will only invest in the Mitcham-Frankston Project and other contiguous roads Potential for capital growth from investment re-rating during construction and Ramp-up The re-rating effect has been observed for other Australian greenfields toll road projects

13 Distributions for the first 12 months equate to an annualised distribution yield on the Initial Instalment of 11.8% CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 11 Distributions for the Fixed Distribution Period (ending 31 March 2010) of 6.5 cents per Stapled Unit per annum > Representing a 6.5% yield on the Issue Price See Section 1.6 for further information on Distributions.

14 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 12 A corridor containing some of the highest growth centres in Australia

15 Attractive demographics > Highest car usage and ownership in Victoria > Services some of Melbourne s fastest growing and more affluent areas CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 13 POPULATION PROJECTIONS MFP CORRIDOR* m 1.67 m 1.80 m 2.02 m 2.24 m * Assumes MFP commences operation in late 2008

16 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 14 Experienced Sponsors>Macquarie Bank has a proven track record in delivering value for infrastructure investors >Thiess has extensive experience in the construction of motorway and tunnel projects across Australia

17 SECTION 1 Summary of the Offer 1

18 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 16 SECTION 1 The following is a summary only and should be read in conjunction with the more detailed information contained elsewhere in this PDS. 1.1 THE MITCHAM-FRANKSTON PROJECT The MFP will be a new 39 kilometre multi-lane, free-flow toll road (including twin 1.5 kilometre tunnels) connecting the Eastern Freeway in the eastern suburbs of Melbourne to the Frankston Freeway in Melbourne s south-east. The toll road will link the commercial, industrial and residential centres of Melbourne s eastern and fast growing south-eastern suburbs, reducing travel times and improving travel time reliability. The MFP will be designed and constructed through a joint venture between Thiess and John Holland under a Fixed Time, Fixed Price Contract (refer to Section 4 and Section 10). Tolls will be based on a per section rate and cars will be subject to a toll cap of $4.43. These toll levels were set as at July 2004 and will be adjusted in line with CPI. Further details on the toll levels are set out in Section INVESTMENT CONSIDERATIONS Attractive returns to Unitholders ConnectEast Group intends to pay semi-annual Distributions equivalent to 6.5 cents per Stapled Unit per annum during the Fixed Distribution Period (the period ending 31 March 2010). These Distributions equate to an annualised distribution yield on the Initial Instalment of 11.8% (for the first 12 months from Allotment Date) and a distribution yield of 6.5% per annum for the remainder of the Fixed Distribution Period (based on the Issue Price of $1.00). Distributions made during the Fixed Distribution Period are expected to be 100% tax deferred (see Section 5.3.3). Distributions to Unitholders over the remainder of the Concession Period will be from any cashflows generated from the MFP. See Section 1.6 for further information on Distributions. High levels of congestion on competing routes are expected to drive traffic onto the MFP Approximately three million trips take place in the MFP corridor each working day (2.6 million trips per day on weekends), with 60% of these trips starting and ending within the MFP corridor. The two principal competing routes to the MFP, Springvale Road and Stud Road, are both highly congested. An Environmental Effects Statement prepared for VicRoads and the Department of Infrastructure found that by 2011, 11 out of 14 key intersections on these routes will be oversaturated (operating at close to theoretical capacity) during peak periods. Springvale Road (to the west of the MFP) has 47 sets of traffic lights including 12 signalised pedestrian crossings and two railway level crossings along its length, while Stud Road and Dandenong-Frankston Road (to the east of the MFP) have 36 sets of traffic lights including four signalised pedestrian crossings. The MFP will be the only north-south freeway standard road east of the Melbourne CBD and will form a vital part of Melbourne s road network as an orbital link connecting the Eastern, Monash and Frankston Freeways. Travel time savings are expected to drive demand for the MFP. As an example, it is estimated that in 2011, an AM peak trip along the MFP from Wantirna South to Doncaster will take 17 minutes compared to an equivalent trip time of 25 minutes along Burwood Highway and Springvale Road. Prospects for strong growth in traffic volumes in the MFP corridor The MFP corridor is home to more than 1.5 million people, a number forecast to grow to 2.2 million by It accounts for 43% of Melbourne s population and 40% of Melbourne s manufacturing output, yet contains only 27% of Melbourne s freeways. The MFP corridor is also characterised by above average levels of car ownership, high car usage rates, a high level of labour self-containment, high levels of congestion on competing routes and limited public transport infrastructure. The MFP will service some of Australia s fastest growing regions which are expected to experience strong residential, commercial and industrial property development over the Concession Period. For example, the City of Casey (in the south-east of the corridor) recently reported an annual influx of approximately 10,000 to 12,000 new residents. The availability of 200 hectares of land for industrial activity near Frankston is expected to give rise to a significant increase in commercial activity in the corridor leading to increased traffic volume. The combined effect of these factors is expected to underpin projected traffic growth in the MFP corridor as a whole and on the MFP. Single purpose investment vehicle ConnectEast Group has been established as a single purpose vehicle to finance, design, construct and operate the MFP for the Concession Period of approximately 39 years. Subject to Unitholder approval, ConnectEast Group may also invest in contiguous road projects. Due to its single purpose focus, Unitholders will not be exposed to risks associated with investments in other infrastructure assets unrelated to the MFP. Greenfield toll road projects in Australia have proven to be attractive investments Australian investors have had the opportunity to invest in a small number of listed greenfield toll road projects. Investing in toll road projects at the

19 SECTION 1 greenfield stage offers investors maximum exposure to capital growth from any investment re-rating experienced during the construction and Ramp-up phases of a toll road project. This re-rating effect has been observed for other greenfields toll road projects in Australia. Construction and project risks have been minimised The technical risk of the MFP s design and construction is considered to be relatively low compared with other Australian toll road projects. This is due to its comparatively simple construction requirements, reliance on existing tolling technology, the extensive experience of the Construction Contractor in large scale infrastructure projects and the nature of the topography and geological characteristics, particularly in relation to construction of the tunnels. In addition, ConnectEast Group s project risk has been mitigated by entering into a Fixed Time, Fixed Price Contract with the Construction Contractor, which covers the design, construction and commissioning of the MFP including the electronic free-flow tolling system. This contract includes a liquidated damages regime designed to compensate ConnectEast Group for delays in construction completion for up to 12 months. The obligations of the Construction Contractor under the Fixed Time, Fixed Price Contract are supported by a parent company guarantee from Leighton Holdings capped at 100% of the Design and Construction Contract Price. A fixed price contract has also been entered into with Transfield Services for the provision of roadside operation and maintenance services for an initial period of five years from commencement of operations. Stable revenues Toll roads typically benefit from low levels of competition from infrastructure of a comparable standard and high barriers to entry due to high capital costs and regulatory, planning and environmental requirements for competing projects. Traffic volumes on other Australian toll roads have demonstrated continued growth beyond the Ramp-up phase, demonstrating the robustness of revenues for toll roads. The underlying projected traffic volumes for the MFP, combined with the absence of comparable roads along the MFP corridor, are expected to enable ConnectEast Group to generate stable revenues over the long-term. Experienced Board ConnectEast Management Limited (CEML), as responsible entity for the ConnectEast Unit Trusts, has a Board of Directors with extensive industry knowledge and infrastructure expertise, including the construction, delivery and operation of large scale infrastructure construction projects. CEML is a wholly owned subsidiary of Macquarie Bank. Macquarie Bank Group has a proven track record in delivering value for infrastructure investors and has one of the world s largest infrastructure advisory groups with over 230 executives in 15 countries. 1.3 INVESTMENT RISKS As well as general market risks facing any investment, there are a number of risks specific to ConnectEast Group and the MFP, including construction risks, traffic and operations risks, legislative and regulatory risks and financing risks. A summary of these risks is set out in Section FUNDING THE MFP A total of $1,410 million of equity funding is being raised to partly finance the construction of the MFP. The equity funding is to be raised in two tranches: > the Offer raising $1,120 million; and > the Deferred Equity Tranches raising $290 million in the aggregate, $30 million of which will be subscribed for by Macquarie Bank at $1.00 per Stapled Unit on the MBL Deferred Equity Contribution Date and the remaining $260 million will be subscribed for by Thiess and John Holland at $1.15 per Stapled Unit on the D&C Deferred Equity Contribution Date (refer to Section 7). In addition, ConnectEast Group will offer a Distribution Reinvestment Plan (DRP) for the Fixed Distribution Period ending on 31 March To the extent that Unitholders elect in writing not to participate in the DRP or are not eligible to participate in the DRP, ConnectEast Group has entered into the DRP Underwriting Agreement to fund cash Distributions during the Fixed Distribution Period, with the exception of the first two Distributions which are not underwritten (but will be funded from cash reserves from the Offer). A further discussion of the DRP is set out in Section The remainder of the MFP funding will be by way of bank debt. The table on the following page sets out the sources and applications of funds for the MFP as at Construction Completion. The Directors of CEML expect that the funding sources will provide ConnectEast Group with sufficient working capital to fund its stated business objectives. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 17

20 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 18 SECTION 1 Sources of Funds $million Application of Funds $million Bank Debt 2,088 1 Construction Cost 2,502 Equity Raised in the Offer 1,120 1 Coupon and Interest Costs Equity Raised via DRP Upfront and Ongoing Development and Financing Costs 444 1, 2 Deferred Equity Tranches 290 Specified Reserves Total 3,795 3, Based on interest rates as at 30 July These balances will be impacted by the interest rates that will be set at Financial Close. 2. This amount includes fees. 1.5 THE OFFER The Offer consists of 1,120 million Stapled Units at an Issue Price of $1.00 per Stapled Unit. Each Stapled Unit comprises one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust, stapled together so that neither unit may be separately traded or transferred. The Issue Price per Stapled Unit is payable in two instalments. The Initial Instalment of $0.55 will be paid with the initial application for Stapled Units. The Final Instalment of $0.45 will be payable 12 months following Allotment Date. Payment of the second Distribution is scheduled to occur after the Final Instalment Payment Date. Accordingly, Unitholders should not rely on the payment of the second Distribution to fund their payment of the Final Instalment. Applications for Stapled Units must be made in accordance with the instructions set out in Section DISTRIBUTIONS TO UNITHOLDERS AND DISTRIBUTION REINVESTMENT PLAN Distributions to Unitholders can be classified into two categories: > Projected Distributions during the Fixed Distribution Period ending on 31 March 2010 (approximately 5.5 years); and > Distributions following the Fixed Distribution Period. During the Fixed Distribution Period ConnectEast Group intends to make semi-annual Distributions for the periods ending 31 March and 30 September of 3.25 cents per Stapled Unit. These Distributions equate to an annualised distribution yield for the first 12 months following Allotment Date of 11.8% (based on the Initial Instalment of $0.55) and a distribution yield of 6.5% per annum for the remainder of the Fixed Distribution Period (based on the Issue Price of $1.00). For the initial period to 31 March 2005, the Distribution will be calculated on a pro rata basis for the period from the Allotment Date. It is expected that these Distributions will be paid on a tax deferred basis (refer to Section 5.3.3). During the Fixed Distribution Period, unless a Unitholder elects in writing not to participate in the DRP, or is not eligible under the DRP Rules to participate in the DRP, Distributions due on the Stapled Units will be reinvested in further Stapled Units under the DRP. To the extent that Unitholders do not participate in the DRP, the cash required for the first two Distributions will be funded from equity raised in the Offer (being equity in excess of the funding requirements for the MFP) and the cash required for later Distributions during the Fixed Distribution Period will be funded by the issue of additional Stapled Units (underwritten under the DRP Underwriting Agreement). There may be circumstances in which the underwriting of the DRP will be limited in amount or will not be available so that ConnectEast Group may not be able to make Distributions in cash (see Section for more information). The Lenders may also prevent ConnectEast Group from making cash Distributions if certain financial covenants and other distribution tests are not met (see Section 8.6.1). Payment of the second Distribution is scheduled to occur after the Final Instalment Payment Date. Accordingly, Unitholders should not rely on the payment of the second Distribution to fund payment of the Final Instalment. For further information on the DRP, see Section Following the Fixed Distribution Period, Distributions will be determined by the Directors of CEML based on the operating results of ConnectEast Group. It is the intention of ConnectEast Group to distribute all available net cashflows to Unitholders after making appropriate allowance for certain provisions and accruals. ConnectEast Group intends to pay these Distributions on a quarterly basis for the periods ending 31 March, 30 June, 30 September and 31 December each year. Distributions and returns are not guaranteed. For a detailed explanation of investment risks, refer to Section RESPONSIBLE ENTITY It is a requirement of the Corporations Act for registered managed investment schemes to have a responsible entity. CEML, a wholly owned subsidiary of Macquarie Bank, is the responsible entity of the ConnectEast Unit Trusts. CEML is responsible to Unitholders for the management of the ConnectEast Unit Trusts and must exercise its powers for the benefit of all Unitholders. Such powers extend to the overall

21 SECTION 1 management and corporate governance of the ConnectEast Unit Trusts, including the issue of annual reports and the issue of this PDS. If CEML is the responsible entity of the ConnectEast Unit Trusts six and a half years after Financial Close or if CEML is removed earlier without cause or has retired (but not voluntarily), Macquarie Bank is entitled to be paid a fee based on a performance linked formula set out in the Constitutions (Fee Amount). The Fee Amount is payable from the assets of ConnectEast Holding Trust and may, at the sole discretion of CEML, be satisfied by the issue of additional Stapled Units. If the Fee Amount has been paid under the Constitutions, the purchase price payable under the Put and Call Option will be reduced by the Fee Amount. Further information on the Fee Amount is set out in Section Under a Put and Call Option between Macquarie Bank and one of the wholly owned subsidiaries of ConnectEast Holding Trust (ConnectEast Holding 2 Pty Ltd), ConnectEast Holding 2 Pty Ltd may require Macquarie Bank to sell CEML to it or Macquarie Bank may require ConnectEast Holding 2 Pty Ltd to purchase CEML, at a purchase price based on a performance linked formula set out in Section 10, less the Fee Amount if paid. The sale and purchase of CEML may not occur prior to the sixth anniversary of Financial Close. If the Purchase Price is paid under the Put and Call Option, the Fee Amount is not payable. Further information on the Put and Call Option is set out in Section 10. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page FEES AND COSTS CEML is entitled to an aggregate management fee of $1 million per annum for acting as responsible entity of the ConnectEast Unit Trusts and as trustee of another ConnectEast Group entity from Financial Close. CEML s management fees are indexed to CPI. CEML is entitled to be reimbursed for all expenses incurred by CEML in the proper performance of its duties in respect of the ConnectEast Unit Trusts. Further information about CEML s management fees and reimbursable expenses is set out in Section TAX IMPLICATIONS The taxation implications of investing in Stapled Units will depend upon an investor s individual circumstances. Applicants should obtain their own tax advice prior to investing in Stapled Units. Further general information on the taxation consequences of investing in Stapled Units is set out in Section 5.

22 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 20

23 SECTION 2 Details of the Offer 2

24 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 22 SECTION TIMETABLE FOR THE OFFER Offer opens 22 October 2004 Offer closes 4 November 2004 Allotment of Stapled Units 10 November 2004 Expected despatch of transaction confirmation statements 11 November 2004 Stapled Units commence trading on ASX (deferred settlement basis) 11 November 2004 Stapled Units expected to begin trading on a normal settlement basis 16 November 2004 Final Instalment Payment Date 12 months following Allotment Date These dates are indicative only. Investors should be aware that the Offer is open for a short period. CEML reserves the right to vary the dates and times of the Offer, which includes closing the Offer at any time before the Closing Date or extending the Offer without prior notice. Applicants are encouraged to submit their Applications as early as possible. No Application made pursuant to this PDS will be accepted by CEML until after the Exposure Period has expired and no preference will be conferred on Applications received during the Exposure Period. 2.2 STRUCTURE OF THE OFFER The Offer comprises: the Public Offer open to Australian resident retail investors the Broker Firm Offer open to Australian and New Zealand resident retail investors who have received a firm allocation from their broker the Institutional Offer open to institutional investors in Australia, New Zealand and a number of other overseas jurisdictions pursuant to this PDS and, where relevant, the New Zealand Investment Statement PUBLIC OFFER The Public Offer is open to all members of the public who are residents of Australia. How many Stapled Units can be applied for? The minimum number of Stapled Units that can be applied for under the Public Offer is 2,000 Stapled Units, and thereafter in multiples of 500. There is no maximum number of Stapled Units that may be applied for under the Public Offer. How to complete an Application Form Applications under the Public Offer can be made by completing and lodging the Application Form attached to or accompanying this PDS. Australian resident retail investors can also apply by submitting an on-line Application Form via CommSec s website at The on-line Application Form is not available to retail investors resident outside Australia. Applications must be completed in accordance with the instructions set out in or accompanying the Application Form. Who should cheques be made payable to? The Application must be accompanied by a cheque(s) or bank draft in Australian dollars drawn on an Australian branch of an Australian bank. Cheque(s) or bank drafts should be made payable to ConnectEast Group Public Offer and crossed not negotiable. Applications through CommSec s website may be made through BPAY. You should ensure that sufficient funds are held in the relevant account(s) to cover the payment. If the amount of your payment for application monies is insufficient to pay for the number of Stapled Units you have applied for in your Application Form, your Application will be rejected. If your BPAY payment (for those Applications made through CommSec s website) is for any reason not received by the Closing Date or not received in full, you may be taken to have applied for such lower number of Stapled Units as your cleared application monies will pay for or your Application may be rejected.

25 SECTION 2 Where and when to send your Application Form Completed Application Forms together with the cheque(s) for application monies should be mailed or delivered to the Registry (on behalf of CEML) so they are received no later than 5.00pm Melbourne time on the Closing Date. Applicants are encouraged to submit their Applications as early as possible. Mailing address: ASX Perpetual Registrars Limited GPO Box 2785 Melbourne VIC 3001 Delivery address: ASX Perpetual Registrars Limited Level 4, 333 Collins St Melbourne VIC 3000 Acceptance of Applications A completed Application constitutes an irrevocable offer to CEML to subscribe for Stapled Units on the terms and conditions outlined in this PDS and, where relevant, the New Zealand Investment Statement. The Underwriters, in consultation with CEML, reserve the right to reject any Application, including Applications that have not been correctly completed or are accompanied by payments that are dishonoured, or to allocate to any Applicant a lesser number of Stapled Units than that Applicant applied for. If an Application is rejected, or accepted in part only, the relevant part of the surplus application monies will be refunded (rounded down to the nearest whole cent). No interest will be paid to Applicants on any application monies refunded. In the event that the Offer is oversubscribed, scale back arrangements will apply. The method of scale back will be determined by the Underwriters in consultation with CEML. PRIORITY FOR VICTORIAN RESIDENTS In the event that the Offer is oversubscribed, an Applicant who is a Victorian resident will receive priority in allocation. The basis of such priority will be at the absolute discretion of the Underwriters, in consultation with CEML BROKER FIRM OFFER The Broker Firm Offer is open to all Australian and New Zealand resident retail clients of the Syndicate Members who are offered a firm allocation of Stapled Units. Applicants under the Broker Firm Offer should follow the application instructions of the Syndicate Member from whom they receive an offer of a Broker Firm allocation. CEML, the Registry and the Underwriters take no responsibility for any acts or omissions by a Syndicate Member in connection with Applications made under the Broker Firm Offer. CEML will not accept an Application if it has reason to believe that the Applicant has not received a complete copy of this PDS and, where relevant, the New Zealand Investment Statement INSTITUTIONAL OFFER The Institutional Offer is structured in two parts: > an invitation to Australian and New Zealand resident institutional investors to subscribe for Stapled Units; and > an invitation to institutional investors resident in certain jurisdictions outside Australia, New Zealand and the United States to subscribe for Stapled Units in transactions exempt from the registration requirements of the Securities Act in reliance on Regulation S under the Securities Act and in compliance with all applicable laws in the jurisdictions in which such Stapled Units are offered and sold. Application procedures for institutional investors will be advised by the Underwriters. The Underwriters, in consultation with CEML have absolute discretion regarding the basis of allocation of Stapled Units, and there is no assurance that any Applicant will be allocated any Stapled Units, or the number of Stapled Units for which they have applied. 2.3 CONDITIONS OF THE OFFER It is expected that Financial Close will occur during November If Financial Close is not achieved by 31 December 2004 and the Stapled Units have not been issued, the Offer may be cancelled and if so a public statement will be made advising that the Offer has been cancelled. Advertisements to this effect will be placed in Melbourne s major metropolitan newspapers (The Age and Herald Sun), The Australian and Australian Financial Review. If the Offer is cancelled, all application monies would then be refunded to Applicants. Interest will not be paid to Applicants on refunded application monies. If Stapled Units have been issued but Financial Close has not occurred prior to 31 December 2004, the ConnectEast Unit Trusts will redeem all Stapled Units for the Initial Instalment. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 23

26 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 24 SECTION ALLOCATION AND ALLOTMENT Allotment of Stapled Units will be made as soon as possible after the date the Offer closes. The Underwriters and CEML reserve the right to allocate Stapled Units offered under this PDS in full on any Application, or to allocate any lesser number, or to decline any Application. In the event that the Offer is oversubscribed, an Applicant who is a Victorian resident will receive priority in allocation. The basis of such priority will be at the absolute discretion of the Underwriters, in consultation with CEML. Where no allotment is made or the number of Stapled Units allotted is less than the number of Stapled Units applied for, the surplus application monies will be despatched to the Applicant within 21 days of the Closing Date. Interest will not be paid to Applicants on refunded application monies. CEML is entitled to keep any interest earned on the trust account. 2.5 FINAL INSTALMENT The amount of the Final Instalment is $0.45 per Stapled Unit. Unitholders who are registered as the holders of the Stapled Units on the Final Instalment Record Date will be required to pay the Final Instalment by the Final Instalment Payment Date. The Final Instalment Payment Date is 12 months following Allotment Date. ConnectEast Group cannot bring forward the Final Instalment Payment Date to an earlier date. ConnectEast Group cannot increase the amount of the Final Instalment. CEML will not accept payment of the Final Instalment until it is called. If Unitholders do not pay the Final Instalment, CEML may take action to recover the amounts owing. While amounts are outstanding, voting and Distribution rights may be suspended. CEML may also sell the Stapled Units of Unitholders who have not paid the Final Instalment, in which case those Unitholders will be liable for any shortfall after the amount outstanding plus interest (calculated from the Final Instalment Payment Date) and the costs and expenses of sale are deducted from the sale proceeds. CEML may apply any proceeds from the resale of Stapled Units to pay up the amount of the Final Instalment. The payment of the Final Instalment has been fully underwritten by the Underwriters but this does not affect the liability of Unitholders to pay the Final Instalment, nor does it guarantee a residual amount to those who have defaulted on payment of the Final Instalment. 2.6 DISBURSEMENT OF APPLICATION MONIES Application monies for Stapled Units offered under this PDS will be held in a trust account for Applicants until the allotment of Stapled Units. The account will be established and kept by CEML on behalf of Applicants. After the Stapled Units have been allotted the application monies will be paid to ConnectEast Group under this PDS. Application monies will be fully or partially refunded where: > an Application is not accepted or accepted in part only; or > the Offer is withdrawn and/or cancelled. Interest will not be paid on refunded application monies. CEML is entitled to keep any interest earned on the trust account. 2.7 BROKER STAMPING FEES Where the Application Form of an Applicant who receives Stapled Units under the Public Offer bears the code of a member organisation of ASX, the Underwriters will pay that member organisation a broker stamping fee of an amount equal to 1.0% (inclusive of GST) of the total value of Stapled Units allotted to that Applicant subject to a maximum amount of $200 per Application. This fee will not apply to Stapled Units issued under the Broker Firm Offer. 2.8 UNDERWRITING The Offer has been fully underwritten by the Underwriters. A summary of the Underwriting Agreement is set out in Section ASX QUOTATION Not later than seven days after the date of issue of this PDS, application will be made to ASX for ConnectEast Group to be admitted to the official list of ASX and for the official quotation of Stapled Units issued under this PDS. The fact that ASX may admit ConnectEast Group to its official list is not to be taken in any way as an indication of the value or merits of ConnectEast Group or of Stapled Units offered under this PDS. Quotation, if granted, will commence as soon as practicable after Financial Close.

27 SECTION NEW ZEALAND OFFER A New Zealand Investment Statement which complies with the Securities Act 1978 (NZ) has been prepared in connection with the Offer. Copies of the New Zealand Investment Statement, which includes, or will be accompanied by, Application Forms for use only by New Zealand residents, can be obtained from the Syndicate Members or the Registry. New Zealand residents applying in the Broker Firm Offer will receive instructions on how to apply from the relevant Syndicate Member. Stapled Units will not be listed on the New Zealand Stock Exchange CHESS AND TRANSACTION CONFIRMATION STATEMENTS ConnectEast Group will apply to ASX to participate in the security transfer system known as CHESS. Under CHESS, ConnectEast Group will not be issuing certificates to Unitholders. ConnectEast Group will operate an electronic issuer sponsored sub-register and an electronic CHESS subregister. Following the issue of Stapled Units to successful Applicants, Unitholders will be mailed a transaction confirmation statement that sets out the number of Stapled Units that have been allotted to them. The transaction confirmation statement will also advise them of their holder identification number in the case of a holding on the CHESS subregister, or securityholder reference number in the case of a holding on the issuer sponsored subregister. Unitholders will be mailed holding statements at the end of any subsequent month during which there has been a movement in their Unitholding. Unitholders may also request additional statements at any other time either through the Unitholder s sponsoring participant, in the case of a holding on the CHESS subregister, or through the Registry in the case of a holding on the issuer sponsored subregister. CEML or the Registry may charge a fee for these additional sponsored statements DEFERRED SETTLEMENT TRADING It is expected that the Stapled Units will be quoted on ASX on or about 11 November 2004 initially on a deferred settlement basis. Trading will initially be on a deferred settlement basis until CEML has advised ASX that transaction confirmation statements have been despatched to Unitholders. Normal delivery trading is expected to commence on or about 16 November Public Offer Applicants will also be able to call the ConnectEast Group Offer Hotline on in Australia or in New Zealand to find out or confirm their allocations. It is the responsibility of each Applicant to confirm their holding before trading in Stapled Units. Applicants who sell Stapled Units before they receive a transaction confirmation statement do so at their own risk. CEML, the Registry and the Underwriters disclaim all liability, whether in negligence or otherwise, to persons who sell Stapled Units before receiving their transaction confirmation statement, whether on the basis of a confirmation of allocation provided by any of them or by the ConnectEast Group Offer Hotline or a Syndicate Member or otherwise WITHDRAWAL CEML may at any time decide to withdraw this PDS and the Offer, in which case CEML will refund all application monies within 21 days of giving notice of its withdrawal. Interest will not be paid to Applicants on refunded application monies. CEML is entitled to keep any interest earned on the trust account ENQUIRIES All enquiries regarding the Offer should be directed to the ConnectEast Group Offer Hotline on in Australia or in New Zealand. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 25

28 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 26

29 SECTION 3 Importance of the MFP 3

30 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 28 SECTION OVERVIEW OF THE MFP ConnectEast Group has been awarded the Concession to finance, design, construct and operate the Mitcham-Frankston Project in Melbourne, Victoria. The MFP will be a toll road approximately 39 kilometres in length (including twin 1.5 kilometre tunnels) connecting the Eastern Freeway in the eastern suburbs of Melbourne to the Frankston Freeway in Melbourne s south-east. The MFP will also incorporate the extension and widening of the Ringwood Bypass and the construction of the Dandenong Southern Bypass. The existing Ringwood Bypass will be widened by one extra lane from Ringwood Street to Maroondah Highway and extended for 1.2 kilometres from Ringwood Street to the MFP. The Dandenong Southern Bypass will be a 4.75 kilometre, four lane road (2 lanes in each direction) from Perry Road to the South Gippsland Highway. Vehicles travelling on the Ringwood Bypass and the Dandenong Southern Bypass will not be tolled. Under the Concession Deed between ConnectEast Group and the State, the Concession Period is approximately 39 years from Financial Close. Based on a Construction Period of approximately 49 months, ConnectEast Group will operate the MFP for approximately 35 years. A summary of the key terms of the Concession Deed is set out in Section 10. The MFP is expected to become a major commuter road and a key intracity arterial route. The toll road will link the fast growing commercial, industrial and residential centres of Melbourne s eastern and south-eastern suburbs, reducing travel times and improving travel time reliability. Like other recent major road projects in Melbourne, the MFP has been designed to address an historical gap in the road network. Melbourne CityLink addressed the lack of connectivity between the Monash, West Gate and Tullamarine Freeways, while the Western/Metropolitan Ring Road provided an orbital route linking Melbourne s north and west. The MFP is a logical next step in the development of Melbourne s strategic road network. As a result of the enhanced accessibility provided by the MFP, it is expected that: > business and industry will relocate to the MFP corridor due to improved travel efficiencies; > households will relocate to the MFP corridor to take advantage of reduced travel times to access employment, goods and services; and > service companies will locate closer to the new markets created by the relocation of businesses, industry and households.

31 SECTION KEY STATE OBJECTIVES FOR THE MFP The Concession Deed outlines a number of key State objectives associated with the design and operation of the MFP. It is expected that the MFP should: > link the transit cities, principal activity centres and major activity centres, identified in the State s Melbourne 2030 vision, in the MFP corridor; > reduce travel times and improve travel time reliability for the movement of people, goods and services in the east and south-east regions of Melbourne; > significantly improve commercial vehicle access to and between the important manufacturing and industrial areas within and around the MFP corridor; > reduce traffic congestion on the surrounding road network, especially Springvale Road, Stud Road and Maroondah Highway; > be constructed and operated with state-of-the-art road safety facilities and procedures; > provide high quality, readily accessible customer service facilities and an interoperable tolling system; and > be integrated into the existing and future surrounding transport network. 3.3 THE NEED FOR THE MFP GROWTH IN VICTORIA AND MELBOURNE Victoria s recent growth has been strong, with gross state product and income levels being above the national average. In particular, from 1998 to 2003 Victoria s gross state product grew at 3.9% compared with 3.5% in the rest of Australia faster than all other States except for Queensland, and faster than the OECD average. Victoria s manufacturing industry is also larger than that of the other States. Victoria s capital city, Melbourne, recorded a population of approximately 3.47 million people in 2001, making it Australia s second largest city. Australian Bureau of Statistics central population projection has Melbourne s population growing to 4.19 million people by CHARACTERISTICS OF THE MFP CORRIDOR The MFP corridor describes the area surrounding and serviced by the MFP which presently contains some of Australia s fastest growing regions. It is home to over 1.5 million people, in itself a population greater than that of Adelaide. Despite having 43% of Melbourne s population, it contains only 27% of Melbourne s freeways. The MFP corridor generates more than 40% of Melbourne s manufacturing output and accounts for 35% of Melbourne s employment, generating annual turnover from production activity of approximately $35 billion. Approximately three million trips take place in the MFP corridor each working day (2.6 million trips per day on weekends) with 60% of these trips starting and ending within the MFP corridor. Key features of the MFP corridor are: > high level of car ownership households within the MFP corridor own an average of 1.68 cars compared with an average of 1.49 cars in Melbourne households outside the MFP corridor; > high rate of car usage 85.6% of workers within the MFP corridor travel to work by road compared to 75.6% of Melbourne workers outside the MFP corridor; > limited public transport infrastructure while the State is currently extending the tram route along Burwood Highway, this will not service significant travel needs within the MFP corridor; there are no north-south rail services; and bus services are limited in frequency and coverage; > ongoing urban development the municipality of Casey in the Southern Sector has one of the highest levels of dwelling approvals in Victoria; > concentration of commercial development the MFP corridor includes one of Australia s largest clusters of high technology companies and organisations in the Monash Science and Technology Cluster such as Monash University, the Monash Medical Centre, CSIRO and the Telstra research laboratories; > high level of labour self containment more than 80% of workers who live within the MFP corridor work within the MFP corridor; > contains one of the last remaining major land release areas for commercial activity in the Greater Melbourne area; and > the gateway to the Mornington Peninsula, one of Victoria s premier holiday destinations. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 29

32 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 30 SECTION DEMOGRAPHICS AND GROWTH IN THE MFP CORRIDOR The MFP corridor can be broken down into three distinct sectors: Northern Sector The sector being serviced by the northern end of the MFP is one of the more affluent areas in Melbourne. This sector has an age profile similar to the metropolitan area and features a well educated and well paid workforce. Car ownership and car usage for the journey to work are each higher than the respective metropolitan averages. Developments in the municipalities of Manningham and Knox are expected to result in further population and economic growth in the Northern Sector. > The City of Manningham s $2 billion development of the 58 hectare Doncaster Hill activity centre is expected to house 8,300 new residents, create 10,000 new jobs and add a further 20,000 m 2 of office space and 10,000 m 2 of retail space. > The planned $200 million expansion of Doncaster Westfield Shoppingtown is expected to further boost activity in the area. > Planning amendments recently adopted by the City of Knox are expected to facilitate development and activity under the Scoresby/Rowville Precinct Plan that will allow for the creation of up to 8,000 additional jobs in the next 20 to 30 years.

33 SECTION 3 Middle Sector The Middle Sector of the MFP corridor contains some of Melbourne s and Australia s fastest growing residential and industrial areas. This sector includes the municipalities of Casey, Berwick, Dandenong, Monash and Pakenham. The eastern part of this sector is dominated by middle income earners and young families, with trade-based occupations higher than the metropolitan average. Car ownership and car usage for the journey to work are each higher than the respective metropolitan averages. Casey is the dominant growth area for south-eastern Melbourne. > It is expected that the municipality of Casey will experience strong population growth. The City of Casey reports an influx of approximately 10,000 to 12,000 new residents annually. > It is projected that the City of Casey will have a population of 300,000 by 2031 which is equivalent to a city the size of present day Canberra. Southern Sector The Southern Sector of the MFP corridor comprises the municipalities of Kingston, Frankston and the Mornington Peninsula. It is distinguished by its relatively aged population and low incomes, reflecting a large retiree base. Car ownership and car usage are each higher than the respective metropolitan averages. This sector has a strong manufacturing industry. In particular, the municipality of Kingston, presently one of Australia s most important manufacturing centres, generates an annual output of more than $5 billion, second only to the municipality of Brisbane. The City of Frankston recently approved 250 building permits and reported that the number of town planning applications submitted since the fourth quarter of 2002 grew by 38%. The potential for further growth in the municipality is enhanced by: > Approval for a multi-million dollar redevelopment of the Frankston Foreshore which is expected to attract additional tourism. > 200 hectares of vacant land in the municipality available for industrial development CONGESTION ON COMPETING ROUTES There are two principal competing routes to the MFP: > Springvale Road (to the west of the MFP); and > Stud Road (to the east of the MFP). Springvale Road Springvale Road runs north-south and is the most easterly of Melbourne s arterial grid road network. It is heavily congested in the AM and PM peak periods and contains: > 47 sets of traffic lights (including signalised pedestrian crossings); > two railway level crossings; and > several major shopping centres along its length. An Environmental Effects Statement prepared for the Department of Infrastructure and VicRoads in relation to the MFP, found that by 2011, 11 out of 14 key intersections on Springvale and Stud Roads will be oversaturated during peak periods. A recent survey found that 20 of the 26 most accident-prone intersections in metropolitan Melbourne are within the MFP corridor. Springvale Road has been rated as Melbourne s most accident-prone arterial road, containing seven of the city s 10 worst accident intersections. In 2011, being the first full calendar year following the completion of Ramp-up, it is estimated that an AM peak trip along the MFP from Wantirna South to Doncaster will take 17 minutes compared to an equivalent trip time of 25 minutes along Burwood Highway and Springvale Road. Stud Road Stud Road runs north-south in the eastern sector of the MFP corridor, however is interrupted as a continuous route at Dandenong. The north-south route re-continues beyond the Princes Highway via Dandenong-Frankston Road. This route contains 36 sets of traffic lights (including four signalised pedestrian crossings) and is heavily congested in the AM and PM peak periods. According to a recent survey, two of the 10 most accident prone intersections in metropolitan Melbourne occur on Stud Road. To the east of Stud Road there are no continuous north-south arterial roads. Located at the foot of the Dandenong Ranges, the topography hinders construction of the grid arterial network that is typical in the inner eastern suburbs of Melbourne. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 31

34 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 32

35 SECTION 4 Construction and operation of the MFP 4

36 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 34 SECTION DESIGN AND CONSTRUCTION OVERVIEW The MFP will comprise a minimum of three lanes in each direction for approximately 33 kilometres from the Eastern Freeway at the northern end, reducing to two lanes in each direction for six kilometres at the southern end. The MFP is expected to be operating on or before 30 November 2008, based on a projected 49 month construction program. The map below shows the proposed design of the MFP including the tunnels at the northern end and the 17 interchanges KEY DESIGN FEATURES Road design and construction is to be undertaken by the Construction Contractor, a 50:50 joint venture between Thiess and John Holland. Thiess and John Holland are experienced contractors both in Australia and Asia with significant resources. The joint venture that has been formed for the MFP replicates the one that was successful in bidding for the Lane Cove Tunnel Project in Sydney. Construction of the Lane Cove Tunnel project has commenced. Further information on Thiess and John Holland is set out in Section

37 SECTION 4 The MFP s design and construction is considered to be relatively low risk compared with previous projects of this nature due to: > comparatively simple design characteristics; > reliance on existing technology and utilisation of proven building methods within the competency of the Construction Contractor; and > the topography and geological characteristics, particularly in relation to the tunnels. The key physical aspects of the MFP are discussed below. > Earthworks and Pavement The total volume of earthworks is estimated at 6.5 million cubic metres. Total pavement area is estimated at 1.55 million square metres on the toll road and ramps, and a further 430,000 square metres on connecting roads. > Tunnel The MFP s design will incorporate twin 1.5 kilometre three lane tunnels between Park Road and Deep Creek Road at the eastern end. Construction of the tunnels is considered to be relatively low risk due to the nature of the hydrogeology, settlement and geology characteristics of the site combined with a relatively simple tunnel design. The Construction Contractor has extensive experience and understanding of tunnelling, having completed more than 75 kilometres of tunnels in Australia in the past 10 years. > Bridges and Interchanges The MFP will comprise 17 interchanges, made up of 3 freeway to freeway interchanges and 14 interchanges with arterial roads. Direct freeway to freeway connections will be located at the Eastern Freeway, Monash Freeway and Frankston Freeway. The MFP will include 72 road bridges and at least 6 pedestrian bridges ADDITIONAL WORKS ConnectEast Group has also undertaken to build two non-tolled public roads, the Ringwood Bypass and the Dandenong Southern Bypass. These bypasses will be handed over to the State upon completion of construction and will not be operated by the ConnectEast Group TOLLING SYSTEM The Construction Contractor must also deliver a fully operating electronic tolling and customer service system under the Design and Construction Contract. The MFP will use an electronic, free-flow tolling system which is designed to be fully interoperable with Melbourne CityLink and other Australian toll roads. Subject to ConnectEast Group and Melbourne CityLink s operator entering into interoperability arrangements, customers will be able to use their existing Melbourne CityLink electronic tag on the MFP and vice versa. The MFP tolling system will utilise third generation tag and video-based tolling technology. No toll plazas have been incorporated in the design of the MFP. Tag technology is utilised on a number of Australian and international toll roads including Melbourne CityLink, Highway 407 in Canada and the Cross Israel Highway. ConnectEast Group expects that the vast majority of users will have tags fitted to their vehicles. Video-based imaging will be utilised as a secondary method of toll collection. Video-based imaging has improved dramatically over the past eight years since the implementation of the Melbourne CityLink system and therefore the cost of image processing has significantly reduced. The use of electronic, free-flow tolling will provide several benefits, including: > the ability to provide motorists with an uninterrupted journey under freeway conditions; > the avoidance of delays typically associated with toll plazas or cash toll systems; > the ability to offer tailored tolling products designed around the travel patterns of various customer groups; > the ability to provide real time information to motorists regarding road and travel conditions; and > providing potential interoperability with Melbourne CityLink and other electronic toll roads in Australia. The Melbourne CityLink experience has shown that drivers are accepting of this tolling system, as evidenced by the high level of traffic at start-up and strong traffic growth over time for that toll road. Following a worldwide tender process, the Construction Contractor has brought together a team of highly credentialed and experienced electronic tolling system providers. The Construction Contractor intends to enter into a subcontract with Sociedad Iberica de Construcciones Electricas, S.A. (SICE) for the provision of the Tolling System (including the back office computer system and the integration of the road-side equipment). SICE, a 100% subsidiary of Spanish construction conglomerate Actividades de Construccion y Servicios, has extensive experience in integrating technologies for intelligent transport systems, including multi-lane, free-flow tolling systems. The company has recently been responsible for the design, supply and installation of a multi-lane, free-flow toll collection system in Chile and is in the process of delivering a second system in Chile. The road-side tolling equipment is expected to be provided by Raytheon. Raytheon is a leader in defence and aerospace systems, information technology and technical services, and is a CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 35

38 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 36 SECTION 4 significant provider of electronic tolling equipment in the world market, having provided the roadside tolling system infrastructure on both Highway 407 in Canada and the Cross Israel Highway. It is the primary responsibility of the Construction Contractor to ensure the Tolling System and related equipment are commissioned on time and to specification. In support of this commitment, the Construction Contractor has agreed to pay liquidated damages in the event completion does not occur on time or to specifications THE CONSTRUCTION CONTRACTOR Thiess Established in 1933, Thiess is one of Australia s largest contractors with a significant focus on civil engineering and construction. Thiess had turnover of $2.4 billion in the financial year and work in hand of approximately $7.0 billion (as at 30 June 2004). Thiess has more than 8,000 employees and contributed over 40% of parent company Leighton Holdings Limited s (Leighton Holdings) revenue in Thiess has constructed more than 10,000 kilometres of roads and highways in Australia, including major works on the Western/Metropolitan Ring Road in Melbourne, the Pacific Motorway from Brisbane to the Gold Coast and the Kwinana Freeway extension in Perth. Major infrastructure projects currently being undertaken by Thiess include: > the 3.4 kilometre Lane Cove Tunnel Project in Sydney (in a joint venture with John Holland); > the $875 million Epping to Chatswood section of the Parramatta Rail Link (which incorporates the construction of twin 13 kilometre tunnels); and > the $200 million Ballarat and Geelong sections of the Regional Fast Rail Project. John Holland Established in 1949, John Holland is a major contracting company with significant engineering projects ongoing including roads and bridges. Since acquiring various segments of Transfield s construction business in early 2003 it has become a major contractor in tunnelling and underground construction. John Holland had turnover of $1.2 billion in the financial year, accounting for approximately 20% of parent company Leighton Holdings revenue, and work in hand of approximately $2.0 billion (as at 30 June 2004). Major completed infrastructure projects in which John Holland has been involved include the Eastern Freeway extension in Melbourne, the Pacific Motorway from Brisbane to the Gold Coast and the $1.1 billion Alice Springs to Darwin Railway. John Holland personnel have also constructed approximately 75 kilometres of tunnels and underground works over the past 10 years. Infrastructure projects currently under construction by John Holland include the Lane Cove Tunnel Project and the Tonkin Highway Extension. John Holland s recent acquisition of various segments of Transfield s construction business enables it to benefit from Transfield s experience in the completion of the 2.3 kilometre Sydney Harbour Tunnel, the Melbourne CityLink Project, the 10 kilometre Airport Rail tunnel in Sydney and the Graham Farmer Freeway in Perth DESIGN AND CONSTRUCTION CONTRACT The Construction Contractor will be responsible for the design, construction and commissioning of the MFP including the electronic tolling system, and will perform these obligations under a Fixed Time, Fixed Price Contract. Should construction and commissioning be completed earlier than the date assumed and the MFP commence operations ahead of schedule, this should benefit Unitholders. The Design and Construction Contract includes a liquidated damages regime which provides for payment by the Construction Contractor of a daily rate designed to compensate ConnectEast Group for operational costs, debt service and, in most cases, equity returns for up to 12 months from the Expected Construction Completion Date. A summary of this contract is set out in Section 10. Thiess and John Holland s obligations under the Design and Construction Contract are joint and several and are supported by: > a parent company guarantee from Leighton Holdings guaranteeing the performance of the Construction Contractor, capped at 100% of the Design and Construction Contract Price; and > security bonds in favour of the Lenders and the State equal to a proportion of the Design and Construction Contract Price, in each case provided by a bank or insurance company issuer of high credit quality. Leighton Holdings, currently rated BBB+ by Standard & Poor s, is the parent company of Australia s largest project development and contracting group which includes Thiess, John Holland, Leighton Contractors, Leighton Asia and Leighton Properties. Leighton Holdings Group has over 15,700 employees and had more than $5.9 billion in revenues in , with operations spread around the Asia-Pacific region. Leighton Holdings is listed on ASX and had a market capitalisation of approximately $2.6 billion as at 30 September INDEPENDENT REVIEWER Under the Concession Deed, an appropriately qualified party will be appointed to act as the Independent Reviewer. The Independent Reviewer will review the progress of construction and act as certifier to the State and ConnectEast Group, in

39 SECTION 4 accordance with the Concession Deed, the Independent Reviewer Deed of Appointment and the MFP Legislation. 4.2 OPERATION AND MAINTENANCE The operation and maintenance of the MFP will comprise two main areas: > tolling and customer service; and > roadside operations and maintenance TOLLING AND CUSTOMER SERVICE ConnectEast Group will undertake the tolling and customer service operations for the MFP in-house. These functions include: > toll collection; > marketing; > operation of customer service centres and call centres; > electronic tag distribution; > business information services; and > toll monitoring. In-house management of these functions is consistent with electronic multi-lane, free-flow toll roads around the world. This approach ensures ConnectEast Group maintains a direct relationship with its customers and strategic control of its business. ConnectEast Group will subcontract maintenance and support of the back office computer system to a suitably qualified service provider ROADSIDE OPERATIONS AND MAINTENANCE Roadside operations and maintenance of the MFP will be undertaken by Transfield Services (the Operator) for an initial period of five years from commencement of operations. These functions include traffic management operations and the routine maintenance and refurbishment of the toll road and associated infrastructure. Core service costs for the first five years of operation are fixed and will escalate with CPI under the Operations and Maintenance Contract, which is a performance-based contract. The Operator will be required to provide security for the performance of its obligations under the Operations and Maintenance Contract by way of two unconditional bank undertakings totalling $5 million a $500,000 bond to be provided on or before Financial Close and another bond for $4.5 million to be provided approximately six months prior to the reasonably anticipated date of first freeway section completion of the first section of the MFP. The date which ConnectEast Group reasonably anticipates will be determined by reference to progress reports and programs received from the Construction Contractor under the Design and Construction Contract. The Operator s liability under the Operations and Maintenance Contract is limited to $15 million. The Operator has extensive experience in the operation of large road infrastructure projects such as the Sydney Harbour Tunnel, Melbourne CityLink and the maintenance of over 2,000 kilometres of roads in Sydney for the Roads and Traffic Authority. The Operator is wholly owned by Transfield Services Limited which is listed on ASX and currently capitalised at approximately $600 million. Transfield Services is the largest provider of infrastructure operations and maintenance services in Australia. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 37

40 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 38 SECTION TOLLING STRUCTURE Drivers will be charged tolls based on the number of sections of the MFP that they travel in a single trip. Tolls are grouped into four bands with the expected base toll levels for cars shown in the table below. The maximum toll for single trips by cars is expected to be $4.43 (in July 2004 dollars). The tolling structure on the MFP equates to a per kilometre rate for cars of approximately $0.18 for the open toll road sections (in July 2004 dollars). Tolls for motorcycles are expected to be half the tolls for cars, tolls for light commercial vehicles are approximately 1.6 times the tolls for cars and tolls for heavy commercial vehicles are approximately 2.65 times the tolls for cars. In accordance with the terms of the Concession Deed, toll levels will increase annually in line with CPI until the end of the Concession Period. Under an interest rate protocol agreed with the State, base tolls will be adjusted for changes in interest rates between 30 July 2004 and Financial Close such that the Base Case Equity Return to Unitholders (see Section 10) is maintained. These tolls are significantly below the estimated revenue-optimising toll levels as calculated by the Traffic Expert. The Directors believe this is an important consideration as it increases the attractiveness of the MFP to a wider range of potential users, thereby reducing the impact of toll diversion. Passenger Vehicles (Cars) Mitcham Frankston Project Section Toll rate Per Section 1 Mitcham Frankston Project Interchange S1 (Tunnel) $2.06 < Melbourne Springvale Rd Ringwood Bypass (Untolled) S2 $0.31 Maroondah Hwy S3 S4 $0.31 $0.31 Canterbury Rd Boronia Rd Burwood Hwy S5 $0.31 High Street Rd S6 $0.46 Ferntree Gully Rd S7 $0.46 Wellington Rd S8 S9 S10 S11 S12 $0.46 $0.46 $0.46 $0.46 $1.03 Police Rd Monash Fwy Princes Hwy Cheltenham Rd Dandenong Southern Bypass (Untolled) Greens Rd S13 $1.03 Thompson Rd Total Cap $4.43 < Frankston Frankston Fwy 1 Toll rates as at July Amounts inclusive of GST (rounded to the nearest cent). Tolls will be adjusted for changes in interest rates between 30 July 2004 and Financial Close (see Section )..

41 SECTION TOLLING PRODUCTS ConnectEast Group will offer customers a variety of tolling products which are designed to be simple to understand and easy to use. Examples of these are summarised in the table below. Customer Product Payment Method Standard Tag Pre-pay Video Pre-pay Commercial (at least 10 tags or Tag Post-pay (subject to conditions) registered licence plate numbers) Video Post-pay (subject to conditions) Casual User Registered Trip Pass Pre-pay Registered Video Pre-pay Unregistered Invoice Post-pay ConnectEast Group expects to provide a low cost pre-paid video account and single or multiple trip passes specifically suited to the casual or infrequent user. These are cost-effective products for one-off or occasional use. Casual users would be able to purchase an unlimited number of trip passes and would not need to specify the day of travel. Subject to agreement with Melbourne CityLink, ConnectEast Group may also offer a Melbourne Day Pass, for use on both the MFP and Melbourne CityLink. In addition, ConnectEast Group is considering providing two discount tolling packages, including: > Weekend Discounts: a discount on weekends, long weekends and public holidays to standard car customers. The discount will apply to both the rates and the cap; and > Neighbourhood Discounts: a discount may apply for those cars making trips on a single section of the MFP. This discount is in place to encourage and reward local residents travelling on the MFP. ConnectEast Group s tolling system is designed to be fully interoperable with Melbourne CityLink and other Australian toll roads TOLLING ENFORCEMENT Under recently passed MFP Legislation the State has established a more moderate approach for tolling enforcement compared to the current system on Melbourne CityLink. Non-registered users will be identified using video imaging technology. These users have the option of purchasing a post-paid trip pass within 72 hours of travel after which ConnectEast Group will implement the following unregistered user procedure: > vehicle owners details will be obtained from VicRoads (or will be sought from the applicable State Road Authority in the case of interstate vehicles); > an invoice will be mailed to the vehicle owner for the toll applicable to MFP use, including an administration fee; > in the event that the vehicle owner does not pay within 14 days ConnectEast Group will attempt to contact the owner; > a second invoice will be mailed if this is unsuccessful; and > if the invoice remains outstanding after a further 14 days ConnectEast Group will commence enforcement actions to recover the unpaid toll. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 39

42 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 40 SECTION MARKETING THE MFP ConnectEast Group will employ a Marketing Manager with responsibility for: > overseeing brand development; > implementing a promotional strategy that incorporates advertising, publications, direct mail and community sponsorship; and > developing and implementing incentive programs and business intelligence programs. ConnectEast Group will access specialist skills across a range of areas including media planning, advertising, website design and development and community relations. ConnectEast Group has undertaken preliminary market research across several key market segments and will carry out further research prior to commencement of operations. This research will take the form of focus groups chosen from key market segments, including commuters, business and freight operators. The focus groups will take into account geographic and demographic characteristics along the MFP corridor. 4.4 CONCESSION DEED The Concession Deed is the key legal agreement between the State and ConnectEast Group governing the terms upon which the MFP will proceed. The Concession Deed grants ConnectEast Group the right and obligation to finance, design, construct, operate and maintain the MFP. It defines the key commercial parameters of the MFP, including the Concession Period, toll levels, risk allocation and termination events. A summary of the Concession Deed is set out in Section 10.

43 SECTION 5 Corporate structure and taxation 5

44 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 42 SECTION CORPORATE STRUCTURE The key entities in the proposed corporate structure of ConnectEast Group are outlined in the diagram below: $0.99 Units ConnectEast Investment Trust Stapled Unitholders Stapled Units $0.01 Units ConnectEast Holding Trust External Lenders ConnectEast Management Limited Loans ConnectEast Asset Trust Lease / Loans Rent / Interest ConnectEast Pty Limited ConnectEast Finance Pty Limited Back-to-Back Loans Note: This is a simplified structure diagram and does not include some intermediate entities. ConnectEast Investment Trust and ConnectEast Holding Trust are the two unit trusts (ConnectEast Unit Trusts) which will issue the Stapled Units to be quoted on ASX. Each of these trusts is a registered managed investment scheme under the Corporations Act. ConnectEast Asset Trust has the right and obligation under the Concession Deed to finance, design and construct the MFP and will have a leasehold interest from the State in the land on which the MFP will be built, as well as over any fixtures on the land at Construction Completion. ConnectEast Pty Limited will have day-to-day responsibility for the operation and maintenance of the MFP and will receive all operating revenue from and meet all operating expenses of the MFP. These arrangements are set out under management agreements with the relevant entities within ConnectEast Group (Management Deeds). A summary of the Management Deeds is set out in Section 10. ConnectEast Finance will enter into senior debt finance agreements with the Lenders. Borrowings by ConnectEast Finance will be on-lent to ConnectEast Asset Trust on back-to-back terms with the senior debt finance agreements. ConnectEast Asset Trust will in turn lend a portion of these funds to ConnectEast Pty Limited to enable it to meet its capital expenditure requirements and operating expenses. ConnectEast Pty Limited will make rental payments to ConnectEast Asset Trust on the land sub-leased to ConnectEast Pty Limited and will make interest payments on borrowings provided by ConnectEast Asset Trust to ConnectEast Pty Limited. This cashflow from ConnectEast Pty Limited is intended to enable ConnectEast Asset Trust to meet its debt service obligations to ConnectEast Finance and any other obligations. Any surplus cashflow (subject to Lenders security arrangements) will be distributed to ConnectEast Investment Trust which will then make Distributions to Unitholders. ConnectEast Management Limited, a wholly owned subsidiary of Macquarie Bank, will act as the responsible entity of ConnectEast Investment Trust and ConnectEast Holding Trust. Further details on the roles and responsibilities of CEML are set out later in this Section. 5.2 RESPONSIBLE ENTITY It is a requirement of the Corporations Act for registered managed investment schemes to have a responsible entity. CEML is the responsible entity of ConnectEast Investment Trust and ConnectEast Holding Trust. CEML is responsible to Unitholders for the management of the ConnectEast Unit Trusts and must exercise its powers for the benefit of all Unitholders. Such powers and functions extend to the overall management and corporate governance of ConnectEast Unit Trusts, including the issue of annual reports and the issue of this PDS. The day-to-day operation of the MFP will be carried out by ConnectEast Pty Limited under the

45 SECTION 5 Management Deeds. Notwithstanding this agreement, CEML remains ultimately responsible to its Unitholders for the management and operations of the ConnectEast Unit Trusts. Information on CEML s corporate governance policies and the management of ConnectEast Group are set out in Section TAXATION The taxation information in this Section is of a general nature only and does not take into account your objectives, financial situation or needs. CEML recommends you seek independent taxation advice which takes into account your individual circumstances. This Section contains a summary of the principal taxation consequences applying to the holding of Stapled Units by a Unitholder. The summary is based on Australian revenue legislation, public taxation rulings, determinations and administrative practice as at the date of this PDS. This discussion relates only to Unitholders who are Australian residents and who hold Stapled Units as a capital asset; that is, the Unitholder will not hold Stapled Units in the course of the business of trading or dealing in such securities. The summary is necessarily general in nature and prospective investors should seek and rely on their own specific professional taxation advice. The taxation consequences associated with an investment in Stapled Units will depend upon the particular circumstances of the Unitholder. Provisions of the Income Tax Assessment Act 1936 (1936 Tax Act), the Income Tax Assessment Act 1997 (1997 Tax Act) the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and the A New Tax System (Goods and Services Tax) Regulations 1999 (1999 Regulations) are referred to in this Section TAX CHARACTERISATION OF STAPLED UNITS Each Stapled Unit will consist of one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust. The units in ConnectEast Investment Trust and in ConnectEast Holding Trust will be stapled and will not be able to be traded or transferred independently of each other. However, the Australian income and capital gains tax consequences of investing in Stapled Units will distinguish the holding of units in each of ConnectEast Investment Trust and ConnectEast Holding Trust TAXATION OF THE CONNECTEAST UNIT TRUSTS Taxation of ConnectEast Investment Trust ConnectEast Investment Trust should not generally be liable to income tax. Rather, Unitholders will be presently entitled to all of the taxable income of ConnectEast Investment Trust and will generally be the persons who will be taxed on the taxable income of ConnectEast Investment Trust. A trust may be taxed in a similar way to a company if the trust is either a corporate unit trust in terms of Division 6B of Part III of the 1936 Tax Act or a public trading trust in terms of Division 6C of Part III of the 1936 Tax Act in respect of the income year. Neither ConnectEast Investment Trust nor any of its subsidiary trusts would be a corporate unit trust under Division 6B or a public trading trust under Division 6C. In particular, in relation to Division 6C ConnectEast Investment Trust: > will not conduct any business other than eligible investment business as defined in Division 6C; and > will not control, or have the ability to control, directly, or indirectly, the affairs or operations of any entity which does not only carry on an eligible investment business. Where a revenue loss or net capital loss is incurred by ConnectEast Investment Trust or one of its subsidiary trusts, that tax loss cannot be passed to another trust or to Unitholders. Rather, revenue losses will be carried forward in the relevant trust to be offset against assessable income derived by that trust in later years, subject to satisfying certain tests for the utilisation of losses in trusts. Similarly, net capital losses will be carried forward in the relevant trust to be offset against capital gains in later years. Taxation of ConnectEast Holding Trust ConnectEast Holding Trust will be a public trading trust under Division 6C of Part III of the 1936 Tax Act. The subsidiary companies will carry on a trading business for Division 6C purposes and ConnectEast Holding Trust will control those companies. As such, ConnectEast Holding Trust will be broadly taxed like a company and will pay income tax at the corporate rate (currently 30%) on its taxable income. Distributions paid by ConnectEast Holding Trust may be franked to reflect tax paid by ConnectEast Holding Trust or its subsidiary companies. Any revenue loss or net capital loss incurred by ConnectEast Holding Trust or one of its subsidiary companies cannot be passed to Unitholders. Rather, any such tax losses may be carried forward or offset against assessable income in later years, subject to satisfying relevant tests for the utilisation of losses. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 43

46 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 44 SECTION INCOME TAXATION AUSTRALIAN RESIDENT UNITHOLDERS The discussion in this Section relates only to Unitholders who are Australian residents and who hold Stapled Units as a capital asset, that is, the Unitholder will not hold Stapled Units in the course of the business of trading or dealing in such securities. Distributions from ConnectEast Investment Trust CEML has determined that the distributable income of ConnectEast Investment Trust for a Distribution Period will be the aggregate of the net income of the Trust calculated in accordance with the provisions of the 1936 Tax Act and the 1997 Tax Act and such other amounts as determined by CEML. On that basis an Australian resident Unitholder will be required to include in their assessable income for the income year in which a distribution period ends (whether that distribution relates to a Fixed Distribution Period or otherwise) such part of a distribution from ConnectEast Investment Trust which represents a distribution of the tax law net income of ConnectEast Investment Trust for a distribution period. That amount must be included in an Australian resident Unitholder s assessable income for that income year even if the distribution by ConnectEast Investment Trust is physically paid to the Unitholder in the subsequent income year, or the distribution amount is reinvested in further Stapled Units under the DRP. A Unitholder will generally not be required to include in their assessable income such part of a distribution which represents an amount paid from the capital of ConnectEast Investment Trust or amounts in excess of the tax law net income of the trust (described in this PDS as a tax deferred payment ). CEML will advise Unitholders of the extent (if any) to which a distribution consists of tax deferred payments. Receipt of tax deferred payments from ConnectEast Investment Trust If a distribution consists of a tax deferred payment then the cost base of the units in ConnectEast Investment Trust to the Unitholder will be reduced by an amount equal to the tax deferred payment. If the cost base of the units in ConnectEast Investment Trust is reduced to nil as a result of receiving such tax deferred payments then any further tax deferred payments received by an Australian resident Unitholder in respect of the units in ConnectEast Investment Trust will result in a capital gain to the Unitholder. Distributions from ConnectEast Holding Trust An Australian resident Unitholder will be required to include Distributions in their assessable income for the income year in which the distribution is paid (including amounts reinvested in further Stapled Units under the Distribution Reinvestment Plan). Distributions may be franked by ConnectEast Holding Trust in broadly the same way as company dividends, so that an Australian resident Unitholder may be entitled to any franking credits attached to the franked distribution. For an Australian resident Unitholder to be entitled to franking credits, the Unitholder must be a qualified person under Division 1A of Part IIIAA of the 1936 Tax Act. In particular, the Unitholder must satisfy the holding period rule, or qualify for an exemption or franking credit rebate ceiling under such provisions. Broadly, the holding period rule requires that the unit in ConnectEast Holding Trust be held sufficiently at risk for more than 45 days. The application of the qualified person provisions and the holding period rule is complicated and Unitholders should seek their own advice as to whether those rules will affect them. On the assumption that the Australian resident Unitholder is a qualified person, the tax treatment of distributions from ConnectEast Holding Trust will generally be as follows: > Individuals The distribution plus any franking credit will be included in the Australian resident individual s assessable income. A tax offset for the amount of the franking credit will be available to offset the tax payable on the individual s assessable income. Any excess tax offset (after offset against tax payable) should be refundable to the individual. > Companies The distribution plus any franking credit will be included in the Australian resident company s assessable income. A tax offset for the amount of the franking credit will be available against tax payable on the company s taxable income. The company will be able to credit its franking account with the franked amount of the distribution. > Trustees (excluding trustees of superannuation funds) If Australian resident beneficiaries of a trust are presently entitled to a distribution of the net income for the year in which the distribution is derived by the trust, generally the franked distribution should flow through to, and be taxable in the hands of, the beneficiaries in accordance with their particular tax status and profile (subject to the trust having positive net income and the beneficiary satisfying the qualified person rules referred to above).

47 SECTION 5 > Life insurance companies (statutory fund) and superannuation funds The distribution plus any franking credit will be included in assessable income. A tax offset for the amount of the franking credit will be available against tax payable. In the case of life companies and complying superannuation funds, a refund of excess franking credits will arise to the extent the offset exceeds the total tax liability. With non-complying superannuation funds and non-complying ADFs, a refund of excess franking credits is not available. Quotation of Tax File Numbers Unitholders will be provided with the opportunity to disclose their Tax File Number (TFN) or any applicable exemption. Although disclosure of a TFN is not compulsory, Australian resident Unitholders should be aware that, unless they quote the applicable exemption, failure to disclose their TFN may result in an amount of tax being deducted from the Distribution payments at the top marginal tax rate plus Medicare levy (currently 48.5%). Alternatively, where a Unitholder holds the Stapled Units in the course or furtherance of an Australian enterprise carried on by the Unitholder, the Unitholder may quote its Australian Business Number (ABN) instead of their TFN. Disposal of Stapled Units Australian resident Unitholders will need to consider their capital gains tax (CGT) liability upon a sale or other disposal of their Stapled Units. For CGT purposes, a Unitholder will be disposing of both the unit in ConnectEast Investment Trust and the unit in ConnectEast Holding Trust which together comprise the Stapled Units. A CGT calculation will be required in respect of the unit in each trust. For CGT purposes a capital gain would arise to an Australian resident Unitholder to the extent of any excess of capital proceeds received from the sale or disposal of the units in each trust over the cost base of the respective units to the Unitholder. The capital proceeds received in respect of the combined Stapled Unit should be apportioned on a reasonable basis between the unit in ConnectEast Investment Trust and the unit in ConnectEast Holding Trust. The cost base of the units would include the amount paid by the Unitholder to acquire the units (whether upon issue by ConnectEast Holding Trust or as a result of purchase from a previous Unitholder) as well as the costs associated with the acquisition and disposal of the units (such as brokerage) incurred by the Unitholder. As noted above, the cost base of the units in ConnectEast Investment Trust may be reduced where a distribution or part of a distribution from ConnectEast Investment Trust is attributable to a tax deferred payment. If the Australian resident Unitholder is an individual and has held the Stapled Units for at least 12 months prior to disposing of them, the Unitholder may be eligible to include only one-half of their capital gains (that is, after application of any available capital losses) in their assessable income. If the Australian resident Unitholder is a complying superannuation fund or the Stapled Units are a virtual PST asset of a life insurance company and the Stapled Units have been held for at least 12 months prior to disposal, the Unitholder may be eligible to include only two-thirds of the capital gains (after application of any available capital losses) in their assessable income. If the Unitholder is the trustee of a trust and has held the Stapled Units for at least 12 months then only one-half of the capital gains (after application of any available capital losses) to determine the net income of that trust for Australian income tax purposes. Conversely, capital losses could arise where the capital proceeds are less than the cost base of the units in the trusts INCOME TAXATION NON-RESIDENT UNITHOLDERS The following discussion in this Section contains general comments in relation to Unitholders who are not Australian residents for income tax purposes. It is very important that a non-resident prospective investor seeks independent tax advice in relation to the tax consequences of investing in the Stapled Units taking into account the particular circumstances of the investor, the tax laws of Australia and of the country of residence of the investor, and the relevant tax treaty (if any) between Australia and the country of residence of the investor. Distributions from ConnectEast Investment Trust Unitholders who are not residents of Australia for tax purposes will generally be subject to Australian tax on their entitlement to Australian-sourced income and gains of the ConnectEast Investment Trust. This tax will usually be withheld from their distributions by CEML. The relevant rates of tax depend on the nature of the income or gain. Australian-sourced rental income distributed to non-residents is currently subject to tax at rates which depend on the nature of the non-resident investor (e.g. individual, company, or other type of entity). A 30% rate applies to distributions of Australian-sourced rental income to non-resident companies, and progressive rates apply to distributions of such income to non-resident individuals. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 45

48 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 46 SECTION 5 In its May 2003 budget the Commonwealth Government announced that it intended, subject to consultation with industry, to amend the law to tax distributions of such rental income to non-residents at a 30% rate in all cases. No further announcement has been made and no legislation has been introduced in relation to this matter. To the extent distributions from ConnectEast Investment Trust to a non-resident Unitholder consist of income in the form of interest, Australian interest withholding tax at the rate of 10% would generally apply. Distributions from ConnectEast Holding Trust Franked distributions paid by ConnectEast Holding Trust to Unitholders who are not residents of Australia for tax purposes will not be subject to Australian dividend withholding tax. Unfranked distributions paid by ConnectEast Holding Trust to non-resident Unitholders will generally be subject to Australian dividend withholding tax at 30% unless the Unitholder is a resident of a country with which Australia has a tax treaty, in which case the withholding tax is generally payable at a 15% rate. Different results can arise in certain circumstances, including where a non-resident company holds at least 10% of the Units in ConnectEast Holding Trust and meets a number of other tests. Disposal of Stapled Units A Unitholder who is not a resident of Australia for tax purposes and who holds Stapled Units on capital account will not generally be subject to Australian CGT on the disposal of their Stapled Units unless that holder (together with its associates) held 10% or more of the issued Units of either ConnectEast Investment Trust or ConnectEast Holding Trust, at any time during the five years before the disposal. If a non-resident would be subject to Australian CGT under this test, the possible relevance of any applicable tax treaty should be considered STAMP DUTY As the Stapled Units will be listed on ASX their issue, transfer, or redemption will not currently attract any stamp duty GST Under the GST Act, GST is imposed on taxable supplies. A financial supply, which is instead input taxed, will not be a taxable supply. Although no GST is payable on a supply which is input taxed, the person making the supply is unable to obtain input tax credits in respect of any GST imposed on another person making supplies to them, in respect of such input taxed supplies. The GST Regulations provide that the provision, acquisition or disposal of an interest in a security is a financial supply. For these purposes, a security includes the capital of a trust. As the Stapled Units will constitute an interest in the capital of ConnectEast Investment Trust and ConnectEast Holding Trust: > the transfer of the Stapled Units by the Unitholder by way of sale; and > the disposal of the Stapled Units by the Unitholder upon failure to pay the Final Instalment (whether to ConnectEast Investment Trust and ConnectEast Holding Trust or to a third party) will be a financial supply which is input taxed and in respect of which no GST is payable.

49 SECTION 6 Board and management 6

50 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 48 SECTION BOARD MEMBERS CEML is responsible for the overall management and corporate governance of ConnectEast Unit Trusts and the protection of Unitholders interests. It is intended that the Board of Directors of CEML be comprised of seven Directors, of whom four will be independent of Macquarie Bank. Currently five Directors have been appointed, of whom two are representatives of Macquarie Bank and one is a Thiess nominee. Thiess and John Holland together are entitled to nominate a representative to the Board of CEML until they cease to hold more than approximately 130 million Stapled Units between them MR TONY SHEPHERD INDEPENDENT CHAIRMAN AND INTERIM CHIEF EXECUTIVE OFFICER, AGE 60 Tony Shepherd is currently Chairman of ERG Limited, Deputy Chairman of Transfield Services Limited, a Director of ADI Limited and York Mining Pty Ltd, and Vice President of the Australian Council for Infrastructure Development. As an executive of the Transfield Holdings Group in the 1980s and 1990s, he was responsible for the development of the Sydney Harbour Tunnel Project and Transfield s successful tender for the Anzac Warship Project. He was Chief Executive Officer of the Project Development Division at Transfield Holdings Group from 1992 to In this position Tony was responsible for the Melbourne CityLink Project, as well as a number of other build-own-operatetransfer projects and the development of Walsh Bay. Tony brings direct relevant expertise to his role as Chairman and Interim Chief Executive Officer DR RAY WILSON DIRECTOR, AGE 59 Ray is Executive General Manager Infrastructure and Corporate Services at Thiess and currently oversees major project development, project financing and strategic planning, corporate and general business development for Thiess and is a Director of each of the companies comprising the Lane Cove Tunnel Group. Ray has more than 25 years of experience in all aspects of international and local project development and operations, including 10 years involvement in the development of privatised infrastructure projects such as toll roads. Ray has worked on projects in Australia, Indonesia, South-East Asia, New Zealand, the Middle East and West Africa. Ray s previous roles have included Operations Director for Baulderstone Hornibrook and General Manager (Heavy Construction) for McConnell Dowell DR MAXWELL LAY INDEPENDENT DIRECTOR, AGE 67 Max Lay has had a distinguished career spanning both civil and transport engineering. Max held the role of Executive Director of the Australian Road Research Board from 1975 to 1988 until he joined VicRoads, where he held the positions of Director of Quality and Technical Resources from 1988 to 1994 and then Director of Major Projects from 1994 until These duties included major planning and review roles leading up to the selection of the successful concessionaire for the Melbourne CityLink Project. Max was then appointed under the Melbourne CityLink Act as the Independent Reviewer on the Melbourne CityLink Project, operating in that role from 1996 until mid Max has had a longstanding involvement with the RACV, having been a Director since 1986, Vice-President and Deputy Chairman from 1995 to

51 SECTION and President from 1999 to He was also President of the Australian Automobile Association from 2000 to He remains an active RACV Director, particularly in the area of new technology in road transport. He will be a valuable contributor to the Board given his knowledge of the Victorian road network as well as his technical engineering expertise MR DAVID ROSEMAN DIRECTOR, AGE 38 David Roseman is an Executive Director of Macquarie Bank. David joined Macquarie Bank from the law firm of Mallesons Stephen Jaques in 1992 and has been Head of Infrastructure Advisory in Australia and New Zealand since Prior to that David was Head of the New York Office for Macquarie Bank. In his current role David is responsible for all aspects of the infrastructure market from tollways, airports, railways, energy assets and social infrastructure. Since 2000, David has been ultimately responsible for all the major infrastructure transactions closed by Macquarie Bank including the Western Sydney Orbital, Sydney Airport, Duke Energy Assets and the Alice Springs to Darwin Railway and is ultimately responsible for the successful ConnectEast Group bid for the MFP MR ED SANDREJKO DIRECTOR, AGE 52 Ed Sandrejko is a Division Director of Macquarie Bank Limited. Ed joined Macquarie Bank in 1984 as part of the Project and Structured Finance Group. He has worked on a wide range of financing transactions involving major corporate and government entities. In 2002 he moved to the Infrastructure and Specialised Funds area and is a Director of Interlink Roads Pty Limited (owner of the M5 Motorway), Statewide Roads Limited (owner of the M4 Motorway), Airport Motorway Limited (owner of the M1 Motorway), Westlink Motorway Limited (owner of the Westlink M7 Motorway) and TransToll Australia Pty Limited. 6.2 MANAGEMENT STRUCTURE The executive management team will include key functional positions covering the whole scope of ConnectEast Group s business. ConnectEast Group will establish the following positions as part of its core executive management team: > Chief Executive Officer > General Manager Operations and Marketing > General Manager Finance and Administration > General Manager Construction (during the construction program) > General Manager Community and Public Affairs > Legal Counsel The proposed management structure is outlined in the diagram below. ConnectEast Group has secured the services of the following three key executives: INTERIM CEO MR TONY SHEPHERD Tony Shepherd s biography has been set out above GENERAL MANAGER OPERATIONS AND MARKETING: MR PETER BENTLEY Throughout his 25-year career, Peter Bentley has contributed to the business development of a diverse range of companies, in many cases acting as General Manager or Managing Director. Peter has extensive experience in developing and managing electronic tolling and traffic management systems. Peter is currently Chair of the National Electronic Tolling Committee that reports to the Special Committee on Transport and is the President of Intelligent Transport Systems Australia. Peter previously held the position of Executive Director of TransLink Systems and Operations where he was responsible for the rectification and ultimate successful implementation of the Melbourne CityLink tolling system GENERAL MANAGER COMMUNITY AND PUBLIC AFFAIRS: MR BRETT WRIGHT Brett Wright has over 24 years experience in media and public relations. As a public relations consultant, Brett has advised government and private sector clients on various infrastructure projects in Victoria. Brett held the position of Senior Policy Communications Officer at the Melbourne CityLink Authority and was also previously responsible for community and media liaison and corporate publications at Transurban CityLink. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 49

52 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 50 SECTION 6 General Manager Operations & Marketing General Manager Finance & Administration OTHER KEY POSITIONS ConnectEast Group is confident that suitably qualified candidates for other key positions can be readily secured. To this end, ConnectEast Group has already commenced identifying potential candidates. ConnectEast Group intends to fill positions on a temporary basis as required from parties supporting ConnectEast Group (such as Macquarie Bank or Thiess as sponsors of ConnectEast Group) until permanent candidates are recruited. 6.3 CORPORATE GOVERNANCE STRUCTURE CEML, as responsible entity, is responsible for the overall corporate governance of ConnectEast Investment Trust and ConnectEast Holding Trust and for the protection of Unitholders interests. The Corporations Act, ASX Listing Rules, the Constitutions of the ConnectEast Unit Trusts and the general law regulate the workings of the ConnectEast Unit Trusts and the essential practices, responsibilities and duties of CEML and its officers. CEML must exercise its powers diligently and in the best interests of Unitholders. Under the terms of the Management Deeds, ConnectEast Pty Limited has been appointed by CEML to manage the day-to-day business affairs of ConnectEast Investment Trust and ConnectEast Holding Trust, respectively. Those functions will be performed by personnel appointed by ConnectEast Pty Limited. Key personnel of ConnectEast Pty Limited must be approved by CEML. A summary of the key terms of the Management Deeds is set out in Section 10. Notwithstanding the delegation of the management function, CEML retains responsibility for the strategic and corporate governance of the ConnectEast Unit Trusts and the protection of Unitholders interests. CEML therefore monitors ConnectEast Group s compliance with its regulatory and contractual obligations ASX CORPORATE GOVERNANCE STANDARDS Listed entities are required to disclose in their annual reports the extent of their compliance with CONNECTEAST GROUP Chief Executive Officer General Manager Construction General Manager Community & Public Affairs Legal Counsel the Corporate Governance Principles and Best Practice Recommendations (the Standards), released by ASX Corporate Governance Committee and to explain why they have not adopted a Standard if they consider it inappropriate in their particular circumstances. The Standards encompass matters such as board composition, committees and compliance procedures and are designed to maximise corporate performance and accountability in the interests of Unitholders and the broader economy. ConnectEast Group will include on its website full details of its corporate governance regime and a corporate governance statement will be included in ConnectEast Group s next annual report. A summary of the corporate governance regime that applies to ConnectEast Group and information about ConnectEast Group s compliance with the Standards is set out below CORPORATE GOVERNANCE STATEMENT Principle 1: Lay solid foundations for management and oversight Responsibility for corporate governance and the internal workings of ConnectEast Investment Trust and ConnectEast Holding Trust rests with the Board of CEML. Board meetings are held at least bi-monthly and more frequently as required. A CEO, General Manager Finance and Administration and General Manager Operations and Marketing are appointed under the terms of the Management Deeds with delineated roles and responsibilities. Principle 2: Structure the Board to add value Details of the Board composition and profiles of the Directors are set out in Section 6.1. A policy has been adopted by the CEML Board in relation to Board membership. This policy requires that the CEML Board comprise at least four Directors and that a majority of those Directors must be independent of Macquarie Bank. The CEML Board is to be comprised of Directors with an appropriate range of qualifications and experience. Principle 3: Promote ethical and responsible

53 SECTION 6 decision making The CEML Board has adopted a Code of Conduct which sets out principles and standards necessary to maintain confidence in ConnectEast Group s integrity and the responsibility and accountability of individuals for reporting and investigating reports of unethical behaviour. Principle 4: Safeguard integrity in financial reporting The CEML Board will appoint an Audit and Risk Committee which is comprised solely of the Independent Directors and in all other respects complies with the Standards. Principle 5: Make timely and balanced disclosure ConnectEast Group s policy will be to provide timely, open and accurate information to all stakeholders, including Unitholders, regulators and the wider investment community. The CEML Board has adopted policies and procedures in relation to compliance with ASX Listing Rules disclosure requirements, having regard to recommendations in the Standards. Principle 6: Respect the rights of Unitholders The cornerstone of ConnectEast Group s Unitholder communications policy is the delivery of timely and relevant information. Principle 7: Recognise and manage risk The CEML Board has adopted a formal risk management policy, which is monitored by the Audit and Risk Committee. Principle 8: Encourage enhanced performance The CEO, General Manager Finance and Administration, General Manager Operations and Marketing and General Manager Construction are appointed under the terms of the Investment Group Management Deed and Holding Group Management Deed (which are set out in Section 10). These appointments will be reviewed and approved by the CEML Board on an annual basis. Directors will participate in a formal induction program and they will also have access to continuing education to update and enhance their skills and knowledge. A review of the performance of the CEML Board and the Audit and Risk Committee will be undertaken annually. Principle 9: Remunerate fairly and responsibly CEML is entitled to a fixed fee in respect of its role as responsible entity of the ConnectEast Unit Trusts and as trustee of ConnectEast Investment Trust 2. The fee payable is set out in Section 7.7. In accordance with its obligations under the Investment Group Management Deed and Holding Group Management Deed, ConnectEast Pty Limited will make staff available to perform the day-to-day administrative and management functions for ConnectEast Investment Trust and ConnectEast Holding Trust, respectively. ConnectEast Pty Limited is not paid a management fee under the Management Deeds. However, it is entitled to be reimbursed for its costs incurred in properly performing those functions and the ConnectEast Unit Trusts will ultimately be liable for these costs. Principle 10: Recognise the legitimate interests of stakeholders The Code of Conduct adopted by the CEML Board addresses matters relevant to ConnectEast Group s compliance with its legal obligations to stakeholders. The Code of Conduct covers those areas which the CEML Board considers relevant to ConnectEast Group s operations. There is a compliance procedure in place to ensure the Code of Conduct is adhered to and a formal complaints handling procedure has been implemented. RELATED PARTY TRANSACTIONS Macquarie Bank is the preferred financial adviser to ConnectEast Group for so long as CEML is the responsible entity. As a result, Macquarie Bank and other Macquarie Bank Group companies may perform various services for ConnectEast Group from time to time. Arm s length fees will be payable for those services. The Directors of CEML may seek external advice as to the appropriateness of fees and the terms of Macquarie Bank Group company engagements. Furthermore, Directors who are employees of Macquarie Bank will not vote on or, unless invited by the remaining Directors, participate in discussions on related party matters involving Macquarie Bank. COMPLIANCE PLANS Under the managed investments scheme regime of the Corporations Act, CEML is required to lodge a Compliance Plan for each of the ConnectEast Unit Trusts with ASIC. The Compliance Plan outlines the measures taken to ensure compliance with the Corporations Act and the Constitutions of the ConnectEast Unit Trusts. Given that the majority of CEML Directors will be independent, the Corporations Act does not require, and the CEML Board does not currently propose to appoint, a separate Compliance Committee. In the absence of a Compliance Committee, the CEML Board will monitor compliance with the Compliance Plans. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 51

54 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 52

55 SECTION 7 Financial analysis and information (including fees and costs) 7

56 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 54 SECTION SOURCES AND APPLICATION OF FUNDS The following table sets out the projected sources and application of funds in the period up to Construction Completion of the MFP. Sources and Application of Funds Sources of Funds $million Bank Debt 2,088 1 Equity Raised in the Offer 1,120 1 Equity Raised via DRP Deferred Equity Tranche 290 Total 3,795 Application of Funds Construction Cost 2,502 Equity Coupons During Construction Net Interest During Construction Upfront Development and Financing Costs (including fees) 225 1,3 Ongoing Development and Financing Costs (including fees) 219 1,4 Distribution Reserve 44 1 Contingency Reserve 25 Interest Rate Reserve 32 1,2 Ramp-up Reserve 99 1 Debt Service Reserve 85 1 Operations Reserve 10 Total 3, Based on interest rates as at 30 July These balances will be impacted by the interest rates that will be set at Financial Close. 2. Some or all of this reserve may be returned via a redemption depending on interest rates at Financial Close. See Section for further details. 3. Includes upfront company costs, sponsor development fee, upfront equity and DRP underwriting and arranging fees, debt underwriting and arranging fees, advisers and consultants fees and other upfront costs. 4. Includes ongoing equity and DRP underwriting fees, ongoing company costs, public transport payment to State, net GST and other ongoing costs. 7.2 EQUITY FUNDING SOURCES It is expected that equity funding of $1,410 million will be raised to assist financing of costs incurred during the construction of the MFP. The equity funding is to be raised in two tranches: > the Offer raising $1,120 million before costs; and > the Deferred Equity Tranches raising $290 million in aggregate. In addition, ConnectEast Group will offer a Distribution Reinvestment Plan (DRP) for the Fixed Distribution Period. The DRP will be underwritten during the Fixed Distribution Period by the DRP Underwriters, with the exception of the first two Distributions for the periods ending 31 March 2005 and 30 September 2005 which will not be underwritten, but will be pre-funded through the Offer. To the extent that eligible Unitholders elect in writing not to participate in the DRP for the first two Distributions, cash Distributions will be funded from equity raised in the Offer in excess of the funding requirements for the MFP. A summary of the DRP is set out in Section THE OFFER The Offer consists of 1,120 million Stapled Units at an Issue Price of $1.00 per Stapled Unit. Each Stapled Unit comprises one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust, stapled together so that neither unit may be separately traded or transferred. As part of the Offer, 50 million Stapled Units will be issued on a deferred settlement basis to the Underwriters or their nominees to cover potential interest rate movements between 30 July 2004 and Financial Close. Some or all of these Stapled Units may be redeemed if not required to cover interest rate movements as at Financial Close. See Section 10.4 and for further details. Applicants under the Offer will pay for their Stapled Units in two instalments. The Initial Instalment of $0.55 will be paid with the initial application for Stapled Units. The Final Instalment of $0.45 will be payable 12 months following Allotment Date. Payment of the second distribution is scheduled to occur after the Final Instalment Payment Date. Accordingly, Unitholders should not rely on payment of the second Distribution to fund payment of the Final Instalment DEFERRED EQUITY TRANCHES Pursuant to the Deferred Equity Commitment Deeds, the Sponsors and John Holland will subscribe for fully paid Stapled Units which will rank equally with all other Stapled Units from their allotment. The obligation to subscribe for Stapled Units under the Deferred Equity Commitment Deeds is secured by Letters of Credit. Macquarie Bank will subscribe for $30 million of Stapled Units at $1.00 per Stapled Unit on the MBL Deferred Equity Contribution Date. Thiess and John Holland will together subscribe for $260 million of Stapled Units at $1.15 per Stapled Unit on the D&C Deferred Equity Contribution Date. Where an event of default occurs under the Financing Documents (unless it has been waived or remedied) the Lenders may demand immediate payment of the deferred equity contributions by the Sponsors and John Holland. A summary of the Deferred Equity Commitment Deeds is set out in Section 10.

57 SECTION DEBT FUNDING OF THE MFP The debt financing for the MFP is being provided through three senior bank debt facilities. The facilities are underwritten by the Joint Lead Arrangers, BOS International (Australia) Limited, Commonwealth Bank of Australia, Société Générale Australia Branch and United Overseas Bank Limited, Sydney Branch. The three debt facilities comprise the following: > Equity Bridge Facilities of $290 million in the aggregate; > a Construction Facility of $2,088 million (which may be reduced or can be increased to $2,200 million depending upon interest rates at Financial Close), which will convert to a three tranche Term Debt Facility at Construction Completion; and > a Bank Bond Facility of $7.5 million EQUITY BRIDGE FACILITIES AND CONSTRUCTION FACILITY The Equity Bridge Facilities and Construction Facility will be available from Financial Close. Funds drawn under each of these facilities will be applied towards meeting costs incurred by ConnectEast Group, specifically: > construction costs certain amounts payable to the Construction Contractor (except bonuses) under the Design and Construction Contract; > development costs costs incurred by ConnectEast Pty Limited at Financial Close and during the Construction Period; > operating costs incurred prior to Construction Completion costs payable to the Operator (except bonuses), fees payable to the Lenders engineer or the Security Trustee, operating expenses, amounts payable to comply with Project Documents, capital maintenance contributions and taxes (including GST); > financing costs incurred prior to Construction Completion funding interest (net of payments under the swap arrangements), fees and other expenses incurred during the Construction Period in relation to the Senior Debt and other fees due to the Lenders; > Reserve Accounts funding the required Debt Service Reserve Account, the Operations Reserve Account, the Ramp-up Reserve Account and the Contingency Reserve Account at Construction Completion; and > other meeting any other costs approved by the Lenders. The Construction Facility can only be drawn once the Offer Proceeds and Final Instalment have been contributed. The Equity Bridge Facilities must be fully drawn (excluding an allowance for future capitalised interest) before drawings can be made under the Construction Facility. The undrawn component of the Equity Bridge Facilities will be applied exclusively to the payment of interest on those facilities. Drawings under both the Equity Bridge Facilities and Construction Facility may be requested monthly. The drawings are deposited into an account controlled by the Lenders. Withdrawals from that account are permitted subject to certain conditions precedent: > no specified event of default, potential event of default, or review event subsists or will occur; > all necessary authorisations have been obtained for the withdrawal and for the relevant stage of the Design and Construction Contract; > a withdrawal notice has been received by the Lenders agent; and > receipt by the Lenders agent of a progress certificate which demonstrates satisfaction of the cost to complete test (demonstrating that there are enough available funds to finance construction until Construction Completion). The Equity Bridge Facilities will be repaid with the proceeds from the Deferred Equity Tranches TERM DEBT FACILITY Upon Construction Completion, the principal outstanding under the Construction Facility will be converted into loans owing under the Term Debt Facility. The Term Debt Facility will comprise three medium-term, interest only tranches, repayable as follows: > Tranche A: 40% of principal outstanding, repayable on the sixth anniversary of Financial Close; > Tranche B: 40% of principal outstanding, repayable on the eighth anniversary of Financial Close; and > Tranche C: 20% of principal outstanding, repayable on the tenth anniversary of Financial Close BANK BOND FACILITY A Bank Bond Facility to the amount of $7.5 million will be established for ConnectEast Group to meet certain obligations to the State under the Concession Deed INTEREST PAYMENTS ConnectEast Group has the flexibility of choosing an interest period of one, two, three or six months or for a term as otherwise agreed by the Lenders. It is assumed that during the Construction Period, interest will be capitalised monthly. After Construction Completion, it is assumed that interest will be paid quarterly. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 55

58 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 56 SECTION DISTRIBUTION POLICY Distributions to Unitholders can be classified into two categories: > Projected distributions during the Fixed Distribution Period; and > Distributions following the Fixed Distribution Period. Distributions will be paid by a cheque posted to the Unitholder s address on the Register or by direct credit to the account nominated by the Unitholder for this purpose. Unitholders will also be provided with a Distribution Statement which sets out the details of their Distributions, including any capital or tax deferred component of their Distributions DISTRIBUTIONS DURING THE FIXED DISTRIBUTION PERIOD During the Fixed Distribution Period, ConnectEast Group intends to make semi-annual Distributions for the periods ending 31 March and 30 September of 3.25 cents per Stapled Unit. These Distributions equate to an annualised distribution yield for the first 12 months following Allotment Date of 11.8% (based on the Initial Instalment of $0.55) and a distribution yield of 6.5% per annum for the remainder of the Fixed Distribution Period (based on the Issue Price of $1.00). For the initial period to 31 March 2005, the Distribution will be calculated on a pro rata basis for the period from Allotment Date. Distributions during the Fixed Distribution Period are expected to be 100% tax deferred (see Section 5.3.3). During the Fixed Distribution Period, unless a Unitholder elects in writing not to participate in the DRP, or is not eligible under the DRP Rules to participate in the DRP, Distributions due on Stapled Units will be reinvested in further Stapled Units under the DRP (see Section 7.4.3). To the extent that Unitholders do not participate in the DRP, the cash required for the first two Distributions will be funded from equity raised in the Offer (being equity in excess of the funding requirements for the MFP) and the cash required for later Distributions during the Fixed Distribution Period will be funded by the issue of additional units (underwritten under the DRP Underwriting Agreement). There may be circumstances in which the underwriting of the DRP will be limited in amount or will not be available so that ConnectEast may not be able to make Distributions in cash (see Section for more information). The Lenders may also prevent ConnectEast Group from making cash Distributions if certain financial covenants and other distribution tests are not met (see Section 8.6.1) DISTRIBUTIONS FOLLOWING THE FIXED DISTRIBUTION PERIOD Following the Fixed Distribution Period, Distributions will be determined by the Directors of CEML based on the operating results of ConnectEast Group. As a result, Distributions to Unitholders following the Fixed Distribution Period may be higher or lower than those during the Fixed Distribution Period. It is the intention of ConnectEast Group to distribute all available net cashflow to Unitholders after making appropriate allowance for certain provisions and accruals. ConnectEast Group intends to pay these Distributions on a quarterly basis for the periods ending 31 March, 30 June, 30 September and 31 December each year. The Directors of CEML expect that these Distributions will be paid on a largely tax deferred basis until Payment of Distributions is subject to certain restrictions contained in the Financing Documents. If ConnectEast Group does not generate sufficient cashflow to maintain Senior Debt interest coverage above levels required under these documents, Unitholders will not be paid any Distributions until such time as the restrictions no longer apply DISTRIBUTION REINVESTMENT PLAN (DRP) The Directors of CEML have established a DRP which will operate during the Fixed Distribution Period. Stapled Units will be issued under the DRP at a 5% discount to the Average Price of the Stapled Units. Unless an eligible Unitholder elects in writing not to participate in the DRP, Distributions due on the Stapled Units will be reinvested in further Stapled Units under the DRP. A Unitholder may elect not to participate in the DRP by notifying CEML. Following allotment, Unitholders will be provided with instructions on how they may elect not to participate in the DRP. If a Unitholder does not participate in the DRP, their holding in ConnectEast Group will be diluted by the Stapled Units issued under the DRP. Persons who acquire Stapled Units on market will have their Distributions reinvested in further Stapled Units under the DRP unless they notify CEML in writing in accordance with the DRP Rules or are ineligible to participate in the DRP. The Stapled Units issued under the DRP will rank equally in all respects with existing Stapled Units. The DRP will be underwritten by the DRP Underwriters for the Fixed Distribution Period, excluding the first two Distributions for the periods ending 31 March 2005 and 30 September A description of the DRP Underwriting Agreement is contained in Section 10.

59 SECTION BID ASSUMPTIONS As part of its bid for the MFP, ConnectEast Group was required to indicate the initial level of tolls that it would charge. In determining that level, ConnectEast Group made a number of assumptions about key variables used in a financial model (Base Case Financial Model) which is incorporated in the Concession Deed (see Section 10). In making the bid assumptions, ConnectEast Group obtained advice from experts in various fields. However, actual outcomes may be different from the assumptions and in many cases the actual outcomes are beyond the control of CEML and of the Board and management of ConnectEast Group. The key assumptions made in ConnectEast Group s bid for the MFP relate to: > traffic volumes; > traffic Ramp-up; > tolling structure; > construction costs; > capital expenditure following Construction Completion; > level of inflation; > interest costs; > refinancing and re-gearing; and > operating and administration costs TRAFFIC VOLUMES ConnectEast Group s bid is based on traffic volume estimates that were produced by the Traffic Expert. A summary of these estimates and details of the traffic model methodology developed by the Traffic Expert to produce these estimates are set out in the Traffic Expert s Report in Section TRAFFIC RAMP-UP The Traffic Expert has estimated that the Ramp-up period for the MFP will be 15 months and traffic volumes will commence at 72% of initial steady state traffic volumes. ConnectEast Group s bid has adopted this profile for the purposes of its bid. The Ramp-up profile and details of the methodology developed by the Traffic Expert are set out in the Traffic Expert s Report in Section TOLLING STRUCTURE The tolling structure for the MFP is set out in the Concession Deed and is described in Section 4. The tolling structure has been used by the Traffic Expert in deriving the estimated traffic volumes and the expected average toll paid per trip CONSTRUCTION COSTS The Design and Construction Contract between the Construction Contractor and ConnectEast Group is a Fixed Time, Fixed Price Contract. The construction costs total approximately $2.5 billion. Construction is assumed to begin in November 2004 and is scheduled for completion by late A summary of the Design and Construction Contract is set out in Section The Engineering Consultant has reviewed the cost and program of the Design and Construction Contract and a summary of the Engineering Consultant s Report is set out in Section CAPITAL EXPENDITURE FOLLOWING CONSTRUCTION COMPLETION ConnectEast Group s bid has assumed that capital expenditure following Construction Completion will take into account the obligations of the ConnectEast Group under the Concession Deed. The assumed capital expenditure set out in the table below is divided into two categories: > civil assets (for example, road surfaces and exhaust fans); and > tolling and customer service (in order to replace parts and upgrade technology). These costs are expressed in December 2004 dollars and are assumed to increase with inflation. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 57 Tolling and Years Period Ending Civil Assets Customer Service Total $million $million $million Dec Dec Dec Dec Dec Dec Dec

60 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 58 SECTION INFLATION ConnectEast Group s bid has assumed a long-term inflation rate of 2.65%, which is within the RBA s long-term inflation range of 2.0 to 3.0% INTEREST COSTS ConnectEast Group will fully hedge its interest rate exposure for the first six years from Financial Close (i.e. expected to be until November 2010) and will be at least 80% hedged for four years thereafter (i.e. expected to be until November 2014). The table below sets out the assumed hedged interest rate costs on ConnectEast Group s debt facilities. Facility Amount Hedged Margin Total Hedged $million Base Rate Interest Rate 1 Equity Bridge Facilities % 0.40% 6.82% Construction Facility (Converts to a Term Debt Facility) 2, % 1.50% 7.95% Term Debt Facility (Until Sixth Anniversary of Financial Close) 2, % 1.65% 8.10% Term Debt Facility (Until Eighth Anniversary of Financial Close) 2, % 1.75% 8.20% 2 Term Debt Facility (Until Tenth Anniversary of Financial Close) 2, % 1.90% 8.35% 2 1. Based on interest rates as at 30 July The actual hedged rates that will apply will be set at Financial Close. 2. Term Debt Facility is assumed to be refinanced at lower margins on the sixth anniversary of Financial Close. See Section Based on interest rates as at 30 July These balances will be impacted by the interest rates that will be set at Financial Close. ConnectEast Group has assumed a long-term unhedged interest rate of 6.23% per annum. This reflects the interest rate determined by reference to a five year interest rate swap commencing in 10 years implied by an interest rate swap curve as at 30 July 2004.

61 SECTION REFINANCING AND RE-GEARING ConnectEast Group s bid has assumed that Tranches A and B of the Term Debt Facility will be refinanced with interest only facilities in 2010 and 2012 respectively and then all tranches are refinanced in 2014 and In 2024 for Tranche A, 2027 for Tranche B and 2029 for Tranche C, it is assumed that the facilities will be refinanced with amortising loans maturing at the end of the Concession Period. At each of the refinancing dates it is assumed that the refinancing margin over the unhedged base interest rate of 6.23% per annum on all three tranches of the Term Debt Facility is between 0.7% and 0.8% per annum. The outstanding level of debt is assumed to increase in 2014 and The amount of the additional borrowings have been determined to ensure an annual interest coverage ratio of approximately 1.60 times. This results in additional borrowings as set out below: CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 59 Additional Debt 1 Refinancing Date $million 30 November November Net of assumed refinancing costs which are also borrowed. The debt assumed to be outstanding over the Concession Period is illustrated in the chart below. Debt Outstanding 4,000 3,500 3,000 2,500 $ millions 2,000 1,500 1, Equity Bridge Construction Facility Tranche A Tranche B Tranche C

62 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 60 SECTION OPERATING AND ADMINISTRATION COSTS The assumed operating and administration costs for the first full year of operation are set out in the table below. All dollar figures are as at 31 December Amount (for 2009) Cost Item $million Road Operations and Maintenance 15.8 Tolling and Customer Service 25.0 Administration Costs 22.6 Total 63.4 Road operations and maintenance will be performed by Transfield Services under a five-year Operations and Maintenance Contract. It is assumed that this contract will be able to be renewed after five years on the same terms (adjusted for inflation). Costs are assumed to increase with inflation over the term of the Concession Period. Administration costs, being those costs incurred by ConnectEast Group in managing the MFP and the Group, have been assumed to increase with inflation over the term of the Concession Period. Tolling and Customer Service (TCS) costs include wages and salaries associated with operating call centres, information technology costs, the cost of purchasing tags and other costs of toll collection such as merchant fees. These costs have been estimated on a line-by-line basis for the first five years of operation and are assumed to decline to an average TCS cost per trip of 20 cents by TCS costs per trip have then been assumed to decline at a rate of approximately 7.5% per annum until the average TCS cost per trip reaches approximately 12 cents. All costs have been assumed to increase with inflation. 7.6 ADDITIONAL RENTAL PAYMENTS In certain circumstances where ConnectEast Group s revenue exceeds the revenue profile for that period shown in the Base Case Financial Model, ConnectEast Group may be required to make additional lease rental payments to the State under the terms of the Concession Deed. 7.7 FEES AND COSTS Fees This table shows fees and other costs that Unitholders may be charged. These fees and costs may be deducted from Unitholders money or from the returns on an investment or from the ConnectEast Unit Trusts assets as a whole. Taxation information is set out in Section 5. Investors should read all the information about fees and costs, as it is important to understand their impact on an investment in the ConnectEast Unit Trusts. As an acquisition of Stapled Units is an investment in ConnectEast Investment Trust and ConnectEast Holding Trust, fees and costs applicable to the Stapled Units have been merged for the purposes of this table. Type of Fee or Cost Amount How and When Fees when moving in or out of the ConnectEast Unit Trusts Establishment fee: This is the fee to set up an initial investment. Nil Not applicable Contribution/Entry fee: This is the fee for the initial and every subsequent investment in the ConnectEast Unit Trusts. Nil Not applicable Withdrawal fee: This is the fee charged for each withdrawal made from the ConnectEast Unit Trusts. Nil Not applicable Termination Fee: This is the fee upon closing an investment. Nil Not applicable Management Costs Administration Costs are the fees Based on a holding of 2,000 The Constitution in respect of each and costs for operating each Stapled Units (which ConnectEast Unit Trust permits CEML as the ConnectEast Unit Trust. They equates to $2,000, at the responsible entity to be reimbursed out of the include administration and other Issue Price), the dollar assets of the ConnectEast Unit Trusts for all fees charged by the responsible value of the administration expenses incurred in relation to the proper entity, distribution costs and other costs is estimated as performance of its duties. This specifically expenses 1 incurred in operating $7.76 for the period from includes reimbursement of administration the ConnectEast Unit Trusts. Financial Close until the costs in relation to the following:

63 SECTION 7 Type of Fee or Cost Amount How and When end of December 2005 for > preparation of the Constitutions and the ConnectEast promotion of the ConnectEast Unit Trusts. Unit Trusts; > preparation and distribution of the PDS and admission to ASX; > administration and management of the ConnectEast Unit Trusts; > audit fees; > compliance costs; and > Directors fees. These fees are inclusive of GST. Investment Costs are the fees and Based on a holding of The Constitution in respect of each costs for investing the assets. 2,000 Stapled Units ConnectEast Unit Trust permits CEML to be They include fees charged by the (which equates to paid a fee of $1 million per annum (indexed responsible entity, fees paid to $2,000 at the to CPI) for acting as the responsible entity of external investment managers Issue Price), the dollar the ConnectEast Unit Trusts. This fee will be and other expenses 2 incurred in value of the investment charged from the date of Financial Close investing the assets (excluding costs is estimated as until the earlier of: transaction costs) 3. $51.06 for the period (a) the internalisation of CEML (see Put and from Financial Close Call Option in Section 10.4); and until the end of (b) the date of the final Distribution upon the December 2005 for winding up of the ConnectEast Unit Trusts. the ConnectEast Unit In certain circumstances this fee may be Trusts. reduced (see Section 10.4 Internalisation of CEML Put and Call Option ). This fee is payable out of the assets of the ConnectEast Unit Trusts within two months of the end of each quarter (30 June, 30 September, 31 December and 31 March). In addition, CEML is entitled to be reimbursed out of the assets of the ConnectEast Unit Trusts for all expenses incurred in relation to the proper performance of its duties. This specifically includes reimbursement of investment costs in relation to the following: > management fees; > insurance costs; > custodian fees; > listing fees; > underwriting costs (initial and DRP); > sponsorship fees; > establishment costs; > borrowing costs (other than interest); and > raising of debt or equity financing. These fees are inclusive of GST. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 61

64 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 62 SECTION 7 Type of Fee or Cost Amount How and When Additional Service Fees Switching fee: This is the fee for switching between investment options. Nil Not applicable Adviser service fee: This is the fee for extra advice from an adviser about an investment. (An adviser may also be paid other amounts as commission out of one or more of the fees listed above.) Nil Not applicable 1. Expenses include those listed in the third column. The estimate does not incorporate an allowance for abnormal expenses, such as any unit holder meetings, changes to the Constitution and defending legal proceedings. 2. Expenses include those listed in the third column. The estimate does not incorporate an allowance for abnormal expenses. 3. See transaction costs in the Important Additional Information below. Important Additional Information Government taxes such as stamp duty and GST will be deducted from the ConnectEast Unit Trusts as appropriate. Relevant tax information is provided in Section 5. Management Fees and Costs CEML is entitled to a management fee of $990,000 per annum for acting as responsible entity of ConnectEast Investment Trust. CEML is also entitled to a management fee of $10,000 per annum for acting as responsible entity of ConnectEast Holding Trust. These fees are indexed to the Consumer Price Index (CPI) and cannot be increased without Unitholder consent. In certain circumstances (see Section 10.4 Internalisation of CEML Put and Call Option ) this fee will be halved. In addition, CEML is entitled to be reimbursed out of the assets of the ConnectEast Unit Trusts (and, in the case of the ConnectEast Investment Trust, out of the assets of the ConnectEast Investment Trust 2) for certain expenses incurred in managing the ConnectEast Unit Trusts. These include expenses properly incurred in the administration, custody, management, compliance (including audit, legal and tax) and promotion of the ConnectEast Unit Trusts. These expenses also include fees paid to directors of CEML (see Section Directors fees ), and fees and costs incurred by Macquarie Bank and Thiess in connection with the establishment of the ConnectEast Unit Trusts and in making the bid for the Concession (see Section 10.8 for further information). If CEML incurs costs for or on behalf or for the benefit of ConnectEast Group, CEML may seek reimbursement for those costs by providing an invoice for the reimbursement costs to the relevant ConnectEast Unit Trust. The reimbursement costs will be apportioned between the ConnectEast Unit Trusts in accordance with the proportion of the gross revenue each ConnectEast Unit Trust bears to the gross revenue of ConnectEast Group for the quarter most recently ended. Each ConnectEast Unit Trust must remit its portion of the reimbursement costs within 14 days of receipt of the invoice. The amount of Administration Costs and Investment Costs shown in the table above is the management fee described above plus the estimated amount of expenses recoverable by CEML for the period from Financial Close until the end of December This figure is an estimate only and based on the following assumptions: > insurance costs are amortised over the period of construction; and > upfront costs (such as sponsor, underwriting and other equity costs) are amortised over 39 years or the term of concession. As CEML has the right to recover all proper and reasonable expenses, this figure may increase or decrease accordingly. The total management cost, assuming an investment holding of 2,000 Stapled Units is $58.83, which equates to 2.94 cents per Stapled Unit (being 2.94% of the Issue Price). A fee (Fee Amount) is payable to Macquarie Bank (as owner of CEML) at the end of six and a half years after Financial Close. The amount of this fee is performance based (see Section 10.4 Internalisation of CEML Fee Amount ). The Fee Amount is payable even if CEML is not the responsible entity at the time the fee becomes due, but will not be payable if CEML has been removed as responsible entity for cause or has voluntarily retired as responsible entity. If CEML is acquired by ConnectEast Group under the Put and Call Option the Fee Amount is not payable (see Section 10.4 Internalisation of CEML Put and Call Option ). Transaction Costs Each ConnectEast Unit Trust s Constitution allows CEML to charge transaction costs, which are determined as the total actual costs estimated to be incurred in the acquisition of the assets and will include brokerage, stamp duty, legal fees, consulting

65 SECTION 7 and advisory fees and any other costs directly attributable to the acquisition of the assets DIRECTORS FEES Tony Shepherd receives remuneration for his role as chairman and interim Chief Executive Officer (CEO) of ConnectEast Group. His remuneration is split into several components as follows: > Base remuneration of $175,000 per annum (indexed to CPI). Subject to Macquarie Bank s policies on trading, thirty-three percent of this remuneration will be directed to the purchase of ConnectEast Stapled Units on market; > Mr Shepherd is also entitled to compensation on Financial Close of approximately $400,000, in recognition of the work he has done prior to completion, including negotiations in connection with the project and for undertaking the role of interim CEO. Subject to Macquarie Bank s policies on trading, fifty percent of this remuneration will be directed to the purchase of Stapled Units under the Offer; Mr Shepherd is also entitled to the following performance based bonuses: > End of Construction Bonus; and > Post Ramp-Up Bonus. The End of Construction Bonus is payable on Construction Completion and is calculated as: 250,000 x Outperformance as at Construction Completion Outperformance means N x X - Y where: N is the number of Stapled Units held by a notional Unitholder at Construction Completion who purchased one Stapled Unit in the Offer and participated fully in each DRP X is volume weighted average price of Stapled Units during the 20 trading days immediately preceding Construction Completion; Y is the value of Stapled Units held by a notional Unitholder on Construction Completion that would yield an IRR of 12.5% (effective annual) assuming that the Unitholder purchased one Stapled Unit in the Offer and participated fully in each DRP. IRR means Pre-tax nominal internal rate of return assuming that: (i) the Unitholder bought their Stapled Unit in the Offer; (ii) all instalments were paid by the Unitholder when due; (iii) all distributions were received by the Unitholder when paid and fully reinvested in each DRP; and (iv) the Unitholder sells their Stapled Units at Construction Completion. The expression distributions includes distributions by way of cash or additional Stapled Units, and distributions to which a Unitholder becomes entitled if the Stapled Units go ex distribution but are not paid prior to Construction Completion. The Post Ramp-Up Bonus is payable on the second anniversary of the date tolling commences on the MFP (Tolling Anniversary Date) and is calculated as: 250,000 x PRU Outperformance as at the Tolling Anniversary Date PRU Outperformance means N x X - Y where: N is the number of Stapled Units held by a notional Unitholder on the Tolling Anniversary Date who purchased one Stapled Unit in the Offer and participated fully in each DRP X is volume weighted average price of Stapled Units during the 20 trading days immediately preceding the Tolling Anniversary Date; Y is the value of Stapled Units held by a notional Unitholder on the Tolling Anniversary Date that would yield an PRU IRR of 12.5% (effective annual) assuming that the Unitholder purchased one Stapled Unit in the Offer and participated fully in each DRP. PRU IRR means Pre-tax nominal internal rate of return assuming that: (i) the Unitholder bought their Stapled Unit in the Offer; (ii) all instalments were paid by the Unitholder when due; (iii) all distributions were received by the Unitholder when paid and fully reinvested in each DRP; and (iv) the Unitholder sells their Stapled Units on the Tolling Anniversary Date. The expression distributions includes distributions by way of cash or additional units, and distributions to which a Unitholder becomes entitled if the Stapled Units go ex distribution but are not paid prior to the Tolling Anniversary Date. For the purposes of calculating the Outperformance and the PRU Outperformance: CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 63

66 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 64 SECTION 7 > if the Outperformance results in a negative amount, the Outperformance will be treated as zero; and > the restrictions in article 3.3 of the Constitutions and the requirement to round down to the nearest Stapled Unit when calculating any DRP entitlement will not apply and fractions of Stapled Units will be calculated to the ninth decimal place. Max Lay receives fees of approximately $75,000 per annum to act as a Director of ConnectEast Group. Twenty percent of this remuneration will be directed to the purchase of ConnectEast Stapled Units on market. Dr Lay will also be entitled to additional remuneration of $10,000 for each board committee that he sits on. Mr Shepherd and Dr Lay are also entitled to be reimbursed for out-of-pocket overseas and interstate travel expenses associated with their role. David Roseman and Ed Sandrejko do not receive Directors fees from CEML. They are employees of Macquarie Bank Limited and are remunerated in that capacity. Ray Wilson does not receive Directors fees from CEML. He is an employee of Thiess Pty Ltd and is remunerated in that capacity. 7.8 PRO-FORMA STATEMENT OF FINANCIAL POSITION ConnectEast Group will be required to prepare aggregated financial statements combining the consolidated financial statements of ConnectEast Investment Trust and ConnectEast Holding Trust. Transactions between the entities will be eliminated in the aggregated financial statements of ConnectEast Group. The following aggregated pro-forma statement of financial position for ConnectEast Group has been prepared as at Expected Construction Completion Date and incorporates the pro-forma transactions committed as at the date of this PDS which are contained in the Investigating Accountant s Report in Section 9. Pro-Forma Statement of Financial Position ConnectEast Group 30 November $million Current assets Cash 357 Total current assets 357 Non-current assets Property, plant and equipment 2,918 Intangibles 20 Other assets 19 Total non-current assets 2,957 Total assets 3,314 Non-current liabilities Interest-bearing liabilities 2,088 Total non-current liabilities 2,088 Total liabilities 2,088 Net Assets 1,226 Equity Contributed equity 1,226 Accumulated losses Total Equity 1, Based on interest rates as at 30 July These balances will be impacted by the interest rates that will be set at Financial Close. Further information is contained in the Investigating Accountant s Report in Section 9.

67 SECTION 8 Risk factors 8

68 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 66 SECTION OVERVIEW Prospective investors should be aware that Distributions from ConnectEast Unit Trusts and the market price of the Stapled Units may be adversely affected by a number of risk factors. These risks include those: > specific to ConnectEast Group and the MFP or inherent to investments in infrastructure or toll road assets; and > general to investing in the stock market, and also include, but are not limited to, the risks set out in this section. Under the Concession Deed, ConnectEast Group has accepted responsibility (as against the State) for almost all of the risks arising from the MFP, and it indemnifies the State from almost all liabilities arising from the MFP. ConnectEast Group receives very few warranties, and only some finite and specific promises from the State in relation to any aspect of the MFP. However: > ConnectEast Group has entered into contracts with third party subcontractors, which pass on most (but not all) of these risks to those subcontractors where practicable; and > if some specific risks occur (called Possible Key Risk Events or PKREs) which have a Relevant Effect, ConnectEast Group is entitled to negotiate with the State to obtain redress. 8.2 CONSTRUCTION RISKS Under the Design and Construction Contract, the Construction Contractor is responsible for constructing the MFP under a Fixed Time, Fixed Price Contract. As a consequence, the Construction Contractor bears the principal risk that the MFP will not be completed on time, within budget and to the agreed specifications. If there is a delay in completing the MFP, in most cases the Construction Contractor carries the risk of the event that caused the delay and, if construction is not completed by the Expected Construction Completion Date, the Construction Contractor will be liable to pay liquidated damages to ConnectEast Group. There is a limit to the liquidated damages available to ConnectEast Group from the Construction Contractor. However, under certain circumstances, the Expected Construction Completion Date may be extended, and the Construction Contractor will only be obliged to pay liquidated damages for late completion if construction is not finished by that later date. This may occur if there is a delay in the construction of the MFP due to certain events which may entitle the Concessionaires to renegotiate the terms of the Concession Deed (see Section 10) or where ConnectEast Group causes the delay. In those limited cases, ConnectEast Group has agreed that the Construction Contractor will be entitled to an extension of time for completion of the MFP (and therefore delay the starting date to pay liquidated damages) to the extent that ConnectEast Group is able to obtain an amount of compensation that covers its financing and operating costs, even if the compensation falls short of covering the adverse effect on the Unitholders rate of return due to the delay. However, the requirement for compensation does not apply where ConnectEast Group has caused the delay. Unitholders bear the risk that any redress obtained under the renegotiation process is insufficient to compensate Unitholders for the effect on their return of the delay in construction. A number of environmental permits will be required for the MFP. These will be issued by SEITA and other authorities, such as the Environment Protection Authority. Some permits may be appealed by ConnectEast Group or third parties. The timetable for these processes cannot be controlled by ConnectEast Group. The MFP has been subject to a number of historical Environment Effects Statements (EES) and it is considered unlikely that any further EES assessment is required. If the State decides to require further EES assessment, and if this delays progress of the MFP by more than six months, then ConnectEast Group may be entitled to negotiate for redress under the Possible Key Risk Event provisions of the Concession Deed (see Section 10). ConnectEast Group may also be entitled to negotiate for redress under those provisions if construction of the MFP is delayed due to action taken under certain Commonwealth environmental law. ConnectEast Group also bears the risk if there is a delay in completion of the MFP due to a delay of more than 18 months in receiving works approval for the ventilation system to be used for the tunnel at Mullum Mullum Creek. In the event of such a delay, the Construction Contractor will pay to ConnectEast Group an amount equal to its daily financing and operating costs for the period of the delay, plus a further amount (for only 30 days of the delay) of approximately of a cent per Stapled Unit per day. If the delay exceeds 30 days, Unitholders bear the risk. If the terms of that works approval, or any other approval received during the construction of the MFP, increase the costs of the MFP, any additional design and construction costs will be borne by the Construction Contractor under the terms of the Design and Construction Contract and ConnectEast Group will bear any additional operating costs. If the Construction Contractor becomes insolvent, ConnectEast Group would bear the time delay and cost of finding a new subcontractor, who may negotiate a different price or other terms to complete the construction. However, ConnectEast Group would have rights:

69 SECTION 8 > under the performance guarantee of the Construction Contractor from Leighton Holdings (see Section 10 for details); and > subject to certain conditions under the construction bond procured by the Construction Contractor. ConnectEast Group also remains at risk if, after construction has been completed, contamination of the site is discovered that was not discovered by or caused by the Construction Contractor. ConnectEast Group also bears part of the risk if there is a delay in completion of construction of the Ringwood Bypass or the Dandenong Southern Bypass beyond the date on which the tollable sections of the MFP are all completed and ready for tolling. If either the Ringwood Bypass or the Dandenong Southern Bypass is not completed by that date, the tolls levied by ConnectEast Group must not exceed 95% of the level otherwise chargeable. In that event, the Construction Contractor will pay daily liquidated damages. These are equal to approximately $28,000 per day for a delay in achieving completion of the Dandenong Southern Bypass and $35,000 per day for a delay in achieving completion of either the Ringwood Bypass or both bypasses. Liquidated damages are payable for a period not exceeding 12 months. If the delay exceeds 12 months, Unitholders bear the risk. 8.3 OPERATION RISKS MFP OPERATION Under the Concession Deed, ConnectEast Group must operate, maintain and repair the MFP in accordance with Operation and Maintenance Best Practices. That term is broadly defined and includes a principle of continuous improvement including a requirement to incorporate advances in technology consistent with other toll roads. ConnectEast Group may from time to time be required to comply with other regulatory orders or changes in operating standards. Unitholders bear the risk if ConnectEast Group must incur material costs to meet this obligation, since ConnectEast Group will not be entitled to recoup that cost by a toll increase (unless the increase in cost results from a change in law which has a Relevant Effect, in which case ConnectEast Group may be entitled to renegotiate the terms of the Concession Deed with the State as set out in Section 10). Under the Operations and Maintenance Contract, the Operator will be responsible for the general operation and maintenance functions of the MFP (excluding the Tolling System but including certain roadside equipment components) and the provision of certain customer services (such as traffic information management and traffic incident management). ConnectEast Group will be directly responsible for the remainder of the operation and maintenance of the Tolling System and collection of tolls. Unitholders bear the risk if the loss suffered by ConnectEast from a default by the Operator exceeds the limit of the Operator s liability under the Operation and Maintenance Contract (see Section 10) REVENUE COLLECTION The Tolling System (including accounting, back office and customer service systems) will be operated by ConnectEast Group. Unitholders bear the risk if ConnectEast Group is not able to operate and maintain the Tolling System in the manner expected, or if the cost of operation and maintenance is greater than expected. However, ConnectEast Group may have rights against the Construction Contractor if this failure is due to the design and construction of the Tolling System not meeting the specifications that the Construction Contractor has warranted in the Design and Construction Contract. In addition, the Construction Contractor must remedy defects in the Tolling System (compared to the warranted specifications) during the first two years of the Operations Phase. ConnectEast Group s tolling revenues (and Unitholders returns) depend on a reliable and efficient Tolling System. ConnectEast Group intends to enter into an agreement with a suitably qualified service provider for maintenance of the software and back office parts of the Tolling System INTEROPERABILITY WITH MELBOURNE CITYLINK The Tolling System is designed to be interoperable with Melbourne CityLink. In order to facilitate this interoperability, ConnectEast Group intends to enter into agreements with Melbourne CityLink Limited, the operator of the Melbourne CityLink under which: > customers of Melbourne CityLink may use their Melbourne CityLink electronic tags on the MFP, and ConnectEast Group will bill Melbourne CityLink for that usage; and > customers of ConnectEast Group may use their MFP electronic tags on the Melbourne CityLink, and Melbourne CityLink Limited will bill ConnectEast Group for that usage. Under the Concession Deed, the State will act to ensure that interoperability agreements between ConnectEast Group and Melbourne CityLink are concluded on commercial terms at net incremental marginal cost. Notwithstanding the State s undertaking, Unitholders bear the risk that these agreements may not be successfully negotiated or may be concluded on terms materially different from those contemplated. However, in such an event, CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 67

70 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 68 SECTION 8 ConnectEast Group will have the capacity to collect tolls using the video-based imaging technology described in Section MAJOR MAINTENANCE ConnectEast Group must meet the cost of all major repairs and maintenance to the MFP other than those for which the Construction Contractor is responsible. The bid assumptions include an allowance for contributions to a maintenance reserve sinking fund for periodic maintenance work. Unitholders bear the risk if major repairs and maintenance cost more than expected, as ConnectEast Group will not be entitled to increase tolls to recover that cost, unless it is entitled to renegotiate the terms of the Concession Deed with the State. Damage to MFP may be covered under the insurance policies that ConnectEast Group will obtain, depending on the cause of the damage INDUSTRIAL RELATIONS DURING THE OPERATIONS PHASE The Operator assumes sole responsibility for industrial relations issues relating to it when performing its obligations under the Operations and Maintenance Contract. If ConnectEast Group is not able to collect tolls due to industrial action by the Operator s personnel, the Operator s liability would be limited to its capped liability of $15 million (refer to Section 10) and Unitholders bear the risk of losses above that level. Unitholders are exposed to the risk of any other industrial actions that may occur during the Operations Phase START-UP RISK As a start-up operation, ConnectEast Group will face the usual risks of any new business, such as the need to hire staff. There is a risk that staff with the requisite skills and experience that ConnectEast Group requires may not be available, or may only be available at a higher cost than originally expected TOLLING SYSTEM START-UP RISK There is a risk that the Tolling System and tags are not ready for use when MFP opens and operations begin. In this case, the MFP would open but no revenue would be received. ConnectEast Group has mitigated this risk through the liquidated damages regime contained in the Construction Contract (refer to Section 10) except in relation to tags, which ConnectEast Group intends to separately acquire. 8.4 STATE RISK TERMINATION OF CONCESSION DEED There are several circumstances that could result in the Concession Deed being terminated before the end of the Concession Period. Depending upon the circumstances that cause the premature termination of the Concession Deed, Unitholders may incur economic loss. The circumstances that could result in early termination of the Concession Deed are set out in Section Termination by State for default by ConnectEast Group In the event of default by ConnectEast Group, the State may give notice requiring that it be remedied within a reasonable period. ConnectEast Group must comply with that notice. If ConnectEast Group believes, in good faith, that the time specified is not reasonable, the matter may be determined under the dispute resolution provisions of the Concession Deed. The Concession Deed contains a detailed list of events of default by ConnectEast Group. ConnectEast Group is entitled to a reasonable remedy period, provided it is diligently pursuing the remedy of the default. The Lenders are entitled to a further remedy period under the Finance Tripartite Agreement (see Section 10). Termination by ConnectEast Group ConnectEast Group may also terminate the Concession Deed if it is prevented from exercising its rights under the Concession Deed due to a discriminatory change in State law, an Act of Prevention by the State or a final court order that is not due to default by ConnectEast Group. In that circumstance ConnectEast Group would receive an Early Termination Amount from the State OCCURRENCE OF VARIOUS KEY RISK EVENTS The Concession Deed defines certain events as being Possible Key Risk Events or PKREs (see Section 10). If a PKRE occurs which has a material and detrimental effect on ConnectEast Group then it may negotiate changes to the terms of the Concession Deed to restore its previous ability to pay the Senior Debt and to pay the Equity Return (or the Base Case Equity Return, if lower). Changes to tolls or to the Concession Period may not necessarily achieve this result in which event the parties may in some (but not all) cases negotiate for a contribution by the State. ConnectEast Group may be required to incur expense in remedying a PKRE and compensation through increased tolls or a longer Concession Period may not provide it with the immediate funding required. There is therefore a cashflow or financing risk in relation to the PKREs. The loss that ConnectEast Group suffers must have both a material and detrimental effect prior to it being entitled to negotiate changes to the Concession Deed. What is considered material may vary in a particular context or at a particular time.

71 SECTION LEGISLATIVE RISK Unitholders are exposed to the risk that the State may exercise its powers under the MFP Legislation, or under another law, in a way that is not beneficial to the MFP or to ConnectEast Group. The terms of the MFP Legislation prevail over any contrary provision of the Concession Deed. ConnectEast Group is also subject to most (but not all) of the general State laws that apply to the construction and operation of roads. The State remains free to exercise its powers under the law and to exercise its general executive powers, even if this may be contrary to the terms of the MFP documents. However (except where the State s action is in the exercise of a duty under the law) ConnectEast Group may nevertheless be entitled to claim damages from the State, if the State s action is contrary to an express obligation of the State under the Concession Deed. In addition, if the State s action amounts to a discriminatory change in State law or an Act of Prevention, ConnectEast Group may be entitled to redress by renegotiating certain terms of the Concession Deed or in some cases to terminate the Concession Deed (see Section 10) TOLLING BREACHES ENFORCEMENT RISK Unitholders bear different risks in respect of tolling breaches according to the circumstances: > if a contracted customer of ConnectEast Group does not pay a toll invoiced to them ConnectEast Group must take legal action to enforce its claim under the customer contract. > other motorists who are not contracted customers of ConnectEast Group will be invoiced a statutory toll and fee by ConnectEast Group. Non-payers will be referred to the State, which may (but is not obliged to) take enforcement action under the MFP Legislation. If the State does not pursue such enforcement actions in broadly the same way that it pursues the enforcement of other traffic offences, ConnectEast Group may be entitled to redress by renegotiating certain terms of the Concession Deed. Subject to that circumstance Unitholders bear the risk if either ConnectEast Group s or the State s enforcement actions against defaulting motorists is not successful and if ConnectEast s own enforcement actions are more costly or difficult than expected. 8.5 TRAFFIC RISK TRAFFIC VOLUMES Returns to Unitholders during the Operating Phase will be a function of the volume of traffic using the MFP and the level of tolls. Traffic volumes are directly and indirectly affected by a number of factors, including among other things, general traffic levels in the area, the quality and proximity of alternative roads and other transport infrastructure, toll rates and fuel prices. Unitholders will bear the risk that traffic volumes and revenue may be adversely affected by various factors including, but not limited to: > the occurrence and timing of road projects (other than the MFP) in Melbourne and the MFP corridor; > problems integrating the MFP into other parts of the local road and transport network and future changes to the surrounding road network; > demographic and economic conditions, including inflation, population growth, interest rates and taxation; > changing travel patterns and habits; > new technologies; > social instability and other political and economic developments; > community opposition to the MFP; and > industrial and residential shifts in the area of the MFP corridor. Any developments which have the effect of reducing traffic volumes or the growth in traffic volumes on the MFP could have a material adverse effect on ConnectEast Group s financial condition and results of operations COMPETITION RISK The MFP traffic may be affected by the improvement of existing alternative routes and/or the construction of new alternative routes or new means of transportation. There is no assurance that alternative roads that may allow for no tolls or faster travelling speeds will not be built or improved. In particular, the State has given no undertaking as to how it will manage other roads in the area, such as Stud Road or Springvale Road. There are no restrictions on the State, its associates or any council to develop, manage or change Melbourne s transport network (including road and public transport networks). Unitholders bear the risk if the State (either itself, or through another party): > constructs new toll roads, freeways or other roads; > connects new or existing toll roads, freeways and other roads to the MFP; > extends, alters or upgrades existing freeways and other roads; and > constructs new public transport routes or services. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 69

72 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 70 SECTION FINANCING RISKS PAYMENT OF CASH DISTRIBUTIONS The Lenders will have the right to prevent ConnectEast Group paying cash Distributions to Unitholders if certain financial covenants and other distribution tests are not met. In this situation the Directors may elect to pay the Distribution in the form of Stapled Units. See Section for a description of certain restrictions on Distributions. In addition, during the Fixed Distribution Period, the payment of cash Distributions will be subject to the DRP Rules and in respect of Distributions other than the initial two Distributions will be subject to the DRP Rules and the conditions of the DRP Underwriting Agreement being satisfied and the DRP Underwriters subscribing for Stapled Units to fund those cash Distributions. Accordingly, Unitholders may be required to accept additional Stapled Units (calculated on the same basis as the DRP) instead of a cash Distribution RISK OF DEBT NOT BEING AVAILABLE The availability of the Senior Debt at Financial Close is subject to a number of conditions precedent including compliance with all relevant documentation. Each drawdown of debt by ConnectEast Group during the term of the debt facilities is also subject to the satisfaction of certain additional conditions precedent. Unitholders bear the risk of non-compliance with these conditions precedent, which may result in ConnectEast Group being unable to make drawdowns which may lead to default under the Concession Deed and the Design and Construction Contract and Distributions to Unitholders being withheld INTEREST RATE RISK If real long-term interest rates increase, Unitholder returns may be adversely affected. However, in the long term, inflation and interest rates have been observed to move in the same direction. Movements of these rates in the same direction will have opposite effects on Unitholder returns. For example, an increase in interest rates will increase ConnectEast Group s costs, while an increase in inflation will increase tolls, thereby increasing ConnectEast Group s revenues. Taking into account the historical observed correlation between movements in interest rates and inflation, an investment in Stapled Units should provide Unitholders with a hedge against a rise in interest rates. During both construction and the start of operations, 100% of the Senior Debt will be hedged, resulting in Unitholders being insulated from changes in interest rates. From years seven to ten, 80% of the Senior Debt will be hedged REFINANCING RISK The debt facilities require the debt to be refinanced on three maturity dates. There is a risk that ConnectEast Group will be unable to arrange refinancing facilities as and when required to repay these debt facilities on the terms expected, or that the terms of any refinancing are less favourable to ConnectEast Group than expected FINANCIAL CLOSE RISK Should Financial Close not occur prior to 31 December 2004 (and after Allotment Date) the ConnectEast Unit Trusts will redeem all Stapled Units (other than the settlement Stapled Units issued to Macquarie Bank) and all application monies will be returned to Unitholders at that time. 8.7 OTHER RISKS TOLL LEVEL AND CPI RISK A variation in a toll or fee may only be made in accordance with the Concession Deed. CPI is the key determinant of changes in toll level. See Section for comment on the relationship between CPI and interest rates DOCUMENTATION RISK Unitholders should be aware that due to the complexity of the legal documentation that supports the MFP, the risk of a dispute over interpretation or enforceability of this documentation may be higher than in a conventional equity investment. The contracts between ConnectEast Group and other parties are fundamental to the success of the investment for Unitholders. As a start-up vehicle, the contracts and documentation, rather than existing physical assets, will to a large extent determine the success of the investment. The terms of the Project Documents contain various representations and indemnities given by ConnectEast Group to other parties. Any loss suffered by a party may lead to a claim against ConnectEast Group and losses incurred may be paid out of ConnectEast Group assets and result in a reduction of ConnectEast Group assets. To better appreciate the risks associated with documentation, Unitholders should also read the Material Contract Summaries which are set out in Section 10. Any discrepancies between the Concession Deed with the State and contracts with other third parties may lead to losses or expenses not presently expected by ConnectEast Group. Generally, ConnectEast Group has attempted to pass on risks to other parties where practicable. However, even where ConnectEast Group has passed risks through to other parties, there may be a mismatch as to terms, timing or amount. ConnectEast Group remains primarily responsible for obligations to the State, even if back-to-back contracts with other parties exist.

73 SECTION TAX RISK Changes in taxation law and administrative practice may affect the future earnings, asset values and relative attractiveness of investing in the Stapled Units. An investment in the Stapled Units may involve tax considerations that differ for each Unitholder. Each prospective investor is encouraged to seek professional tax advice in connection with their investment. Unitholders will bear any risks relating to the tax treatment of the MFP and related transactions. ConnectEast Group does not intend to seek private rulings from the ATO or similar rulings from other revenue authorities in relation to the tax treatment of the MFP and the transactions connected with the MFP PERFORMANCE BONDING If the State draws upon the Operation Phase Bond (or, in certain circumstances, the Construction Bond), the Concessionaires must procure replacement bonding for the State to the original level. Unitholders bear the risk if the Operator (or the Construction Contractor, as applicable) does not procure that bonding when required FORCE MAJEURE Force majeure refers to an event beyond the control of a party, including natural disasters, war and other events outside the control of a party, that can affect a party s ability to perform its contractual obligations. Force majeure is a risk, sometimes uninsurable, that may adversely affect returns to Unitholders. ConnectEast Group has undertaken to repair any part of the road that is damaged or destroyed. ConnectEast Group has undertaken to obtain insurance policies, to the extent commercially available, to protect MFP cashflows. If a force majeure event occurs which is identified in the Concession Deed as being uninsurable and which has a material and detrimental effect on ConnectEast Group, it has a right to negotiate with the State to achieve redress. An event is uninsurable if it is a force majeure event where insurance against the risk is excluded from standard market practice on commercially reasonable terms, or the State agrees that such insurance is unavailable. 8.8 GENERAL RISKS Prospective investors should be aware that the market price of Stapled Units may be influenced by, but is not limited to, the following: > changes in the Australian and international economic outlook; > changes in Government fiscal, monetary and regulatory policies; > changes in interest rates and inflation; > changes in the general level of prices on local and international share markets and general investor sentiment in these markets; and > significant industrial, contractual or political disturbances impacting ConnectEast Group or the continuity of its business. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 71

74 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 72

75 SECTION 9 Experts and consultant s reports 9

76 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 74 SECTION 9 14 October 2004 The Directors ConnectEast Management Limited as Responsible Entity for the ConnectEast Investment Trust and ConnectEast Holding Trust No. 1 Martin Place Sydney NSW 2000 Dear Sirs INVESTIGATING ACCOUNTANTS REPORT Introduction Deloitte Touche Tohmatsu A.B.N Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX 10307SSE Tel: +61 (0) Fax: +61 (0) This report and its Annexure have been prepared at the request of the Directors of ConnectEast Management Limited ( CEML or the Issuer ) for inclusion in a Product Disclosure Statement ( PDS ) to be issued by CEML in respect of the offer of 1,120,000,000 Stapled Units at $1.00 each in ConnectEast Group. Each Stapled Unit comprises one unit in ConnectEast Investment Trust and one unit in ConnectEast Holding Trust, stapled together. The issue price is payable in two instalments an Initial Instalment of $0.55 per Stapled Unit which will be payable at the time of application and a Final Instalment of $0.45 per Stapled Unit which will be payable one year from Allotment Date. The Issuer intends to apply to have the Stapled Units quoted on the Australian Stock Exchange ( ASX ). The net proceeds raised pursuant to the Offer of Stapled Units together with debt facilities will be utilised to fund the construction of the Mitcham to Frankston Project ( MFP ) and meet other ConnectEast Group expenses. References to the Trusts and other terminology used in this report have the same meaning as in the PDS unless defined to the contrary. Background Information ConnectEast Group was recently named preferred tenderer to finance, design, construct and operate the MFP pursuant to the Concession Deed. The Concession Deed has a term of approximately 39 years from Financial Close. It is assumed for the purposes of this report that Financial Close will occur on 31 October 2004, and Financial Close and Allotment Date occur on the same day. Scope of Report You have requested that we prepare an Investigating Accountants Report reviewing: the pro-forma statement of financial position of ConnectEast Group as at 31 October 2004 and notes thereto assuming this is the Allotment Date of the Stapled Units by ConnectEast Group and the proposed transactions contemplated by this PDS to have occurred as at the Allotment Date were complete as at that date; and the pro-forma statement of financial position of ConnectEast Group as at 30 November 2008 and notes thereto assuming this is the Construction Completion Date, being a period of approximately 49 months after the Allotment Date and the proposed transactions contemplated by this PDS to have occurred by the Construction Completion Date were complete as at that date. Together we refer to the above hereafter as the Pro-Forma Financial Information which is set out in the Annexure to this report. Member of Deloitte Touche Tomatsu The liability of Deloitte Touche Tohmatsu, is limited by, and to the extent of, the Accountants Scheme under the Professional Standards Act 1994 (NSW).

77 SECTION 9 Page 2 The Pro-Forma Financial Information has been prepared by CEML in accordance with Australian Accounting Standards, other mandatory professional reporting requirements in Australia effective as at the date of this report and the accounting policies set out in the Annexure to this report. However, financial reporting in accordance with the Corporations Act 2001 for ConnectEast Group at Construction Completion Date will be in accordance with Australian equivalents to International Financial Reporting Standards ( A-IFRS ) operative at that date. The Pro-Forma Financial Information does not reflect the effect of the transition to A-IFRS. The Directors of CEML in their capacity as Responsible Entity of the Trusts have adopted the Pro-Forma Financial Information for the purposes of the Offer made pursuant to this PDS. In our role as Investigating Accountants, we have reviewed the Pro-Forma Financial Information in order to state whether, on the basis of the procedures described, anything has come to our attention which would indicate that the Pro-Forma Financial Information is not presented fairly in accordance with Australian Accounting Standards, other mandatory professional reporting requirements in Australia effective as at the date of this report and the accounting policies described in the Annexure to this report. Our review of the Pro-Forma Financial Information has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our review was limited primarily to examination of supporting documentation, analytical procedures applied to the financial data and the evaluation of accounting policies used. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 75 These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit and accordingly, we do not express an audit opinion. Statement Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Pro-Forma Financial Information set out in the Annexure to this report does not present fairly: the pro-forma statement of financial position of ConnectEast Group as at 31 October 2004 assuming this is the Allotment Date of the Stapled Units by ConnectEast Group and the proposed transactions to have occurred as at the Allotment Date were complete as at that date; and the pro-forma statement of financial position of ConnectEast Group as at 30 November 2008 assuming this is the Construction Completion Date, being a period of approximately 49 months after the Allotment Date and the proposed transactions to have occurred as at the Construction Completion Date were complete by that date; in accordance with Australian Accounting Standards, other mandatory professional reporting requirements in Australia effective as at the date of this report and the accounting policies described in the Annexure to this report. Subsequent Events Up to the date of this report, nothing has come to our attention that would cause us to believe material transactions or events outside of the ordinary course of business of ConnectEast Group have occurred, other than the matters dealt with in this report or the PDS, which would require comment on, or adjustment to, the Pro- Forma Financial Information contained in this report, or which would cause the Pro-Forma Financial Information contained in this report to be misleading. Yours faithfully DELOITTE TOUCHE TOHMATSU James H W Riddell Partner

78 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 76 SECTION 9 CONNECTEAST GROUP PRO-FORMA AGGREGATED STATEMENTS OF FINANCIAL POSITION Page A1 ANNEXURE Note 31 Oct Nov 2008 $ million $ million Current assets Cash Receivables Total current assets Non-current assets Property, plant and equipment ,918 Intangibles Other assets Total non-current assets 201 2,957 Total assets 1,071 3,314 Non-current liabilities Interest-bearing liabilities 8-2,088 Total non-current liabilities - 2,088 Total liabilities - 2,088 Net Assets 1,071 1,226 Equity Contributed equity 9 1,071 1,226 Total Equity 1,071 1,226 Notes to and forming part of the pro-forma aggregated statements of financial position of ConnectEast Group are set out on the following pages.

79 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 1. Basis of Preparation of the Pro-Forma Financial Information Page A2 ANNEXURE A The pro-forma statements of financial position have been prepared based on information known as at the date of this report and as if the following committed transactions had completed as anticipated as at the Allotment Date and Construction Completion Date respectively: Assumptions Allotment Date The 1,120,000,000 Stapled Units issued by ConnectEast Group pursuant to the Offer have been partly paid to $0.55 per Stapled Unit as at Allotment Date; The Final Instalment of $0.45 per Stapled Unit is receivable one year from Allotment Date; ConnectEast Group has incurred costs of $49 million to issue the Stapled Units which have been netted against the proceeds raised; CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 77 ConnectEast Group has incurred costs in relation to the arrangement of the Construction Facility and the Equity Bridge Facility, which have been capitalised as an asset and, to the extent applicable, will be amortised over the relevant term of the borrowings; ConnectEast Group has paid Thiess and John Holland an equity support fee of $24 million in consideration for their agreement to enter into the D&C Deferred Equity Commitment Deed which has been capitalised as an asset until the D&C Deferred Equity Contribution Date (currently expected to occur on the Construction Completion Date); ConnectEast Group has paid the underwriters of the Distribution Reinvestment Plan ( DRP ) a fee of $6 million for providing the DRP Underwriting Facility, which has been capitalised as an asset until Stapled Units are issued in accordance with the DRP; ConnectEast Group has entered into a Concession Deed with the State. This Concession Deed grants ConnectEast Group the right to finance, design, construct and operate the MFP for a period of approximately 39 years from Financial Close. Costs of $20 million payable pursuant to the Concession Deed as a contribution to the State s cost of public transport infrastructure and community infrastructure within the MFP corridor have been deferred and recognised as an intangible asset; and ConnectEast Group has incurred costs of $108 million prior to entering into the Concession Deed with the State of Victoria that are attributable to the design and construction of the MFP. These costs have been deferred and capitalised to property, plant and equipment. Assumptions Construction Completion Date The Final Instalment of $0.45 per Stapled Unit has been received in full as at Construction Completion Date, and Equity Underwriting Fees of $3 million, paid on receipt of the Final Instalment, have been immediately reinvested in Stapled Units; Thiess and John Holland have subscribed for $260 million of Stapled Units at $1.15 per Stapled Unit on the D&C Deferred Equity Contribution Date; Macquarie Bank Limited has subscribed for $30 million of Stapled Units at $1.00 per Stapled Unit on the MBL Deferred Equity Contribution Date (currently expected to occur one year after Allotment Date); The Equity Bridge Facility of $290 million has been fully drawn to fund costs during construction of the MFP and repaid using the total proceeds of the Deferred Equity Tranches of $290 million (outlined above);

80 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 78 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 1. Basis of Preparation of the Pro-Forma Information (cont d) Page A3 ANNEXURE A The equity support fee of $24 million in relation to the arrangement of the D&C Deferred Equity Commitment, previously capitalised as an asset, has been netted against proceeds raised; The construction facility of $2,088 million has been fully drawn to fund costs during construction of the MFP and converted to the Senior Bank Debt facilities as at Construction Completion Date. No additional upfront fees were paid or payable to the senior lenders at the time the Construction Facility was converted to the Senior Bank Debt facilities; ConnectEast Group has incurred costs of $36 million in ongoing commitment fees in relation to borrowings and fixed interest costs of $248 million prior to the Construction Completion Date that have been capitalised to property, plant and equipment; Construction of the MFP, including tolling systems and equipment, has been completed as at the Construction Completion Date and the construction contractor has been paid the fixed Design and Construction Contract price of $2,502 million; Fixed distributions of $67 million payable in respect of the Stapled Units for the period from Allotment Date to 30 September 2005 have not been underwritten and have been paid in cash. This makes no allowance for any participation in the DRP by ConnectEast Group unitholders; Fixed distributions of $248 million payable in respect of the Stapled Units between 1 October 2005 and the Construction Completion Date have been reinvested in further Stapled Units in accordance with the underwritten DRP; Distributions during the Construction Period have been disclosed as a return of capital on the basis that no accounting profit is generated during the Construction Period; The upfront DRP Facility Fee of $6 million, previously capitalised as an asset, has been offset against equity. Additional underwriting fees of $6 million incurred during the Construction Period in respect of the DRP have been offset against equity; and The interest rate reserve of $32 million, created to protect the ConnectEast Group against potential interest rate movements prior to Allotment Date, has been returned to investors via a redemption of 32 million Stapled Units. 2. Summary of Accounting Policies (a) Basis of Accounting The pro-forma aggregated statements of financial position of the ConnectEast Unit Trusts have been prepared in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia. This report does not comply with all the disclosure requirements set out in the Corporations Act 2001, applicable Accounting Standards and other mandatory professional reporting requirements in Australia, however in our opinion contains adequate information for the purposes of this PDS. (b) Principles of Aggregation The pro-forma aggregated statements of financial position have been prepared by combining the consolidated financial statements of all the entities that comprise ConnectEast Group, being ConnectEast Investment Trust and ConnectEast Holding Trust. In preparing the pro-forma aggregated statements of financial position, all transactions within ConnectEast Group have been eliminated in full.

81 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 2. Summary of Accounting Policies (cont d) (c) Income Tax Page A4 ANNEXURE A Pursuant to the provisions of Division 6C of the Income Tax Assessment Act 1936 ( the Act ), it is intended that the ConnectEast Holding Trust will be treated as a public trading trust and effectively treated as a company for income tax purposes. Accordingly, the ConnectEast Holding Trust will recognise income tax payable using the liability method of tax-effect accounting. Pursuant to the provisions of Division 6A of the Act, it is intended the ConnectEast Investment Trust will not be liable for income tax under the Act, provided that the taxable income of the Trust is fully distributed to unitholders each year. Accordingly, income tax and tax-effect accounting will not be applied in relation to the ConnectEast Investment Trust. (d) Property, Plant and Equipment CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 79 Items of property, plant and equipment are brought to account at cost. Cost of non-current assets constructed includes all direct costs incurred. The cost of Leasehold Improvements includes: costs incurred by the ConnectEast Group prior to entering into the Concession Deed with the State of Victoria in relation to the design and construction of the MFP; all directly related expenditure (including administrative expenditure) incurred in construction of the assets comprising the MFP up to the date of commencement of operations; preliminary costs of formation of the ConnectEast Investment Trust and its wholly owned subsidiary trusts; and facility and borrowing costs incurred by the ConnectEast Investment Trust and its wholly owned subsidiary trusts in relation to the design and construction of the MFP. Interest payments on loans up to the date of commencement of operations are offset against interest receipts and the balance capitalised as part of Leasehold Improvements. Depreciation and Amortisation Property, plant and equipment assets are depreciated on a straight-line basis at various rates being the shorter of the average useful life for that asset type and, if relevant, over the period of the Concession Deed. The estimated useful lives of each class of asset are: Leasehold Improvements Plant and Equipment 35 years 2-15 years (e) Borrowing costs Debt establishment costs are capitalised and amortised on a straight-line basis over the term of the applicable borrowings. Borrowing costs comprise interest and the amortisation of costs incurred in establishing borrowing facilities. Where borrowings are specifically incurred in relation to qualifying assets, the actual borrowing costs are capitalised into the carrying value of those assets. Where borrowings are not specifically incurred in relation to qualifying assets, the amount of borrowing costs to be capitalised to qualifying assets is determined by applying a capitalisation rate to the weighted average accumulated expenditure relating to qualifying assets during the period. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity s outstanding borrowings during the period. Borrowing costs are capitalised up to the date when the asset is substantially complete and ready for use and are subsequently amortised over the useful life of the asset.

82 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 80 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 2. Summary of Accounting Policies (cont d) (f) Interest-bearing liabilities All loans are measured at the principal amount. Interest is charged as an expense as it accrues. (g) Contributed equity Issued Stapled Units are recognised at the fair value of consideration received by the Trusts. Page A5 ANNEXURE A Transaction costs arising on the issue of Stapled Units are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. 31 Oct 2004 $ million 30 Nov 2008 $ million 3. Cash Cash Cash set aside to meet operating costs pre-construction Completion Cash reserved for specific purposes Total Cash reserves of $139 million have been set aside to meet the operating costs of the ConnectEast Group during the period to Construction Completion Date. The quantum and timing of the operating costs for this period are not committed at the date of this report. In accordance with Note 2(d), qualifying expenditure incurred in construction of the MFP including directly attributable operating costs pre-construction completion will be capitalised to Leasehold Improvements or Plant and Equipment, as appropriate. 4. Receivables Final Instalment Other 10 - Total The Final Instalment of $0.45 per Stapled Unit is receivable one year from Allotment Date. The Final Instalment in relation to the Offer pursuant to this PDS has been fully underwritten by various financial institutions. 5. Property, plant and equipment Leasehold Improvements 108 2,482 Plant and Equipment ,918

83 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 6. Intangibles (non-current) 31 Oct 2004 $ million 30 Nov 2008 $ million Concession Deed for MFP Other Assets (non-current) Debt establishment costs Other deferred financing costs Interest-bearing liabilities (non-current) Secured against the assets of ConnectEast: Senior Debt Facility Tranche A Senior Debt Facility Tranche B Senior Debt Facility Tranche C ,088 Page A6 ANNEXURE A CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 81 On the Construction Completion Date the principal outstanding under the Construction Facility is converted to Senior Bank Debt facilities. The terms and conditions of each tranche of senior debt, including the term to maturity, the relevant interest rate (including margins) and other conditions associated with these facilities are described in Section 7 of the PDS. ConnectEast Group will hedge its interest rate exposure through interest rate swap contracts, as disclosed in note Contributed Equity Stapled Units issued pursuant to the Offer 1,120 1,120 Stapled Units issued pursuant to the D&C Deferred Equity Issue Stapled Units issued pursuant to the MBL Deferred Equity Issue - 30 Redemption of Stapled Units - (32) Distributions - Return of Capital - (315) Stapled Units issued pursuant to the DRP Stapled Units issued pursuant to the equity underwriting fee re-invested - 3 Unit issue costs (49) (88) 1,071 1,226 The Final Instalment of $0.45 per Stapled Unit is receivable one year from Allotment Date. The receivable is fully underwritten as part of the initial application for the Stapled Units. Pursuant to the D&C Deferred Equity Commitment Deed, $260 million of Stapled Units will be subscribed for at $1.15 per Stapled Unit on the D&C Deferred Equity Contribution Date (currently expected to occur on the Construction Completion Date). The obligation to subscribe for Stapled Units under the Deferred Equity Commitment Deed is secured via Letters of Credit.

84 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 82 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 9. Contributed Equity (cont d) Page A7 ANNEXURE A Pursuant to the Macquarie Bank Limited Deferred Equity Commitment Deed, $30 million of Stapled Units will be subscribed for at $1.00 per Stapled Unit on the MBL Deferred Equity Contribution Date (currently expected to occur one year after the Allotment Date). Fixed distributions of 6.5 cents per Stapled Unit per annum will be paid on a semi-annual basis to the Unitholders during the period between Allotment Date and Construction Completion Date. ConnectEast Group has established a DRP which will operate between Allotment Date and Construction Completion Date. Stapled Units allotted under the DRP will be issued at the Average Price, less a discount of 5%. Unless unitholders elect otherwise, distributions payable on the Stapled Units will be reinvested in further Stapled Units under the DRP. Unitholders may elect not to participate in the DRP. The first two fixed distributions totalling $67 million payable on 31 March 2005 and 30 September 2005 to Unitholders will not be underwritten. Thereafter, fixed distributions payable to Unitholders up to Construction Completion are fully underwritten by the DRP Underwriting Agreement, whereby any cash distributions during this period are funded by the issue of new Stapled Units. Distributions during the period from Allotment Date to the Construction Completion Date have been disclosed as a return of capital based on the assumption that no accounting profit is generated during this period. 31 Oct 2004 $ million 30 Nov 2008 $ million 10. Expenditure Commitments (a) Operating leases Operating leases relate to an operation and maintenance agreement, with a term that ends 5 years from completion of construction. Non-cancellable operating leases contracted for, but not recognised in the statement of financial position, are payable as follows: Payable not later than one year - 15 Later than one year and not later than five years Later than five years

85 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 10. Expenditure Commitments (cont d) (b) Capital expenditure ConnectEast Group has entered into a construction contract to complete the required construction activities over the expected period of 49 months from Allotment Date. Non-cancellable construction commitments contracted for, but not recognised in the statement of financial position, are payable as follows: 31 Oct 2004 $ million 30 Nov 2008 $ million Page A8 ANNEXURE A CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 83 Payable not later than one year Later than one year and not later than five years 2,011 - Later than five years - - 2, Financing Facilities Equity Bridge Facilities Drawn - - Committed Construction Facility Drawn - - Committed 2,088 - Senior Debt Facility Drawn - 2,088 Committed - 2,088 Bank Bond Facility Drawn - - Committed 8 8 Underwritten DRP Facility Drawn - - Committed Drawdowns of the Construction Facility, which is converted to the Senior Debt Facilities on the Construction Completion Date, are made in accordance with a committed drawdown schedule and will be used to fund committed capital expenditure, interest and other expenses incurred during the Construction Period, which are outlined in Section 7 of the PDS.

86 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 84 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 12. Financial Instruments Page A9 ANNEXURE A The following table details ConnectEast Group s exposure to interest rate risk as at Allotment Date and the Construction Completion Date. This table is based on interest rates at 30 July These balances and the interest rates will be impacted by the interest rates that will be set at Financial Close. 31 Oct 2004 $ million Average Interest Rate (%) Variable Interest Rate Fixed Interest Rate 1-5 years Fixed Interest Rate > 5 years Total Financial Assets Cash Market Financial Liabilities Hedge Interest rate swaps ,378 (290) (2,088) - 30 Nov 2008 $ million Average Interest Rate (%) Variable Interest Rate 2,734 (290) (2,088) 356 Fixed Interest Rate 1-5 years Fixed Interest Rate > 5 years Total Financial Assets Cash Market Cash set aside to meet operating costs pre-construction Completion Market Financial Liabilities Interest-bearing liabilities 7.94 (2,088) - - (2,088) Hedge Interest rate swaps ,088 (835) (1,253) (835) (1,253) (1,731) Refer note 3 for an explanation of cash set aside to meet operating costs pre-construction Completion. 13. Australian Equivalents to International Financial Reporting Standards The financial information is based on Australian Accounting Standards effective at the date of the PDS and does not reflect the effect of the transition to Australian Equivalents to International Financial Reporting Standards ( A-IFRS ) in The Financial Reporting Council and the Australian Accounting Standards Board have committed to the adoption of IFRS equivalent standards in Australia for financial years beginning on or after 1 January Although Australia has been undertaking a harmonisation policy for several years, there are still significant differences between IFRS and Australian GAAP, and conversion to A-IFRS will result in many changes to accounting policies and therefore a consequential impact on financial performance and position. As the Australian equivalents to IFRS do not apply until financial years beginning on or after 1 January 2005, an initial assessment of the impact of A-IFRS from that date has been performed and in particular has identified the following areas that have potential impact for ConnectEast Group:

87 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 13. Australian Equivalents to International Financial Reporting Standards (cont d) Page A10 ANNEXURE A AASB 139: Financial Instruments: Recognition and Measurement requires all financial assets and liabilities, including derivatives to be recognised on balance sheet. This will, amongst other possible impacts, require: interest rate swaps to be brought to account at fair value with gains or losses arising from fair value movement taken to equity unless specific hedging criteria under AASB 139 are not met, whereby to the extent that the hedging criteria are not met, gains or losses arising from fair value movements will be recognised in the income statement; derivatives embedded within any contracts to be separated and measured at fair value, in certain circumstances. For example, derivatives may be found in lease contracts; and borrowings to be initially recognised at fair value net of transaction costs directly attributable to the issue of the liability. Subsequently, borrowings will be measured at amortised cost with interest calculated based on an effective yield given the revised carrying amount. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 85 AASB 1: First-Time Adoption of Australian Equivalents to International Financial Reporting Standards requires: IFRS converged AASB Standards to be retrospectively applied when first adopted, with certain limited mandatory and optional exceptions; and comparative information to be fully restated to comply with the converged AASB Standards (except for the information relating to AASB 139). AASB 3: Business Combinations excludes stapling arrangements from the scope of AASB 3. The Australian Accounting Standards Board decided on transition to IFRS, Australian entities would continue to apply the guidance in UIG 13 for such arrangements. This guidance requires the book values of the net assets of the combining entities to be used as the basis for preparing the combined financial statements. In April 2004, the IASB proposed a limited amendment to AASB 3 to include stapling arrangements within its scope, and therefore for one of the combining entities to be identified as the acquirer. Under this approach, the fair values of the net identifiable assets of the acquiree at the date of the stapling would be used in preparing the combined financial statements. The proposal is expected to be applied to stapling arrangements entered into on or after 31 March The Australian Accounting Standards Board proposes to make these proposals applicable from the first reporting period beginning on or after 1 January It is uncertain at this time as to whether these proposals will be finalised in their current form. AASB 117: Leases and in particular SIC-29: Disclosure Service Concession Arrangements - contains disclosure requirements in respect of service concession arrangements, but there is a lack of specific guidance on how they should be accounted for. In response to these concerns, the IFRIC began consideration of the issues in October 2003, including the extent to which the lease accounting model of AASB 117, and other models, are relevant to the accounting treatment of service concessions. At their recent discussions in May 2004, the IFRIC agreed that there seemed to be three possible accounting models being put forward for the operator: 1) the operator recognises the road as its asset; 2) the operator recognises a receivable for the fixed payments it receives over the life of the concession; or 3) the operator recognises an intangible asset. It is uncertain at this time which, if any, of these options might be exposed for public comment, and whether any proposal would be finalised in time for Where the above requirements include options, ConnectEast Group has not yet decided which option they will select under A-IFRS.

88 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 86 SECTION 9 CONNECTEAST GROUP NOTES TO THE PRO-FORMA FINANCIAL INFORMATION 14. Contingent Liabilities Page A11 ANNEXURE A Macquarie Bank and CEML are party to a Put and Call Option as outlined in Section 10.4 of the PDS. If an option is exercised under the Put and Call Option, the Purchase Price will be calculated based on a formula outlined in Section 10.4 of the PDS. A fee may also be payable (Fee Amount) to Macquarie Bank at the end of a six and half year period after Financial Close (Post Anniversary Date) if certain conditions are met. The Fee Amount will be calculated based on a formula outlined in Section 10.4 of the PDS. As both the Purchase Price and the Fee Amount are based on a future volume weighted average trading price which is not measurable as at the date of the PDS, it is not practicable to estimate the financial effect at this time. If the Purchase Price has been paid, the Fee Amount is not payable. If the Fee Amount has been paid, the Purchase Price is reduced by the Fee Amount. Refer to Section 10.4 of the PDS for further information.

89 SECTION 9 = = NQ=lÅíçÄÉê=OMMQ= = qüé=aáêéåíçêë= `çååéåíb~ëí=j~å~öéãéåí=iáãáíéç= iéîéä=nn= N=j~êíáå=mä~ÅÉ= póçåéó===kpt===ommm= = aé~ê=páêë= = qê~ññáå=~åç=^îéê~öé=qêáé=qçää=mêçàéåíáçåë=ó=jáíåü~ãjcê~åâëíçå=mêçàéåí= Hyder Consulting Pty Ltd ABN Level 16, 31 Queen Street Melbourne VIC 3000 Australia Tel: Fax: CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 87 NK= fåíêççìåíáçå= eóçéê=`çåëìäíáåö=míó=iíç=eeóçéêf=ü~ë=äééå=éåö~öéç=íç=éêéé~êé=íê~ññáå=~åç=~îéê~öé=íêáé= íçää=éêçàéåíáçåë=ñçê=íüé=jáíåü~ã=cê~åâëíçå=mêçàéåí=eíüé=jcmfk==qüáë=êééçêí=ëìãã~êáëéë= eóçéêûë=éêçàéåíéç=íê~ññáå=~åç=~îéê~öé=íêáé=íçääë=ñçê=íüé=jcm=~åç=ü~ë=äééå=éêéé~êéç=íç=äé= áååäìçéç=áå=~=mêççìåí=aáëåäçëìêé=pí~íéãéåí=emapf=ç~íéç=çå=çê=~äçìí=nq=låíçäéê=ommq= Ñçê=íÜÉ=çÑÑÉêáåÖ=çÑ=pí~éäÉÇ=råáíë=áå=`çååÉÅíb~ëí=fåîÉëíãÉåí=qêìëí=~åÇ=`çååÉÅíb~ëí= eçäçáåö=qêìëí=eíçöéíüéêi=`çååéåíb~ëí=dêçìéfk=== eóçéê=áë=~=öäçä~ä=éåöáåééêáåö=åçåëìäíáåö=åçãé~åó=ïáíü=~=ïáçé=ê~åöé=çñ=ëééåá~äáëí=ëâáääëk== qüéëé=ëééåá~äáëí=ëâáääë=áååäìçé=~=íé~ã=çñ=íê~ññáå=~åç=íê~åëéçêí=éêçñéëëáçå~äë=ïüç= ëééåá~äáëé=áå=íê~ññáå=éåöáåééêáåö=~åç=íê~åëéçêí=éä~ååáåök==eóçéê=ü~ë=äééå=áåîçäîéç=áå=íüé= éêéé~ê~íáçå=çñ=íê~ññáå=éêçàéåíáçåë=ñçê=~=åìãäéê=çñ=êéåéåí=^ìëíê~äá~å=íçää=êç~ç=éêçàéåíëi= áååäìçáåöw= íüé=`êçëë=`áíó=qìååéä=çå=äéü~äñ=çñ=íüé=`êçëë=`áíó=jçíçêï~ó=åçåëçêíáìãx=~åç== íüé=jéääçìêåé=`áíóiáåâ=çå=äéü~äñ=çñ=qê~åëìêä~åi=ñçê=ïüáåü=íüé=çäëéêîéç=ommn=íê~ññáå= Ñäçïë=Ü~îÉ=ÄÉÉå=ëÜçïå=íç=ÄÉ=ïáíÜáå=~Äçìí=NB=çÑ=íÜÉ=ÑçêÉÅ~ëí=OMMN=íê~ÑÑáÅ=ÑäçïëK= få=éêéé~êáåö=íüé=éêçàéåíáçåë=çñ=íê~ññáå=~åç=~îéê~öé=íêáé=íçääë=ñçê=íüé=jcmi=eóçéê=ü~ë= ìåçéêí~âéå=~å=~å~äóëáë=çñ=íüé=âéó=áåñäìéååéë=çå=íê~ññáå=ñçê=íüé=jcm=åçêêáççê=~åç=íüé= jcmk=få=çìê=çéáåáçåi=íüé=éêçàéåíáçåë=çñ=íê~ññáå=~åç=~îéê~öé=íêáé=íçääë=~êé=ä~ëéç=çå= êé~ëçå~ääé=~ëëìãéíáçåë=~åç=íüé=éêçàéåíáçåë=çñ=íê~ññáå=~åç=~îéê~öé=íêáé=íçääë=~êé= êé~ëçå~ääék== qüé=êéã~áåçéê=çñ=íüáë=êééçêí=çìíäáåéëw= íüé=ãéíüçççäçöó=~ççéíéç=ñçê=íüé=íê~ññáå=ãççéääáåö=éêçåéëëx= íüé=~êé~ë=áå=ïüáåü=~ëëìãéíáçåë=ü~îé=äééå=ã~çéx= ÇÉí~áäë=çÑ=íÜÉ=íçääë=~ééäóáåÖ=íç=íÜÉ=jcmX=~åÇ= íüé=íê~ññáå=~åç=~îéê~öé=íêáé=íçää=éêçàéåíáçåë=ñçê=íüé=jcmk= = oéöáëíéêéç=çññáåéw=iéîéä=ri=nns=jáääéê=píêééíi=kçêíü=póçåéó=kpt=omsmk=oéöáëíéêéç=áå=^ìëíê~äá~==^_k=pq=mmm=rtv=mqs=

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93 SECTION 9 qüé=éêçàéåíáçåë=~ëëìãé=jéääçìêåéûë=éçéìä~íáçå=ïáää=åçåíáåìé=íç=öêçïi=äìí=íüé=ê~íé=çñ= ÖêçïíÜ=áë=~ëëìãÉÇ=íç=ëäçï=çîÉê=íÜÉ=ÅçãáåÖ=ÇÉÅ~ÇÉë=ÇìÉ=íç=ÇÉÅäáåáåÖ=ÄáêíÜ=ê~íÉë=~åÇ= äçïéê=áåíéêå~íáçå~ä=áããáöê~íáçå=äéîéäëk=páãáä~ê=íç=íüé=êéëí=çñ=^ìëíê~äá~i=jéääçìêåéûë= éçéìä~íáçå=áë=~öéáåö=ê~éáçäók=aéåäáåáåö=ïçêâñçêåé=öêçïíüi=~åç=íüé=íêéåç=íç=çéåäáåáåö= é~êíáåáé~íáçå=ê~íéëi=áë=éñééåíéç=íç=å~ìëé=~=ä~êöéäó=çéãçöê~éüáåjçêáîéå=ëäçïççïå=áå= ÉãéäçóãÉåí=ÖêçïíÜ=áå=íÜÉ=ÇÉÅ~ÇÉë=~ÜÉ~ÇK==qÜÉëÉ=~ëëìãéíáçåë=~êÉ=Äêç~Çäó=ÅçåëáëíÉåí= ïáíü=öçîéêåãéåí=ñçêéå~ëíëk= PKO= mçéìä~íáçåi=éãéäçóãéåí=~åç=ä~åç=ìëé=éêçàéåíáçåë=ñçê=íüé=jcm=åçêêáççê= ^ë=~=êéëìäí=çñ=íüé=éåü~ååéç=~ååéëëáäáäáíó=éêçîáçéç=äó=íüé=jcmi=áí=áë=éñééåíéç=íü~íw= _ìëáåéëëéë=~åç=áåçìëíêó=ïáää=êéäçå~íé=~åç=éñé~åç=çåíç=åéï=ëáíéë=ïüéêé= ~ÅÅÉëëáÄáäáíó=áë=ÉåÜ~åÅÉÇI=áå=é~êíáÅìä~ê=~êÉ~ë=éêçñáã~íÉ=íç=íÜÉ=jcmX= eçìëéüçäçë=ïáää=êéäçå~íé=áåíç=íüé=jcm=åçêêáççê=íç=í~âé=~çî~åí~öé=çñ=êéçìåéç=íê~îéä= íáãéë=íç=~ååéëë=éãéäçóãéåí=~åç=ìêä~å=öçççë=~åç=ëéêîáåéëx= eçìëéüçäçë=ïáää=äé=öáîéå=öêé~íéê=åüçáåé=ïáíü=êéëééåí=íç=éä~åéë=íç=ëüçéi=äé~êå=~åç= êéåêé~íé=~ë=~=çáêéåí=êéëìäí=çñ=íüé=êéçìåéç=íê~îéä=íáãéë=áå=íüé=jcm=åçêêáççê=~åç=ïáää= íê~îéä=ãçêé=ïáçéäó=~ë=~=êéëìäíx=~åç= båíéêéêáëéë=ëéêîáåö=íüé=åééçë=çñ=üçìëéüçäçë=ïáää=äçå~íé=åäçëéê=íç=íüé=åéï=ã~êâéíëk= qüé=jcm=qê~ññáå=jççéä=áë=ä~ëéç=çå=íüé=ñçääçïáåö=éçéìä~íáçå=éêçàéåíáçåë=áå=íüé=jcm= ÅçêêáÇçê=ÇÉîÉäçéÉÇ=Äó=ëìÄJÅçåëìäí~åíëW= CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 91 Population and Employment Projections - MFP Corridor 2,500,000 Population Employment 2,000,000 1,500,000 1,000, , = PKP= ^ååì~äáë~íáçå=c~åíçêë= qüé=jcm=qê~ññáå=jççéä=éêççìåéë=~=íïçjüçìê=îçäìãé=éêçàéåíáçå=ñçê=~=úíóéáå~ä=ïééâç~óû= ^j=mé~â=ééêáçç=ñçê=å~êë=~åç=åçããéêåá~ä=îéüáåäéëk==^ååì~äáë~íáçå=ñ~åíçêë=ü~îé=äééå= ìëéç=íç=åçåîéêí=^j=mé~â=íê~ññáå=ñäçïë=íç=^ååì~ä=^îéê~öé=a~áäó=qê~ññáå=e^^aqf=~åç= ^îéê~öé=tééâ=a~ó=qê~ññáå=e^taqf=ñäçïë=çå=íüé=jcmk=== ^å~äóëáë=çñ=íê~ññáå=ñäçï=ç~í~=çå=åçãé~ê~ääé=êç~çë=áå=íüé=îáåáåáíó=çñ=íüé=jcm=ï~ë= ìåçéêí~âéå=áå=çêçéê=íç=çéíéêãáåé=íüé=íê~ññáå=åü~ê~åíéêáëíáåë=íüêçìöüçìí=íüé=jcm=åçêêáççê= ~åç=çéîéäçé=~ééêçéêá~íé=~ååì~äáë~íáçå=ñ~åíçêë=ñçê=íüé=jcmk==^ååì~äáë~íáçå=ñ~åíçêë=íéåç= íç=áååêé~ëé=çîéê=íáãé=çìé=íç=åü~åöéë=áå=íüé=éêçñáäé=çñ=íê~ññáå=íüêçìöüçìí=íüé=ç~ó=~åç= ïééâk==qüé=~ååì~äáë~íáçå=ñ~åíçêë=ìëéç=íç=çéîéäçé=íüé=íê~ññáå=~åç=~îéê~öé=íêáé=íçää= R=

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97 SECTION 9 RKO= OMMU=mêçàÉÅíáçåë= qüé=ommu=éêçàéåíáçåë=~êé=ëüçïå=áå=íüé=í~ääé=äéäçïk==qüéëé=~êé=íüé=ëíé~çó=ëí~íé= éêçàéåíáçåë=äéñçêé=çáëåçìåíáåö=ñçê=íüé=ê~ãéjìé=éêçñáäé=çìíäáåéç=áå=ëéåíáçå=pkqk= OMMU=mêçàÉÅíáçåë= vé~ê= ^^aq= EÚMMMF= ^îéê~öé=qçää=m~áç=ééê=qêáé N= EA=éÉê=îÉÜáÅäÉF= `~êë= OPQKV= OKSM= i`s= NOKS= PKSP= e`s= NMKT= SKSO= qçí~ä O = ORUKO= J= RKP= OMNN=mêçàÉÅíáçåë= qüé=omnn=éêçàéåíáçåë=~êé=ëüçïå=áå=íüé=í~ääé=äéäçïk= OMNN=mêçàÉÅíáçåë= vé~ê= ^^aq=eúmmmf= ^îéê~öé=qçää=m~áç=ééê=qêáé N= EA=éÉê=îÉÜáÅäÉF= `~êë= OTPKQ= OKSR= i`s= NPKV= PKSO= e`s= NNKS= SKSS= qçí~ä O = OVVKM= J= CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 95 RKQ= OMON=mêçàÉÅíáçåë= qüé=omon=éêçàéåíáçåë=~êé=ëüçïå=áå=íüé=í~ääé=äéäçïk= OMON=mêçàÉÅíáçåë= vé~ê= ^^aq=eúmmmf= ^îéê~öé=qçää=m~áç=ééê=qêáé N= EA=éÉê=îÉÜáÅäÉF= `~êë= PPTKM= OKSS= i`s= NSKN= PKSN= e`s= NPKP= SKSR= qçí~ä O = PSSKR= J= RKR= OMPN=mêçàÉÅíáçåë= qüé=ompn=éêçàéåíáçåë=~êé=ëüçïå=áå=íüé=í~ääé=äéäçïk= OMPN=mêçàÉÅíáçåë= vé~ê= ^^aq=eúmmmf= ^îéê~öé=qçää=m~áç=ééê=qêáé N= EA=éÉê=îÉÜáÅäÉF= `~êë= PRVKO= OKSV= i`s= NSKN= PKSR= e`s= NOKU= SKTT= qçí~ä O = PUUKM= J= ================================================ N =bñéêéëëéç=áå=êé~ä=íéêãë=~ë=~í=gìäó=ommq=~åç=ä~ëéç=çå=_~ëé=qçääë=ïüáåü=ïáää=äé=~çàìëíéç=áå=~ååçêç~ååé= ïáíü=íüé=íéêãë=çñ=~å=áåíéêéëí=ê~íé=éêçíçåçä=íç=êéñäéåí=åü~åöéë=áå=áåíéêéëí=ê~íéë=äéíïééå=pm=gìäó=ommq=~åç= cáå~ååá~ä=`äçëék= O =kìãäéêë=ã~ó=åçí=~çç=çìé=íç=êçìåçáåök= V=

98 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 96 SECTION 9 RKS= mêçàéåíáçåë=éçëí=ompn= `çååéåíb~ëí=dêçìé=íê~ññáå=éêçàéåíáçåë=äéóçåç=ompn=ïéêé=å~äåìä~íéç=äó=~ëëìãáåö=~= Åçåíáåì~íáçå=áå=íÜÉ=áåÅêÉãÉåí~ä=áåÅêÉ~ëÉ=áå=íê~ÑÑáÅ=ÄÉíïÉÉå=íÜÉ=OMON=~åÇ=OMPN= éêçàéåíáçåë=ñçê=íüé=óé~êë=ñçääçïáåö=ompn=ìåíáä=íüé=éåç=çñ=íüé=åçååéëëáçå=ééêáççk== RKT= `~é~åáíó=çñ=jcm= qüé=ompn=íê~ññáå=éêçàéåíáçåë=ñçê=íüé=jcm=~êé=öéåéê~ääó=ïáíüáå=íüé=~î~áä~ääé=å~é~åáíó= éêçîáçéç=äó=íüé=jcmk=cäçïë=éñåééçáåö=íüé=å~é~åáíó=áå=íüé=éé~â=üçìêë=ïáää=êéëìäí=áå=éé~â= ëéêé~çáåö=éå~ääáåö=íüé=éêçàéåíéç=^^aq=ñäçï=íç=äé=~ååçããçç~íéç=äó=íüé=~î~áä~ääé= Å~é~ÅáíóK= SK= `çååäìëáçå= eóçéê=ü~ë=ìåçéêí~âéå=~=êáëâ=~ëëéëëãéåíi=áå=~ååçêç~ååé=ïáíü=^plkwp=qpsmjnvvvi=çñ= íüé=êáëâ=íü~í=íüé=~åíì~ä=ñìíìêé=íê~ññáå=îçäìãéë=çå=íüé=jcm=e~åç=~îéê~öé=íêáé=íçääëf=~êé=äéëë= íü~å=íüé=éêçàéåíáçåëk=^=ëìãã~êó=çñ=íüé=qê~ññáå=oáëâ=áëëìéë=áë=áååäìçéç=áå=péåíáçå=v=çñ=íüé= map=ççåìãéåík=eóçéê=åçååäìçéç=íü~í=íüé=çîéê~ää=éêçàéåí=êáëâë=ê~åöé=ñêçã=~å=ìåäáâéäó= êáëâ=çñ=~å=éîéåí=çååìêêáåö=ïáíü=ãáåçê=çê=ãççéê~íé=åçåëéèìéååéë=íç=~=éçëëáääé=åü~ååé= çñ=~=êáëâ=çååìêêáåö=ïáíü=ãáåçê=åçåëéèìéååéëk== qê~ññáå=îçäìãéë=~êé=çáêéåíäó=~åç=áåçáêéåíäó=~ññéåíéç=äó=~=åìãäéê=çñ=ñ~åíçêëi=áååäìçáåö= ~ãçåö=çíüéê=íüáåöëi=öéåéê~ä=íê~ññáå=äéîéäë=áå=íüé=~êé~i=íüé=èì~äáíó=~åç=éêçñáãáíó=çñ= ~äíéêå~íáîé=êç~çë=~åç=çíüéê=íê~åëéçêí=áåñê~ëíêìåíìêéi=íçää=ê~íéë=~åç=ñìéä=éêáåéëk=tüáäé= éêçàéåíáçå=êáëâ=å~ååçí=äé=éäáãáå~íéçi=áí=ü~ë=äééå=êéçìåéç=äó=eóçéê=íüêçìöüw= ~ÇçéíáåÖ=ÅçåëÉêî~íáîÉ=~ëëìãéíáçåëX= ìíáäáëáåö=éêçîéå=íéåüåáèìéë=~åç=éêçåéçìêéë=íüêçìöüçìí=íüé=éêçàéåíáçå=éêçåéëëx== ëéåëáíáîáíó=íéëíáåö=çå=áåéìíë=áåíç=íüé=ãççéääáåö=éêçåéëë=ïüáåü=áãéêçîéë=åçåñáçéååé= áå=íüé=éêçàéåíáçåëx=~åç= ~ëëéëëáåö=êáëâë=~ö~áåëí=íüé=äáâéäáüççç=çñ=çååìêêéååé=~ë=ïéää=~ë=éçëëáääé=áãé~åík== eóçéê=åçåëáçéêë=íüé=íê~ññáå=îçäìãéë=~åç=~îéê~öé=íêáé=íçää=éêçàéåíáçåë=éêéé~êéç=~êé=ä~ëéç= çå=ëçìåç=áåéìíë=~åç=ëìáí~ääé=ãççéääáåö=éêçåéëëéëi=~åç=éêççìåé=êé~ëçå~ääé= éêçàéåíáçåëk= TK= líüéê=oéäéî~åí=fåñçêã~íáçå= qüáë=çéáåáçå=ü~ë=äééå=éêéé~êéç=ñçê=`çååéåíb~ëí=dêçìé=ëçäéäó=ñçê=íüé=éìêéçëé=çñ= éêçîáçáåö=eóçéêûë=îáéïë=çå=íê~ññáå=éêçàéåíáçåëk=qê~ññáå=éêçàéåíáçåë=~êé=çåäó=~=éêéçáåíáçå=çñ= ïü~í=ãáöüí=ü~éééå=áå=íüé=ñìíìêé=~åç=ã~ó=åçí=äé=~åüáéîéçk=qüé=íê~ññáå=~åç=~îéê~öé=íêáé= íçää=éêçàéåíáçåë=êéäó=çå=~=åçãéäéñ=ëéí=çñ=ç~í~=áåéìíëi=ãççéääáåö=éêçåéçìêéë=~åç= ìåçéêäóáåö=~ëëìãéíáçåëk== få=~ååçêç~ååé=ïáíü=êéöìä~íáçå=tkskmnenfeìf=çñ=íüé=çñ=íüé=`çêéçê~íáçåë=oéöìä~íáçåë=ommni= eóçéê=ã~âéë=íüé=ñçääçïáåö=çáëåäçëìêéëw= eóçéê=ï~ë=êéí~áåéç=äó=j~åèì~êáé=_~åâ=iáãáíéç=~åç=qüáéëë=míó=iíç=íç=éêçîáçé=íê~ññáå= éêçàéåíáçå=ëéêîáåéë=áååäìçáåö=éêéé~êáåö=íüáë=íê~ññáå=êééçêík=råçéê=íüé=íéêãë=çñ=íü~í= êéí~áåéêi=eóçéê=ïáää=êéåéáîé=íüé=ñçääçïáåöw== E~F= ÑÉÉë=~åÇ=ÉñéÉåëÉ=êÉáãÄìêëÉãÉåí=çÑ=ANINUMIPQOKOM=áå=íÜÉ=~ÖÖêÉÖ~íÉI=Ñçê= ìåçéêí~âáåö=ëéêîáåéë=áå=êéä~íáçå=íç=éêéé~êáåö=éêçàéåíáçåë=çñ=íê~ññáå=~åç=~îéê~öé= íêáé=íçää=éêçàéåíáçåë=ñçê=íüé=jcm=íç=íüé=ç~íé=çñ=íüáë=qê~ññáå=oééçêíx=~åç= NM=

99 SECTION 9 EÄF= ÑÉÉë=çÑ=ATQPINNMKMM=Ñçê=éêÉé~ê~íáçåI=Ñáå~äáë~íáçå=~åÇ=éêçîáÇáåÖ=áíë=ÅçåëÉåí=íç= áååäìëáçå=çñ=íüé=íüáë=qê~ññáå=oééçêí=áå=íüáë=mapk=qüáë=ñéé=ïáää=äé=é~ó~ääé=çå=íüé= Ñáêëí=íç=çÅÅìê=çÑ=íÜÉ=äçÇÖÉãÉåí=çÑ=íÜáë=map=ïáíÜ=^ìëíê~äá~å=pÉÅìêáíáÉë=~åÇ= fåîéëíãéåí=`çããáëëáçå=e^pf`f=çê=t=ç~óë=~ñíéê=ñáå~ååá~ä=åäçëéx= eóçéê=ü~ë=êéåéáîéç=íüé=äéåéñáí=çñ=çíüéê=åçåíê~åíì~ä=íéêãë=áååäìçáåö=~å=~öêééç= äáãáí~íáçå=çñ=eóçéêûë=äá~äáäáíóx== çíüéê=íü~å=íüé=êéí~áåéêi=eóçéê=ü~ë=åçí=éêéîáçìëäó=äééå=éåö~öéç=äó=`çååéåíb~ëí= dêçìé=êéä~íéç=åçãé~åáéë=ñçê=íüé=éêçîáëáçå=çñ=íê~ññáå=éêçàéåíáçå=ëéêîáåéëx= eóçéê=~åíáåáé~íéë=íü~í=ñìêíüéê=éåö~öéãéåíë=áå=êéä~íáçå=íç=íüé=éêçîáëáçå=çñ=íê~ññáå=~åç= íêáé=íçää=éêçàéåíáçå=ëéêîáåéë=~åç=çíüéê=éåöáåééêáåö=ëéêîáåéë=ã~ó=äé=éåíéêéç=áåíç=ïáíü= `çååéåíb~ëí=j~å~öéãéåí=iáãáíéçi=`çååéåíb~ëí=míó=iáãáíéç=~åç=çíüéê= `çååéåíb~ëí=dêçìé=êéä~íéç=åçãé~åáéë=~åç=ëçãé=çñ=íüéëé=çíüéê=éåö~öéãéåíë=áå= êéä~íáçå=íç=íüé=jcm=åçìäç=êéëìäí=áå=ëáöåáñáå~åí=ñééë=íç=eóçéêx= eóçéê=ççéë=åçí=ã~âé=~åó=çáêéåí=çê=áåçáêéåí=áåîéëíãéåí=áå=íüé=`çååéåíb~ëí=dêçìé=çê= áíë=ãéãäéêë=çê=íüéáê=äìëáåéëë=áåíéêéëíë=~åç=ü~ë=åç=åçããéêåá~ä=áåíéêéëíë=áå=íüé= Ñáå~åÅá~ä=éêçÇìÅíë=ÄÉáåÖ=çÑÑÉêÉÇ=çíÜÉê=íÜ~å=~ë=~=ëÉêîáÅÉ=éêçîáÇÉê=íç=íÜÉ=`çååÉÅíb~ëí= dêçìé=êéä~íéç=åçãé~åáéëx=~åç= íüáë=qê~ññáå=oééçêí=ççéë=åçí=öáîé=~åç=ëüçìäç=åçí=äé=áåíéêéêéíéç=~ë=öáîáåö=~å=çéáåáçå= çê=~çîáåé=çå=~=ñáå~ååá~ä=éêççìåí=ïáíüáå=íüé=ãé~åáåö=çñ=ëéåíáçå=tss_=çñ=íüé= `çêéçê~íáçåë=^åí=ommn=çê=ëéåíáçå=no_^_=çñ=íüé=^ìëíê~äá~å=péåìêáíáéë=~åç= fåîéëíãéåíë=`çããáëëáçå=^åí==ommnk=cáå~ååá~ä=éêççìåí=~çîáåé=å~å=çåäó=äé=öáîéå=äó= ~ÇîáëÉêë=ÜçäÇáåÖ=~å=^ìëíê~äá~å=cáå~åÅá~ä=pÉêîáÅÉë=iáÅÉåÅÉK=eóÇÉê=áë=åçí=çéÉê~íáåÖ= ìåçéê=~å=^ìëíê~äá~å=cáå~ååá~ä=péêîáåéë=iáåéååé=áå=éêçîáçáåö=íüáë=qê~ññáå=oééçêík= = = vçìêë=ñ~áíüñìääó= eóçéê=`çåëìäíáåö=míó=iíç= CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 97 = méíéê=eìåâáå= aáêéåíçê=ó=qê~ññáå= = = NN=

100 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 98 SECTION 9 14 October 2004 The Directors ConnectEast Management Limited Level 15, 1 Martin Place SYDNEY NSW 2000 Dear Sirs MITCHAM-FRANKSTON PROJECT ENGINEERING CONSULTANT S REPORT This letter has been prepared at the request of ConnectEast Management Limited ("CEML", the responsible entity of the ConnectEast Holding Trust and the ConnectEast Investment Trust) for inclusion in a Product Disclosure Statement ( PDS ) dated on or about the date of this report. URS Australia Pty Limited ( URS ) is a professional services company providing engineering and environmental expertise to businesses and communities in the Asia Pacific region. In August 2003, URS was commissioned by the ConnectEast consortium ( ConnectEast, formed by Macquarie Bank Limited and Thiess Pty Limited ("Thiess")) to conduct a review of certain technical aspects of the proposal by ConnectEast to design, construct and operate the Mitcham-Frankston Project ( MFP ), for the benefit of ConnectEast and any proposed providers of finance to ConnectEast for the MFP ("ConnectEast Financiers"). URS delivered its report titled Mitcham Frankston Freeway, Independent Technical Review, dated 22 nd April 2004, to ConnectEast setting out the results of that review on or about that date (the URS Report ). The URS Report outlined our opinions on certain engineering and technical matters in relation to the MFP and was prepared during January to April 2004 based on documentation made available to URS during that period. In August 2004, URS was commissioned by ConnectEast (for the benefit of ConnectEast and the ConnectEast Financiers) to review additional matters arising from the tender assessment process and provided a supplementary report to the URS Report ("Supplementary URS Report", together with the URS Report, the "Full URS Report"). Accordingly, the documentation that URS reviewed for the purpose of preparing the Full URS Report was current up to and including 11 August The purpose of this letter is to summarise the key factual matters and opinions expressed in the Full URS Report taking into account the nature and scope of review as outlined in Section 1 below. URS Australia Pty Ltd (ABN ) Level 6, 1 Southbank Boulevard South Bank, Victoria 3006, Australia Tel: Fax: Page 1

101 SECTION 9 1. Nature of Review and Scope 1.1 Nature of Review You should note that in conducting our review and preparing the Full URS Report on which this letter is based: Our review has been of a high level overview nature and can not be considered a detailed review or verification that would be required for construction purposes, however, it is considered to be commensurate with the role of a technical/engineering and process reviewer, and consistent with the level of review undertaken at the pretender stage on projects of a similar nature. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 99 Our review has been based on the tender design produced by ConnectEast Construct ( CEC ), the MFP construction contractor which is a 50/50 joint venture between Thiess and John Holland Pty Limited ("John Holland"). Tender designs are typically preliminary, incomplete and subject to considerable change when compared with the final design (typically a tender design may comprise only 5-10% of the design effort required for a project, which explains why the final design is often substantially changed from the tender design). As such, our review and conclusions are only appropriate to the tender design available at the time of the review and are provided subject to any changes to the tender design (see Section 5, Technical Review Risks, below). Our review has not involved a detailed review of any aspect of the MFP nor a comprehensive assessment of all risks in design, construction, operations or maintenance. URS has relied on the accuracy and relevance of information supplied by ConnectEast and CEC. URS reviewed only a small portion of the information available given the high level nature of the review. The review undertaken by URS did not involve any detailed analysis, calculations, modelling, design, site visits or other work which would normally be undertaken by a designer undertaking a tender design. The review has identified some project risks. The estimation of the probabilities and consequences of such risks are based on an interpretation of industry standards and practices, as well as the experience and judgement of the URS personnel involved in the review. The results of such estimates are therefore subjective and subject to change. Due to the high level nature of the review, URS did not and have not considered or reviewed all risks. URS has only reviewed what it considers to be the more significant risks. In addition, there are other risks outlined in the Full URS Report Page 2

102 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 100 SECTION 9 that are not discussed in this letter although this letter has sought to summarise the material technical risks identified by URS in the Full URS Report. The review on freeway traffic capacity was based on vehicular traffic volume data supplied by ConnectEast. URS did not undertake any independent assessment, verification or checking of the accuracy or reasonableness of this data. This task was excluded from the URS scope of work. 1.2 Scope of Review In summary, subject to the above matters, the scope of our review included the following: A review of design and construction ( D&C ) issues, including: The technical feasibility of the proposed engineering solutions for roads, traffic, drainage, structures, geotechnical, tunnel, noise, tolling and environmental matters; The budgeted construction costs and risk contingencies; The proposed construction program and risk of delay; and The technical experience and competence of the D&C team proposed to deliver the project infrastructure. A review of operation and maintenance ( O&M ) issues, including: The compatibility of the operating assumptions with the design basis; The adequacy and suitability of the O&M arrangements including scheduled maintenance planning and proposed staffing and equipment; The plan for the tolling strategy, tolling and customer service systems, including proposed technology and systems, design, installation, and commissioning, and capability to deliver the required systems incorporating a review of the system providers; The technical experience and capability of the contractors appointed to conduct the MFP O&M; and The budgeted O&M costs including assessing the timing and the costs associated with the long term asset maintenance cycles for the MFP. Page 3

103 SECTION 9 2. Background of the MFP The MFP comprises approximately 39 km of freeway (including 1.5km tunnels) in eastern Melbourne between the Eastern Freeway near Springvale Road through to the Frankston Freeway in Seaford in the State of Victoria (the State ). The Southern and Eastern Integrated Transport Authority ( SEITA ) was established by the State for the purposes of management of the MFP on behalf of the State. ConnectEast was requested by SEITA to submit a minimum requirements proposal for the MFP (the "Minimum Requirements Proposal"). CEC developed the Minimum Requirements Proposal for submission to SEITA which includes a 1.5 km long twin three lane tunnel, three freeway to freeway connections, twelve arterial road interchanges, and extensive noisewalls and landscaping. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 101 The Minimum Requirements Proposal in the form reviewed by URS during January to April 2004, and again in July to August 2004 formed the basis of our review, resulting in the URS Report dated 22 nd April 2004, and the Supplementary URS Report dated 6 th August 2004 (and updated and reissued on 11 August 2004). 3. Key assumptions In conducting our review, we adopted the following key assumptions, all of which in our view are reasonable at the tender stage of the MFP: ConnectEast and CEC and related parties will comply with their expressed intentions as to the way the MFP would be delivered and the project management systems to be applied to the MFP, and will retain specialist consultants to provide professional services (particularly but not only those specified in the tender documents) as required. The technical performance standards specified by SEITA are able to be achieved in final design, that these standards will not change for the final design and that these requirements will prove adequate performance standards for the MFP. The concepts developed during tender design will remain of the same form for the final design in terms of proposed structural arrangements, technologies and construction methodologies and thus of similar construction cost and construction time risk. The extent of additional site testing, survey, and other preliminary investigative works recommended by CEC and other advisors during the tender phase is undertaken to enable proper consideration of the results of these investigations on the proposed technical solutions. Page 4

104 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 102 SECTION 9 The review was undertaken for the benefit of ConnectEast and the ConnectEast Financiers and accordingly, technical issues and related risks were considered from this perspective. URS was aware that under the proposed construction contract, CEC must take out project-specific contract works and other insurance for an amount not less than $1 billion. In addition, URS was also aware that the proposed construction contract would be a fixed time, fixed fee contract and that should construction be delayed by up to 12 months, in most cases, liquidated damages would be payable by CEC. Accordingly, in considering the materiality of risks for the purpose of our review, although not determinative, we had regard to these factors when identifying risks which might have a material negative impact on the MFP so as to impact on the ConnectEast Financiers. We also understand that ConnectEast proposes to subcontract the entire design and construction of the MFP to CEC under a fixed price fixed time contract. As stated above, CEC is a 50/50 joint venture between Thiess and John Holland. We also understand that ConnectEast and CEC will retain specialist consultants to provide professional services as required. If any of the above assumptions does not apply to the conduct of the MFP then the opinions and conclusions stated in the Full URS Report and summarised in this letter may vary significantly. 4. Methodology In undertaking the review, URS utilised the following methods to arrive at opinions and conclusions in relation to the MFP. URS reviewed a portion of the SEITA supplied information for issues that were considered relevant to the review including: The Reference Design which includes drawings showing a conceptual arrangement of the MFP developed by SEITA; The Outline Scope and Project Requirements which specify the technical performance requirements required by SEITA; and, The Draft Concession Deed which outlines the proposed contractual arrangements between ConnectEast and SEITA. URS reviewed the Minimum Requirements Proposal developed by CEC, being the technical proposal provided to SEITA in response to the performance requirements of the Outline Scope and Project Requirements and Draft Concession Deed noted above. The Minimum Requirements Proposal was reviewed in the following manner; Page 5

105 SECTION 9 URS undertook interviews with team leaders involved with both design and construction where proposed technical solutions were presented and discussed. In some cases conceptual arrangements, plans, sketches and design reports were made available for review. Where particular issues of concern were noted by URS, in some instances, further discussions, documentation or other information were provided to URS for consideration. URS undertook a high level assessment of the key technical risks arising from the review including the potential order of magnitude of cost impacts. For the purposes of our high level review, we consider the documents provided to URS were a reasonable subset of documents on which to conduct the review. Other documentation and information not provided to URS may however be relevant to the findings and conclusions contained in the Full URS Report and summarised in this letter, but was outside the scope of our review. URS does not take responsibility for documents and information not provided to URS and which may affect the conclusions or findings contained in the Full URS Report and summarised in this letter. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page Technical Review 5.1 Key Findings URS has made the following key findings in the Full URS Report: The Minimum Requirements Proposal developed by CEC is considered technically feasible and appropriate for the MFP, and key risks have been identified and reflected in project cost estimates and schedules. The technical solutions developed for the Minimum Requirements Proposal should be able to be developed during final design into technically feasible and practical construction solutions. The level of detail developed by CEC in the preparation of the tender design for the Minimum Requirements Proposal is consistent with the level of complexity of the MFP and consistent with the standard normally expected of design and construct projects of this nature. 5.2 Key Risks The Full URS Report highlighted some key technical risks that are believed to be relevant to the MFP as a whole. A summary of those risks is set out below. Page 6

106 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 104 SECTION Tender Design Risk CEC developed a tender design that formed the primary basis for establishing the cost of construction and the time period for construction. The amount of effort required to produce a tender design might only represent 5-10% of the effort required to produce the final design for construction. A tender design is therefore preliminary, incomplete and likely to change. There is significant risk in estimating the project cost and duration based on a tender design. The tender design could change significantly during the final design and result in additional construction cost and time to CEC. The preliminary nature of the tender design gives rise to significant construction risks to CEC. In respect of the MFP, CEC has estimated contingencies to cover the costs of these risks based on the tender design (as to which see Section below) Resources Risk URS is of the opinion that the MFP will place significant additional demand on certain technical resources necessary to deliver the MFP within the required timeframe given the size of the project, the current market for technical resources and the anticipated level of activity in those markets. Key resource constraints are considered to be sufficiently skilled design engineers and personnel to progress the design effort in a timely manner, and key construction personnel with relevant skills and experience to manage and deliver the construction works. URS is of the opinion that CEC is aware of these issues and has strategies in place to minimise the impact of this resource risk on the MFP Residual Risk from Sub-Contracted Packages One of the strategies being considered for managing the resource risk outlined above is to subcontract large packages of work to other major civil works contractors. We understand that CEC proposes to contract these work packages on terms back to back with or equivalent to the CEC D&C contract with ConnectEast. Despite this URS recognises that achievement of back to back terms within the industry is difficult and any failure to do so, or even if achieved, variances in day to day project management and contract administration of those terms, creates risk that the ultimate delivery of the MFP will not be in line with the terms agreed with ConnectEast. Accordingly, there remains a risk of significant claims from subcontractors to CEC. CEC is aware of this risk, as it is a common element of the business of large civil contracting firms and managing this risk is a normal part of their business management. CEC has contingencies in their cost estimates for this risk (as to which see Section below). Page 7

107 SECTION Authority Approvals Risk There are numerous components to the MFP that require an approval from an authority before construction can commence. For example, Melbourne Water will be required to approve all drainage works prior to construction; the EPA will need to provide a Works Approval for tunnel ventilation; and, other authority approvals will be required. At the time of conducting our review most of these approvals were not in place (nor would they be expected to be) and as such there is a risk that these authorities could request a design that is of a higher standard than that allowed by CEC at the time of tender or could delay the project by a lengthy approval process. Some approvals may also be subject to a third party appeals process, for example the EPA Works Approval for tunnel ventilation, which could add considerable time to the approvals process. The size of this project may also mean that authorities are stretched in responding to approval requests and this could add to any delays. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 105 URS is of the opinion that there is a risk of both cost and time to CEC, and note that contingencies have been allowed for this Contingencies Contingencies are a normal part of allowing for uncertainties associated with the preliminary and incomplete nature of the tender design and the overall construction risks. It has not been possible to assess with accuracy the adequacy of contingencies allowed for by CEC for the overall project, as the review has been high level in nature, based on a preliminary and incomplete tender design and not all potential contingent risks/costs can or have been identified in this process. URS has made an assessment of the significant risks it has identified and, on the basis of probabilistic methods, made an estimation of the order of magnitude of possible additional costs arising from those risks should they arise. URS has also reviewed the contingencies allowed for by CEC in their construction cost estimate. Based on our own assessment and by reviewing the CEC estimates, URS concluded that; The contingencies allowed for in the CEC estimate are of the right order of magnitude given the project size, risk profile and delivery method. The processes undertaken by CEC to estimate risks and contingencies allowed for in their bid are considered appropriate for a project of this nature. Whilst it is intended that the contingencies allowed for in the CEC estimate will cover most of the expected risks, there is a chance that the contingencies may prove inadequate and that the financial impact of such risks could impact on the profit allowance made by CEC. Page 8

108 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 106 SECTION Other Technical Risks In addition, our review identified other material technical risks listed here in summary form: Industrial relations uncertainties. Uncertainty in ground conditions including contamination, ground water, foundation conditions and excavated soil conditions. Hydraulic issues including river flooding, drainage and impact on the project and surrounding infrastructure. Geometric performance of the freeway in some sections to deal with anticipated traffic volumes. Tolling system including technology, customer service, tag management and revenue loss. Other low probability risks like flood events, earthquakes, terrorism, fire and structural failure. The contingencies allowed for in the CEC estimate for these risks are considered reasonable given the project size, risk profile and delivery method. 6. Design and Construction 6.1 Construction Cost CEC s construction cost estimate has been compiled from an estimate of the scope of work as shown on the tender drawings, supplier quotations, previous similar works and judgement by experienced quantity surveying and estimating personnel. URS is of the opinion that the level of detail contained in the estimate is consistent with normal industry standards for a project of this nature. URS did not undertake a detailed independent check of the estimate, however, small samples of the estimate were undertaken as a sensibility check for quantities and rates. 6.2 Construction Programme We have reviewed CEC s design and construction program and have conducted a risk sensitivity analysis on the likely completion date. This review was based on the proposed program by CEC and importantly the assumption that the assumed resource levels would be achieved (see Section Resources Risk, above). The risk sensitivity has also been undertaken on the assumption that only scheduled event risks are considered. Page 9

109 SECTION 9 Therefore un-scheduled events like structural collapses, terrorism, fire etc have not been considered even though they are risks to the project program. The estimated completion dates are based on the assumption that the contract for delivery of the MFP is awarded to ConnectEast in November The award date may vary from this and if so our conclusions as to the likely completion date may also change. URS has conducted a probabilistic assessment of completion dates for the overall project based solely on the program of works produced by CEC. We assessed the likely completion dates based on those scheduled events by applying a probability to a range of completion dates for each scheduled event, which were in turn based on the information made available to URS, the assumptions underpinning our review and generally accepted practices and standards within the construction industry. The results of our assessment are as follows: CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 107 The proposed 49 month construction period is considered reasonable and includes some allowances for unforeseen events and delays. The processes undertaken by CEC in developing a construction programme for this project are considered appropriate for a project of this nature. Whilst we consider that there is a reasonable likelihood that the project will be completed within the proposed 49 month period, there is a chance that the MFP could take longer than expected with considerable financial implications to CEC and ConnectEast. 7. Design and Construction Team As stated above, we understand that ConnectEast proposes to subcontract the entire design and construction of the MFP to CEC. URS is of the opinion that, as at the date of the URS review, both Thiess and John Holland are of the appropriate size and have the necessary expertise and relevant experience to act as D&C contractor on the MFP. Further, we consider that their previous experience on large infrastructure projects, delivered using design and construct processes, provides them with an understanding of the risks inherent in this process. Obviously however, this opinion may be substantially affected by and is subject to the internal management of both companies, day to day management decisions, and the ongoing prosperity of each company, which may change over time. In addition, we understand that CEC has retained the services of CW-DC Pty Ltd, Hyder Consulting Pty Ltd and Parsons Brinckerhoff Pty Ltd and other consultants for the development of the tender design, and proposes to subcontract certain design packages to those parties if the ConnectEast tender is successful. These firms have experience in transportation infrastructure design of a similar nature to the MFP in Australia. However, the extent to which each such party is involved in the MFP will be substantially affected Page 10

110 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 108 SECTION 9 by and is subject to the day to day management of the MFP by CEC and these consultants and contracts for this work are unable to be finalised until ConnectEast is awarded the MFP. 8. Tolling Design and Construct Strategy We understand that ConnectEast proposes to engage SICE and Raytheon to be responsible for the design, supply, installation and commissioning of the tolling system. In particular, we understand that SICE will be responsible for the supply of the back office tolling infrastructure and Raytheon will be responsible for the road side equipment. By treating the tolling system projects as multi-vendor projects, the technical integration risk of the back office infrastructure and the road side equipment is expected to be minimised. ConnectEast has also specified that the Tolling Delivery and Supply Contract between CEC and SICE and Raytheon is to be on terms back-to-back with the head contract with the State, which should help minimise the contractual risk to ConnectEast. However, the extent to which each such party is involved in the MFP delivery will be substantially affected by and is subject to the day to day management of the MFP by ConnectEast and CEC and the tolling subcontractors. 9. Operations and Maintenance 9.1 Tolling and Customer Service Consistent with the approach on similar electronic toll road projects elsewhere in the world, tolling and customer services will be undertaken in-house by ConnectEast. We are of the opinion that there is considerable advantage in ConnectEast directly owning and controlling the customer relationship. 9.2 Freeway Operations and Maintenance We understand that the freeway operations and maintenance will be undertaken by Transfield Services. Transfield Services provided a comprehensive estimate to ConnectEast of the expected operational and maintenance costs associated with the running of the MFP, and an estimate of any major replacement and refurbishment costs. URS did not undertake an independent calculation of the freeway operations and maintenance costs, however, the Transfield Services estimates were reviewed and a broad comparison was made to the costs of the Citylink project in Melbourne (a comparable project). On this basis, URS believes that the estimate provided by Transfield Services is reasonable. Page 11

111 SECTION Limitations The scope of URS technical review, is subject to the following limitations and disclaimers: This letter (and the Full URS Report) was prepared for use by CEML (and in respect of the Full URS Report, by ConnectEast and the ConnectEast Financiers) with the usual care and thoroughness of the engineering consulting profession in accordance with the agreed scope of work. It is based on generally accepted practices and standards at the time it was prepared. To the maximum extent permitted by law, and subject to the requirements of the Corporations Act 2001, no other warranty, expressed or implied, is made as to the professional advice included in the Full URS Report or this letter. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 109 URS does not and cannot represent or warrant that all material engineering issues relevant to the MFP have been identified in the Full URS Report or this summary letter or within the broader PDS. The methodology adopted and sources of information used by URS are summarised in this letter. In particular, in preparing its report, URS has relied on information and advice made available by ConnectEast and CEC. URS has made no independent verification of this information/advice beyond the agreed scope of work and, to the maximum extent permitted by law and subject to the requirements of the Corporations Act 2001, URS assumes no responsibility for any inaccuracies or omissions arising from that information/advice. No indications were found during our investigations that the information/advice as provided to URS for preparation of the Full URS Report was inaccurate. Opinions and conclusions presented in this letter apply to the tender design produced by CEC at the time of our review and necessarily cannot apply to changes made in the process of final design. To the maximum extent permitted by law and subject to the requirements of the Corporations Act 2001, URS disclaims responsibility for any changes that may have occurred after the time of our review. The nature of our review assumed that certain intentions expressed by ConnectEast and CEC as to the way the MFP would be delivered and the project management to be applied to the MFP (such as the intentions to appoint specified parties to conduct certain work packages), would in fact apply to the MFP delivery phase. Any variance during MFP delivery from those intentions will have an impact on actual results and may therefore affect the conclusions drawn in the Full URS Report and in this letter. URS takes no responsibility for any divergence between tender intentions and MFP implementation. This letter addresses only our key findings in the Full URS Report as they related to the scope described in Section 1.2 above. Of necessity this means that certain Page 12

112 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 110 SECTION 9 elements of the Full URS Report are not included in this letter, and such matters may be relevant to a more detailed understanding of the URS work and findings (which is beyond the purpose of this letter). This letter should be read in full. To the maximum extent permitted by law and subject to the requirements of the Corporations Act 2001, no responsibility is accepted for use of any part of this letter in any other context or for any other purpose not stated therein. This letter does not purport to give legal advice. Neither the Full URS Report nor this letter gives nor should be interpreted as giving an opinion, recommendation or advice on a financial product within the meaning of section 766B of the Corporations Act 2001 or section 12BAB of the Australian Securities and Investment Commission Act Financial product advice can only be given by advisers holding an Australian Financial Services Licence. URS is not operating under an Australian Financial Services Licence in providing the Full URS Report or this letter. In accordance with regulation (1)(u) of the Corporations Regulations 2001, URS makes the following disclosures: URS was retained by ConnectEast to provide the Full URS Report as referred to above. Under the terms of that retainer URS will receive fees not exceeding A$600,000 (excluding GST, of which an amount not exceeding A$160,000, is payable upon ConnectEast being named the preferred tenderer for the MFP and achieving Financial Close) and the benefit of other contractual terms (including limited indemnities in favour of URS and an agreed limitation of URS liability). URS was retained by CEML to provide this summary letter. Under the terms of that retainer URS will receive fees not exceeding A$50,000 (excluding GST) and the benefit of other contractual terms (including limited indemnities in favour of URS and an agreed limitation of URS liability). URS has previously been engaged by ConnectEast related companies and anticipates that further engagements in relation to the provision of engineering and environmental consultancy services may be entered into with ConnectEast Pty Ltd, CEC and its related entities, and SEITA, for other possible roles on the MFP or on an as required basis. Some of these other engagements on the MFP could result in significant fees for URS. URS does not make any direct investment in ConnectEast or its members or their business interests and has no commercial interests in the financial products being offered other than as a service provider to ConnectEast, the ConnectEast Financiers and CEML. Page 13

113 SECTION 9 Drafts of each of the Full URS Report and this letter have been provided to ConnectEast and CEML respectively for review and comment. Other limitations and qualifications as described in this letter. Yours sincerely, CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 111 Tim Gosbell Senior Principal Page 14

114 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 112

115 SECTION 10 Additional information 10

116 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 114 SECTION REPORTING AND DISCLOSURE OBLIGATIONS Each of the ConnectEast Unit Trusts is or is expected to become a disclosing entity under the Corporations Act and will be subject to regular reporting and disclosure obligations under the Corporations Act, including the preparation of annual reports and half yearly reports. Copies of documents lodged with ASIC will be available to the public and may be obtained from, or inspected at, an ASIC office. Following the listing on ASX the ConnectEast Unit Trusts will be required to notify ASX of information about specific events and matters as they arise for the purposes of ASX making that information available to the stock markets conducted by ASX. In particular, the ConnectEast Unit Trusts will have an obligation under the Listing Rules (subject to certain exceptions) to notify ASX immediately of any information of which it becomes aware which a reasonable person would expect to have a material effect on the price or value of the Stapled Units. This information will be available to the public and may be obtained from ASX AVAILABILITY OF DOCUMENTS The following documents are available for inspection at the offices of CEML between 9.00am and 5.00pm on business days or a copy may be requested to be provided free of charge by contacting the ConnectEast Group Offer Hotline on in Australia or in New Zealand: > Constitution of ConnectEast Holding Trust; > Constitution of ConnectEast Investment Trust; and > Rules of the Distribution Reinvestment Plan INVESTMENT CONSIDERATIONS CEML does not take into account labour standards or environmental, social or ethical considerations in the selection, retention or realisation of investments of the ConnectEast Unit Trusts SUMMARY OF CONSTITUTIONS OF CONNECTEAST UNIT TRUSTS ConnectEast Investment Trust and ConnectEast Holding Trust are registered managed investment schemes. The responsible entity of each ConnectEast Unit Trust is CEML. The main rules governing the operation of the ConnectEast Unit Trusts are set out in the constitutions of each ConnectEast Unit Trust (each a Constitution). The Corporations Act, exemptions and declarations given by ASIC, the Listing Rules (subject to waivers), and the general law of trusts are also relevant to the rights and obligations of CEML and of Unitholders. The terms and conditions of the Constitutions are binding on Unitholders and CEML. The main provisions of each Constitution are very similar and are summarised below. Copies of the Constitutions are available free of charge on request (see Section 10.2 above). The following brief summary does not refer to every provision of the Constitutions and should be read in conjunction with other references contained in this PDS. Principal Investment Policy The Principal Investment Policy of each ConnectEast Unit Trust is the holding (either directly or indirectly) of investments or interests in the MFP and providing financial assistance to any entity in ConnectEast Group. The Principal Investment Policy may be varied by CEML only with the approval of a special resolution of Unitholders passed at a joint meeting of the ConnectEast Unit Trusts. For the avoidance of doubt, the construction, operation and leasing (or authorising others to do so) of any service centre or advertising signage on land that is either leased by the Concessionaires, or is immediately adjoining (and accessible from) the MFP is included in the Principal Investment Policy. Any developments on a connecting or a nearby road and any other investment (such as in another road project) would require the approval of the Unitholders. Stapling The Constitutions contain provisions allowing ConnectEast Investment Trust units to be stapled to ConnectEast Holding Trust units. Stapling means that ConnectEast Investment Trust units must not be transferred, issued or otherwise dealt with without a corresponding and contemporaneous transfer, issue or dealing of ConnectEast Holding Trust units and vice versa. Essentially, the ConnectEast Investment Trust units and the ConnectEast Holding Trust units are attached such that they are treated as one joint security. CEML must use every reasonable endeavour to procure that while the Stapled Units are officially quoted they are dealt with in a manner consistent with Stapling. The Constitutions also contain provisions for the Stapled Units to be destapled. However, Stapled Units may not be destapled without a special resolution of the Unitholders at a joint meeting of the ConnectEast Unit Trusts. In addition, no Stapling provision of the Constitutions may be amended or deleted without a special resolution of the Unitholders at a joint meeting of the ConnectEast Unit Trusts. The Constitutions provide for the sharing of information between the ConnectEast Unit Trusts in relation to the preparation of financial accounts, the adoption of the same valuation and accounting policies, the provision of all reports, circulars and other information which are required by law or the Listing Rules or which may be reasonably desirable to provide to Unitholders.

117 SECTION 10 Partly paid Stapled Units CEML has the power to issue partly paid Stapled Units. Either all the Stapled Units on issue will be partly paid or all will be fully paid. There will never be both partly paid and fully paid Stapled Units on issue at the one time. A Stapled Unit does not confer an interest in a particular asset. Joint holders of partly paid Stapled Units are jointly and severally liable to pay all amounts due and payable on the partly paid Stapled Units held by them. Subject to the Listing Rules, CEML may revoke or postpone the payment of the Final Instalment. Subject to the Listing Rules, the non-receipt of a notice that the Final Instalment is due, or the accidental omission to give a Unitholder a notice that the Final Instalment is due does not invalidate the instalment being due. Subject to the Corporations Act and the Listing Rules, CEML may extinguish in full or in part any liability of Unitholders in respect of any monies unpaid on the Stapled Units. Failure to pay Final Instalment If a Unitholder fails to pay in full the Final Instalment on or by the Final Instalment Payment Date, CEML may serve a notice on that Unitholder requiring payment of the unpaid Final Instalment, any interest owing (which is calculated daily at the interest rate on Reuters page BBSW plus 3% per annum payable monthly and compounded) and all expenses incurred by CEML as a result of the nonpayment. The notice must specify a further time and day (not earlier than 10 days from the date of the notice) on or by which payment of the instalment is to be made. The notice must also state that in the event that the Final Instalment is not paid by the specified time and date, the relevant partly paid Stapled Units may be sold by CEML (Defaulted Units). If the requirements of the notice are not complied with, the Defaulted Units may be sold at any time after the date specified in the notice for payment. Subject to the Listing Rules, the Corporations Act and the Constitutions, all voting rights, entitlements to distributions and other rights in connection with the Defaulted Units are suspended until reinstated by CEML. The holder of Defaulted Units ceases to be a Unitholder in respect of those Stapled Units when they are sold, but remains liable to pay all monies which at the date of sale were payable by that Unitholder to CEML in respect of the Defaulted Units (including expenses and interest). The former Unitholder s liability ceases when CEML receives payment in full of all amounts due in respect of the Defaulted Units. Where a Defaulted Unit is sold or disposed of for cash, CEML must deduct from the amount obtained the amount of the Final Instalment, together with accrued interest, a sum representing an amount which has been or will be incurred for commissions, stamp duties, transfer fees and other usual charges on the sale or disposal of the Defaulted Unit and any expenses associated with the disposal or any proceedings brought against the Unitholder to recover the Final Instalment. CEML may retain the amounts so deducted. The balance remaining must be paid to the former holder of the Defaulted Units. Transfer of Stapled Units Stapled Units are transferable and may be transferred in any manner permitted by CHESS. Transfers of Stapled Units are not effective until registered. Subject to the Listing Rules, CEML may refuse to register any transfer of Stapled Units without giving any reason. However, the Listing Rules substantially restrict when CEML may refuse to register a transfer. CEML must request a holding lock to be applied to prevent a transfer of Stapled Units from being registered if required by the Listing Rules, the Corporations Act or the terms of a restriction agreement. CEML must give notice to the Unitholders, the transferee and the broker within two months after the date the transfer was lodged. Failure to give this notice does not invalidate the decision of CEML. Legal Entitlement and Joint Holdings Unless otherwise required by law, only persons registered as Unitholders are recognised as having any interest in the ConnectEast Unit Trusts. Where two or more Unitholders are registered as jointly holding Stapled Units, those Unitholders hold as joint tenants (and not tenants in common) with rights of survivorship unless CEML agrees otherwise. If a Unitholder dies or becomes subject to a legal disability such as bankruptcy or insanity, only the survivor (where the deceased was a joint Unitholder) or the legal personal representative (in any other case) will be recognised as having any claim to the Stapled Units. A person who becomes entitled to Stapled Units because of the death, bankruptcy, insanity or other legal disability of a Unitholder, is not entitled to attend or vote at meetings of Unitholders until that person is registered as holder of the Stapled Units. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 115

118 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 116 SECTION 10 Distributions to Unitholders and Trust Income (A) Distributions CEML intends to pay a Fixed Distribution of 6.5 cents per Stapled Unit per annum during the Fixed Distribution Period. The Fixed Distribution will be paid semi-annually in arrears. The first Distribution will be pro rated for the period from Allotment Date to the first Distribution Calculation Date. After the Fixed Distribution Period, Distributions on the Stapled Units will be determined by CEML. CEML may determine to satisfy all or part of any Distribution by the issue of additional Stapled Units. In such circumstances Unitholders will not be entitled to receive a cash Distribution. This applies to all Distributions including Fixed Distributions. (B) Entitlement A Unitholder s entitlement to a Distribution is calculated on a proportionate basis according to the number of Stapled Units the Unitholder holds. Distributions must be paid to a Unitholder within six months of the Distribution Calculation Date. An eligible person registered as a Unitholder on a Record Date determined by CEML is entitled to receive the Distribution for the Distribution Period notwithstanding a transfer or transmission of Stapled Units after the Record Date. (C) ConnectEast Investment Trust a distributing trust ConnectEast Investment Trust is a distributing trust and should not be taxed as a company. CEML must determine the distributable income of ConnectEast Investment Trust for each Financial Year. Unless CEML determines otherwise prior to the end of the Financial Year, the distributable income of ConnectEast Investment Trust will be subject to the general operation of the trust estate rules in Division 6 of Part III of the Income Tax Assessment Act If Australian resident Unitholders are made presently entitled to all the income of ConnectEast Investment Trust for an income year, CEML will not be taxed on the taxable income of ConnectEast Investment Trust for that income year. (D) ConnectEast Holding Trust taxed as a company ConnectEast Holding Trust will be taxed as a company. ConnectEast Holding Trust will be a public trading trust under Division 6C of the Income Tax Assessment Act 1936 and is intended to be taxed at the corporate tax rate and distributions are intended to be franked in a similar way as company dividends. For further details on the taxation of the ConnectEast Unit Trusts, please refer to Section (E) Other Distributions CEML, as the responsible entity of the ConnectEast Unit Trusts, may at any time distribute any amount of capital or income to Unitholders pro rata according to the number of Stapled Units held as at a time determined by CEML. The Distribution may be in cash or by way of issue of additional Stapled Units. (F) Distribution Reinvestment Plan (DRP) During the Fixed Distribution Period, CEML will implement a DRP. Unless a Unitholder is not eligible to participate in the DRP or elects in writing not to participate in the DRP, Distributions due on the Stapled Units will be reinvested in further Stapled Units under the DRP. A Unitholder may elect not to participate in the DRP by notifying CEML in writing in accordance with the DRP Rules. Following allotment, Unitholders will be provided with instructions on how they may elect not to participate in the DRP. If a Unitholder does not participate in the DRP, their holding in the ConnectEast Unit Trusts will be diluted, as Stapled Units issued under the DRP will be issued at a discount of 5% to the Average Price of Stapled Units. With the exception of the first two Distributions, the DRP during the Fixed Distribution Period will be underwritten by the DRP Underwriters. A description of the DRP Underwriting Agreement is contained at Section Deductions and Tax Amounts Owing CEML may deduct from amounts to be paid to or received from a Unitholder (or a former Unitholder): > any taxes or other amounts owed by the Unitholder to any person, which CEML is required or authorised by law or by the Constitutions to deduct; or > any other amounts owed to CEML that CEML considers should be deducted. Limited Redemption If Financial Close does not occur on or before 31 December 2004, CEML must redeem all the Stapled Units (other than the settlement Stapled Units issued to Macquarie Bank) for the Initial Instalment. In such circumstances the Initial Instalment must be repaid by 30 January In addition, if at Financial Close, CEML determines that it has excess funds, CEML may elect to return the excess by redeeming Stapled Units from the Underwriters for the Initial Instalment. In such circumstances the Initial Instalment must be repaid by 30 January 2005.

119 SECTION 10 Meetings and Voting Rights to requisition, attend and vote at meetings are mostly prescribed by the Corporations Act. CEML may at any time convene a meeting of Unitholders of the ConnectEast Unit Trusts and must do so if required by the Corporations Act. The Constitution provides that the quorum for a meeting is two Unitholders present in person or by proxy. It allows meetings by electronic means including telephone. Any resolution being considered at a meeting is determined by a show of hands unless a poll is demanded. On a show of hands, a Unitholder present in person and each other person present as a proxy, attorney or representative of the Unitholder has one vote. On a poll, a Unitholder present in person has one vote for each dollar of the value of the Stapled Units held by the Unitholder and each other person present as a proxy, attorney or representative of the Unitholder has one vote for each dollar of the value of the Stapled Units held by the Unitholder that the person represents. Small Holdings While the ConnectEast Unit Trusts are Listed, CEML may in its discretion from time to time sell any Stapled Units held by a Unitholder which comprise less than a marketable parcel as provided in the Listing Rules without request by the Unitholder. This sale must be carried out in accordance with the procedures set out in the Constitution. Powers of CEML CEML has all powers it would have if it were the absolute owner of the assets of ConnectEast Investment Trust and the assets of ConnectEast Holding Trust. CEML has wide powers to invest and deal with such assets, subject to the Principal Investment Policy. CEML s duties as responsible entity are mainly contained in the Corporations Act and include the duty to act honestly and in the best interests of Unitholders, and to exercise the degree of care and skill that a reasonable person would exercise if they were in CEML s position. CEML may authorise any person to act as its agent or delegate, including the appointment of ConnectEast Pty Limited as its agent or delegate under the Management Deeds (summarised in this Section ). CEML is also permitted to: > enter the Transaction Documents, the Underwriting Agreement, the DRP Underwriting Agreement and, in its capacity as responsible entity of ConnectEast Holding Trust, enter the Put and Call Option and procure that ConnectEast Holding 2 Pty Ltd enters the Put and Call Option; > issue units on such terms as it determines; > take and act upon advice from professionals; > value the assets of the ConnectEast Unit Trusts at any time; > determine the net asset value of the ConnectEast Unit Trusts at any time, including more than once a day; > hold Stapled Units in the ConnectEast Unit Trusts in any capacity; and > contract with itself or any associate and be interested in any such contract. While Units of the Trusts are not listed, the application price for units of the Trusts will be calculated in accordance with the following formula: Net Asset Value + Transaction Costs number of Units on issue Transaction Costs will be determined as the total actual costs estimated to be incurred in the acquisition of the assets and will include brokerage, stamp duty, legal fees, consulting fees and advisory fees and any other costs directly attributable to the acquisition of the assets. In arriving at Net Asset Value, CEML will calculate the value of assets of the ConnectEast Unit Trusts on the following basis: > in the case of an asset that is cash or a deposit with an Australian Authorised Deposit Taking Institution, its face value plus any accrued interest; > in the case of an asset that is an interest in a managed investment scheme that is not listed or quoted for dealing on a financial market: > the latest available redemption price of the interest quoted by the manager, trustee or responsible entity of the scheme or, where the scheme is operated by the Manager or a related body corporate of the Manager, the redemption price of the interest determined in accordance with the constitution of the scheme excluding any allowance for transaction costs; or > where the scheme is not liquid, the latest available unit price provided by manager, trustee or responsible entity of the scheme; > in the case of accounting accruals such as prepayments and deferred costs, their face value; CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 117

120 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 118 SECTION 10 > in the case of any other asset, the value of the asset determined in accordance with a valuation framework adopted by CEML. The primary valuation methodology will be a discounted cashflow analysis unless CEML believes that the valuation will not result in an appropriate valuation. Indemnity in Favour of the Manager Subject to the Corporations Act, CEML is not liable in contract, tort or otherwise to the Unitholders of for any loss suffered in any way relating to the ConnectEast Unit Trusts. CEML has a broad right to be indemnified out of the assets of the ConnectEast Unit Trusts for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to the relevant ConnectEast Unit Trust (including any liability incurred as a result of an act or omission of its appointed delegates and agents), except to the extent liability is incurred as a result of fraud, wilful misconduct, gross negligence or breach of trust by CEML in the performance of its duties. This indemnity is in addition to any indemnity allowed by law. Limitation of Liability Each Constitution limits the liability of each Unitholder to their investment in the ConnectEast Unit Trusts together with any unpaid amount for a Stapled Unit unless a Unitholder incurs user pays fees or makes a separate agreement with CEML. Based on each Constitution and current law, a Unitholder should not (other than as stated above), solely by reason of being a Unitholder, be personally liable to indemnify CEML or any creditors of a ConnectEast Unit Trust if that trust is unable to meet its debts. However, CEML cannot provide an absolute assurance that a Unitholder s liability is limited in all circumstances as the issue has not been finally determined by a superior court. Where two or more Unitholders are registered as holding their Stapled Units jointly, the Unitholders are liable in respect of those Stapled Units both jointly and separately. Retirement of CEML CEML may retire as responsible entity of the ConnectEast Unit Trusts as permitted or when required by law. When CEML retires or is removed, CEML is released from all obligations in relation to the relevant ConnectEast Unit Trust arising after the time when CEML retires or is removed. CEML may, in relation to its retirement, receive a benefit from an incoming responsible entity and is not required to account to Unitholders for that benefit. The new responsible entity must execute a deed by which it covenants to be bound by the Constitutions as if it had originally been a party to them and the fees to be paid to the new responsible entity will not exceed 2% per annum of the gross assets of the ConnectEast Unit Trusts for the quarter most recently ended. If CEML voluntarily retires as responsible entity of the ConnectEast Unit Trusts: > prior to the sixth anniversary of Financial Close, the right to exercise an option under the Put and Call Option terminates (see Section 10.4 Internalisation of CEML - Put and Call Option ); or > prior to six and a half years after Financial Close, Macquarie Bank is not entitled to be paid the Fee Amount under the Constitutions (see Section 10.4 Internalisation of CEML Fee Amount ). Internalisation of CEML Fee Amount A fee (Fee Amount) is payable to Macquarie Bank (as owner of CEML) at the end of six and a half years after Financial Close (Post Anniversary Date). The amount of this fee is performance based. This Fee Amount is payable on the Post Anniversary Date if the following conditions are met: > an option has been exercised under the Put and Call Option but the shares in CEML cannot be or have not been transferred to ConnectEast Holding 2 Pty Ltd; and either > CEML is the responsible entity of the ConnectEast Unit Trusts on the Post Anniversary Date; or > CEML has been removed as responsible entity of the ConnectEast Unit Trusts prior to the Post Anniversary Date without cause or it has retired (but not voluntarily) as responsible entity prior to that date. Macquarie Bank is not entitled to be paid the Fee Amount if CEML has been removed as the responsible entity of the ConnectEast Unit Trusts by the Unitholders for cause or it has voluntarily retired as responsible entity. If CEML is acquired by ConnectEast Group under the Put and Call Option (see Section 10.4 Internalisation of CEML Put and Call Option ) the Fee Amount is not payable.

121 SECTION 10 The Fee Amount is: A x (B x C D) x E where: A means 10% B means the number of Stapled Units which would be held on the sixth anniversary of Financial Close (Sixth Anniversary Date) by a Unitholder who purchased one Stapled Unit in the Offer and participated fully in each DRP C means volume weighted average price of Stapled Units traded on ASX and calculated over the 20 business days ending on the Sixth Anniversary Date D means the value of Stapled Units held by a Unitholder on the Sixth Anniversary Date that would yield an IRR of 15% (effective annual) assuming that the Unitholder purchased one Stapled Unit in the Offer and participated fully in each DRP E means the number of Stapled Units on issue on the Sixth Anniversary Date IRR means the pre-tax nominal internal rate of return assuming that: (a) the Unitholder purchased a Stapled Unit in the Offer; and (b) all instalments were paid by the Unitholder when called; and (c) all distributions were received by the Unitholder when paid and fully reinvested in each DRP; and (d) the unitholder sells the Stapled Units on the Sixth Anniversary Date. distributions in (c) means distributions on the Stapled Units by way of cash or the issue of additional Stapled Units and distributions to which a Unitholder is entitled if the Stapled Units go ex distribution but are not paid prior to the Sixth Anniversary Date. For the purpose of calculating the Fee Amount: > If the Fee Amount results in a negative amount, the Fee Amount will be treated as zero; and > The restrictions in article 3.3 of the Constitutions and the requirement to round down to the nearest Stapled Unit when calculating any DRP entitlement will not apply and fractions of Stapled Units will be calculated to the ninth decimal place. Subject to the Listing Rules, CEML may in its sole discretion elect to satisfy the payment of the Fee Amount by the issue of Stapled Units as follows: N = Amount C where: N means the number of Stapled Units to be issued Amount means the Fee Amount C means the volume weighted average price of Stapled Units traded on ASX and calculated over the 20 business days ending on the Sixth Anniversary Date. If the Fee Amount is paid under the Constitutions, the purchase price payable under the Put and Call Option (see below) will be reduced by the Fee Amount. Put and Call Option Macquarie Bank, ConnectEast Holding 2 Pty Ltd and CEML have entered into an agreement that gives: > ConnectEast Holding 2 Pty Ltd the right to require Macquarie Bank to sell all the shares in CEML to it (Call Option); and > Macquarie Bank the right to require ConnectEast Holding 2 Pty Ltd to purchase all of the shares in CEML (Put Option). These options may not be exercised prior to the Sixth Anniversary Date and may not be exercised if CEML has been removed as the responsible entity of the ConnectEast Unit Trusts by the Unitholders for cause or has voluntarily retired as responsible entity. Macquarie Bank undertakes not to sell its shares in CEML prior to the Post Anniversary Date, other than to another subsidiary of Macquarie Bank. Before ConnectEast Holding 2 Pty Ltd exercises its Call Option to acquire CEML, CEML must seek Unitholder approval by resolution. If either the Put or Call Option is exercised, the purchase price will be paid out of the assets of ConnectEast Holding Trust. The purchase price for the CEML Shares (Purchase Price) will be calculated in accordance with the following formula: Purchase Price = SC + Fee Amount where: > SC is CEML s paid up share capital; > Fee Amount has the meaning given above in the section titled Fee Amount. If the Fee Amount has been paid under the Constitutions, the Purchase Price will be reduced by the amount of the Fee Amount. Subject to ASX Listing Rules, the ConnectEast Group may at its option elect to satisfy the payment of the Purchase Price by the issue of Stapled Units calculated as set out above in the section titled Fee Amount. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 119

122 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 120 SECTION 10 To better ensure that Unitholders interests are given priority after the Put Option or the Call Option has been exercised, the Constitutions oblige CEML to seek the approval of Unitholders on the appointment and removal of Directors of CEML and enable CEML to seek directions from Unitholders in respect of certain other matters involving the exercise by ConnectEast Holding 2 Pty Ltd of its powers as shareholder of CEML. If the Put Option or the Call Option is exercised, but the transfer of the shares in CEML is prohibited by law, CEML will be entitled to the Fee Amount under the Constitutions (see Section 10.4 Internalisation of CEML Fee Amount ). If at that time CEML is the responsible entity of the ConnectEast Unit Trusts, it will remain as responsible entity of the ConnectEast Unit Trusts but its management fee will be reduced to $500,000 per annum (CPI adjusted). If CEML subsequently retires as responsible entity of the ConnectEast Unit Trusts, Macquarie Bank must pay ConnectEast Group an amount equal to the lesser of (1) the Fee Amount and (2) the Present Value of (A B) for the remaining term of the Concession Period (Differential Amount): where: A means the management fee paid to the replacement manager (CPI adjusted); B means the management fee of $500,000 (CPI adjusted) paid to CEML; and Present Value is to be calculated by discounting future payments at 15% per annum Macquarie Bank does not have to pay the Differential Amount where Unitholders vote to remove CEML as responsible entity. If the Put Option is exercised, but the transfer of the shares in CEML is prevented by Unitholders voting not to approve the transfer of the shares, (if such approval is required by law) Macquarie Bank will be entitled to be paid the Fee Amount under the Constitutions and CEML will remain as responsible entity of the ConnectEast Unit Trusts. In these circumstances, CEML will be entitled to be paid its management fee of $1,000,000 as provided under the Constitutions. Winding up CEML may wind up each ConnectEast Unit Trust if: > as a result of any law it appears to CEML to be in the interests of Unitholders to do so; > the MFP is terminated pursuant to the Concession Deed; or > legislation is enacted such that the income of the ConnectEast Unit Trusts are taxed in the hands of CEML and the Unitholders decide by special resolution to wind up the ConnectEast Unit Trusts. In a winding up of a ConnectEast Unit Trust, Unitholders are entitled to receive a share of the value of the assets of the ConnectEast Unit Trust proportionate to their paid-up holding of Stapled Units. Duration of the ConnectEast Unit Trusts Each ConnectEast Unit Trust will continue until terminated on completion of the winding up and distribution of its respective assets. Amendment of the Constitution The Constitutions may be amended by a special resolution of Unitholders or by deed executed by CEML provided CEML reasonably considers the change will not adversely affect Unitholders rights.

123 SECTION MATERIAL CONTRACT SUMMARIES MAIN DOCUMENTS This section contains a summary of the material contracts entered into by ConnectEast Group in relation to the MFP. The main contracts, including the parties and a brief description of the subject matter, are as follows. All of the main contracts (other than the Underwriting Agreement and Management Deeds) were executed on or about the date of this PDS, unless otherwise stated: Title Parties Subject Matter Main project documents Concession Deed The State and the Regulates the relationship of the parties Concessionaires concerning the design, financing, construction and operation of the MFP and allocates risk between them. State Deed of Charge The State, SEITA, the The Concessionaires and ConnectEast Finance charge Concessionaires and all of their assets and undertakings to the State and ConnectEast Finance SEITA, to secure their obligations under the Project Documents. Finance Tripartite The State, SEITA, the Regulates the relationship between the Agreement Concessionaires, the Concessionaires, SEITA, the Lenders and the State and Security Trustee, the regulates the enforcement of their respective securities Agent, ConnectEast over the Concessionaires and ConnectEast Finance. Finance Construction The State, the Regulates the relationship between the State and the Tripartite Agreement Concessionaires, the Construction Contractor, including in relation to dealing Construction Contractor with any Construction Contractor default. and Leighton Holdings Operating Tripartite The State, ConnectEast Regulates the relationship between the State and the Agreement Pty Limited, the Operator Operator, including in relation to dealing with any and Transfield Services default by the Operator. Limited Freeway Crown Lease The State, Asset Trustee This is the agreed form of the lease which the State will grant to Asset Trustee following completion of construction of the MFP. It is an exhibit to the Concession Deed. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 121 Main design, construction and operation documents Design and The Concessionaires and The Concessionaires appoint the Construction Construction Contract the Construction Contractor to design, construct and commission the Contractor MFP. Operation and ConnectEast Pty Limited ConnectEast Pty Limited appoints the Operator to Maintenance Contract and the Operator provide roadside operation and maintenance services, for the MFP. Main financing documents Loan Note ConnectEast Finance, The Lenders agree to provide funding to ConnectEast Subscription ConnectEast Pty Limited, Finance for the purposes of funding the MFP. Agreement Asset Trustee, the Agent, the Security Trustee and the Lenders Security Trust Deed ConnectEast Finance, The Security Trustee agrees to hold for the Lenders the and Securities ConnectEast Pty Limited, various securities granted by ConnectEast Group. Asset Trustee and the These securities mortgage and charge all of the assets Security Trustee and undertaking of Asset Trustee, ConnectEast Pty Limited and ConnectEast Finance. In addition, the issued capital of Asset Trustee, ConnectEast Asset Trust, ConnectEast Pty Limited and ConnectEast Finance are mortgaged or charged to secure the funding provided by the Lenders.

124 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 122 SECTION 10 Title Parties Subject Matter Construction Consent The Concessionaires, the Regulates the relationship between the Lenders and the Deed Security Trustee, the Construction Contractor and contains a parent Construction Contractor, guarantee from the parent of the Construction the Agent and Leighton Contractor, Leighton Holdings. Holdings O&M Consent Deed ConnectEast Pty Limited, Regulates the relationship between the Lenders and the Security Trustee, the Operator, and contains a parent guarantee from the Agent, Transfield Services parent of the Operator, Transfield Services Limited. Limited and the Operator Main equity documents D&C Deferred Equity The Construction The Construction Contractor undertakes to subscribe for Commitment Deed Contractor, ConnectEast equity to ConnectEast Holding Trust and ConnectEast Holding Trust, ConnectEast Investment Trust on the D&C Deferred Equity Investment Trust and Contribution Date. others MBL Deferred Equity Macquarie Bank, Macquarie Bank undertakes to subscribe for equity to Commitment Deed ConnectEast Holding Trust, ConnectEast Holding Trust and ConnectEast Investment ConnectEast Investment Trust on the MBL Deferred Equity Commitment Date. Trust and others Underwriting The Underwriters, The Underwriters agree to underwrite the Offer and the Agreement ConnectEast Holding Trust, call for the Final Instalment. ConnectEast Investment Trust Management Deeds ConnectEast Group Certain entities in ConnectEast Group appoint ConnectEast Pty Limited to manage the affairs of ConnectEast Group. DRP Underwriting The DRP Underwriters, The DRP Underwriters agree to underwrite the issue ConnectEast Holding Trust of Stapled Units by CEML under the DRP. and ConnectEast Investment Trust The Concessionaires and other members of ConnectEast Group are also entering into various other documents, setting out their respective rights and obligations in relation to the MFP. Diagram of Main Documents State Concession Deed, State Deed of Charge ConnectEast Asset Trust ConnectEast Pty Limited Design and Construction Contract Operations and Maintenance Contract ConnectEast Finance Construction Contractor Operator Financing Documents Lenders Security Trustee

125 SECTION 10 The summary of the material contracts in this Section 10 is not exhaustive. The documents summarised have further qualifications to rights and other obligations which are not mentioned here. Definitions The following definitions are used throughout this Section 10. Separate definitions are also used in relation to particular contracts (see Definitions in relation to the relevant contract). Act of Prevention means certain acts by the State or its associates which prevent, hinder or disrupt implementation of the MFP, except in accordance with law, or due to a default by the Concessionaires or their associates. Base Case Equity Return means a figure sourced from the Base Case Financial Model and used in the Concession Deed and other documents as the benchmark for calculating certain adjustments and payments due to the Concessionaires. Depending upon the circumstance, this benchmark is defined in either nominal or real terms. When used to calculate toll rate adjustments under the Interest Rate Management Protocol (refer Tolling below), the benchmark to be used is a nominal internal rate of return (post-connecteast Group tax, pre-investor tax). When used to calculate an Early Termination Amount (refer Termination by Concessionaires below) and when used in the negotiation of compensation following a Possible Key Risk Event (refer Possible Key Risk Events Regime below), the benchmark to be used is a real internal rate of return (post-connecteast Group tax, pre-investor tax). Base Case Financial Model means the financial model and assumptions which are incorporated in the Concession Deed. Early Termination Amount means an amount payable by the State to the Concessionaires, if the Concessionaires terminate the Concession Deed because they are prevented from carrying out the MFP due to a default by the State, an Act of Prevention by the State or a final court judgment that does not result from a default by the Concessionaires. Equity Return is the internal rate of return at any time which a notional investor is reasonably projected to receive (post-connecteast Group tax, pre-investor tax) on its investment in the MFP over the Concession Period from the date of investment. Extension Event means an event which entitles the Concessionaires to an extension of the Planned Date for Freeway Section Completion in respect of the construction of a section of the MFP. The term includes events such as force majeure and certain other events outside the control of the Concessionaires. Facility means each of the facilities described in Section Force Majeure Event means certain events which are beyond the reasonable control of the Concessionaires, which cause them to be unable to perform an obligation under the Project Documents, and which could not be prevented, remedied or overcome by the Concessionaires or their contractors exercising a reasonable standard of care and diligence. Freeway Sub-lease means a sub-lease of the MFP to be granted by Asset Trustee to ConnectEast Pty Ltd, in accordance with the Agreement to Sub-Lease. Lenders means each of the financial institutions who are making financial accommodation available to ConnectEast Finance under the Loan Note Subscription Agreement (summarised in this Section). Lenders Security Documents means each of the securities summarised in Section Median means the land between the traffic lanes of the MFP. Operation and Maintenance Best Practices means operating, maintenance and repair practices which comply with the law, and which ensure that the MFP is operated, maintained and repaired in a manner safe to all people and to the environment. It requires the Concessionaires to adhere to the principle of continuous improvement in the standards and quality of the operation, maintenance and repair of the MFP. Project Documents includes each of the documents summarised in Sections to Planned Date for Freeway Section Completion means the date on which completion of a section of the MFP is planned to occur. Relevant Effect means a Possible Key Risk Event that has had a material and detrimental effect on the ability of the Concessionaires to pay the Senior Debt and Base Case Equity Return. Security Trust Deed means the deed that established the Mitcham to Frankston Freeway Security Trust and sets out the terms on which the Security Trustee holds the securities granted by ConnectEast Group on behalf of the Lenders. Security Trustee means the security trustee appointed under the Security Trust Deed. Tolling Extension Event means an event which may entitle the Construction Contractor to an extension of time for construction of the MFP, and hence to delay the date upon which they would be liable to pay liquidated damages to ConnectEast Group for the delays in completing construction. The term includes Extension Events (see above) and certain other circumstances that are outside the control of ConnectEast Group and the Construction Contractor CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 123

126 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 124 SECTION 10 and certain specified events that are within ConnectEast Group s control CONCESSION DEED Parties The State and the Concessionaires. Purpose The Concession Deed sets out the terms on which the MFP will proceed, and the rights and obligations of the State and the Concessionaires. Performance Bonds to be provided by Concessionaires The Concessionaires must give the State a Construction Bond for 3.5% of the construction price. The Concessionaires must also provide an Operation Phase Bond for $5 million. These bonds secure the performance by the Concessionaires of their obligations under the Project Documents. If the Concessionaires do not operate the MFP satisfactorily, the State may require a further performance bond of up to $20 million (indexed). This will be returned if there are no further failures by the Concessionaires in the 12 months after the original non-compliance was rectified. Land The State must make available an agreed corridor of land by certain agreed dates. The Concessionaires may request additional land, but they accept all risks relating to this, such as delays and extra costs. The State has no responsibility to help the Concessionaires obtain access to any additional land. Upon Completion of a Freeway Section, the State must grant Asset Trustee a Lease of that Freeway Section. (Asset Trustee will sub-lease that MFP section to ConnectEast Pty Limited under the Freeway Sub-lease.) Land Conditions and Environmental Issues The Concessionaires bear all risks relating to the condition of the land used for the MFP, including pre-existing or new contamination, artefacts and latent defects, and any pollution coming from that land. Construction Phase The MFP must be built in accordance with the Project Scope and Project Requirements. The Concessionaires overall responsibility is to ensure that the MFP is fit for its intended purpose, and will remain so throughout the Concession Period and its residual design life. The Concessionaires must use their best efforts to achieve completion of the construction activities by the relevant Planned Date. Although there are construction milestones, a failure to achieve them is not a breach and does not give rise to any damages/payment by the Concessionaires. Delays in Construction There is a regime for granting extensions of time, the effect of which is to adjust the relevant Planned Date if an Extension Event occurs, subject to the Concessionaires and their contractors mitigating any delay. If a Freeway Section is not completed by its Planned Date (as extended) then the Concessionaires must diligently pursue completion, in accordance with a timetable to be developed by the Concessionaires and approved by the State under the Concession Deed. If the Concessionaires fail to do so, the State may terminate the Concession Deed. Modifications requested by the State If the State requests a modification to the MFP, the Concessionaires must advise its effect on the MFP. If the State accepts the Concessionaires notice, then the Concessionaires must carry out the modification on those terms. Failing agreement, the terms on which the modification must be made may be resolved under the dispute resolution provisions (see below). Operation Phase The Concessionaires must operate, maintain and repair the MFP in accordance with Operation and Maintenance Best Practices. Obligation to keep MFP open The MFP must be kept open for traffic unless there is material risk to the health or safety of members of the general public or to comply with other legal obligations. Tolling Until all MFP Sections are open, tolls and charges may only be levied at 50% of the usual rate. However, if a MFP section is completed prior to the expected date (and earlier than 31 October 2008), then the Concessionaires may levy tolls at a higher percentage (75% of the usual rate) or at a higher rate (up to 90% of the usual rate) if that is necessary to enable the Concessionaires to pay the costs of opening and operating that section of the MFP. The tolls and any fees must be levied in accordance with a toll calculation schedule, which is annexed to the Concession Deed. They cannot be varied except in accordance with: (a) the toll calculation schedule; (b) the adjustment mechanism for changes to the base interest rate (described below); or (c) the Possible Key Risk Events Regime (see below).

127 SECTION 10 The Concession Deed defines a mechanism whereby the initial tolls will be adjusted for changes in interest rates between 30 July 2004 and Financial Close. The tolls are adjusted to the extent necessary such that: (i) the Equity Return calculated by the Base Case Financial Model is not less than the Base Case Equity Return (in this context Base Case Equity Return means a nominal internal rate of return of 12.50% (post-connecteast Group tax, pre-investor tax); and (ii) the debt sizing parameters as defined in the Loan Note Subscription Agreement are satisfied. The Concessionaires must obtain the prior approval of the State for any material change in the tolling system used by the Concessionaires. The State receives an irrevocable, non-exclusive licence to use the Concessionaires tolling system. The Concessionaires must use their reasonable endeavours to enter into an interoperable agreement with the operators of other Australian toll roads, that will enable customers of the Concessionaires to use their electronic tags on other toll roads, and be billed for the relevant tolls and charges by the Concessionaires. Customer Service The Concessionaires must provide customer services in accordance with Operation and Maintenance Best Practices. There are conditions applying to customer contracts, tolling products and dealing with customer complaints. An annual customer service audit must be conducted. Transport Network The State must support the MFP, to an equivalent level to that given to other freeways, by: > managing principal road interfaces with the MFP (these are the main roads that bring traffic onto or take traffic off the MFP); > diligently progressing the maintenance and repair of those principal road interfaces; and > procuring there will be no interference with the flow of traffic on the principal road interfaces due to damage or failure to diligently progress repair work. If the State does not provide this support, this may give rise to renegotiation under the Possible Key Risk Events regime (see below). The State is free to develop, manage or change Melbourne s transport network other than the MFP itself. In particular, the State gives no undertaking as to how it will manage other roads in the area, such as Stud Road or Springvale Road, nor is there any restriction on the development of any competing road or on public transport changes. ConnectEast Group shall pay a $20 million contribution towards the cost of public transport infrastructure and community infrastructure in the MFP corridor by 1 July Proximate State Works If the State authorises the construction of any Proximate State Works, the State must compensate the Concessionaires for any adverse impacts on the MFP. Proximate State Works includes: > connecting to, constructing, maintaining or repairing any structure under, on or above the MFP; or > connecting roads or public transport to the MFP; or > anything that is reserved for the State or its associates under the Freeway Lease. Additional Lease Rental The Concessionaires must pay to the State additional rent equal to an agreed percentage of the revenue derived in a 12-month period which exceeds that set out in the Base Case Financial Model for that period. The percentage is a sliding scale with the top percentage being 70% for that portion of revenue which is more than 105% above the level projected for that period. Payment of this additional rent is deferred if the Concessionaires would not be able to pay operating and financing costs which are then payable. Bypasses and Other Returned Works ConnectEast Group must construct and return to the State certain works including the Dandenong Southern Bypass and the Ringwood Bypass. If either the Ringwood Bypass or the Dandenong Southern Bypass is not completed by that date, the tolls levied by ConnectEast Group must not exceed 95% of the level otherwise chargeable. In that event, the Construction Contractor will pay daily liquidated damages. These are equal to approximately $28,000 per day for a delay in achieving completion of the Dandenong Southern Bypass and $35,000 per day for a delay in achieving completion of either the Ringwood Bypass or both bypasses. Liquidated damages are payable for a period not exceeding 12 months. Compensable Enhancements If the State changes the surrounding transport network in a way which was not taken into account when preparing the Base Case Financial Model, and if those changes have an overall positive impact on traffic volumes on the MFP, then the Concessionaires and the State must negotiate to agree on the net additional revenue likely to be derived by the Concessionaires for each financial year until the end of the Concession Period. The Concessionaires must then make annual rental CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 125

128 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 126 SECTION 10 payments to the State equal to 50% of that additional revenue for each subsequent financial year. Payment of this additional rent is deferred if the Concessionaires would not be able to pay the operating and financing costs which are then payable. Possible Key Risk Events Regime Certain matters that are capable of materially adversely affecting the MFP, are defined as Possible Key Risk Events. They include: > an Act of Prevention occurs; > the State fails to support the transport network connected to the MFP in the manner it has undertaken (this relates to maintaining the principal roads that connect to the MFP); > a change in State law occurs; > a native title claim prevents the Concessionaires from complying with their Concession Deed obligations; > an uninsurable force majeure event occurs; > certain changes occur in the State s policy or resources for enforcing tolling offences by motorists using the MFP. (This relates to enforcement of the penalties for non-payment of the statutory Tolls that are payable by non-customers of MFP. The State provides no assistance to the Concessionaires to collect amounts due by persons who have signed customer contracts with MFP, or under inter-connection agreements); or > delay due to certain action being taken under Commonwealth environmental legislation (other than one related to the Dandenong Southern Bypass, where the delay must exceed 18 months from the date of referral), or a delay greater than six months (or 18 months for the Dandenong Southern Bypass) due to an environmental effects statement being required. If a PKRE has occurred which has had a Relevant Effect then the Concessionaires may open negotiations with the State to determine a method of redress which restores the Concessionaires to their previous position, but not exceeding the Base Case Equity Return. In other words, if Unitholders were previously receiving a return greater than the Base Case Equity Return, the negotiations will not seek to restore that excess return. In this context the Base Case Equity Return is defined as a real internal rate of return (post-connecteast Group tax, pre-investor tax) of 9.54%. In the case of the PKRE which is a non-discriminatory change in State law or uninsurable force majeure, an additional financial contribution from the State is not a matter that is open for negotiation. In that case, the Concessionaires may obtain redress only by negotiating for changes in the MFP terms, such as the level of tolls and/or the Concession Period. In other cases, a contribution from the State may be open for negotiation, but only if changes to tolls or other terms of the MFP are not able to restore the position of the Concessionaires. Force Majeure The Concessionaires performance of their non-financial obligations may be suspended if they are prevented or delayed by a Force Majeure Event. Property Damage and Personal Injury and Indemnities to the State The Concessionaires bear the risk of loss or damage to the MFP and other related facilities, with limited exceptions. The Concessionaires indemnify the State and its associates from all claims, liability and loss which result from the MFP, whether or not any breach of obligations by the Concessionaires or their subcontractors has occurred. The Concessionaires have the same level of responsibility in respect of persons and property and all other aspects of the MFP as they would have if they owned the land freehold. Insurance The Concessionaires must obtain such insurances as a prudent owner and operator would obtain and maintain, as well as the minimum insurances specified in the Concession Deed. These include contract works, public liability, professional indemnity and business interruption insurance. If the required insurances are unavailable, or are not available on commercially reasonable terms, the Concessionaires may be excused from their obligation to obtain them. Road Operation and Traffic Management The Concessionaires must manage traffic in adjacent areas during construction. Restrictions on the Concessionaires The Concessionaires business is limited to carrying out the MFP and complying with the Transaction Documents. All transactions with related bodies corporate must be on arm s length commercial terms.

129 SECTION 10 Changes of Control of Parties A change of control of the Concessionaires, Operator or Construction Contractor (including upstream changes) may trigger a default by the Concessionaires, unless the State consents. However, the State may only reject a change of control if the person acquiring control is not solvent or reputable, or has a conflict of interest with the State, or the change would be against the public interest, or have certain adverse impacts. Refinancing State consent is required to any refinancing of the Senior Debt. That consent must not be withheld for a refinancing of the current facilities contemplated by the Base Case Financial Model, provided that the principal amount outstanding is not increased by more than the amount of the reasonable refinancing costs incurred and certain other assumptions are satisfied. For other refinancings, that consent may not be unreasonably withheld or delayed if the State is satisfied as to certain matters, including: > the credit rating of the incoming financier; > the refinancing must be on commercial terms and effected on an arm s length basis; > credit rating (if any) of the Concessionaires must be maintained not less than investment grade; and > the State s position must be no worse than it would have been if the financing was unchanged. For those other refinancings, the State is entitled to share in 50% of any refinancing gains. Default by the Concessionaires and Termination by the State Events of default by the Concessionaires include: > failure to commence or to diligently progress construction of the MFP; > abandonment of the MFP; > lane closure (other than as permitted); > failure to comply with material approvals or material laws; > failure to operate, maintain, repair or insure the MFP in accordance with the Concession Deed; > material default in other obligations under Project Documents; > failure to remedy a materially incorrect or misleading representation; > insolvency events affecting the Concessionaires or their contractors. A 40 Business Day grace period applies for the Construction Contractor, or the Operator to enable replacement; > changes of control, unless approved by the State; > cancellation of funding; > adverse credit change occurring to any provider of deferred equity; > failure to procure bonds; and > failure to pay money after 10 Business Days grace. Before the State is entitled to terminate the Concession Deed in respect of an event of default, the Concessionaires are entitled to a period in which to remedy the breach. Under a separate Finance Tripartite Deed, the Lenders also have a further right to remedy the breach before the State can terminate the Concession Deed. The remedy period for the Concessionaires is based on the period reasonably required to remedy the particular breach. The availability of the remedy period is subject to the Concessionaires diligently pursuing the cure of the breach. If the Concession Deed is terminated by the State due to a default by the Concessionaires, the State is not obliged to pay any compensation to the Concessionaires. Termination by Concessionaires The Concessionaires may terminate the Concession Deed on 30 Business Days notice to the State if: > a Court makes a final determination (which cannot be appealed) relating to State laws (except if due to Concessionaires breach); or > there is a discriminatory change in State law or an Act of Prevention by the State, which prohibits or prevents the Concessionaires from undertaking all or substantially all the MFP in all material respects. The State may suspend that termination notice for up to 24 months, provided it pays the Concessionaires, in respect of the period of the suspension, an amount sufficient to place it in the net after-tax cash position it would have been in if the relevant circumstance had not occurred. That payment does not include indirect, consequential or economic loss, except to the extent necessary to pay the Senior Debt on the due dates for payment (without regard to any acceleration) and to give the Unitholders an Equity Return (during that period) based on their Equity Return at that time. Ultimately, if the relevant circumstance is not resolved, the Concessionaires may terminate the Concession Deed and receive the Early Termination Amount from the State. This amount is calculated to enable repayment of the Senior Debt and the Equity Return to that date (or the Base Case Equity Return if termination occurs before the third anniversary of the commencement of tolling of the MFP, and in this context, the Base Case Equity Return will be a real internal rate of return (post-connecteast Group tax, pre-investor tax) of 9.54%). CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 127

130 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 128 SECTION 10 The Concession Deed may only be terminated for these reasons. If the State breaches some other obligation under the Project Documents, the Concessionaires cannot terminate the Concession Deed, although it may have a right to claim damages from the State, depending on the circumstances of the default. Handover at End of Concession Period The Concessionaires must hand over the MFP (including equipment) at the end of the Concession Period in a condition which complies with the Concession Deed. To secure this obligation, certain revenue (after operating and maintenance costs) for the last three years of the Concession Period must be paid into a escrow account, up to an amount equal to the costs agreed for works to implement the agreed program to achieve the standard of condition required at handover. Dispute Resolution There is a dispute resolution procedure for all disputes connected with the Concession Deed. This involves negotiation, arbitration, expert determination or a combination of these FINANCE TRIPARTITE AGREEMENT Parties The State, SEITA, Concessionaires, ConnectEast Finance and Security Trustee. Purpose This agreement regulates the remedying of Events of Default by the Concessionaires under the Concession Deed, the exercise of rights under the State Deed of Charge and the Financing Documents, and the order of priority of the securities held by the State and the Security Trustee. Consent to Securities The Security Trustee consents to the State Deed of Charge and the State consents to the Lenders Security Documents. Amendment of Financing Documents Notice must be given to the State, and its consent obtained, prior to the Lenders terminating, amending, waiving, or varying any Financing Document. However, consent is not required for: > any novation, assignment or substitution of a Lender, if the Lender has a particular minimum credit rating and it has fully funded its commitment under the Financing Documents; > a permitted refinancing under the Concession Deed; > an amendment required in relation to a permitted modification under the Concession Deed or as a result of agreed redress for a Possible Key Risk Event; > waivers to avoid default, or of conditions precedent; > the exercise of an express unilateral right to make an amendment under a Financing Document; or > other amendments which do not increase principal outstanding, accelerate repayments, increase interest and which satisfy certain other conditions. Assignment of Secured Property The Security Trustee agrees not to exercise its rights under the Lenders Security Documents to dispose of any charged property without the prior consent of the State. The State may not withhold its consent if it is reasonably satisfied that the property is being disposed of to a fit and proper person, who has assumed all of the obligations of the Concessionaires under the Project Documents and has the necessary financial and technical capacity to perform the Concessionaires obligations under the Project Documents. The disposal also must not adversely affect the rights of the State under the Project Documents. Lender s Participation in Meetings The Security Trustee may attend meetings and negotiations under the Concession Deed as an observer. There are restrictions on appointing replacement contractors without State consent. Priorities The parties agree that the order of priority of payment between the State Deed of Charge and the Lenders Security Documents is, at any particular time: (a) first, the State Deed of Charge for certain amounts payable by the Concessionaires to the State under the Concession Deed relating principally to step-in costs and losses suffered

131 SECTION 10 where the Concessionaires elect not to repair or reinstate damage; (b) secondly, the Lenders Security Documents for the aggregate of: (i) the senior finance debt; and (ii) amounts other than senior finance debt due from the Concessionaires because of their breach of a Financing Document at that time. Security Trustee Cure Rights The State acknowledges that the Security Trustee and its controller may, to the extent of enforcing the Lenders Security Documents, exercise the rights of the Concessionaires under the Project Documents. They must first notify the State before doing so. The State acknowledges that the taking of steps by the Security Trustee to enforce the Lenders Security Documents will not of itself give the State the right to terminate the Project Documents. The State will continue to observe the terms of the Project Documents during this time. The Security Trustee and its controller will not be taken to have assumed liability for any of the obligations of the Concessionaires under the Project Documents by reason only of the creation of the Lenders Security Documents. It is acknowledged that the State s rights in relation to access and step in under the Concession Deed may be exercised even if a Controller (defined below) has been appointed or the Security Trustee has otherwise taken enforcement action. At any time prior to termination of the Concession Deed, the Security Trustee may notify the State of its intention to appoint a receiver or other controller (Controller) to endeavour to remedy all events of default under the Concession Deed and to develop a cure program. The State may only terminate the Concession Deed if the Controller fails to remedy the event of default within the permitted time or fails to diligently pursue all steps and actions described in the cure program or, alternatively, the State may terminate if all of the completed traffic lanes of the MFP are not open for use by the general public. The remedy program may be varied from time to time by agreement between the State and the Security Trustee. If an event of default is incurable, the State may elect to require the Security Trustee to cease acting and may terminate the Concession Deed in accordance with its terms STATE DEED OF CHARGE Parties The State, SEITA, the Concessionaires and ConnectEast Finance (each a Mortgagor). Purpose This document sets out the terms on which the Mortgagors grant a first ranking fixed and floating charge to the State over their assets as security for the performance of each of their obligations under the Project Documents. Charging Provision The Mortgagors charge all property to the State to secure the due and punctual performance of their obligations and the due and punctual payment in full to the State of all the money secured under the charge. The charge operates as a fixed charge over all interests in land (including all leasehold interests, all licence interests and all interests in fixtures and improvements), all capital, all machinery, plant and equipment (excluding items which do not exceed $500,000 in value (indexed)), insurance policies and proceeds, goodwill, all approvals, all security interests, all marketable securities, all documents of title, all intellectual property rights, property which would be handed over if the Concession Deed were to terminate, debts and any other rights to recover money or property by legal proceedings (but not amounts credited to bank accounts and the proceeds realised in relation to book debts) and interests in partnerships and joint ventures. The remaining property is subject to a floating charge. Enforcement All money secured under the charge becomes immediately due and payable on demand by the State if the State is entitled to appoint a receiver to the Mortgagors. Appointment of Receiver The State may appoint a receiver to the Mortgagors in limited circumstances, including if: (a) an insolvency event has occurred in relation to the Mortgagors; (b) a notice has been given by the State to terminate the Concession Deed; or (c) the State is exercising a step-in right and the Concessionaires have failed in whole or part to comply with their obligations under the Concession Deed to assist the State to exercise that right; or (d) if the Concessionaires have failed to comply with their handover obligations under the Concession Deed. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 129

132 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 130 SECTION CONSTRUCTION TRIPARTITE AGREEMENT Parties The State, the Concessionaires, the Construction Contractor and Leighton Holdings (Completion Guarantor). A reference to the Construction Contractor includes a reference to the Completion Guarantor to the extent that the Completion Guarantor is performing any obligations of the Construction Contractor under the Design and Construction Contract. Purpose This document sets out the rights between the State, the Concessionaires and the Construction Contractor in relation to the Design and Construction Contract. Acknowledgement The Construction Contractor acknowledges that the Concessionaires may charge the Design and Construction Contract to the State and the Security Trustee. Undertakings of the Construction Contractor The Construction Contractor must notify the State of any default event and give copies of all documents issued by it to the Construction Contractor under the Design and Construction Contract relating to default events. Modifications, variations or amendments to the Design and Construction Contract are generally not permitted without State consent. The State must not withhold or delay its consent if the amendment would not adversely affect the capacity of the Construction Contractor or the Concessionaires to perform their respective obligations, or adversely affect the ability of the State to enforce its rights under the Project Documents, decrease the State s return, increase the State s liability or make it more likely that certain amounts will be payable by the State. In addition no consent is required for modifications expressly permitted under the terms of the Design and Construction Contract. Novation, assignment or substitution of any party rights, obligations or interest in the Design and Construction Contract is not permitted without the State s consent. State Cure Rights The State may, upon becoming aware of any default event, take steps to remedy that default or if it is not capable of remedy, commence and continue to perform the obligations of the Concessionaires under the Design and Construction Contract. The Construction Contractor may only exercise a power to terminate or suspend the performance of any or all of their obligations under the Design and Construction Contract, as a result of a default event if it has given prior notice to the State setting out the details of the default, the Lenders have failed to cure the default and the State has either failed to cure or failed to pay reasonable compensation. If there is no default event, the Construction Contractor may only terminate or suspend the performance of its obligations under the Design and Construction Contract if it has power to do so under the Design and Construction Contract or the State otherwise consents. State Step-in Rights At any time after the State has received notice of a default under the Design and Construction Contract, or after it is entitled to exercise step-in rights under the Concession Deed, the State may: (a) take such action as is permitted by law under the terms of the Project Documents; or (b) by notice to the Construction Contractor, procure that a company which is wholly owned by the State or SEITA assumes jointly and severally with the Concessionaires all of the Concessionaires rights and obligations under the Design and Construction Contract. After the State has given notice that it is entitled to exercise a step-in right, it may perform all or any of the obligations of the Concessionaires under or in relation to the Design and Construction Contract, as if it were the Concessionaires to the exclusion of the Concessionaires at the Concessionaires risk. Each Concessionaire indemnifies the State against any loss suffered by the State in exercising its step-in rights OPERATING TRIPARTITE AGREEMENT Parties The State, ConnectEast Pty Limited, the Operator and Transfield Services Limited. Purpose This document sets out the rights between the State and the Operator in relation to the Operation and Maintenance Contract.

133 SECTION 10 Content The Operating Tripartite Agreement broadly regulates the Operations and Maintenance Contract in the same way as the Construction Tripartite Agreement regulates the Design and Construction Contract FREEWAY CROWN LEASE Parties The State and Asset Trustee. Purpose This document sets out the terms on which the State grants Asset Trustee a lease of the land on which the MFP is built. Reservations The State reserves the right to deal with the Median and to have access to the Median. The State also reserves various other rights in respect of minerals, adjoining land, utility infrastructure and non-road infrastructure. The Proximate State Works regime applies to the exercise of any of these reservations. Grant of Lease Asset Trustee is granted a lease of the land for the Concession Period. Asset Trustee acknowledges that the Lease and its rights in respect of the land are subject to interests, rights, easements and reservations affecting the land and rights reserved by the State under the Concession Deed, including step-in rights. The State makes no representations and warranties in relation to the suitability of the land. Rent Rent under the Freeway Crown Lease is nominal. In certain specified circumstances, additional lease rental may be payable in the amounts determined under the Concession Deed. Risk and Liability Subject to the Concession Deed and obligations undertaken or retained by the State, the Concessionaires accept and bear all risks relating to the use and occupation of the Land. Except in relation to obligations expressly undertaken, or retained by the State under the Project Documents, neither the State nor any of its associates will have any liability in relation to risks relating to the use and occupation of the land. Asset Trustee indemnifies the State against any loss suffered by the State in respect of breaches of the lease. Asset Trustee releases the State, to the maximum extent permitted by law, from all claims and liabilities (except to the extent any claim or liability is caused by the State). Agreement to Sub-Lease Upon the grant of each Freeway Crown Lease to Asset Trustee by the State, Asset Trustee has agreed to sub-lease the relevant land to ConnectEast Pty Limited. The arrangements are back-to-back and, should the Freeway Crown Lease terminate, the Sub-Lease will automatically terminate DESIGN AND CONSTRUCTION CONTRACT The Construction Contractor s obligations under this contract include (without limitation): > designing, constructing and commissioning the MFP (including the tolling system) so that the MFP remains at all times fit for its intended purpose; and > rectifying defects on the MFP for a period of 24 months after the completion of Construction. Payments The Construction Contractor will be paid on a fixed price, fixed time basis. The Design and Construction Contract Price is approximately $2.5 Billion. Variations will be payable in limited circumstances, including for modifications required by the Concessionaires or the State. Extensions of time will be available in very limited circumstances. Generally, ConnectEast Group passes down to the Construction Contractor the right to receive extensions of time and compensation only where they are available to ConnectEast Group, either under the Concession Deed or through its insurance policies. Limitation of liability The Construction Contractor s liability is limited to 100% of the contract price. This limit does not apply to liability for loss, damage and expense caused by the malicious and deliberate or fraudulent acts of the Construction Contractor, its employees and agents. Performance Bonds The Construction Contractor must provide bonds in favour of the Lenders initially amounting to 7.5% of the contract price and bonds in favour of the State initially amounting to 3.5% of the contract price for the State (in satisfaction of the Concessionaires obligation to do so under the Concession Deed). These bonds are to be provided on or before Financial Close. The Construction Contractor must also procure a parent company guarantee from Leighton Holdings in favour of the Lenders which is capped at 100% of the contract price. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 131

134 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 132 SECTION 10 Insurance The Construction Contractor must take out works insurance, workers compensation insurance and motor vehicle insurance. ConnectEast Group will take out public liability insurance and professional indemnity insurance. Where a dispute arises under the Design and Construction Contract which may affect the rights of the parties to the Concession Deed, or where a dispute under the Concession Deed may impact on the rights of the parties to the Design and Construction Contract, it must be resolved in accordance with the Concession Deed. The parties (including the Construction Contractor) agree to be bound by such resolution. To facilitate this process, ConnectEast Group must dispute decisions of the State under the Concession Deed (if the Construction Contractor reasonably request), and give the Construction Contractor an opportunity to make written submissions or observe negotiations. The Concessionaires must not agree to a resolution of the dispute without the written consent of the Construction Contractor and must use their best efforts to obtain relief from the State which would entitle the Construction Contractor to an extension of time or compensation for the delay. Default by Construction Contractor If the Construction Contractor defaults (which includes a material breach, a failure to diligently progress work, a closure of one or more traffic lanes of the MFP other than for permitted reasons, an insolvency event and a failure to comply with an approval or any law) the Concessionaires may give notice requiring it to be remedied within a specific time. If the Construction Contractor fails to remedy the default within that time, and the Construction Contractor is not diligently pursuing such remedy, the Concessionaires may give notice of their intention to terminate. If, after that notice period (being 20 Business Days for events of default other than an insolvency event, for which no time period is necessary), the event of default has not been remedied, or remedy of the event of default is not being diligently pursued, the Concessionaires may terminate the Design and Construction Contract. If the Construction Contractor does not complete the MFP on the Expected Construction Completion Date, the Design and Construction Contract provides a liquidated damages regime which provides for payment by the Construction Contractor of a daily rate designed to compensate ConnectEast Group for operational costs, debt service and equity return for up to 12 months from the Expected Construction Completion Date. The amount of liquidated damages is capped at 100% of the contract price. If the delay in completion of the MFP (including the Tolling System) is due solely to a delay of more than 18 months in the issue of the works approval for the tunnel ventilation system to be used for the tunnel at Mullum Mullum Creek, the liquidated damages payable by the Construction Contractor will be equal to the daily financing and operating costs for the period for the delay plus a further amount of approximately of a cent Stapled Unit per day for a period of not more than 30 days. Extensions of Time for Completion of Construction The Construction Contractor is entitled to extend the date for Completion of Construction (and thus delay the date on which liquidated damages would become payable to ConnectEast Group) for a limited number of delays. These include the occurrence of an Act of Prevention by the State, a discriminatory change in State law, an uninsurable force majeure event, and delays caused by legal challenges to the MFP. However, the Construction Contractor is only entitled to an extension of time if ConnectEast Group firstly receives compensation for its daily financing and operating costs incurred during the period of the delay. In some cases ConnectEast Group may receive that compensation under the Possible Key Risk Event renegotiation process under clause 45 of the Concession Deed, subject to the Possible Key Risk Event having a Relevant Effect on ConnectEast Group OPERATIONS AND MAINTENANCE CONTRACT The Operator will perform its obligations under the Operations and Maintenance Contract for five years from commencement of operations of the last Freeway Section (in addition to the pre-operation activities). The services to be performed by the Operator will be split into two categories core services (which cover the services set out below) and additional services (such as major repairs or improvements). The core services include: > the performance of pre-operation activities; > operating, maintaining and repairing the MFP (other than tolling and customer service) in accordance with the Operations and Maintenance Contract so that the MFP remains at all times fit for its intended purpose; > keeping all traffic lanes of the MFP open for traffic, except to the extent that compliance with the Operations and Maintenance Contract requires closure of lanes; and > the performance of certain aspects of the Customer Services which relate to the operation, maintenance and repair of the MFP (including providing traffic information and incident management and any other customer service requirements of the Project Scope and Project Requirements). ConnectEast Pty Limited retains the right to vary the scope of the activities to be carried out by the

135 SECTION 10 Operator (with the Operator being entitled to an appropriate adjustment to its fee). Payments The Operator will be paid for the performance of the core services, calculated in accordance with a defined payment schedule set out in the Operations and Maintenance Contract. This fee is subject to adjustment for changes in CPI, and particular components of this fee are subject to adjustment for the cost of power and ventilation based on differences between forecast and actual traffic flow. Payment for additional services will be on a cost-plus basis. The parties agree to negotiate in good faith and use reasonable endeavours to agree (within three months prior to the opening of the first Freeway Section) a performance fee payable to the Operator for exceeding certain performance targets. The payment of the performance fee is to be negotiated based on commercial principles set out in the Operations and Maintenance Contract. If the Operator fails to meet defined key performance indicators set out in the Operations and Maintenance Contract, service credits will apply to reduce the amount payable to the Operator. Limitation of Operator s Liability The Operator s liability is limited to $15 million. This limit does not apply to liability for loss, damage and expense caused by the malicious, intentionally wrongful or fraudulent acts of the Operator, its employees and agents, and does not apply in relation to any service credits for which the Operator is responsible for failing to meet the key performance indicators. Bonding and Insurance The Operator must provide unconditional bank undertakings of $5 million, and is under an obligation to top-up the bank undertakings to $10 million if the Operator fails to correct a non-compliance within a period specified in a notice from ConnectEast Pty Limited. The Operator must take out workers compensation insurance and motor vehicle insurance. ConnectEast Pty Limited will take out project-specific contract works insurance and public liability insurance. Disputes Where a dispute arises under the Operations and Maintenance Contract which may affect the rights of the parties to the Concession Deed, or where a dispute under the Concession Deed may impact on the rights of the parties to the Operations and Maintenance Contract, such a dispute is to be resolved in accordance with the Concession Deed. The Operator agrees to be bound by that resolution. To facilitate this process, ConnectEast Pty Limited must dispute decisions of the State under the Concession Deed (if the Operator reasonably requests), and give an opportunity for the Operator to make submissions or participate in negotiations. ConnectEast Pty Limited must not agree to a resolution of the dispute without the written consent of the Operator. Default by the Operator If the Operator defaults (which includes a material breach, a failure to diligently progress work, a failure to operate, maintain and repair the facilities as required, a closure of one or more traffic lanes of the MFP other than for permitted reasons, an insolvency event and a failure to comply with an approval or any law) ConnectEast Pty Limited may give notice requiring the default to be remedied within a specific time. If the Operator fails to remedy the default within the required time, and the Operator is not diligently pursuing such remedy, or all of the lanes of the MFP are not open to traffic, ConnectEast Pty Limited may give notice of its intention to terminate FINANCING DOCUMENTS Loan Note Subscription Agreement The Concessionaires and ConnectEast Finance will enter into a loan note subscription agreement with a syndicate of Lenders, an Agent and a Security Trustee. The facilities to be provided under the agreement will comprise the following: Equity Bridge Facilities: maximum of $260 million and $30 million respectively (to fund construction, development, operating and finance costs. This is a bridge facility to fund costs until Stapled Units are subscribed under the Deferred Equity Commitment Deeds). Construction and maximum of $2,200 million Term Facility: (to fund construction, development, operating and finance costs). Bank Bond Facility: maximum of $7.5 million (to fund the operation phase bonds required to be provided by ConnectEast Pty Limited under the Concession Deed). Drawings under the Construction Facility will convert to the Term Facility on Construction Completion. The Equity Bridge Facilities will be repaid from the Deferred Equity Tranche under the Deferred Equity Commitment Deeds. ConnectEast Finance will enter into back-to-back agreements with ConnectEast Asset Trust to on-lend the funds borrowed by it to ConnectEast Asset Trust (i.e. the First Onlending Agreement), and CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 133

136 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 134 SECTION 10 ConnectEast Asset Trust will enter into back-to-back agreements with ConnectEast Pty Limited to on-lend some of the funds to ConnectEast Pty Limited (i.e. the Second Onlending Agreement), consistent with ConnectEast Finance s obligations under the Facility. The Loan Note Subscription Agreement contains mechanisms as to the treatment and distribution of revenue by the Concessionaires. From Construction Completion, all revenue and proceeds of asset sales, proceeds of senior debt or equity, and other specified amounts must be paid into a proceeds account. Withdrawals from this account are subject to a priority waterfall to ensure that certain costs (such as operating costs, maintenance and repair costs, financing costs, scheduled repayments of principal, contributions to reserve accounts, mandatory prepayments, deferred payments to the Construction Contractor, Operator performance fees and fees of CEML, as responsible entity) are met before distributions to equity and repayments of Unitholder loans are permitted. Further, distributions to equity will only be permitted if certain conditions are satisfied, including that Completion has occurred, that the Concessionaires and ConnectEast Finance are not in default or potential default, the balance of a ramp-up reserve account has been released (designed to meet early construction, operating and finance costs), and certain interest cover ratios (present and forward-looking) and a loan life cover ratio are satisfied. Also, such distributions must not be made more than quarterly. These distributions restrictions do not apply to any distribution on units issued by ConnectEast Asset Trust or shares issued by ConnectEast Pty Limited if, and only if the distribution is applied by way of set off against the issue price for new units issued by Asset Trust or shares issued by ConnectEast Pty Limited, and no actual cash payment is made by ConnectEast Asset Trust or ConnectEast Pty Limited. The Concessionaires must also maintain a debt service reserve account, an operation reserve account, a KPI Credit reserve account and a maintenance and repair reserve account, each being subject to a requirement to maintain certain minimum balances. The Loan Note Subscription Agreement also contains a range of mandatory prepayment events which, if triggered, require ConnectEast Finance to repay either the Construction Facility or the Term Facility. These include: > a cash sweep of the main proceeds account if a particular interest cover ratio or loan life cover ratio is not satisfied at a specified calculation date; > insurance proceeds received in circumstances where it is not economically viable to repair the asset for which they were received; > certain payments made to the Concessionaires by the State under the Concession Deed; > the proceeds of certain permitted disposals of assets; > the balance of the disbursement account after remaining construction and development costs have been met; and > between the eighth and tenth anniversaries of the date when each of the conditions precedent to drawing under the Loan Note Subscription Agreement has been satisfied, 50% of amounts that would otherwise be available as distributions to equity. In addition, the Loan Note Subscription Agreement contains a range of representations and warranties and undertakings on the part of ConnectEast Finance and the Concessionaires and events of default. Breach of these will result in the Lenders being able to exercise acceleration rights (subject to the Finance Tripartite Agreement) to require the senior debt to be repaid early and enforce its security. Securities The obligations of ConnectEast Finance under each Facility and the associated interest rate management agreements are secured. The security will include: (a) fixed and floating charges over all the assets and undertakings of ConnectEast Finance, ConnectEast Pty Limited and ConnectEast Asset Trust. The charges will include a featherweight floating charge (enforceable only during the appointment of an administrator) over the distribution account; (b) real property mortgages over the Freeway Leases; (c) a limited recourse third party mortgage granted by ConnectEast Investment Trust 2 and ConnectEast Holding 2 Pty Ltd over their respective shares or units, as applicable, in each of ConnectEast Asset Trust (and its trustee), ConnectEast Pty Limited and ConnectEast Finance. The benefit of the securities will be held by a Security Trustee on behalf of the Lenders and the providers of interest rate management hedging. Consent Deeds There will be two consent deeds providing the Lenders with certain controls over the Design and Construction Contract and the Operations and Maintenance Contract, and other related matters. Specifically, the documents will include:

137 SECTION 10 (a) (in respect of the Construction Consent Deed only), security bonds in a form and by a bank or insurance company issuer or issuers acceptable to the Lenders, being available to meet any obligation of the Design and Construction Contract owed to ConnectEast Pty Limited; (b) restrictions on variations, providing that no variations are to be agreed without the approval of the majority of Lenders; (c) restrictions on termination and suspension rights; and (d) consent to security and assignment by banks. Each consent deed will also contain a guarantee from (in the case of the Construction Consent Deed) Leighton Holdings and (in the case of the Operations and Maintenance Consent Deed) Transfield Services Limited. The guarantee will cover the performance of obligations under the Design and Construction Contract and Operations and Maintenance Contract respectively and payment defaults by the Construction Contractor and the Operator respectively CUSTODY DEED The Custody Deed between Trust Company of Australia Limited (Custodian) and CEML is dated 21 April The Custody Deed appoints the Custodian to hold the property of the ConnectEast Unit Trusts and the property of ConnectEast Investment Trust 2 on trust for CEML. The Custodian will act in accordance with the instructions of CEML. The terms of the Custody Deed include the specific requirements of ASIC policies UNDERWRITING AGREEMENT Under the Underwriting Agreement, the Underwriters agree to underwrite: > an offer of Stapled Units made by CEML to both retail and wholesale investors (Offer); and > the call on the partly paid Stapled Units (Call). Each Underwriter will undertake to underwrite a set portion of the Offer and a set portion of the Call. The Underwriters may appoint sub-underwriters. The Underwriters have agreed to subscribe for up to 50 million Stapled Units on a deferred settlement basis to cover potential interest rate movements between 30 July 2004 and Financial Close. No retail clients may subscribe for these Stapled Units which may be redeemed for the Initial Instalment depending upon interest rates at Financial Close. The Underwriting Agreement contains various representations and warranties, and imposes various obligations on CEML including to ensure that the PDS complies with the Corporations Act and the Listing Rules and that the offer documents and public information will not contain any material statements which are misleading or deceptive or any material omissions. The Underwriters may terminate the Underwriting Agreement on the occurrence of certain events between the date of the Underwriting Agreement and 20 business days after the date the PDS is lodged with ASIC. These events are: (a) an adverse change occurs in the assets, liabilities or financial position of ConnectEast Group; (b) change of law making the Offer illegal; (c) debt funding not being available on or prior to Financial Close; or (d) a breach of the Transaction Documents. Each Underwriter will receive: (a) a Call underwriting commission of 0.5% of the Underwriter s portion of the Final Instalment payable on Financial Close; (b) an underwriting commission of: (i) 3.60% of the Issue Price per Stapled Unit on that Underwriter s portion of the Offer payable on Financial Close; and (ii) 0.25% of the Issue Price per Stapled Unit on that Underwriter s portion of the Offer. This fee will be paid to each Underwriter on the Final Instalment Payment Date and will be immediately reinvested in fully paid Stapled Units issued at $1.00 per Stapled Unit; (c) reimbursement of certain costs incurred in respect of the Offer and the Call including: (i) all legal costs in accordance with their engagement letters; (ii) if Financial Close occurs, any additional out of pocket expenses to a maximum of $50,000 per underwriter (treating MECM and Macquarie Bank as one for the purposes of this maximum); (iii) stamp duty payable in respect of the agreement; (iv) any sub-underwriting and commitment fees in excess of $3 million offered or incurred prior to 27 April 2004; and (v) all reasonable costs in respect of any review of the PDS undertaken by ASX, ASIC or other regulatory bodies. MECM is also to receive an arranging fee of: (a) 0.4% of the Initial Instalment of the underwritten Stapled Units payable on Financial Close; and (b) 0.4% of the Final Instalment payable on Financial Close. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 135

138 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 136 SECTION DEFERRED EQUITY COMMITMENT DEEDS In addition to the above equity, Stapled Units will be issued to John Holland and Thiess in accordance with the D&C Deferred Equity Commitment Deed on or before a specified subscription date for a total subscription price equal to $260 million at $1.15 per fully paid Stapled Unit. The obligation is supported by an unconditional direct pay letter of credit (Equity Support). Asset Trustee will pay Thiess and John Holland an equity support fee of $24 million at Financial Close as a condition of their obligations under the D&C Deffered Equity Commitment Deed. The subscription date will be the earliest to occur of: (a) the date of Completion; (b) the date which is 49 months after Financial Close; and (c) demand being made after the occurrence of an event of default under the senior financing documents (unless it has been waived or remedied) (D&C Deferred Equity Distribution Date). Equity Support may also be drawn if the party which has provided the Equity Support fails to provide replacement Equity Support when required (for example, on a downgrade of the issuer of the Equity Support). The minimum amount of equity committed to be provided by Thiess and John Holland (or one or more of their representative subsidiaries) is $130 million each. Restrictions are placed on Thiess and John Holland from disposing of a number of Stapled Units until the second anniversary of Completion and from disposing of more than half of that amount until the third anniversary of Completion. In addition to the above equity, Stapled Units will also be issued to Macquarie Bank in accordance with the MBL Deferred Equity Commitment Deed on or before a specified subscription date for a total subscription price equal to $30 million at $1.00 per fully paid Stapled Unit provided that Macquarie Bank receives fees of $30 million on Financial Close. The obligation is also supported by an unconditional direct pay letter of credit. The subscription date under the MBL Deferred Equity Commitment Deed is the earliest to occur of: (a) demand being made after the occurrence of an event of default under the senior financing documents (unless it has been waived or remedied); and (b) 12 months after Financial Close (MBL Deferred Equity Contribution Date). If Macquarie Bank subscribes this amount prior to the record date for a Distribution, Macquarie Bank will be entitled to the full amount of that Distribution on its Stapled Units payable on the relevant Distribution date. The terms of MBL Deferred Equity Commitment Deed are similar to those in the D&C Deferred Equity Commitment Deed, except that: > Macquarie Bank s obligation to subscribe is conditional on Macquarie Bank receiving fees of $30 million on Financial Close; > the subscription price is $1.00 per fully paid Stapled Unit; and > Macquarie Bank is not subject to any restrictions on disposal of the Stapled Units. In each case, Stapled Units will rank pari passu with existing Stapled Units on issue at that time MANAGEMENT DEEDS Under two Management Deeds, CEML, the Trustee, Asset Trustee and ConnectEast Holding 2 Pty Ltd and ConnectEast Finance (each a Delegator), each delegate the management of the day-to-day business affairs of ConnectEast Group to ConnectEast Pty Limited. The delegation under the deeds does not relate to financial services matters for which CEML and Trustee will appoint certain ConnectEast Pty Limited executives to provide certain services and advice pursuant to the terms of a Financial Services Appointment Letter. This delegation is needed in order to satisfy the State s requirement that there must be a single point of contact for all dealings with the State in relation to the MFP, regardless of how many entities are comprised in ConnectEast Group structure. Under each of the Management Deeds, ConnectEast Pty Limited is appointed to manage the day-to-day business affairs of ConnectEast Group for an initial term of six years, and the term will be automatically renewed for a further three-year term, unless any party gives six months notice prior to the end of the term. ConnectEast Pty Limited is not paid a management fee under the Management Deeds. However, ConnectEast Pty Limited is entitled to be reimbursed by the Delegators for all costs properly paid by ConnectEast Pty Limited in performing its functions under the Management Deeds, other than costs which: (a) are not paid out of the assets of the relevant Delegator, or (b) in respect of which CEML, in its capacity as responsible entity, is not indemnified by the relevant trust under the terms of the Constitution of the relevant trust. ConnectEast Pty Limited s authority is subject to certain limitations. In particular, it cannot embark

139 SECTION 10 on a new line of business, incur or assume debt or any guarantee in excess of $500,000 in the aggregate, incur capital expenditure in excess of $1 million in the aggregate, or make a Distribution, dividend or materially change any Distribution or dividend policy or appoint or remove key personnel without the consent of the relevant Delegator. Each Delegator may terminate the relevant Management Deed if ConnectEast Pty Limited commits a breach of trust, ConnectEast Pty Limited breaches applicable law, ConnectEast Pty Limited fails to hold or maintain the necessary licences to perform its obligations under the Management Deed, a Delegator determines that termination is required in order to comply with applicable law, and in the case of CEML, in its capacity as the responsible entity of the ConnectEast Unit Trusts, CEML is obliged to terminate under the terms of any applicable Constitution, applicable law, or any resolution binding on it or any stock exchange listing rule. The key personnel of ConnectEast Pty Limited must be approved by the Delegators and ConnectEast Pty Limited must notify the Delegators of any changes in key personnel. Any party to the relevant Management Deed may terminate the deed if the other party is in default. A defaulting party includes where a party suspends payments of its debts, a party that enters into any arrangement with its creditors, a party that ceases or threatens to cease carrying on business, an administrator or receiver is appointed in respect of the party, steps are taken to wind up the party, a notice or application is made under section 601AB and section 601AA of the Corporations Law respectively or any representations or warranties given by the party are or become untrue in a material respect. If the Delegator considers that there has been unsatisfactory performance by ConnectEast Pty Limited of its obligations under the Management Deed, the parties must meet and attempt to negotiate a program to rectify the unsatisfactory performance or a program for its prevention in the future. If the parties are unable to agree on a program, ConnectEast Pty Limited fails to implement the program or does not comply with the program, the Delegator may terminate the relevant Management Deed. ConnectEast Pty Limited indemnifies each Delegator from any losses arising from any claim brought against it by a third party in connection with the Management Deeds and for any breach of ConnectEast Pty Limited s obligations under the Management Deeds, but only if such loss arises from the negligence, wilful default or fraud of ConnectEast Pty Limited s employees, agents or contractors DISTRIBUTION REINVESTMENT PLAN (DRP) Overview CEML may permit or require the Unitholders to reinvest some or all of any Distribution in additional Stapled Units. During the Fixed Distribution Period, CEML will implement a Selective Reinvestment, which means all or any part of the Distributions will be automatically reinvested in Stapled Units on behalf of the Unitholder unless the Unitholder notifies CEML in writing to the contrary. The DRP will be underwritten during the Fixed Distribution Period by the DRP Underwriters, with the exception of the first two Distributions for the periods ending 31 March 2005 and 30 September 2005, which will not be underwritten, but will be pre-funded through the Offer. To the extent that Unitholders are not eligible to participate in the DRP or elect in writing not to participate in the underwritten DRP following the first two distributions, the DRP Underwriters will subscribe for Stapled Units to fund the cash Distribution to be made to Unitholders. If a Unitholder does not participate in the DRP, the issue of new Stapled Units under the DRP (including to the DRP Underwriters) will dilute that Unitholder s holding of Stapled Units relative to other holders of Stapled Units. Certain circumstances may arise, such as where ConnectEast Group is in Distribution Lock-up, in which Unitholders will not have the option of receiving cash Distributions and, as such, will automatically receive their Distributions as Stapled Units on the same terms as set out in the DRP (see Sections and for further details). Purpose of DRP The purpose of the DRP is to provide Unitholders with an ability to reinvest all or part of their Distributions in additional Stapled Units in ConnectEast. The DRP will commence on the Allotment Date. Eligibility All Unitholders are eligible to participate in the DRP unless CEML determines that: > it would be unlawful, impractical or impossible for the Unitholder to participate; > such participation would cause an adverse effect on the regulatory approvals or licences which the ConnectEast Unit Trusts hold or for which they intend to apply; or > the Unitholder has a registered address in a place where a participation would require the issue of a prospectus or product disclosure statement under foreign law. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 137

140 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 138 SECTION 10 Participation Participation in the DRP is optional, however unless a Unitholder elects in writing not to participate in the DRP or is not eligible to participate in the DRP, Distributions on all of a Unitholder s Stapled Units will be reinvested in additional Stapled Units during the Fixed Distribution Period. A Unitholder may at any time elect to vary their level of participation in the DRP or withdraw from the DRP (see Welcome Pack below). Stapled Units issued under the DRP and any bonus Stapled Units issued in respect of Stapled Units will be added to the Unitholders Stapled Units. CEML may at any time: > suspend or terminate the DRP if the issue of Stapled Units would breach any law or a distribution will not be made; > limit the amount of a Distribution which may be reinvested under the DRP; > in its absolute discretion determine that a Unitholder may not participate in the DRP without being bound to give any reason for doing so; > require all eligible Unitholders to participate fully in the DRP notwithstanding that a Unitholder has elected not to participate in the DRP or has elected not to participate fully in the DRP; and > require an increase in Unitholders participation in the DRP, notwithstanding a Unitholder s election under a Notice of Variation. Welcome Pack Shortly after Allotment Date, Unitholders will be mailed a Welcome Pack which will contain the ConnectEast Distribution Reinvestment Plan Rules (DRP Rules). These DRP Rules set out the detailed terms of the DRP and Unitholders are encouraged to read them and not to rely on this summary. In the event of any inconsistency between the DRP Rules and this summary, the DRP Rules will prevail. The DRP Rules will also contain information on how to vary or terminate a Unitholder s participation in the DRP (see below). Variation of Level of Participation or Withdrawal from the DRP Participating Unitholders may vary the level of participation or withdraw from the DRP at any time by completing a Notice of Variation and returning it to the Registry. The variation or withdrawal will be effective for the next Distribution, provided the Notice of Variation is received on or prior to the DRP election date for that Distribution. CEML will notify Unitholders of the DRP election date in accordance with the DRP Rules. Entitlement On each Distribution payment date, participating Unitholders will be entitled to be issued the nearest whole number of Stapled Units (rounding down) which can be acquired at the issue price using the cash Distribution on the Stapled Units in the relevant unitholding account. If there is a cash amount remaining after Stapled Units have been issued under the DRP, that amount will be carried forward to the next Distribution and will be added to that Distribution in determining the number of Stapled Units to be issued under the DRP on that next Distribution Date. Stapled Units will not be issued under the DRP if the issue would breach any provision of any applicable law or if CEML determines not to make a Distribution. Any Distributions on Stapled Units which CEML is entitled to retain under the Constitutions or otherwise will not be available for subscription under the DRP. If withholding tax is payable in respect of a Distribution that tax will be deducted and only the balance will be applied in subscribing for Stapled Units. Issue Price of DRP Stapled Units Stapled Units allotted under the DRP will be issued at the Average Price, less a discount of 5%. Costs The issue of Stapled Units under the DRP will not be subject to brokerage, commissions, stamp duty or other transaction costs. Ranking of DRP Stapled Units Stapled Units issued under the DRP will rank equally in every respect with ConnectEast Unit Trusts existing issued Stapled Units and will participate in all Distributions subsequently declared or paid. For the avoidance of doubt, Stapled Units issued under the DRP while the Stapled Units are partly paid will be partly paid Stapled Units and Stapled Units issued under the DRP when the Stapled Units are fully paid will be fully paid Stapled Units. Accordingly, Unitholders will be obliged to pay the Final Instalment in respect of the total number of partly paid Stapled Units held by them at the Final Instalment Date. DRP Records Unitholders participating in the DRP will be mailed a statement at the time of each Distribution payment showing, for each unitholding account, full details of the amount of Distribution entitlement, the issue price, the number of Stapled Units issued and any residual Distribution carried forward.

141 SECTION 10 Sale of Stapled Units Unitholders participating in the DRP may sell any of their Stapled Units, including Stapled Units participating in the DRP or issued under the DRP, at any time. If a Unitholder does not give CEML a Notice of Variation in respect of the sale, the Stapled Units sold will, to the extent possible, be taken to be Stapled Units that are not participating in the DRP. Stapled Units which are transferred are deemed on registration of a valid transfer document to participate fully in the DRP. The purchaser of the Units may vary the level of participation or withdraw from the DRP by completing a Notice of Variation as set out above. Stock Exchange Listing Application will be made for all Stapled Units allotted under the DRP to be quoted on ASX. Taxation Unitholders participating in the DRP will be liable to include Distributions under the DRP in their taxable income on the same basis as if those Distributions had been received in cash. CEML does not take responsibility for the taxation liability of Unitholders. For further details, refer to Section However, we recommend that Unitholders obtain independent professional taxation or financial advice. Modification and Termination of the DRP The DRP may be varied, suspended or terminated by CEML at any time by giving participating Unitholders written notice as provided in the DRP Rules DRP UNDERWRITING The DRP Underwriting Agreement provides that the DRP will be underwritten by the DRP Underwriters during the Fixed Distribution Period, with the exception of the first two distributions for the periods ending 31 March 2005 and 30 September 2005 which will not be underwritten (Underwritten Period). The DRP Underwriters agree to provide an aggregate underwritten facility of $400 million (Underwriting Facility), to be applied by CEML, at its discretion, in any proportion and to any or all offers of Stapled Units during the Underwritten Period as required. In addition, the DRP Underwriters obligation to underwrite a Distribution is subject to certain limitations and will not exceed 3.5% of the market capitalisation of the Stapled Units (as at the close of trading on the record date for the Distribution) plus 50% of the amounts (if any) sub-underwritten (as at the same date). These dates may be varied by the parties. CEML may elect not to have a Distribution underwritten or to have a Distribution partially underwritten by the DRP Underwriters during the Underwritten Period. The DRP Underwriting Agreement contains various representations and warranties, and imposes various obligations on CEML, including that the ConnectEast Unit Trusts are not in breach of the Listing Rules or the Corporations Act to an extent that is material to the ConnectEast Unit Trusts or the DRP. The DRP Underwriters may terminate the DRP Underwriting Agreement on the occurrence of certain events between the declaration date and 9.00am on the business day prior to the Distribution Payment Date for that Distribution. These events are standard DRP underwriting termination events. Each DRP Underwriter will receive: (a) a fee of 1.5% of that DRP Underwriter s portion of the Underwriting Facility; (b) an underwriting commission of 2.5% of that DRP Underwriter s portion of the value of the DRP Underwriting as required to be paid at the time of the DRP Underwriting; (c) reimbursement of certain costs incurred in respect of the DRP offer including: (i) all reasonable legal costs and additional out-of-pocket expenses; (ii) stamp duty payable in respect of the agreement; and (iii) all reasonable costs in respect of any review of the DRP offer for each Distribution of Stapled Units undertaken by ASX, ASIC or other regulatory bodies MFP LEGISLATION Scope of MFP Legislation The MFP Legislation, namely the Mitcham-Frankston Project Act 2004, broadly does the following: > authorises entry into the Concession Deed; > grants land acquisition powers in respect of the area required for the MFP; > modifies laws relating to land use and approvals in respect of the area required for the MFP; > governs the interface with utilities within the MFP area; > provides for road management powers; and > provides for the Concessionaires ability to levy and collect tolls (and enforce non-payment). Effect of Concession Deed The MFP Legislation authorises the State to enter into the Concession Deed. The Concession Deed will not have the force of law, however breaches of the Concession Deed by the State may be the subject of an action by the Concessionaires against the State. The MFP Legislation is expressed to prevail over the Concession Deed in the event of inconsistency. CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 139

142 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 140 SECTION 10 Land Acquisition Powers SEITA is given broad powers to compulsorily acquire land necessary for the MFP and the power to purchase land that has not previously been identified as necessary for the MFP by agreement with the relevant landowners. SEITA is authorised to license the relevant land to the Concessionaires for the purposes of construction and, upon completion, the State will lease the land to the Concessionaires. Road Management Powers Under the MFP Legislation, the Concessionaires are given certain powers to open, close and relocate roads to facilitate construction of the MFP. It will also be the responsible road authority for the MFP and have the functions of providing and maintaining the road, managing traffic and coordinating installation of infrastructure. VicRoads and Councils will not be able to exercise road management functions in respect of the MFP. The Concessionaires will have similar road management powers as other road authorities, aside from powers peculiar to public or statutory authorities. The Concessionaires will be able to rely on similar (but not identical) protections granted to road authorities as set out in the Road Management Act For instance, in an action for failure to maintain the MFF, the Concessionaires may rely on a defence that it has taken such care as in all the circumstances is reasonably required to ensure the relevant part of the public road was not dangerous for traffic. Statutory Approvals and Exemptions With some exceptions (such as EPA approvals), the MFP Legislation provides exemptions from requirements to obtain statutory approvals to construct the MFP, though these must still be obtained from SEITA. There are instances where further approvals may be required, such as environmental approvals if the Concessionaires submit an alternative proposal that requires construction outside the area originally contemplated or with respect to the Dandenong Southern Bypass. Although most construction will not require planning approval, some matters may require a planning permit, such as construction of the traffic control centre, the placement of advertising signs and the relocation of utility infrastructure. Both the MFP Legislation and Concession Deed indicate that the State will undertake to resolve issues with native title so far as the Project Area is concerned. The MFP Legislation also contains a mechanism which allows for the compulsory acquisition of native title rights and interests which will facilitate the resolution of native title issues (should they arise). Tolling The legislative right to charge and collect tolls (and applicable administrative fees) is enshrined in the MFP Legislation. The MFP Legislation provides for the charging and enforcement of tolls against casual users, not users who have entered into freeway use agreements or who are party to freeway use agreements with a prescribed interoperable toll operator. The Concessionaires will be required to enforce their contractual rights against persons subject to freeway use agreements with each contracted customer. The Concessionaires may seek to recover the applicable tolls and administrative fees by written demand. There is a two-step process of issuing two written demands prior to issuing an infringement notice or commencing enforcement proceedings. The MFP Legislation creates an offence for a driver to use the MFP without paying the relevant toll and administrative fee within 14 days of service of the second demand by the Concessionaire requiring payment. If after 14 days the Concessionaire has not received payment, it may request the enforcement agency to issue an infringement notice to the owner of the vehicle ASIC MODIFICATIONS ASIC has granted a number of modifications to and an exemption from the Corporations Act to the ConnectEast Unit Trusts, including: > modifying paragraphs 601FC(1)(c) and 601FD(1)(c) of the Corporations Act to permit CEML to have regard to the interests of Unitholders in the ConnectEast Unit Trusts rather than members interests on a scheme by scheme basis; > modifying paragraph 601GA(1)(a) of the Corporations Act to permit the Issue Price of a Stapled Unit to be determined by the CEML once the Stapled Units are officially quoted (CEML to allocate the issue price for the Stapled Unit between the components of that Stapled Unit); > granting an exemption under section 601QA(1) of the Corporations Act from compliance with Part 5C.7 of the Corporations Act to enable CEML and entities it controls to give financial benefits out of scheme property of the ConnectEast Unit Trusts to other entities in the ConnectEast Group; > granting an interim exemption under section 601QA(1) of the Corporations Act in respect of section 601GA(1)(a) to permit registration of the ConnectEast Unit Trusts as registered managed investment schemes notwithstanding the definitions of Transaction Costs and Liabilities and the valuation methodologies set out in the Constitutions; > a modification of section 1012D(3) of the Corporations Act so that the exemption from the

143 SECTION 10 requirement to give a PDS under the DRP applies in respect of the Stapled Units; and > a modification of section 1017E of the Corporations Act to the extent necessary to permit CEML to hold application monies for the Stapled Units in one account ASX WAIVERS ASX has: (a) granted the ConnectEast Unit Trusts waivers from: > condition 7 of Listing Rule 1.1 to the extent necessary not to require each of the ConnectEast Unit Trusts to have Unitholders holding a parcel of units with a value of at least $2,000 on the condition that the units are stapled together and the value of a parcel of Stapled Units will be greater or equal to $2,000; > condition 8 of Listing Rule 1.1 in respect of compliance with Listing Rule 1.3 on the basis that the ConnectEast Unit Trusts will together satisfy the assets tests in Listing Rule 1.3; > condition 2 of Listing Rule 2.1 on the basis that the Stapled Units (rather than each individual unit) will have an Issue Price and paid up value of at least 40 cents; > Listing Rule 6.24 in respect of item 1 of Appendix 6A to permit an estimated Distribution rate to be advised to ASX on the same day that the record date for determining entitlement to the Distribution is announced, and the actual Distribution rate to be advised to ASX as soon as it becomes known; > Listing Rule 8.10 to the extent necessary to permit CEML to refuse to register a transfer of a unit in a ConnectEast Unit Trust if not accompanied by a transfer of a unit in the other ConnectEast Unit Trust; > Listing Rule 10.1 to allow the transfer of substantial assets between the ConnectEast Unit Trusts without Unitholder approvals; > Listing Rule 6.11 to the extent necessary to permit the Distribution to be paid on a partly paid Stapled Unit prior to the Final Instalment Payment Date to be calculated on the basis that the partly paid Stapled Unit is fully paid; > Listing Rule 7.1 to the extent necessary to permit the issue of Stapled Units under each of the Deferred Equity Tranches, the Underwriting Agreement, the Put and Call Option, the DRP and the DRP Underwriting without Unitholder approval provided certain conditions are satisfied; > Listing Rule to the extent necessary to permit the issue of Stapled Units under each of the Deferred Equity Tranches, the Underwriting Agreement, the Put and Call Option, the DRP and the DRP Underwriting without Unitholder approval provided certain conditions are satisfied; > Listing Rule on the basis that the ConnectEast Unit Trusts will not have audited accounts for three full financial years because the ConnectEast Unit Trusts have not been in existence for such period; and (b) given the ConnectEast Unit Trusts confirmation that: > the Constitutions are consistent with the Listing Rules; > the terms of the Stapled Units comply with the requirements of Listing Rule 6; > disclosure by one ConnectEast Unit Trust of matters in respect of the Stapled Units under Listing Rule 3.1 satisfies the disclosure requirements of the other ConnectEast Unit Trust in respect of the same matter; > the partly paid Stapled Units call program is acceptable having regard to Condition 4 of Listing Rule 2.1; > the partly paid Stapled Units voting and distribution arrangements are acceptable having regard to condition 1 of Listing Rule ; > the right to divest a holder of their partly paid Stapled Units on a failure to pay a call when due and payable is acceptable having regard to Listing Rule and is appropriate and equitable having regard to Listing Rule ; > the right to a lien over the partly paid Stapled Units on a failure to pay a call when due and payable is acceptable having regard to Listing Rule ; > the terms of the DRP are acceptable having regard to Listing Rule 7.8; > the change in the amount of Distributions paid after the Fixed Distribution Period does not breach Listing Rule 6.10; > ConnectEast Unit Trusts are not investment entities as defined in Listing Rule 19 for the purposes of the Listing Rule 1.3; > the business objective of the ConnectEast Unit Trusts are satisfactory to ASX given that ConnectEast Unit Trusts only asset (after raising funds) will be the cash received under the Offer and that ASX will not suspend quotation of the Stapled Units under Listing Rule 12.3; and CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 141

144 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 142 SECTION 10 > the Stapled Units will be classified as deferred settlement for a short period after official quotation INTERESTS AND BENEFITS OF ADVISERS AND EXPERTS Macquarie Equity Capital Markets, Macquarie Bank, ABN AMRO Rothschild and Commonwealth Securities have each acted as Underwriters to the Offer and are each entitled to receive the fees set out in the summary of the Underwriting Agreement in Section Macquarie Equity Capital Markets has also acted as Arranger to the Offer and is entitled to receive the additional fees set out in the summary of the Underwriting Agreement in Section Deloitte Touche Tohmatsu has prepared the Investigating Accountant s Report contained in this PDS and has been paid or will be paid $305,000 (excluding GST and disbursements). Hyder Consulting has provided traffic consulting services for ConnectEast Group s bid for the MFP and prepared the Traffic Report contained in this PDS and has been paid or will be paid an amount not exceeding $2 million (excluding GST). Macquarie Bank has been a Sponsor of ConnectEast Group s bid for the MFP. For this role, Macquarie Bank will be paid $7.5 million (excluding GST and disbursements) on Financial Close (as a development fee) and ConnectEast Group will pay or reimburse Macquarie for all out of pocket costs in relation to the bid. Macquarie Bank has acted as financial adviser to ConnectEast Group s bid for the MFP and the Offer. For this role, Macquarie Bank will be paid the following fees on Financial Close: 1. A completion fee of 1% of the total capital cost of the MFP being the total sources of funds of the ConnectEast Group which includes any capitalised interest and development costs, fees and reserves, the projected proceeds of the Final Instalment and any amounts projected to be raised pursuant to the DRP during the Construction Period. Based on interest rates as at 30 July 2004, the completion fee is approximately $37.64 million (excluding GST and disbursements). The final completion fee will depend on the total capital cost of the MFP determined on Financial Close pursuant to the mechanism for adjusting initial tolls for changes in interest rates between 30 July 2004 and Financial Close described in the summary of the Concession Deed in Section A syndicate management fee of 2% of the amount of equity being raised by ConnectEast Group including the value of the DRP Underwriting Facility and the projected proceeds of the Final Instalment but in all cases excluding any equity underwritten by the Macquarie Bank Group, any equity subscribed by the Construction Contractors and that amount (if any) of up to 50 million Stapled Units that it is determined on Financial Close are not required pursuant to to the mechanism for adjusting initial tolls for changes in interest rates between 30 July 2004 and Financial Close described in the summary of the Concession Deed in Section Based on interest rates as at 30 July 2004, the syndicate management fee is approximately $18.51 million (excluding GST and disbursements). The final syndicate management fee will depend on the amount (if any) of up to 50 million Stapled Units that it is determined on Financial Close are not required pursuant to to the mechanism for adjusting initial tolls referred to above. Macquarie Bank has agreed to subscribe for Stapled Units under the MBL Deferred Equity Commitment Deed which is summarised in Section Thiess has been a Sponsor of ConnectEast Group s bid for the MFP. For this role, Thiess will be paid $7.5 million (excluding GST and disbursements) on Financial Close. ConnectEast Group will pay or reimburse Thiess for all of its out of pocket costs in relation to the bid, except those borne by it in its capacity as Construction Contractor (which are recovered by Thiess through its D&C price). Thiess (together with John Holland) has agreed to subscribe for Stapled Units under the D&C Deferred Equity Commitment Deed and is entitled to receive the fees set out the summary of the Deferred Equity Commitment Deeds set out in Section Mallesons Stephen Jaques has advised ConnectEast Group in relation to its bid for the MFP and the Offer and has been paid or will be paid $6,850,000 (excluding GST and disbursements). URS has provided engineering consulting services for ConnectEast Group s bid for the MFP and prepared the Engineering Consultant s Report contained in this PDS and has been paid or will be paid an amount not exceeding $550,000 (excluding GST and disbursements) BENEFITS TO RELATED PARTIES Macquarie Bank Macquarie Bank was issued 1,818 partly paid Stapled Units on the establishment of the ConnectEast Unit Trusts. Macquarie Bank is a party to the Underwriting Agreement and is entitled to receive from CEML the fees set out in the summary of the Underwriting Agreement in Section Macquarie Bank has been a Sponsor and financial adviser for ConnectEast Group s bid for the MFP and is entitled to the fees for those roles set out in the summary of interests and benefits of advisers and experts in Section 10.8.

145 SECTION 10 CEML is a wholly owned subsidiary of Macquarie Bank and as responsible entity of the ConnectEast Unit Trusts and a trustee of ConnectEast Investment Trust is entitled to the fees and reimbursement of its costs as described in Section 7.7. Macquarie Bank is the preferred financial adviser to ConnectEast Group for so long as CEML is the responsible entity. As a result, Macquarie Bank and other Macquarie Bank Group companies may perform various services for ConnectEast Group from time to time. Arm s length fees will be payable for those services. The Directors of CEML may seek external advice as to the appropriateness of fees and the terms of Macquarie Bank Group company engagements. Furthermore, Directors who are employees of Macquarie Bank will not vote on or, unless invited by the remaining Directors, participate in discussions on related party matters. Macquarie Bank is a party to the MBL Deferred Equity Commitment Deed under which it has committed to subscribe for an additional 30 million Stapled Units. See section for a summary of this deed. Macquarie Bank is a party to the Put and Call Option under which CEML may exercise a call option or Macquarie Bank may exercise a put option to require the transfer of CEML to ConnectEast Group. If an option is exercised under the Put and Call Option, the purchase price payable to Macquarie Bank will be based upon a performance linked formula set out in Section 10.4 Internalisation of CEML Put and Call Option. A fee (Fee Amount) is payable to Macquarie Bank six months after the sixth anniversary of Financial Close. This fee is based on a performance linked formula set out in Section 10.4 Internalisation of CEML Fee Amount. If CEML is purchased by the ConnectEast Group under the Put and Call Option the Fee Amount will not be payable. Macquarie Equity Capital Markets Macquarie Equity Capital Markets is a party to the Underwriting Agreement and DRP Underwriting Agreement and is entitled to receive from CEML the fees set out in the summary of the Underwriting Agreement and DRP Underwriting Agreement in Sections and respectively. ConnectEast Group There are a number of agreements that have been entered into between entities within the ConnectEast Group that have been summarised in Section 10: > Put and Call Option (see the summary set out in Section 10.4); > Management Deeds (see the summary set out in Section ); > Agreement to Sub-Lease (see the summary set out in Section ); and > Loan Note Subscription Agreement (see the summary set out in Section ) COMPLAINTS CEML must deal with complaints communicated to it by Unitholders in relation to the ConnectEast Unit Trusts. CEML must act in good faith to deal with any complaint and seek to resolve complaints promptly and fairly. CEML must give written acknowledgement of written complaints to Unitholders and must respond to each complaint with a view to resolving the complaint within 45 days. If you are not satisfied with the outcome, you may take your complaint to the Banking and Financial Services Ombudsman Limited, Level 5, 31 Queen Street, Melbourne VIC 3000 or on-line at Alternatively, you may phone them on The responsible entity is a member of the industry complaints service CONSENTS AND DISCLAIMERS Macquarie Equity Capital Markets, Macquarie Bank, ABN AMRO Rothschild and Commonwealth Securities have given and have not, before the date of this PDS, withdrawn their consent to be named in this PDS as Underwriters to this Offer in the form and context in which they are included. This PDS does not contain statements made by the Underwriters or statements said to be based on statements made by the Underwriters. Accordingly, each of the Underwriters expressly disclaims responsibility for any part of this PDS. Deloitte Touche Tohmatsu has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as Investigating Accountants and to the inclusion of the Investigating Accountant s Report and all references to that report or that information in this PDS in the form and context in which it is included. Deloitte Touche Tohmatsu expressly disclaims and takes no responsibility for any part of this PDS other than its Investigating Accountant s Report and other references to that report or that information in this PDS. Hyder Consulting has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as Traffic Expert and to the inclusion of the Traffic Report and projections and all references to that report or that information in this PDS in the form and context in which they are included and formally verified by Hyder Consulting. Hyder Consulting expressly disclaims and takes no responsibility for any part of this PDS other than its Traffic Report and projections and other references to that report or that information in this PDS. Macquarie Bank has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as a sponsor of ConnectEast Group s bid CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 143

146 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 144 SECTION 10 for the MFP in the form and context in which they are included. Macquarie Bank expressly disclaims and takes no responsibility for any part of this PDS. Mallesons Stephen Jaques has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as legal advisers to ConnectEast Group in the form and context in which they are included. Mallesons Stephen Jaques expressly disclaims and takes no responsibility for any part of this PDS. Thiess has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as a sponsor of ConnectEast Group s bid for the MFP in the form and context in which they are included. Thiess expressly disclaims and takes no responsibility for any part of this PDS. URS has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as Engineering Consultant and to the inclusion of the Engineering Consultant s Report and all references to that report in this PDS in the form and context in which they are included. URS expressly disclaims and takes no responsibility for any part of this PDS other than its Engineering Consultant s Report and other references to that report in this PDS. ASX Perpetual Registrars Limited has given and has not, before the date of this PDS, withdrawn its consent to be named in this PDS as the Registry in the form and context in which they are included. ASX Perpetual Registrars Limited expressly disclaims and takes no responsibility for any part of this PDS DIRECTORS CONSENT TO LODGEMENT Each Director of CEML has given, and not withdrawn, their consent to lodgement of this PDS with ASIC.

147 SECTION 11 Glossary 11

148 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 146 SECTION 11 A$ or $ or AUD Australian dollars ABN AMRO Rothschild A joint venture between ABN AMRO Equity Capital Markets Limited (ABN ) and Rothschild Australia Securities Limited (ABN ) ABS Australian Bureau of Statistics Additional Lease Rentals means additional rent which the Concessionaires must pay to the State if the revenues from operating the MFP exceed certain agreed benchmarks Allotment Date The date on which the Stapled Units issued under the PDS are allotted to Unitholders Application or Application form attached to or accompanying this PDS Application Form ASIC Australian Securities and Investments Commission Asset Trustee ConnectEast Nominee Company Pty Ltd (ACN ), the trustee of ConnectEast Asset Trust ASTC ASX Settlement and Transfer Corporation Pty Ltd (ABN ) ASX Australian Stock Exchange Limited (ACN ) Average Price The arithmetic average of the daily volume weighted average price for Stapled Units sold on ASX (excluding special crossings) during the 20 trading days from and including the ninth trading day after the declaration date for the Distribution CEML ConnectEast Management Limited (ACN ) CHESS The Clearing House Electronic Subregister System operated by ASTC for the purpose of settling transactions and registering transfers of approved financial products CityLink or A 22 kilometre toll road linking the north-western and south-eastern suburbs of Melbourne CityLink Melbourne. It consists of two major sections: the Western Link, which connects the Tullamarine and West Gate Freeways; and the Southern Link, which connects the Monash and West Gate Freeways. Generally, these terms include the Exhibition Street Extension Commonwealth Commonwealth Securities Limited (ABN ) Securities or CommSec Concession The right granted by the State under the Concession Deed to design, construct, operate and maintain the Mitcham-Frankston Freeway and charge a toll for vehicular use Concessionaires Asset Trustee and ConnectEast Pty Limited Concession Deed The Concession Deed between the State and the Concessionaires under which ConnectEast Group is granted the right to build, own and operate the MFP Concession Period A period of approximately 39 years from the date of Financial Close under the Concession Deed ConnectEast Finance ConnectEast Finance Pty Ltd (ACN ) ConnectEast Group ConnectEast Holding Trust, Connect East Investment Trust, ConnectEast Investment Trust 2, ConnectEast Asset Trust, ConnectEast Holding 2 Pty Ltd, ConnectEast Pty Limited, ConnectEast Finance Pty Ltd and ConnectEast Nominee Company Pty Ltd ConnectEast Holding ConnectEast Holding Trust (ARSN ) established under ConnectEast Trust Holding Trust Constitution, dated 21 April 2004 ConnectEast ConnectEast Holding 2 Pty Ltd (ACN ) Holding 2 Pty Ltd ConnectEast Investment ConnectEast Investment Trust (ARSN ) established under Trust ConnectEast Investment Trust Constitution, dated 21 April 2004

149 SECTION 11 ConnectEast Pty Limited ConnectEast Trusts ConnectEast Unit Trusts Connell Wagner Constitutions ConnectEast Pty Limited (ACN ), a special purpose company established to bid for the MFP ConnectEast Holding Trust, Connect East Investment Trust, ConnectEast Investment Trust 2 and ConnectEast Asset Trust ConnectEast Holding Trust and ConnectEast Investment Trust CW-DC Pty Ltd (ACN ), a subsidiary of Connell Wagner The constitution of ConnectEast Investment Trust and the constitution of ConnectEast Holding Trust or either one of them Construction Completion The date on which construction of the MFP is completed (including commissioning of the Tolling System) Construction Contractor A 50:50 joint venture between Thiess and John Holland Construction Period The period in which the MFP is being constructed Contractual Close The date on which the Concession Deed is executed by all parties Corporations Act Corporations Act 2001 (Cwlth) CPI The Consumer Price Index D&C Deferred Equity The earlier of: Contribution Date (a) Construction Completion; (b) 49 months after Financial Close; (c) demand being made after the occurrence of an event of default under the senior financing documents (unless it has been waived or remedied) Dandenong Southern A bypass road between South Gippsland Highway and Perry Road to be Bypass or DSB constructed by ConnectEast Group and returned to the State Deferred Equity The Deferred Equity Commitment Deeds described in Section Commitment Deeds Deferred Equity Tranches Deferred equity arrangements with the Sponsors and John Holland Deloitte Deloitte Touche Tohmatsu (ABN ) Design and The contract between the Concessionaires and the Construction Contractor to Construction Contract design and construct the MFP Design and Construction means a fixed sum of $2,502 million Contract Price Distribution Calculation The last day of each Financial Year or such other days as CEML designates Date Distribution Payment The date on which the semi-annual Distributions for the periods ending Date 31 March and 30 September are paid Distribution Period The period from the day after the Distribution Calculation Date to the next occurring Distribution Calculation Date Distributions Distributions on Stapled Units DRP Distribution Reinvestment Plan of the ConnectEast Unit Trusts DRP Rules The ConnectEast Distribution Reinvestment Plan Rules DRP Underwriters MECM and ABN AMRO Rothschild DRP Underwriting The underwriting of the DRP by the DRP Underwriters under the DRP Underwriting Agreement DRP Underwriting The agreement of that name dated 11 October 2004, between CEML and the DRP Agreement Underwriters Engineering Consultant URS Australia Pty Ltd (ABN ) Expected Construction The date on which construction of the MFP (including commissioning of the Tolling Completion Date System) is expected to be completed by the Construction Contractor currently expected to be 30 November 2008 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 147

150 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 148 SECTION 11 Final Instalment Final Instalment Payment Date Final Instalment Record Date Financial Close Financial Year Financing Documents $0.45 per Stapled Unit 12 months following Allotment Date The date at which a person is taken to hold Stapled Units for the purposes of determining whether that person is required to pay the Final Instalment The date of financial close of the MFP, when all the conditions precedent of the State, ConnectEast Group and other parties to the MFP have been either satisfied or waived by the party entitled to them. These conditions precedent include arranging the insurance policies and performance bonds required for the MFP, tabling the Concession Deed in Parliament and notification in the Victorian Government Gazette of the entry of the relevant parties into the Concession Deed. This is expected to occur during November 2004 The 12-month period ending 30 June in each year The documents summarised in Section , the Security Trust Deed and each interest rate management agreement entered into by ConnectEast Finance in connection with the MFP Fixed Distribution Period The period ending 31 March 2010 Fixed Time Fixed Price A contract pursuant to which a stipulated scope of work is to be designed and Contract constructed for an agreed price within an agreed timeframe on the terms set out in the contract. The price and the timeframe are subject to adjustment in certain circumstances, including for modifications and for certain equipment that is subject to final specifications Government or State The State Government of Victoria Hyder Consulting Hyder Consulting Pty Ltd (ABN ), the traffic consultant to CEML Important Notice The notice and disclaimer at the beginning of this PDS Independent Reviewer The independent reviewer appointed by SEITA or IR Initial Instalment $0.55 per Stapled Unit Investor Investor in the Stapled Units Issue Price $1.00 per Stapled Unit John Holland John Holland Pty Ltd (ACN ), a 70% owned subsidiary of the Leighton Holdings Group Lane Cove Tunnel or LCT Twin 3.4 kilometre, two lane tunnels, with three lanes provided in some sections, connecting the Gore Hill Freeway with the M2 in Sydney Leighton Holdings Leighton Holdings Limited (ACN ) Leighton Holdings Group Leighton Holdings and all of its majority or wholly owned entities and subsidiaries Listed Being on the official list of ASX and Listing is to be construed accordingly Listing Rules Listing Rules of the Australian Stock Exchange Limited Macquarie Bank Macquarie Bank Limited (ACN ) Macquarie Bank Group Macquarie Bank and all of its majority or wholly owned entities and subsidiaries Macquarie Equity Capital Macquarie Equity Capital Markets Limited (ABN ) Markets or MECM MBL Deferred Equity The earlier of: Contribution Date (a) demand being made after the occurrence of an event of default under the Financing Documents (unless it has been waived or remedied); and (b) 12 months after Financial Close Melbourne 2030 The State s policy and long-term strategy to guide the growth of Melbourne as stated from time to time by the State MFP Mitcham-Frankston Project

151 SECTION 11 MFP Legislation MRP Offer Operating Phase Mitcham-Frankston Project Act 2004 (Vic) Minimum Requirements Proposal The offer of 1,120 million Stapled Units pursuant to this PDS The period from completion of construction of the MFP until the end of the Concession Period, during which ConnectEast Group shall be entitled to operate the MFP and collect toll revenues from it Operations and Contract between ConnectEast Pty Limited and the Operator to perform the Maintenance Contract operation, maintenance and repair of the MFP (including tolling system, roadside equipment and communications cables, but excluding the back office facilities), maintenance and repair of the maintained off freeway facilities, and delivery of those parts of the customer services dealing with traffic management related matters Operator The Contractor engaged by ConnectEast Group to perform the operations and maintenance of the MFP, initially being Transfield Services Limited (ACN ) PDS This Product Disclosure Statement Possible Key Risk Include: Events or PKREs (a) an Act of Prevention by the State; (b) the State fails to support the transport network connected to the MFP in the manner it has undertaken (this relates to maintaining the principal roads that connect to the MFP); (c) a change in State Law occurs; (d) a native title claim prevents the Concessionaires from complying with their obligations under the Concession Deed; (e) an uninsurable force majeure event occurs; (f) certain changes occur in the State s policy or resources for enforcing toll evasion offences by motorists using the MFP; and (g) a delay due to an action being taken under certain Commonwealth environmental legislation (other than one related to the Dandenong Southern Bypass, where the delay must exceed 18 months from the date of referral) or a delay greater than six months (or 18 months for the Dandenong Southern Bypass) due to an environmental effects statement being required Project Scope and The technical description of the construction and operating activities which are to Project Requirements be carried out by the Concessionaires or their contractors pursuant to the Project Documents. It is an exhibit to the Concession Deed Put and Call Option The agreement of that name between Macquarie Bank, ConnectEast Holding 2 Pty Ltd and CEML RACV Royal Automobile Club of Victoria (ACN ) Ramp-up The build up of traffic in the initial period following the opening of a toll road, as drivers adjust their behavioural patterns to take account of the toll road RBA Reserve Bank of Australia Registry ASX Perpetual Registrars Limited (ABN ) RFP Request for Proposal to design, construct, commission, finance, toll, operate, maintain, repair and hand over the MFP Ringwood Bypass A bypass road between the Ringwood interchange and Maroondah Highway at Mount Dandenong Road, to be constructed by ConnectEast Group and returned to the State S&P ASX 200 Index The Standard & Poor s/asx index of the top 200 listed entities by market capitalisation SEITA Southern and Eastern Integrated Transport Authority CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 149

152 CONNECTEAST GROUP PRODUCT DISCLOSURE STATEMENT page 150 SECTION 11 Senior Debt SICE Sponsors Stapled Stapled Unit State Syndicate Member Thiess The financial accommodation made available to ConnectEast Finance under or in connection with the Financing Documents Sociedad Iberica de Construcciones Electricas, S.A Macquarie Bank and Thiess In relation to a unit in ConnectEast Investment Trust and a unit in ConnectEast Holding Trust, means the linking together of the units so that a unit in ConnectEast Investment Trust may not be transferred, issued or otherwise dealt with without a unit in ConnectEast Holding Trust in accordance with the Constitutions and vice versa. Stapling should be construed accordingly A unit in ConnectEast Investment Trust and a unit in ConnectEast Holding Trust which are stapled together The State Government of Victoria Any of the Underwriters, Macquarie Equities Limited, ABN AMRO Morgans, ABN AMRO Craigs, ASB Securities Limited and Macquarie Equities New Zealand Limited Thiess Pty Ltd (ABN ), a wholly owned subsidiary of the Leighton Holdings Group Tolling System The physical, software and other aspects of the system used for tolling or the provision of customer services in relation to the MFP in accordance with the Project Scope and Project Requirements, and includes the billing systems, operating systems, customer relationship management systems and any other ancillary systems that are necessary for the full and proper operation of the Tolling System and the MFP, all as modified Traffic Expert Hyder Consulting Pty Limited (ABN ) Transaction Document The project, finance and ancillary documents in relation to the MFP, and any amending or supplemental agreements to these documents Transfield Services Transfield Services (Australia) Pty Limited (ACN ) Trustee ConnectEast Management Limited, in its capacity as trustee of ConnectEast Investment Trust 2 Underwriters MECM, ABN AMRO Rothschild and Commonwealth Securities and only in respect of underwriting the Final Instalment, includes Macquarie Bank Underwriting Agreement Agreement dated 15 August 2004, between CEML and the Underwriters and as subsequently amended by the parties Unitholders Holders of Stapled Units URS URS Australia Pty Ltd (ABN ) VicRoads Roads Corporation of Victoria established under the Transport Act 1983 (Vic) VTTS Value of Travel Time Saving. This is an estimate of how much a traveller is willing to pay for saving time during a particular trip

153 SECTION 12 Application forms 12

154 Pin cheque here ConnectEast Group Australian Application Form ConnectEast Management Limited AFSL as responsible entity for ConnectEast Investment Trust ARSN and ConnectEast Holding Trust ARSN This Application Form must not be handed to another person unless attached to or accompanied by the PDS dated 14 October 2004 and a person who gives another person access to this Application Form must at the same time and by the same means give the other person access to the PDS. While the PDS is current, ConnectEast Management Limited will send paper copies of the PDS, and any supplementary document and the Application Form, free of charge upon request. A C Number of Stapled Units applied for Initial Instalment per Stapled Unit Enclosed amount,, (minimum 2,000 Stapled Units, thereafter in multiples of 500 Stapled Units) at $A0.55 B $A,,. 0 0 PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Surname/Company Name Applicant Title First Name Middle Name + Surname/Company Name Joint Applicant #2 Title First Name Middle Name Designated account e.g. <Super Fund> (or Joint Applicant #3) D PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/property name/building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode address (only for purpose of electronic communication of unitholder information) E CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here) X Telephone Number where you can be contacted during business hours F ( ) G Contact Name (PRINT) Cheque or bank draft should be made payable to ConnectEast Group Public Offer in Australian dollars and crossed Not Negotiable. Cheque or Bank Draft Number BSB Account Number - INVESTOR DECLARATION I/we declare that by lodging this Application Form, I/we represent and warrant that I/we have read and understood the PDS to which the Application Form relates and the instructions on the reverse of this Application Form, including the disclaimer under CAPITAL AND INVESTMENT RETURNS ARE NOT GUARANTEED and agree to be bound by the Constitutions of ConnectEast Investment Trust and ConnectEast Holding Trust and the terms and conditions of the Offer (including the representations, warranties and agreements contained in the PDS). I/we hereby apply for such number of Stapled Units as may be calculated in accordance with the terms of the PDS. By lodging this Application Form, I/we declare that this Application Form is attached to or accompanying the PDS and that all statements made by me/us are complete and accurate. I/we represent and warrant that by lodging this Application Form, I am/we are 18 years old or older, and are in compliance with all laws of the Commonwealth of Australia relevant to this Application. I/we acknowledge that I am/we are residents of Australia and physically located in Australia. Applicant Joint Applicant 2 (individual) Joint Applicant 3 (Individual) Sole Director and Sole Secretary Director/Company Secretary (Delete one) Director SIGNING INSTRUCTIONS This Application Form must be signed by the Applicant. If a joint Applicant, all Applicants must sign. If signed under power of attorney, the power of attorney must have been previously noted by the Registry or a certified copy must be attached to this Application Form. If executed by a company, the Application Form must be executed in accordance with the Applicant company s constitution and the Corporations Act 2001 (Cwlth). LODGEMENT INSTRUCTIONS General Applications: You must return your application so it is received before 5.00pm on 4 November 2004 to: ASX Perpetual Registrars Limited, GPO Box 2785, MELBOURNE VIC 3001 or ASX Perpetual Registrars Limited, Level 4, 333 Collins Street Melbourne Victoria 3000 Offer Closes 5:00pm AEST on Thursday 4 November 2004 CEG IPO001 + *CEG IPO001*

155 Your Guide to the Application Forms Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form. Each Applicant by lodging this Application Form agrees to become a member of ConnectEast Investment Trust and ConnectEast Holding Trust and agrees to be bound by their respective constitutions as amended from time to time. The Stapled Units to which this Application Form relates each comprises a Unit in ConnectEast Investment Trust and a Unit in ConnectEast Holding Trust, which will be listed on ASX as Stapled Units. The Stapled Units are being offered for subscription by ConnectEast Management Limited ( CEML ). Further details about the Stapled Units are contained in the PDS dated 14 October While the PDS is current, CEML will send paper copies of the PDS, any supplementary document and the Application Form, free of charge upon request. ASIC requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant PDS. This Application Form is included in the PDS. The PDS contains important information about investing in Stapled Units. You should read the PDS before applying for Stapled Units. A B C D Insert the number of Stapled Units you wish to apply for. The Application must be for a minimum of 2,000 Stapled Units and thereafter in multiples of 500. You may be issued all of the Stapled Units applied for or a lesser number. Insert the relevant amount of application monies. The Issue Price is $A1.00 per Stapled Unit, payable in two instalments: an Initial Instalment of $A0.55 per Stapled Unit payable on Application; and a Final Instalment of $A0.45 per Stapled Unit payable 12 months following Allotment Date. To calculate your total Initial Instalment payable, multiply the number of Stapled Units applied for by $A0.55. Amounts should be in Australian dollars. Please make sure the amount of your cheque(s) equals this amount. Write the full name you wish to appear on the register of Stapled Units. This must be either your own name or the name of a company. Up to three joint applicants may register. You should refer to the table below for the correct registrable title. Please enter your postal address for all correspondence. All communications to you from CEML and the Registry will be mailed to the person(s) and address as shown. For joint applicants only one address can be entered. CAPITAL AND INVESTMENT RETURNS ARE NOT GUARANTEED Investments in Stapled Units are not deposits with or liabilities of Macquarie Bank Limited (ACN ) (Macquarie Bank) or any other entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither CEML nor any member of the Macquarie Bank Group guarantees any particular rate of return on the Stapled Units or the performance of ConnectEast Group, nor do they guarantee the repayment of capital from ConnectEast Group. CORRECT FORMS OF REGISTRABLE NAMES Note that ONLY legal entities are allowed to hold Stapled Units. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below. Put the name(s) of any joint applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application. E F G If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. The name and address provided must be exactly the same as recorded on CHESS, otherwise an issuer sponsored holding will be established. Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your application. Please complete cheque details and make it payable to ConnectEast Group Public Offer as follows: Make your cheques payable in Australian dollars and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian branch of an Australian Bank. The amount should agree with the amount shown in Section B. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your application being rejected. Pin (do not staple) your cheque(s) to the Application Form where indicated. PRIVACY STATEMENT ASX Perpetual Registrars Limited advises that once you become a Unitholder in ConnectEast Group, Chapter 2C of the Corporations Act 2001 requires information about you (including your name, address and details of the Stapled Units you hold) to be included in a public register. This information must continue to be included in a public register if you cease to be a Unitholder. These statutory obligations are not altered by the Privacy Act By filling out this Application Form, you are providing information to CEML (directly and/or via our Registry, ASX Perpetual Registers Limited) that may constitute personal information for the purposes of the Privacy Act CEML (and the Registry on its behalf) collects, holds and uses personal information in relation to your Application in order to assess your Application, service your needs as an Investor, provide facilities and services that you request and administer your holding of Stapled Units. If you do not provide the information requested, CEML and the Registry may not be able to process or accept your Application or administer your holding of Stapled Units appropriately. Access to your personal information may be provided to other companies within ConnectEast Group and to CEML's agents and service providers on the basis that they deal with such information in accordance with CEML's privacy policy, a copy of which can be accessed at the following website: You can request access to personal information collected in relation to your Application by writing to the Registry at the address on the other side of this form. Type of Investor Correct Form of Registration Incorrect Form of Registration Individual Use given names in full, not initials Mrs Katherine Clare Edwards K C Edwards Company Use Company s full title, not abbreviations Liz Biz Pty Ltd Liz Biz P/L or Liz Biz Co. Joint Holdings Mr Peter Paul Tranche & Peter Paul & Use full and complete names Ms Mary Orlando Tranche Mary Tranche Trusts Mrs Alessandra Herbert Smith Alessandra Smith Use the trustee(s) personal name(s) <Alessandra Smith A/C> Family Trust Deceased Estates Ms Sophia Garnet Post & Estate of late Harold Post Use the executor(s) personal name(s) Mr Alexander Traverse Post or <Est Harold Post A/C> Harold Post Deceased Minor (a person under the age of 18 years) Mrs Sally Hamilton Master Henry Hamilton Use the name of a responsible adult with an appropriate <Henry Hamilton> designation Partnerships Mr Frederick Samuel Smith & Fred Smith & Son Use the partners personal names Mr Samuel Lawrence Smith <Fred Smith & Son A/C> Long Names Mr Hugh Adrian John Smith-Jones Mr Hugh A J Smith Jones Clubs / Unincorporated Bodies / Business Names Mr Alistair Edward Lilley Vintage Wine Club Use office bearer(s) personal name(s) <Vintage Wine Club A/C> Superannuation Funds XYZ Pty Ltd XYZ Pty Ltd Use the name of the trustee of the fund <Super Fund A/C> Superannuation Fund

156 CORPORATE DIRECTORY ConnectEast Holding Trust Legal Adviser to CEML Level 26, 101 Collins Street Mallesons Stephen Jaques Melbourne VIC 3000 Level 28, Rialto AUSTRALIA 525 Collins Street Melbourne VIC 3000 AUSTRALIA ConnectEast Investment Trust Investigating Accountant Level 26, 101 Collins Street Deloitte Touche Tohmatsu Melbourne VIC 3000 Grosvenor Place AUSTRALIA 225 George Street Sydney NSW 2000 AUSTRALIA Directors of ConnectEast Group Registry Tony Shepherd ASX Perpetual Registrars Limited Ray Wilson Level 4, 333 Collins Street Maxwell Lay Melbourne VIC 3000 David Roseman AUSTRALIA Ed Sandrejko Responsible Entity ConnectEast Management Limited Level 15, 1 Martin Place Sydney NSW 2000 AUSTRALIA Underwriters Macquarie Bank Limited Level 23, 101 Collins Street Melbourne VIC 3000 AUSTRALIA Macquarie Equity Capital Markets Limited Level 23, 101 Collins Street Melbourne VIC 3000 AUSTRALIA ABN AMRO Rothschild Level 29, ABN AMRO Tower Cnr Phillip and Bent Street Sydney NSW 2000 AUSTRALIA Commonwealth Securities Limited Level 14, 363 George Street Sydney NSW 2000 AUSTRALIA IDEAssociates.com.au

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