UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

Commission File Number: 001-32385

Macquarie Infrastructure Company Trust

(Exact name of registrant as specified in its charter)

Commission File Number: 001-32384

Macquarie Infrastructure Company LLC

(Exact name of registrant as specified in its charter)

(212) 231-1000

(Registrants’ telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act: None

      Indicate by check mark if the registrants are collectively a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes o          No þ

      Indicate by check mark if the registrants are collectively not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o          No þ

      Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the registrants are collectively a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer     o          Accelerated filer     þ          Non-accelerated filer     o

      Indicate by check mark whether the registrants are collectively a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

      The aggregate market value of the outstanding shares of trust stock held by non-affiliates of Macquarie Infrastructure Company Trust at June 30, 2005 was $694,472,790 based on the closing price on the New York Stock Exchange on that date. This calculation does not reflect a determination that persons are affiliates for any other purposes.

      There were 27,050,745 shares of trust stock without par value outstanding at March 13, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

      The definitive proxy statement relating to Macquarie Infrastructure Company Trust’s Annual Meeting of Shareholders, to be held May 25, 2006, is incorporated by reference in Part III to the extent described therein.

TABLE OF CONTENTS

EXPLANATORY NOTE

      This Annual Report on Form 10-K/ A, or this Amendment, is being filed for the purpose of amending and restating certain notes to our consolidated financial statements and certain other quarterly and segment information contained in our Annual Report on Form 10-K for the year ended December 31, 2005 that was originally filed with the Securities and Exchange Commission on March 15, 2006, as amended by the Form 10-K/ A filed September 29, 2006. The Amendment is being made to revise unaudited quarterly financial information and certain segment information to correct an accounting error in the treatment for interest rate and foreign exchange derivative instruments that did not qualify for hedge accounting during this period. Although the impact of this accounting error on our unaudited quarterly information and certain segment information is material, the cumulative effect is immaterial to our audited consolidated financial statements. As a result, we have not restated our audited financial statements for the year ended December 31, 2005 and other consolidated annual financial information to reflect this error. However, we have restated 2005 financial information for our airport services and airport parking segments to reflect this error. We have also filed today amended and restated Quarterly Reports on Form 10-Q/ A for the quarters ended March 31, 2006 and June 30, 2006 to reflect the same correction of an accounting error related to the accounting treatment for derivative instruments, which include comparative quarterly information for the comparable period in 2005.

      This Amendment also corrects our evaluation of disclosure controls and procedures and management’s report on internal control over financial reporting as a result of our reassessment of material weaknesses in internal control over financial reporting. Following our initial discovery of errors related to hedge accounting for certain derivatives, on September 13, 2006 our Audit Committee determined that we would amend and restate previously issued unaudited financial statements and other financial information for the first two quarters of 2006 and we initiated a comprehensive review of all of our determinations and documentation related to hedge accounting for derivative instruments, as well as our related processes and procedures. During this process, management had frequent discussions with the Audit Committee members to review the potential impact of these matters and the progress of the comprehensive review and analysis. As a result of that review, management determined that none of our interest rate or foreign exchange derivative instruments qualified for hedge accounting and recommended to the Audit Committee that previously reported 2005 unaudited quarterly financial statements and quarterly financial information, as well as certain 2005 segment financial information should also be restated. The Audit Committee agreed with management’s recommendation and determined that previously reported unaudited quarterly financial statements for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005, quarterly financial information relating to each quarter within 2005 and 2005 financial information for our airport services and airport parking segments should no longer be relied upon. See Note 24 to our consolidated financial statements for a discussion of the nature of this error and the effect of this change in our accounting treatment on our unaudited quarterly financial information for the quarters ended March 31, 2005, June 30, 2005, September 30, 2005 and December 31, 2005 and on our 2005 financial information for our airport services and airport parking segments. See Item 9A — Controls and Procedures for further information regarding our reassessment of material weaknesses in internal control over financial reporting.

      We also included as exhibits to this Amendment new certifications of our principal executive officer and principal financial officer. Finally, we have included the audited financial statements of Connect M1-A1 Holdings Limited and Subsidiary for the year ended March 31, 2006 which were previously filed with the SEC in our Annual Report of Form 10-K/ A on September 29, 2006.

      Except as described above, no attempt has been made in this Amendment to amend or update other disclosures presented in the Annual Report on Form 10-K/ A, and therefore this Amendment does not reflect events occurring after the original filing on March 15, 2006 or amend or update those disclosures, or related exhibits, affected by subsequent events. Accordingly, this Amendment should be read in conjunction with our amended and restated Quarterly Reports on Form 10-Q/ A for the quarters ended March 31, 2006 and June 30, 2006 filed today as well as our other filings with the SEC subsequent to the original filing of our Annual Report on Form 10-K.

      We have included or incorporated by reference into this report, and from time to time may make in our public filings, press releases or other public statements, certain statements that may constitute forward-looking statements. These include without limitation those under “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” or “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

      In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward-looking statements made by us. Any such forward-looking statements are qualified by reference to the following cautionary statements.

      Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:

      Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of risks that could cause our actual results to differ appears under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this report. It is not possible to predict or identify all risk factors and you should not consider that description to be a complete discussion of all potential risks or uncertainties that could cause our actual results to differ.

      In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this report may not occur. These forward-looking statements are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we may make in future filings with the Securities and Exchange Commission.

Exchange Rates

      For the purposes of this report, to the extent we have converted foreign currency amounts into U.S. dollars, we have used the Federal Reserve Bank noon buying rate at December 30, 2005 for our financial information and the Federal Reserve Bank noon buying rate at February 6, 2006 for all other information. At December 30, 2005, the noon buying rate of the Australian dollar was USD $0.7342 and the noon buying rate of the Pound Sterling was USD $1.7188. At February 6, 2006, the noon buying rate of the Australian dollar was USD $0.7426 and the noon buying rate of the Pound Sterling was USD $1.7462. The table below sets forth the high, low and average exchange rates for the Australian dollar and the Pound Sterling for the years indicated:

Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require the following statements: Investments in Macquarie Infrastructure Company Trust are not deposits with or other liabilities of Macquarie Bank Limited or of any Macquarie Group company and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member company of the Macquarie Group guarantees the performance of Macquarie Infrastructure Company Trust or the repayment of capital from Macquarie Infrastructure Company Trust.

Part I

Item 1.     Business

      Macquarie Infrastructure Company Trust, a Delaware statutory trust that we refer to as the trust, owns its businesses and investments through Macquarie Infrastructure Company LLC, a Delaware limited liability company that we refer to as the company. Except as otherwise specified, “Macquarie Infrastructure Company,” “we,” “us,” and “our” refer to both the trust and the company and its subsidiaries together. The company owns the businesses located in the United States through a Delaware corporation, Macquarie Infrastructure Company Inc., or MIC Inc., and those located outside of the United States through Delaware limited liability companies. Macquarie Infrastructure Management (USA) Inc., the company that we refer to as our Manager, is part of the Macquarie Group of companies. References to the Macquarie Group include Macquarie Bank Limited and its subsidiaries and affiliates worldwide.

GENERAL

      The trust and the company were each formed on April 13, 2004. On December 21, 2004, we completed our initial public offering and concurrent private placement of shares of trust stock representing beneficial interests in the trust. Each share of trust stock corresponds to one LLC interest of the company. We used the majority of the proceeds of the offering and private placement to acquire our initial businesses and investments and to pay related expenses.

      We own, operate and invest in a diversified group of infrastructure businesses in the United States and other developed countries. We offer investors an opportunity to participate directly in the ownership of infrastructure businesses, which traditionally have been owned by governments or private investors, or have formed part of vertically integrated companies. Our businesses consist of the following:

      Our investments consist of:

      Additionally, we have entered into an agreement to acquire 100% of The Gas Company, a regulated retail gas distribution company serving Hawaii. We expect to complete this acquisition in the second or third quarter of 2006.

Our Manager

      We have entered into a management services agreement with our Manager. Our Manager is responsible for our day-to-day operations and affairs and oversees the management teams of our operating businesses. Neither the trust nor the company have or will have any employees. Our Manager has assigned, or seconded, to the company, on a permanent and wholly dedicated basis, two of its employees to assume the offices of chief executive officer and chief financial officer and makes other personnel available as required. The services performed for the company are provided at our Manager’s expense, including the compensation of our seconded officers.

      Our Manager is a member of the Macquarie Group, that, together with its subsidiaries and affiliates worldwide, provides specialist investment, advisory, trading and financial services in select markets around the world. The Macquarie Group is headquartered in Sydney, Australia and employs over 7,600 people in 23 countries as of the date of this report. The Macquarie Group is a global leader in advising on the acquisition, disposition and financing of infrastructure assets and the management of infrastructure investment vehicles on behalf of third-party investors.

      We believe that the Macquarie Group’s demonstrated expertise and experience in the management, acquisition and funding of infrastructure businesses will provide us with a significant advantage in pursuing our strategy. Our Manager is part of the Macquarie Group’s Infrastructure and Specialized Funds division, or ISF, which as of December 31, 2005, managed a $23 billion investment portfolio on behalf of retail and institutional investors comprising investments in infrastructure and infrastructure-like businesses. These businesses include toll roads, airports and airport-related infrastructure, communications, media, electric and gas distribution networks, water utilities, aged care, rail and ferry assets. The ISF division has been operating since 1996 and currently has over 340 executives internationally, with more than 50 executives based in the US and Canada.

      We expect that the Macquarie Group’s infrastructure advisory division, with over 340 executives internationally, including more than 70 executives in North America, will be an important source of acquisition opportunities and advice for us. During 2005, the Macquarie Group globally advised on infrastructure transactions valued at more than $32 billion. The Macquarie Group’s infrastructure advisory division is separate from the ISF division. Historically the Macquarie Group’s advisory group has presented the various infrastructure investment vehicles in ISF with a significant number of high quality infrastructure acquisition opportunities.

      Although it has no contractual obligation to do so, we expect that Macquarie’s infrastructure advisory division will present our Manager with similar opportunities. Under the terms of the management services agreement, our Manager is obliged to present to us, on a priority basis, acquisition opportunities in the United States that are consistent with our strategy, as discussed below, and the Macquarie Group is our preferred financial advisor.

      We also believe that our relationship with the Macquarie Group will enable us to take advantage of its expertise and experience in debt financing for infrastructure assets. As the typically strong, stable cash flows of infrastructure assets are usually able to support high levels of debt relative to equity, we believe that the ability of our Manager and the Macquarie Group to source and structure low-cost project and other debt financing provides us with a significant advantage when acquiring assets. We believe that relatively lower costs will help us to maximize returns to shareholders from those assets.

Industry

      Infrastructure businesses provide basic, everyday services, such as parking, roads and water. We focus on the ownership and operation of infrastructure businesses in the following categories:

      By their nature, businesses in these categories generally have sustainable and growing long-term cash flows due to consistent customer demand and the businesses’ strong competitive positions. Consistent customer demand is driven by the basic, everyday nature of the services provided. The strong competitive position results from high barriers to entry, including:

      These barriers to entry have the effect of protecting the cash flows generated by the infrastructure assets owned by these businesses. These barriers to entry largely arise because services provided by infrastructure businesses, such as parking, roads, and water, can generally only be delivered by relatively large and costly physical assets in close proximity to customers. These services cannot be delivered over the internet, and cannot be outsourced to other countries, and are therefore not susceptible to the competitive pressures that other industries, including manufacturing industries, typically face. We do not expect to acquire infrastructure businesses that face significant competition, such as merchant electricity generation facilities.

      The prices charged for the use of infrastructure assets can generally be expected to keep pace with inflation. “User pays” assets typically enjoy pricing power in their market due to consistent demand and limited competition, the contractual terms of contracted assets typically allow for price increases, and the regulatory process that determines revenues for regulated assets typically provides for an inflation adjustment.

      Infrastructure assets, especially newly constructed assets, tend to be long-lived, require minimal and predictable maintenance capital expenditures and are generally not subject to major technological change or physical deterioration. This generally means that significant cash flow is often available from infrastructure businesses to service debt, make distributions to shareholders, expand the business, or all three.

      The sustainable and growing long-term cash flows of infrastructure assets mean their capital structures can typically support more debt than other businesses. Our ability to optimize the capital structure of our businesses is a key component in maximizing returns to investors.

Strategy

      We have two primary strategic objectives. First, we intend to grow our existing businesses. We intend to accomplish this by:

      Second, we intend to acquire businesses we believe will provide yield accretive returns in infrastructure sectors other than those in which our businesses and investments currently operate. We believe our association with the Macquarie Group is key to the successful execution of our strategy.

      We will rely on the Macquarie Group’s demonstrated expertise and experience in the management of infrastructure businesses to execute our operational strategy. In managing infrastructure businesses, the Macquarie Group endeavors to (1) recruit and incentivize talented operational management teams, (2) instill disciplined financial management consistently across the businesses, (3) source and execute acquisitions, and (4) structure and arrange debt financing for the businesses to maximize returns to shareholders.

      We plan to increase the cash generated by our businesses through initiatives to increase revenues and improve gross operating income. We have in place seasoned management teams at each of our businesses who will be supported by the demonstrated infrastructure management expertise and experience of the Macquarie Group in the execution of this strategy.

      We expect our acquisition strategy to benefit from the Macquarie Group’s deep knowledge and ability to identify acquisition opportunities in the infrastructure area. We believe it is often the case that infrastructure opportunities are not widely offered, well-understood or properly valued. The Macquarie Group has significant expertise in the execution of such acquisitions, which can be time-consuming and complex.

      We intend to acquire infrastructure businesses and investments in sectors other than those sectors in which our businesses currently operate, provided we believe we can achieve yield accretive returns. Our pending acquisition of The Gas Company is an example of this strategy. While our focus is on acquiring businesses in the United States, we will also consider opportunities in other developed countries. Generally, we will seek to acquire controlling interests, but we may acquire minority positions in attractive sectors where those acquisitions generate immediate dividends and where our partners have objectives similar to our own. Our acquisitions of SEW and MCG are consistent with this philosophy. We believe that the sectors in which SEW and MCG operate will continue to present attractive acquisition opportunities and that partnering with other Macquarie Group-managed vehicles with experience in those sectors is an appropriate way to pursue opportunities in those sectors.

Acquisition Opportunities

      Infrastructure sectors that may present attractive acquisition candidates include, in addition to our initial businesses, electricity transmission and gas distribution networks, water and sewerage networks, contracted power generation and communications infrastructure. We expect that acquisition opportunities will arise from both the private sector and the public (government) sector.

      Under the terms of the management services agreement, the company has first priority ahead of all current and future entities managed by our Manager or by members of the Macquarie Group within the ISF division among the following infrastructure acquisition opportunities within the United States:

Sector

      The company has first priority ahead of all current and future entities managed by our Manager or any Manager affiliate in all investment opportunities originated by a party other than our Manager or any Manager affiliate where such party offers the opportunity exclusively to the company and not to any other entity managed by our Manager or any Manager affiliate within the ISF division of the Macquarie Group.

Financing

      We expect to fund any acquisitions with a combination of new debt at the company or MIC Inc. level, subsidiary non-recourse debt and issuance of additional shares of trust stock. We expect that a significant amount of our cash from operations will be used to support our dividend policy. We therefore expect that in order to fund significant acquisitions, in addition to new debt financing, we will also need to either offer more equity or offer our shares to the sellers of businesses that we wish to acquire.

      Our businesses and investments have generally been partially financed with subsidiary level non-recourse debt that is repaid solely from the businesses’ revenues. The debt is generally secured by the physical assets, major contracts and agreements, and when appropriate, cash accounts. In certain cases, the debt is secured by our ownership interest in that business. This type of financing is referred to as “project financing.” We have project financing transactions at our airport services and district energy businesses that generally are structured so that all revenues of a project or business are deposited directly with a bank or other financial institution acting as escrow or security deposit agent. These funds are then payable in a specified order of priority usually first to pay operating expenses, senior debt service, taxes and to fund reserve accounts. Thereafter, subject to the satisfaction of debt service coverage ratios and

      These project financing structures are designed to prevent lenders from looking through the operating businesses to us or to our other businesses for repayment, that is, they are “non-recourse” to us and the other businesses and investments not involved in the specific project or business, unless we specifically agree to assume liability for payment. The debt at our parking business is also non-recourse, although there is no escrow or security deposit agent. These arrangements effectively result in each of our businesses being isolated from the risk of default by any other business we own or in which we have invested.

      We do not currently have any debt at the company level. However, we have entered into a revolving credit facility at the MIC Inc. level, currently undrawn, that provides for borrowings up to $250 million primarily to finance acquisitions and capital expenditures pending refinancing through equity offerings at an appropriate time.

OUR BUSINESSES AND INVESTMENTS

Airport Services Business

      Our airport services business, or Atlantic, operates fixed-based operations, or FBOs, at eighteen airports and one heliport throughout the United States. FBOs primarily provide fuelling and fuel-related services, aircraft parking and hangarage to owner/operators of jet aircraft in the general aviation sector of the air transportation industry. The business also operates six regional and general aviation airports under management contracts, although airport management constitutes a small portion of our airport services business. Previously, the airport services business consisted of two operating companies, Atlantic and AvPorts. These businesses have been substantially integrated and are now managed as one business. The airport services business had revenue of $201.5 million and operating income of $28.3 million for our 2005 fiscal year, and total assets of $553.3 million at December 31, 2005 and $410.3 million at December 31, 2004. Revenues from our airport services business comprised 66.2% of our total revenues in the 2005 fiscal year.

      On the day following our initial public offering, we purchased 100% of the ordinary shares in North America Capital Holding Company, or NACH, the parent company of the Atlantic business, from Macquarie Investment Holdings Inc., a wholly owned indirect subsidiary of Macquarie Bank Limited, for a purchase price of $118.2 million (including transaction costs) plus $130 million of assumed senior debt pursuant to a stock purchase agreement. Prior to our acquisition of NACH, it acquired 100% of the shares of Executive Air Support Inc., or EAS, the parent company of the Atlantic business, and assumed $500,000 of debt pursuant to a stock purchase agreement.

      On the day following our initial public offering, we also acquired the AvPorts business from Macquarie Specialised Asset Management Limited, as Trustee for and on behalf of Macquarie Global Infrastructure Funds A and C, and Macquarie Specialised Asset Management 2 Limited, as Trustee for and on behalf of Macquarie Global Infrastructure Funds B and D, for cash consideration of $42.4 million (including transaction costs) and assumption of existing debt.

      On January 14, 2005, we acquired all of the membership interests in General Aviation Holdings, LLC, or GAH, which operates two FBOs in California for $53.5 million (including a working capital adjustment, transaction costs, and funding of the debt service reserve). $32 million of the purchase price was funded by an increase in the then senior debt facility of the business with the balance funded by proceeds from our initial public offering.

      FBOs predominantly service the general aviation industry. General aviation, which includes corporate and leisure flying, pilot training, helicopter, medivac and certain air freight operations, is the largest segment of U.S. civil aviation and represents the largest percentage of the active civil aircraft fleet. General aviation does not include commercial air carriers or military operations. In order to attract independent operators to service general aviation aircraft, local airport authorities grant FBO operators the right to sell fuel. Fuel sales provide most of an FBO’s revenue.

      FBOs generally operate in an environment with limited competition and high barriers to entry. Airports have limited physical space for additional FBOs, due in part to safety restrictions that limit construction in the vicinity of runways. Airport authorities generally do not have the incentive to add additional FBOs unless there is a significant demand for capacity, as profit-making FBOs are more likely to reinvest in the airport and provide a broad range of services, which attracts increased airport traffic. The increased traffic generally generates additional revenue for the airport authority in the form of landing and fuel flowage fees. Government approvals and design and construction of a new FBO can also take significant time.

      Demand for FBO services is driven by the number of general aviation aircraft in operation and average flight hours per aircraft. Both factors have recently experienced strong growth. According to the Federal Aviation Administration, or the FAA, from 1995 to 2005, the fleet of fixed-wing turbine aircraft, which includes turbojet and turboprop aircraft, increased at an average rate of 5.4% per year. Fixed-wing turbine aircraft are the major consumers of FBO services, especially fuel. Over the same period, the general aviation hours flown by fixed-wing turbine aircraft have increased at an average rate of 5.4% per year. These factors have contributed to an average annual growth rate in general aviation jet fuel consumption of 6.1% from 1995 to 2005. This growth is and has been driven by a number of factors, in addition to general economic growth over the period, which include the following:

      We believe generally that the events of September 11, 2001 have increased the level of general aviation activity. We believe that safety concerns for corporate staff combined with increased check-in and security clearance times at many airports in the United States have increased the demand for private and corporate jet travel.

      As a result of these factors, the FAA is forecasting continued growth in general aviation jet fuel consumption, on average, of 8.6% per year from 2005 to 2017.

      The growth in the general aviation market has driven demand for the services provided by FBOs, especially fuel sales. The general aviation market is serviced by FBOs located throughout the United States at various major and regional airports. According to Aviation International News, there are approximately 4,500 FBOs throughout North America, with generally one to five operators per airport. Most of the FBOs

      We believe that our FBO business will continue to benefit from the overall growth in the corporate jet market and the demand for the services that our business offers. However, we believe that our airport services business is in a position to grow at rates in excess of the industry as a result of our internal growth, marketing and acquisition strategies.

      Internal Growth. We plan to grow revenues and profits by continuing to focus on attracting pilots and passengers who desire full service and quality amenities. We will continue to develop our staff so as to provide a level of service higher than that provided by discount fuel suppliers. In addition, we will make selective capital expenditures that will increase revenues and reinforce our reputation for service and high quality facilities, potentially allowing us to increase profits on fuel sales and other services over time.

      Marketing. We plan to improve, expand and capitalize on our existing marketing programs, including our proprietary point of sale system and associated customer information database, and our “Atlantic Awards” program. Through our marketing programs, we expect to improve revenues and margins by generating greater customer loyalty, encouraging “upselling” of fuel, cross-selling of services at additional locations to existing customers, and attracting new customers.

      Acquisitions. We will focus on acquisitions at major airports and locations where there is likely to be growth in the general aviation market. We believe we can grow through acquisitions and derive increasing economies of scale, as well as marketing, head office and other cost synergies. We believe the highly fragmented nature of the industry and the desire of certain owners for liquidity provide attractive acquisition candidates, including both individual facilities and portfolios of facilities. In considering potential acquisitions, we will analyze factors such as capital requirements, the terms and conditions of the lease for the FBO facility, the condition and nature of the physical facilities, the location of the FBO, the size and competitive conditions of the airport and the forecasted operating results of the FBO.

      We believe our airport services business has high-quality facilities and operations and focuses on attracting customers who desire high-quality service and amenities. Fuel sales represented approximately 71% of our airport services business revenue for 2005. Other services provided to these customers include de-icing, aircraft parking, hangar rental and catering. Fuel is stored in fuel farms and each FBO operates refueling vehicles owned or leased by the FBO. The FBO either maintains or has access to the fuel storage tanks to support its fueling activities. Services are also provided to commercial carriers and include refueling from the carrier’s own fuel supplies stored in the carrier’s fuel farm, de-icing and ground and ramp handling services.

      Our cost of fuel is dependent on the wholesale market price. Our airport services business sells fuel to customers at a contracted price, or at a price negotiated directly with the customer. While fuel costs can be volatile, we generally pass fuel cost changes through to customers.

      Our FBO facilities operate pursuant to long-term leases from airport authorities or local government agencies. Our airport services business and its predecessors have a strong history of successfully renewing leases, and have held some leases since the 1940s, 1950s and 1960s. The existing leases have an average remaining length of approximately 17 years.

      The airport authorities have termination rights in each lease. Standard terms allow for termination if the tenant defaults on the terms and conditions of the lease or abandons the property or if the tenant is insolvent or bankrupt. In addition, Atlantic’s FBOs at Chicago Midway, Philadelphia, Northeast Philadelphia, New Orleans International and Orange County may be terminated with notice by the airport authority for convenience. In each case, there are compensation agreements or obligations of the authority to make best efforts to relocate the FBO. Most of the leases allow for the lease to be terminated if there are liens filed against the property. The new operating agreement at Metroport East 34th Street Heliport also contains provisions allowing the authority to terminate the operating agreement for convenience. In this case, the authority will be obligated to pay compensation to Atlantic equal to the level of Atlantic’s unamortized cost of capital expenditure at the heliport.

      Atlantic manages and operates six airports on behalf of local authorities under management contracts. Under these contracts, Atlantic is responsible for the day-to-day operation of the airfield and terminal and is paid a fixed annual fee for providing these services. The annual fee is paid to Atlantic irrespective of the number of passengers that pass through the airport and, therefore, is unaffected by changes in airport activity. Management contracts accounted for less than 1% of Atlantic’s revenue for fiscal 2005.

      Atlantic operates six regional or general aviation airports under management contracts at the following locations:

      We believe our airport services business has an experienced marketing team and marketing programs that are sophisticated relative to those of other industry participants. Our airport services business’ marketing activities support its focus on high-quality service and amenities and are intended to generate greater customer loyalty, encourage “upselling” of fuel, present cross-selling services at additional locations to existing customers, and attract new customers.

      Atlantic has established two key marketing programs. Each utilizes an internally-developed point-of-sale system that operates at substantially all locations. This system tracks all aircraft utilizing the airport and records which FBO the aircraft uses. To the extent that the aircraft is a customer of another Atlantic FBO but did not use the Atlantic FBO at the current location, a member of Atlantic’s customer service team will send a letter alerting the pilot or flight department of Atlantic’s presence at that site and invite them to visit next time they are at that location.

      The second key program is the “Atlantic Awards” program. This program also operates through the point-of-sale system. For each 100 gallons of fuel purchased, the pilot is given a voucher for five “Atlantic Awards.” The pilot can begin accumulating points after registering the voucher on Atlantic’s website. Once 100 Atlantic Awards have been accumulated, the pilot is sent a pre-funded American Express card, branded with Atlantic’s logo. The card is recharged each time the pilot registers additional vouchers on Atlantic’s website. This program has rapidly gained acceptance by pilots and is encouraging “upselling” of fuel, where pilots purchase a larger portion of their overall fuel requirement at our locations. These awards are recorded as a reduction in revenue in our consolidated financial statements.

      Competition in the FBO business exists on a local basis at most of the airports at which our airport services business operates. Seven of our FBOs (including the heliport) are the only FBO at that airport, either because of the lack of suitable space at the airfield, or because the level of demand for FBO services at the airport does not support more than one FBO. The remaining twelve FBOs have one or more competitors located at the airport. FBO operators at a particular airport compete based on a number of factors, including location of the facility relative to runways and street access, service, value-added features, reliability and price. Our airport services business positions itself at these airports as a provider of superior service to general aviation pilots and passengers. Staff are provided with comprehensive training on an ongoing basis to ensure high and consistent quality of service. Our airport services business markets to high net worth individuals and corporate flight departments for whom fuel price is of less importance

      There are nine competitors with operations at five or more U.S. airports, including Signature Flight Support, Landmark Aviation, Million Air Interlink, Trajen and Mercury Air. These competitors tend to be privately held or owned by much larger companies, such as BBA Group plc, The Carlyle Group and Allied Capital Corporation. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport or to compete for acquisitions. We believe that the airport authorities from which our airport services business leases space are satisfied with the performance of their FBOs and are therefore not seeking to solicit additional service providers.

      The aviation industry is overseen by a number of regulatory bodies, the primary one being the FAA. At the FBO level, our airport services business is largely regulated by the local airport authorities through lease contracts with those authorities. Our airport services business must comply with federal, state and local environmental statutes and regulations associated in part with numerous underground fuel storage tanks. These requirements include, among other things, tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills. Our airport services business’ operations are subject to regular inspection by federal and local environmental agencies and local fire and airline quality control departments. With respect to environmental and compliance requirements, we expect to install fuel farm containment equipment in 2006 and secondary fuel containment equipment for our fuel trucks in 2007 to comply with new fuel farm containment requirements. We do not expect that compliance and related remediation work will have a material negative impact on earnings or the competitive position of our airport services business. To date, our airport services business has not received notice of any cease and abatement proceeding by any government agency as a result of failure to comply with applicable environmental laws and regulations.

      The day-to-day operations management of our airport services business is undertaken by individual site managers. Local managers at each site are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at their sites and that revenue from the sites is collected, and expenses incurred, in accordance with internal guidelines. In order to maximize the revenue earned at the FBOs, local managers are, within the specified guidelines, empowered to make decisions as to fuel pricing and other services. In this way, our airport services business is able to respond to its customers’ needs efficiently and provide them with high quality service.

      Atlantic’s operations are managed and overseen by a group of senior personnel who, on average, have over 19 years experience in the aviation industry. Most of the business management team members have been employed at our airport services business (or its predecessors) for over 11 years and have established close and effective working relationships and understanding with local authorities, customers, service providers and subcontractors. These teams are responsible for, among other things, overseeing the FBO operations, setting strategic direction and ensuring compliance with all contractual and regulatory obligations.

      Atlantic’s head office is in Plano, Texas. The head office provides the business with central management and performs overhead functions, such as accounting, information technology, human resources, payroll and insurance arrangements. We believe our facilities are adequate to meet our present and foreseeable operational needs.

      As of December 31, 2005, our airport services business employed over 1,080 employees at its various sites. Approximately 18% of employees are covered by collective bargaining agreements. We believe that employee relations at our airport services business are good.

Airport Parking Business

      Our airport parking business is the largest provider of off-airport parking services in the United States, measured by number of facilities, with 31 facilities comprising over 40,000 parking spaces and over 360 acres at 20 major airports across the United States, including six of the ten largest passenger airports. Our airport parking business, operating generally under the names “PCA,” “Avistar” or “SunPark,” provides customers with 24-hour secure parking close to airport terminals, as well as transportation via shuttle bus to and from their vehicles and the terminal. Operations are carried out on either owned or leased land at locations near airports. Operations on owned land or land on which our airport parking business has leases longer in term than 20 years (including extension options) account for a majority of operating income. The airport parking business had revenues of $59.9 million and operating income of $6.5 million for fiscal 2005, and total assets of $288.8 million at December 31, 2005 and $205.2 million at December 31, 2004. Revenues from our airport parking business comprised 19.6% of our total revenues in fiscal 2005.

      In 2002, the Macquarie Global Infrastructure Fund, together with other investors, acquired the ten off-airport parking facilities formerly owned and operated by the PCA Group. That transaction closed in December 2002, and the business commenced operations as Macquarie Parking. In October 2003, Macquarie Parking acquired the ten off-airport parking facilities of Airport Satellite Parking LLC, known as Avistar. Since that acquisition was completed, the two businesses have been operated as one merged business. Between October 2003 and December 23, 2004, the business acquired an additional four facilities.

      On the second day following our initial public offering, we acquired 100% of the ordinary shares in Macquarie Americas Parking Corporation, or MAPC, from the Macquarie Global Infrastructure Fund for cash consideration of $33.8 million (including transaction costs). At that time MAPC owned approximately 83% of the outstanding ordinary membership units in Parking Company of America Airports Holdings LLC, or PCAA Holdings. In turn, PCAA Holdings owned approximately 51.9% of the outstanding membership units in PCAA Parent LLC, or PCAA Parent. PCAA Parent is the 100% owner of a number of subsidiaries that collectively own and operate Macquarie Parking.

      On the same day, we also acquired all of the minority interests in PCAA Holdings for $6.7 million and 34.3% of the outstanding membership units in PCAA Parent for $23.3 million (in each case, including transaction costs). As a result of these transactions, we acquired in aggregate 100% of PCAA Holdings and 87.2% of PCAA Parent, and thereby acquired Macquarie Parking. The affairs of PCAA Parent are governed by its LLC agreement. PCAA Parent has a board of directors and PCAA Holdings has the right to appoint all members to the board of directors. Pursuant to the LLC agreement, most major decisions are referred to the board of directors of PCAA Parent, where decisions are made by majority vote.

      On October 3, 2005, our airport parking business acquired real property, and personal and intangible assets related to six off-airport parking facilities. These facilities are collectively referred to as “SunPark” and are located at airports in St. Louis, Philadelphia, Houston, Oklahoma City, Buffalo and Columbus. During 2005, our airport parking business also acquired a facility in Philadelphia, a leasehold facility in Cleveland and exercised the option to purchase previously leased property at existing facilities in Phoenix and Newark. In conjunction with the property acquisition in Phoenix, we consolidated our market presence to two facilities by not renewing the lease on a third facility. We contributed $17.8 million of the equity

      Airport parking can be classified as either on-airport (generally owned by the airport and located on airport land) or off-airport (generally owned by private operators). The off-airport parking industry is relatively new, with the first privately owned parking facilities servicing airports generally only appearing in the last few decades. Industry participants include numerous small, privately held companies as well as on-airport parking owned by airports.

      Airports are generally owned by local governments, which often do not operate or market their parking operations as effectively as the privately owned operators, as the parking operations do not form part of the airport’s core function. In many cases, on-airport parking facilities are managed by large parking facility management companies pursuant to cost-plus contracts that do not create incentives to maximize profitability. Most airports have historically increased parking rates rapidly with increases in demand, creating a favorable pricing environment for off-airport competitors.

      Airport parking facilities operate as “self-park” or “valet” parking facilities. Valet parking facilities often utilize “deep-stack” parking methods that allow for a higher number of cars to be parked within the same area than at a self-parking facility of the same size by minimizing space between parked cars. In addition, valet parking provides the customer with superior service, often allowing the parking rates to be higher than at self-park facilities. However, the cost of providing valet parking is generally higher, due to higher labor costs, so self-parking can be more profitable per car, depending upon land availability at an affordable cost, labor costs and the premium that can be charged for valet service.

      The substantial increase in use of the internet to purchase air travel through companies such as Expedia, Orbitz and Travelocity, as well as through airlines’ own websites, provides a strong co-marketing opportunity for larger off-airport parking operators that provide broad nationwide coverage at the busiest airports. In addition, we believe the highly fragmented nature of the industry provides strong consolidation opportunities for larger off-airport parking operators that benefit from economies of scale and national marketing programs, distribution networks and information systems.

      We believe that we can grow our airport parking business by focusing on achieving operating efficiencies and internal growth, expanding marketing efforts and complementary acquisitions.

      Internal Growth. Our strategy includes:

      Operating Efficiencies. Our business was enlarged with the acquisition of SunPark in October 2005 and we intend to pursue additional complementary acquisitions. We believe there are economies of scale that can be realized due to the increased size, in areas such as combined marketing programs, vehicles and equipment purchases and employee benefits.

      Acquisitions. We believe we can grow through selective acquisitions and derive benefits from economies of scale, including revenue and marketing, head office, insurance, shuttle buses and other cost synergies. We believe the highly fragmented nature of the industry and the desire of owners for liquidity provide attractive acquisition candidates. Acquiring facilities at major airports where we do not currently have a facility would allow us to expand our nationwide presence, while opportunities in markets where we already have a presence should provide increased operating efficiencies and expanded capacity. These acquisitions can take the form of entering into new leases or purchasing land.

      We believe our size and nationwide coverage and sophisticated marketing programs provide us with a competitive advantage over other airport parking operators. We aim to centralize our marketing activities and the manner in which we sell our services to customers. Individual location operations can focus on service delivery as diverse reservation services and customer and distribution channel relations are managed centrally. Our size and the diversity of our operations enable us to mitigate the risk of a downturn or competitive impact in particular locations or markets. In addition, our size provides us with the ability to take advantage of incremental growth opportunities in any of the markets we serve as we generally have more capital resources to apply toward those opportunities than single facility operators.

      Our nationwide presence also allows us to provide “one stop shopping” to internet travel agencies, airlines and major corporations that seek to deal with as few suppliers as possible. Our marketing programs and relationships with national distribution channels are generally more extensive than those of our industry peers. We market and provide discounts to numerous affinity groups, tour companies, airlines and online travel agencies. We believe most air travelers have never tried off-airport parking facilities, and we use these relationships to attract these travelers as new customers.

      Most of our customers fall into two broad categories: business travelers and leisure travelers. Business travelers are typically much less price sensitive and tend to patronize those locations that emphasize service, particularly prompt, consistent and quick shuttle service to and from the airport. Shuttle service is generally provided within a few minutes of the customer’s arrival at the parking facility, or the airport, as the case may be. Leisure travelers often seek the least expensive parking, and we offer substantial discounts and coupon programs to attract leisure travelers. In addition to reserved parking and shuttle services, we provide ancillary services at some parking facilities to attract customers to the facility and/or to earn additional revenue at the facility. Such services include car washes or auto repairs, either at no cost to the customer or for a fee.

      We provide off-airport parking services at the following airports. Each airport is ranked according to the number of passenger enplanements (passengers boarding airplanes) sourced from FAA data for 2004:

      Our marketing team continually develops new programs designed to maximize revenue growth. These include developing and refining our internet reservation capability, opening new distribution channels, improving the product offering for corporate accounts and providing personalized web pages and activity reports for corporate accounts. For example, our Express Club provides a premium service and discounts for the highest turnover valet customers in return for an annual membership fee. Further, following the events of September 11, 2001, members of the management team of our airport parking business and others established AirportDiscountParking.com, the first nationwide alliance of off-airport parking businesses which have locations at over fifty airports in the United States. Promotional agreements with airlines as well as traditional and internet travel agencies attracted prospective customers to the AirportDiscountParking.com websites for coupons, maps and directions. Since its inception, we believe AirportDiscountParking.com has accelerated the rate at which new customers are attracted to try our parking services for the first time. Marketing initiatives in 2005 included radio advertising and a relationship with Frontier Airlines.

      Our facilities operate under various trade names. We use the Parking Company of America name pursuant to a perpetual trademark licensing agreement.

      Competition exists on a local basis at each of the airports at which we operate. Generally, airport parking facilities compete on the basis of location (relative to the airport and major access roads), quality of facilities (including whether the facilities are covered), type of service provided (self-park or valet), security, service (especially relating to shuttle bus transportation), price and marketing. We face direct competition from the on-airport parking facilities operated by each airport, many of which are located closer to passenger terminals than our locations. Airports generally have significantly more parking spaces than we do and provide different parking alternatives, including self-park short-term and long-term, off-airport lots and valet parking options. However, as the airports are government-owned, competitive dynamics of service and pricing are generally different than those experienced with privately owned competitors. The airports generally do not view parking operations as their core function, and their pricing strategy is often driven by the fiscal state of the airport authority, which often leads to sudden high price increases.

      We also face competition from existing off-airport competitors at each airport. While each airport is different, there generally are significant barriers to entry preventing new off-airport competitors from entering the markets in which we operate, including limited availability of suitable land of adequate size near the airport and major access roads, and zoning restrictions. While competition is local in each of the markets in which we operate, we face strong competition from several large off-airport competitors, including companies such as The Parking Spot, ParkNFly, Airport Fast Park and PreFlight Airport Parking (owned by General Electric) that have operations at five or more U.S. airports. In each market in which we operate, we also face competition from smaller, locally owned independent parking operators, as well as from hotels or rental car companies that have their own parking facilities. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport or to compete for acquisitions.

      Indirectly, we face competition from other modes of transportation to the airports at which we operate, including public transportation, airport rail links, taxis, limousines and drop-offs by friends and family. We face competition from other large off-airport parking providers in gaining access to marketing and distribution channels, including internet travel agencies, airlines and direct mail.

      Our airport parking business is subject to federal, state and local regulation relating to environmental protection. We own a parcel of real estate that includes land that the Environmental Protection Agency, or EPA, has determined to be contaminated. A third party operating in the vicinity has been identified as a potentially responsible party by the EPA. We do not believe our parking business contributed to this contamination and we have not been named as a potentially responsible party. Nevertheless, we have purchased an environmental insurance policy for the property as an added precaution against any future claims. The policy expires in July 2007 and is renewable.

      We transport customers by shuttle bus between the airport terminals and its parking facilities, and its shuttle operations are subject to the rules and policies of the local airport. The airports are able to regulate or control the flow of shuttle buses. Some airport authorities require permits and/or levy fees on off-airport parking operators for every shuttle trip to the terminals. These regulations have not materially affected our airport parking business to date. If fees were to be significantly increased, we would seek to pass the increases on to our customers through higher parking rates, which could result in a loss of customers.

      The FAA and Transportation Safety Administration, or the TSA, generally have the authority to restrict access to airports as well as to impose parking and other restrictions near the airport sites. The TSA generally prohibits parking within 300 feet of airport terminals during times of heightened alert. While we believe that existing regulations or the present heightened security at airports may be relaxed in the future, the existing 300 feet rule may benefit us as it has prevented some on-airport competitors from using a number of their existing parking spaces.

      The day-to-day operations of our airport parking business are managed by an operating management team located at head offices in Downey, California and Newark, New Jersey. Each site is operated by local managers who are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at their site and that revenue from the sites is collected and expenses incurred in accordance with internal guidelines.

      As of February 28, 2006, Macquarie Parking employed approximately 1,000 individuals. Approximately 22% of its employees are covered by collective bargaining agreements. We believe that employee relations at Macquarie Parking are good.

District Energy Business

      Our district energy business consists of Thermal Chicago and a 75% interest in Northwind Aladdin. We also own all of the senior debt of Northwind Aladdin. The remaining 25% equity interest in Northwind Aladdin is owned by Nevada Electric Investment Company, or NEICO, an indirect subsidiary of Sierra Pacific Resources. The district energy business had revenues of $43.4 million and operating income of $9.4 million for our 2005 fiscal year, and total assets of $245.4 million at December 31, 2005 and $254 million at December 31, 2004. Revenues from our district energy business comprised 14.2% of our total revenues in the 2005 fiscal year.

      Thermal Chicago operates the largest district cooling system in the United States. The system currently serves 98 customers under long-term contracts in downtown Chicago and one customer in Chicago outside the downtown area, and has signed contracts with two additional customers expected to start service between 2006 — 2009. Our district energy business provides chilled water from five modern plants located in downtown Chicago through a closed loop of underground piping for use in the air conditioning systems of large commercial, retail and residential buildings in the central business district. The first of the plants became operational in 1995, and the most recent came on line in June 2002. The total capacity of the downtown system is 83,900 tons of chilled water with deliverable capacity of approximately 94,400 tons due to the reduced rate arrangements with interruptible customers who, when called upon, could meet their own cooling needs during peak times.

      The table below provides summary data regarding the capacity of the downtown Chicago plants:

      Thermal Chicago also owns a site-specific heating and cooling plant, P-6, that serves a single customer in Chicago outside of the downtown area. The P-6 plant has the capacity to produce 4,900 tons of cooling and 58.2 million British Thermal Units, or BTUs, of heating per hour.

      The Northwind Aladdin plant has been in operation since 2000 and has the capacity to produce 9,270 tons of chilled water, 40 million BTUs of heating per hour and approximately 5 megawatts of electricity.

      On the day following our initial public offering, we acquired 100% of the membership interests in Macquarie District Energy Holdings, LLC, or MDEH, the holding company of our district energy business, from Macquarie Investment Holdings Inc., a wholly owned indirect subsidiary of Macquarie Bank Limited, for $67 million (including transaction costs) and assumed $120 million of senior debt that was used partially to finance the acquisition of Thermal Chicago and our interest in Northwind Aladdin.

      Prior to our initial public offering, Macquarie District Energy, Inc., or MDE, a wholly owned subsidiary of MDEH, acquired 100% of the shares in Thermal Chicago Corporation, the holding company for Thermal Chicago, from Exelon Thermal Holdings, Inc., a subsidiary of Exelon Corporation, or Exelon, for $135 million plus a working capital adjustment of $2.7 million, with no assumption of debt pursuant to a stock purchase agreement. Prior to our initial public offering, MDE also acquired all of the shares of ETT Nevada, Inc., which owns a 75% equity interest in Northwind Aladdin, and separately all of the senior debt in Northwind Aladdin from a wholly owned subsidiary of Exelon. The acquisition price for the shares and senior debt was $26.1 million plus a working capital adjustment of $2 million. In addition to the purchase prices under the purchase agreements, MDE incurred fees and other expenses of approximately $9 million in connection with the completion of the acquisition of Thermal Chicago and ETT Nevada, Inc. and required cash for debt service reserves of approximately $4 million.

      District energy is the provision of chilled water, steam and/or hot water to customers from a centralized plant through underground piping for cooling and heating purposes. A typical district energy customer is the owner/manager of a large office or residential building or facilities such as hospitals, universities or municipal buildings. District energy systems exist in most major North American and European cities and some have been in operation for over 100 years. District energy is not, however, an efficient option for suburban areas where customers are widely dispersed.

      To provide district cooling, the system is filled with water obtained from the municipal system and chilled using electric chillers. Within the plant, a refrigerant gas is compressed into a liquid state. This liquid refrigerant is piped into a larger (less pressurized) chamber, allowing it to expand. The chamber is surrounded by water pipes. As part of the expansion process, the refrigerant absorbs heat from the water in the pipes into the expanding gas, causing the water to be chilled. The chilled water is then sent down a system of underground pipes to buildings where the thermal energy (cold) is transferred into the buildings’ internal systems. System water does not mix with in-building water; instead the thermal energy is transferred via a heat exchanger. Water is then returned to the plant for re-chilling through the same system. While the process is relatively simple, operating a district energy system at high levels of availability and optimum levels of efficiency is complex. The key operating risks are limited primarily to the availability of electricity (i.e., blackouts) and general system breakdowns (in either plant or distribution systems).

      District heating is the provision of steam or hot water through pipes for use as a heating source. The steam is generated through the burning of fuel to boil water in a boiler. The steam is distributed through underground piping. After the steam is used to heat the customer’s facility, the condensed steam is returned to the central plant.

      District energy systems are largely unregulated in the United States, although each multi-customer system usually has an agreement with the city in which it operates that provides permission to lay pipes under the streets (generally in the form of a use agreement or concession). The plans for laying these pipes need to be drawn up and provided to the city engineers for approval. Our district energy business is not subject to specific government regulation, however, our downtown Chicago operations are operated subject to the terms of a Use Agreement with the City of Chicago. See “— Business — Thermal Chicago — City of Chicago Use Agreement.”

      We believe that we can grow our district energy business internally via capital expenditure and through acquisitions.

      Internal Growth. We plan to grow revenues and profits by increasing the output capacity of Thermal Chicago’s plants in downtown Chicago and adding new customers to the system. Over the past two years, minor system modifications have been made that increased capacity by 3,000 tons. In addition, efficiencies we have achieved at our plants and throughout our system have created approximately 9,000 additional tons of saleable capacity. A portion of this capacity will be used to accommodate four customers who will convert from interruptible to continuous service in mid-2006. The balance has been sold to new customers contracted in 2005 and early 2006.

      We anticipate spending up to $8.4 million over two years starting in 2007 for a system expansion that will increase saleable capacity by an additional 7,000 tons. This additional capacity will be available to serve existing and new customers. We anticipate entering into contracts or letters of intent with customers prior to committing to the capital expenditure.

      Acquisitions. We will seek to grow our district energy business through acquisitions of other district energy systems where these acquisitions can be made on favorable economic terms. The ownership of district energy systems in the United States is highly fragmented, and we believe the sector has potential for consolidation. Also, a number of diversified electric utilities with non-core district energy operations may seek to sell their systems. We anticipate that these systems, once acquired, will continue to be operated under the direct control of local management.

      Each chilling plant is manned when in operation and has a central control room from which the plant can be operated and customer site parameters can be monitored and controlled. The plant operators can monitor, and in some cases control, the functions of other plants allowing them to cross-monitor critical functions at the other plants. The control room at Plant 2 is set up as the primary system control room with extensive monitoring and control functions and is where the majority of day-to-day system operating decisions are made.

      Since the commencement of operations, there have been no unplanned interruptions of service to any customer. Occasionally, we have experienced plant or equipment outages due to electricity loss or equipment failure; however, in these cases we had sufficient idle capacity to maintain customer loads. When maintenance work performed on the system has required customer interruption, we have been able to coordinate our operations for periods of time to meet customer needs. The effect of major electric outages is generally mitigated since both customers and the plants are equally affected; the plants affected by the outages cannot produce cooling and affected customers are unable to use the cooling service.

      The largest and most variable direct expense of the operation is electricity. As a consequence, operating personnel historically manage this cost in accordance with a strategy that takes into account system hydraulic requirements and the costs and efficiencies of each plant. The efficient use of electricity at each plant will vary based on its design, operation and its electricity rate plan. In addition, at several plants, ice can be made overnight to store thermal energy when electricity costs are generally lower. This ice is then used during the day to chill water when electricity costs are highest.

      Electric utility restructuring legislation was adopted in Illinois in December 1997 to provide for a transition to a deregulated generation market scheduled for 2007. The new law provided Illinois electric utilities the opportunity to restructure their businesses, mandated a reduction in rates for residential customers and a rate freeze for customers under bundled rate plans, and allowed customers the opportunity to remain on their bundled rate plan or achieve savings by purchasing electricity supply from alternative retail energy suppliers. The legislation also included a provision for electric utilities, in our case ComEd, to collect a customer transition charge, or CTC, from customers who choose to purchase electricity from an alternative retail energy supplier or those who elect ComEd’s Power Purchase Option, or PPO, during the transition period as opposed to the bundled rate plans. The CTC allowed ComEd to recover some of its costs that might otherwise be unrecoverable under market-based rates. Due to the recent rise in market-based cost of power, CTCs have fallen.

      Three of Thermal Chicago’s plants currently participate in the PPO plan due to the economic advantages of the lower delivery service costs. In the beginning of each calendar year, ComEd calculates the rates to be charged under the PPO plan, including the CTC for each participant, with new rates becoming effective beginning each May. Under the terms of the PPO plan, if the CTC of any participant is reduced to zero, that participant becomes ineligible to purchase electricity under the PPO plan. With the recent high cost of market-based power, ComEd’s calculation of our CTCs at the beginning of 2006 is zero. As a result, the three plants will no longer be able to purchase electricity under the PPO plan effective May 2006.

      Effective May 1, 2004, ComEd became an integrated member of the PJM interconnection regional transmission organization (PJM). As a result, ComEd began to pass on PJM transmission charges to its customers that procure energy from retail energy suppliers. PJM transmission charges are passed to Thermal Chicago at the one plant currently supplied by a retail energy supply contract. As the PPO contracts with each of our other three plants expire, we expect that ComEd will pass through these costs to these three plants.

      We have reviewed our options to purchase power for the remainder of 2006 and have entered into a contract to purchase electricity with a retail energy supplier. Based on an historically normal level of electricity usage, we estimate our electricity costs will increase by $750,000 for the remainder of 2006. We believe we can mitigate this impact through a combination of operational and strategic initiatives and offsets from our contract escalators. Had we remained on the PPO contracts and based on an historically normal level of electricity usage, we estimate our electricity costs would have increased by $1.1 million due to the revised PPO rates determined by ComEd in early 2006.

      The Illinois electricity markets are expected to deregulate beginning in January 2007 and we will be required to enter into new electricity purchase arrangements effective at that time. ComEd has proposed a procurement process referred to as a reverse-auction. In a reverse-auction, the independent auction manager sets the opening bid — designed to attract more supply than needed — and then manages successive rounds of descending bids until just enough supply is committed at the lowest possible price to meet customer needs. Under this process, regulated electric utilities in Illinois will procure electricity on behalf of certain customers in a reverse-auction process and pass through the costs of that electricity to its customers. Large users, including Thermal Chicago Corporation, are typically excluded from this process. Although the Illinois Commerce Commission, or ICC, has approved the proposed reverse-auction process,

      The market prices of electricity available to us are likely to reflect prices established in the reverse-auction process. Market prices of electricity in Illinois are also affected by changes in natural gas prices, which have been very volatile, but overall have increased significantly over the past year. We cannot predict the market prices for electricity that we will face beginning in 2007 but we anticipate, based on current market dynamics, that electricity will cost substantially more in 2007 than in the second half of 2006, as discussed above.

      In addition, on August 31, 2005, ComEd filed a rate case with the ICC, which seeks, among other things, to increase delivery rates in a manner that we believe disproportionately impacts larger users of electricity. If the rate case is approved as currently proposed, our electricity costs would increase by an additional $2 million annually. We have joined a consortium of large users to challenge ComEd’s rate increase. On December 23, 2005, ICC staffers filed an objection to ComEd’s initial request to raise its delivery charge. Instead, they are calling for a slight decrease on the basis that the utility is trying to pass on too many administrative and other costs to customers. In addition, the Citizens’ Utility Board and other government agencies have filed testimony with the ICC refuting ComEd’s rationale for an increase in its delivery rates. The results of the rate case are not expected to be known until at least the third quarter of 2006.

      We currently serve 98 customers in downtown Chicago and one outside the downtown area and have signed contracts with two additional customers expected to begin service between 2006 — 2009. These customers comprise a diverse customer base consisting of retail stores, office buildings, residential buildings, theaters and government facilities. Customers include a number of landmark Chicago buildings. Office and commercial buildings comprise approximately 70% of the customers. No one customer accounts for more than eight percent of total contracted capacity and only three customers account for more than five percent of total contracted capacity each. The top 20% of customers account for approximately 62% of contracted capacity.

      Our downtown district energy system has sold 85,492 tons of cooling capacity pursuant to contracts under which it is obligated to provide 72,617 tons of continual service and 12,875 tons of chilling capacity to interruptible customers. Service to interruptible customers may be discontinued at any time and in return interruptible customers pay lower prices for the service. We are able to sell continual service capacity in excess of the capacity of our system because customers do not all use their full capacity at the same time. Because of this diversity in customer usage patterns, we have not had to discontinue service to interruptible customers since the initial phases of system construction. Four interruptible customers will become customers requiring continual service in mid-2006. The total interruptible capacity contracted to these four customers is approximately 6,700 tons and we have the system capacity to accommodate this conversion. The conversion of these customers will lead to revenue increases of approximately $1 million per year as these customers will lose their applicable price discounts.

      We enter into contracts with the owners of the buildings to which the chilling service is provided. The terms of customer contracts vary from customer to customer. Approximately half of our customer contracts expire in the period from 2016 to 2020. The weighted average life of customer contracts as of December 31, 2005 is approximately 14 years.

      At expiration, 64% of our customer contracts either automatically renew unless our district energy business terminates them or are silent in relation to renewal. This effectively gives us the ability to re-price these contracts at expiry unless our customers choose to use an alternative source for chilled air. The automatic renewal terms range from five to ten years. The rest of the customer contracts provide the customer with the option to renew the contract at the existing contract pricing for similar renewal terms of five to ten years.

      Because of a lack of competition from other district energy systems and district energy’s advantages over alternative sources of cooling for customers, we believe that a high percentage of our existing contracts will be renewed at expiry. See “— Competition.”

      Customers pay two charges to receive chilled water services: a fixed charge, or capacity charge, and a variable charge, or consumption charge. The capacity charge is a fixed monthly charge based on the amount of chilled water that we have contracted to make available to the customer. The consumption charge is a variable charge based on the volume of chilled water actually used during a billing period.

      Adjustments to the capacity charge and consumption charge occur periodically, typically annually, either based on changes in certain economic indices or, under some contracts, at a flat rate. We make the necessary adjustments and then invoice the customer appropriately. Capacity charges generally increase at a fixed rate or are indexed to the Consumer Price Index, or CPI, which is a broad measure of inflation. Consumption charges are generally indexed to changes in a number of economic indices. These economic indices measure changes in the costs of electricity, labor and chemicals in the region in which we operate. While the indices used vary from contract to contract, consumption charges in 90% of our contracts (by capacity) are indexed to indices weighted at least 50% to increases in the Midwest producer price index for commercial electric power, with the balance indexed to costs of labor and chemicals. Hence 45% or $7.2 million of our 2005 consumption revenue for Thermal Chicago is linked to the Midwest producer price index. This weighting is comparable to the composition of Thermal Chicago’s direct expenses, excluding non-cash items, of approximately 50% which are for electricity. The producer price index reflects the cost of electricity across a broad geographic region in the Midwest and, as a result, does not fully reflect changes in electricity costs that occur locally. Changes in this index, which are not in our control, combined with recent significant increases in local power prices, are likely to result in our electricity costs increasing significantly without a corresponding increase in contracted revenues to fully offset the cost. In addition, because our contracts typically adjust consumption charges annually, there is likely to be a significant lag before changes in market prices of electricity are reflected in our contracts overall. We are currently evaluating the components and calculation of the producer price index and alternative contractual price adjustment options to determine whether our contract provisions will allow us to better offset recent increases in electricity costs described above.

      Events of Default and Contract Termination. Customer contracts generally permit termination by the customers if, after an appropriate cure period, we fail to provide the chilled water service or otherwise fail to comply with the terms of the contract. We can terminate the contracts if, after an appropriate cure period, customers fail to make payments to us or otherwise fail to comply with the terms of the contract.

      Make Whole Payments. Except for four contracts that comprise approximately 3% of capacity sold, if a customer wishes to terminate a contract early or we terminate the contract for customer default, then the customer is required to pay a lump sum. While the formulas vary across contracts, the basic principle is that the lump sum payment enables us to recover a portion of the capital that we invested to provide the service to the customer.

      Losses and damages are typically defined in the contracts, and in these cases are restricted to physical damages to property, etc. Some contracts are vague in regard to the definitions of losses and damages and therefore give rise to the risk of suit for consequential damages. As a result of these potential damages, we seek to operate with a high level of reliability and an appropriate level of redundancy.

      Change of Ownership Assignment. Generally, the customer is required to obtain our consent to assign its obligations under the contract (which may occur if the customer wishes to sell the property to which we provide service). In some cases, the contract may be assigned without our consent, provided that the assignee meets certain credit standards.

      Approximately half of our revenues come in the form of capacity charges and half in the form of consumption charges. Consumption revenues are higher in the summer months when the demand for chilled water is at its highest and as a consequence, approximately 80% of consumption revenue is received in the second and third quarters of each year. Consumption payments also fluctuate from year to year depending on weather conditions.

      Thermal Chicago is not subject to substantial competitive pressures. Pursuant to customer contracts, customers are generally not allowed to cool their premises by means other than chilled water service provided by our district energy business. The exception is when we cannot or choose not to provide additional capacity. The customer also may be allowed to operate separate cooling units to be used as back-up for critical operations.

      In addition, the major alternative cooling system available to building owners is the installation of a stand-alone water chilling system (self-cooling). While we consider that competition from self-cooling exists, we do not consider that it has a material impact on the likelihood that the current contracts will be renewed at their scheduled maturity. Installation of a water chilling system (or refurbishment of retired systems for customers who once self-cooled) requires significant building reconfiguration and space and capital expenditure by our customers, whereas our district energy business has the advantage of economies of scale in terms of plant efficiency, staff and power sourcing.

      We believe competition from an alternative district energy system in the Chicago downtown market is unlikely. There are significant barriers to entry including the considerable capital investment required, the need to obtain City of Chicago consent and the difficulty in obtaining sufficient customers given the number of buildings in downtown Chicago already committed under long-term contracts to the use of the system owned by us.

      We are not subject to specific government regulation, but our downtown Chicago operations are operated subject to the terms of a Use Agreement with the City of Chicago. The Use Agreement establishes the rights and obligations of our district energy business and the City of Chicago for the utilization of certain public ways of the City of Chicago for the operation of our district cooling system. Under the Use

      The Use Agreement expires on December 31, 2020. Any proposed renewal, extension or modification of the Use Agreement will be subject to the approval by the City Council of Chicago. Prior to the expiration date, the agreement may be terminated by the City of Chicago for uncured material breaches of its terms and conditions by us. If we install any facilities that are not properly authorized under the Use Agreement or if the district cooling system does not conform with the standards generally applied by the City of Chicago, the City of Chicago may impose upon us liquidated damages in the amount of $6,000 per day if we fail to remove, modify, replace or relocate our facilities when requested by the City of Chicago.

      The day-to-day operations of our district energy business are managed by an operating management team located in Chicago, Illinois. Our management team has a broad range of experience that includes engineering, construction and project management, business development, operations and maintenance, project consulting, energy performance contracting, and retail electricity sales. The team also has significant financial and accounting experience.

      Approximately 90% of Northwind Aladdin’s cash flows are generated from a long-term contract with the Aladdin resort and casino, with the balance generated from a contract with the Desert Passage shopping mall. The Aladdin resort and casino is located at the center of Las Vegas Boulevard in Las Vegas and includes a 2,567-room hotel, a 100,000 square foot casino and a 75,000 square foot convention and conference facility. Additional buildings are being constructed on the Aladdin property and the Northwind Aladdin plant has the capacity to serve the buildings.

      In 2001, the then owner of the Aladdin resort and casino filed for bankruptcy protection under Chapter 11. Pursuant to a settlement agreement approved by the bankruptcy court, Opbiz, LLC, a consortium comprised of Starwood Hotels and Resorts, Robert Earl, the chairman of Planet Hollywood, and Bay Harbor Management acquired the Aladdin resort and casino in September 2004 for approximately

      The existing customer contracts with Aladdin resort and casino and the Desert Passage shopping mall both expire in February 2020. At expiry of the contracts, the plant will either be abandoned by us and ownership will pass to the Aladdin resort and casino for no compensation, or the plant will be removed by us at the cost of the Aladdin resort and casino.

      The Northwind Aladdin plant has been in operation since 2000 and has the capacity to produce 9,270 tons of chilled water, 40 million BTUs of heating per hour and approximately 5 megawatts of electricity. The plant is manned 24 hours a day. The plant supplies district energy services to its customers via an underground pipe system.

      Northwind Aladdin LLC’s limited liability company agreement, or the operating agreement, dated March 18, 1999 (as amended on March 15, 2002) provides for, among other things, the ownership rights of its members, NEICO, and ETT Nevada, Inc., respectively. The operating agreement provides that the business and affairs of Northwind Aladdin are managed by or under the direction of a board of managers to which ETT Nevada, Inc. is entitled to appoint three members and NEICO is entitled to appoint one member. Provided all members of the board of managers are present, decisions of the board of managers require the approval of three of the four directors, except for certain reserved matters, including approval of the budget and capital calls, which require unanimous approval. With respect to amendments to the operating agreement, the approval of members owning not less than 80% of the interests is required in addition to unanimous board approval. In the event of a deadlock, the dispute is referred to the chief executive officers of the ultimate parent companies of the members and, if the deadlock remains unresolved, the members can elect to exercise a buy-out mechanism.

      Our district energy business has 44 full-time employees and one part-time employee. There are 35 plant staff members employed under the terms of contracts with the International Union of Operating Engineers. On December 19, 2005, contracts covering unionized employees were renewed for another three years effective January 15, 2006. In Las Vegas, the contract term is currently four years and expires on March 31, 2009.

Toll Road Business

      Connect M1-A1 Limited operates the M1-A1 Link Road, or Yorkshire Link, a highway of approximately 19 miles in length that links the M1 and M62 highways south of Leeds and the A1 highway south of Wetherby in England. Connect M1-A1 Limited is responsible under a concession with the U.K. government’s Transport Secretary for the design, building, financing and operation of Yorkshire Link, until 2026. Yorkshire Link is part of the U.K. national highway network and provides a major road link for both national and regional traffic. It also serves a local function by providing a bypass around Leeds and access to the East of Leeds area. Connect M1-A1 Limited had revenue of £47.1 million and operating income of £34.4 million during the year ended March 31, 2005.

      In return for building and operating Yorkshire Link, Connect M1-A1 Limited receives revenues under a shadow tolling system. Under a shadow tolling system, road users do not pay tolls; instead, the U.K. government pays fees or “shadow tolls” to Yorkshire Link based on the volume of user traffic on Yorkshire

      On December 22, 2004 we acquired 100% of Macquarie Yorkshire Limited, or Macquarie Yorkshire, from Macquarie European Infrastructure plc, or MEIP, an entity that is a member of the Macquarie Infrastructure Group, or MIG, for a total purchase price of $84.7 million including transaction costs. MIG is an infrastructure fund managed by the Macquarie Group that is listed on the Australian Stock Exchange.

      Macquarie Yorkshire owns 50% of Connect M1-A1 Holdings Limited, or CHL, which owns 100% of Connect M1-A1 Limited. Connect M1-A1 Limited is the holder of the Yorkshire Link concession. The remaining 50% interest in CHL is held by Balfour Beatty, one of the United Kingdom’s leading construction companies, concession owners, infrastructure service operators and maintenance providers, for whom the U.K. road sector is a core business.

      We set aside a further £1 million (USD $1.9 million) of the cash acquired through our acquisition of Macquarie Yorkshire to cash collateralize a letter of credit of the same amount required by a lender to Connect M1-A1 Limited as security for funding breakage costs on their fixed rate loan. This cash was released in the fourth quarter 2005 when certain financial tests were met by Connect M1-A1 Limited.

      Toll roads exist in almost every developed country in the world. Using “user pays” tolls to finance the development of essential road infrastructure represents an alternative to imposing general tax increases. Over the past 25 years, governments in various countries, including Australia and the United Kingdom, faced with fiscal pressures and growing needs for new road infrastructure have sought to have the private sector develop new toll roads. This privatization offers several advantages for governments, including allowing a transfer of development risk, the risk of construction time and cost overruns, actual traffic usage and future maintenance costs, to the private sector.

      In spite of the trend toward privatization, significant impediments limit new road construction. These include required governmental and environmental permits and approvals, scarcity of available land on which to build and significant time and upfront construction costs. For example, construction of Yorkshire Link took approximately three years and cost approximately £300 million.

      Operational toll roads are generally attractive to owners in that road traffic growth, and therefore revenue growth, has historically been quite predictable.

      The use of shadow toll road programs has an established history of operations in the United Kingdom. Yorkshire Link is one of eight shadow toll road programs implemented by the U.K. government since 1996 and was one of the first road programs procured under the U.K. government’s Private Finance Initiative. As compared to a toll road, the shadow tolling system provides a benefit to owners by not requiring the construction and staffing of tollbooths. Sensors embedded in the road surface count the number of cars and trucks traveling on the road. The U.K. government then pays a “shadow toll” on the basis of the traffic volume and the only revenues that need to be accounted for are for payments that are received monthly from the Transport Secretary. Drivers, in turn, do not have to contend with the delays caused by tollbooths.

      In March 1996, Connect M1-A1 Limited signed a concession with the Transport Secretary to design, build, finance and operate Yorkshire Link for a 30-year contract term in return for shadow tolling revenues. Pursuant to the concession, Yorkshire Link must be operated and maintained by Connect M1-A1 Limited throughout the 30-year period. The concession expires in 2026, when Connect M1-A1 Limited will no longer be entitled to receive revenues and will not be responsible for the maintenance of Yorkshire Link.

      Pursuant to the concession, shadow toll revenue paid by the Transport Secretary is based on two factors:

      The amount payable to Connect M1-A1 Limited for each vkm traveled by heavy goods vehicles and other vehicles is determined through the use of bands. Each vehicle category has four traffic volume bands, and different amounts are payable per vkm in each band.

      Historical revenue calculations under each band are as follows:

      For the concession year ended March 31, 2005, other vehicles traffic was 634.8 million vkms, and revenue calculations were as follows:

      For the concession year ended March 31, 2005, heavy goods vehicles traffic was 148.4 million vkms, and revenue calculations were as follows:

      For the concession year ended March 31, 2004, heavy goods vehicles traffic was 144.6 million vkms, and revenue calculations were as follows:

      Each year the bands are adjusted and payments per vkm of traffic in the various bands are subject to a series of escalation adjustments as follows:

      Adjustments are also made for lane closure charges and certain other matters, if required. Lane closure charges have been very minor to date, and they have been largely passed through to subcontractors responsible for such lane closures. The calculation is made within a few months after the end of the concession year when all the required variables have been determined.

      We believe that there is one new road development, the East Leeds Link, that will affect future traffic flows on Yorkshire Link. It is a new road connecting an existing junction near the midpoint of Yorkshire Link to Leeds city center. We expect that East Leeds Link will slightly increase traffic on Yorkshire Link when it opens. It is scheduled to open in 2008.

      The West Yorkshire Local Transport Plan, or LTP, which was published in 2000, sets forth the local context for transportation in which Yorkshire Link operates, although Yorkshire Link also carries longer-distance traffic and is less sensitive to local factors than the surrounding local roads. The target for traffic growth on all roads in West Yorkshire established by the LTP is 5% from 1999 to 2011. This compares with U.K. government forecasts of between 8.5% and 15.2% for the region over the same period.

      The LTP also includes plans for the Leeds Supertram network of three tram lines, which may have some negative impact on growth of Yorkshire Link traffic. The lines were programmed to be fully operational in 2007, but the project has been subject to delays and it now looks unlikely to proceed in the foreseeable future.

      Under the terms of the concession, Connect M1-A1 Limited is responsible for the operation and maintenance of Yorkshire Link. Connect M1-A1 Limited is also responsible for the lighting and associated energy costs and the communications systems on the road. The police are responsible for managing traffic flow, although Connect M1-A1 Limited is required to provide assistance in the event of accidents.

      The operations and maintenance activity and the management of the concession requirements are managed and coordinated by a small operations team consisting of a staff of six seconded from Balfour Beatty. The cost of the management team is recovered from Connect M1-A1 Limited based on a cost-plus formula. Operations have been substantially subcontracted under contracts of varying duration. There are an additional 14 full-time employees of subcontractor organizations on site. These subcontractor contracts represented approximately 60% of the routine maintenance costs for the 2005 concession year.

      Connect M1-A1 Limited has met the operational requirements of the concession over the six years it has operated and maintained Yorkshire Link. The operations and maintenance requirements of the concession can be described in the following categories:

      There are penalty point and warning notice provisions in the concession that may be imposed if there are deficiencies in the way Connect M1-A1 Limited manages its operations and maintenance responsibili-

      Traffic is counted by traffic measurement equipment, which has been installed in accordance with the specifications of the U.K. Highways Agency. Traffic is counted in each direction at nine sites that lie between each junction of Yorkshire Link. At each site, each lane, including the hard shoulder, is equipped with a pair of electromagnetic inductive loops buried in the roadway. The loops detect passing vehicles and record the passage in a counter unit. The loops also enable the length of vehicles to be measured in order to categorize vehicles into heavy goods vehicles and other vehicles. Software in the roadside equipment compares the output from adjacent lanes and automatically allows for the effects of vehicles straddling lanes. Periodic reports generated from a central computer form the basis of the annual calculation of vkms on which payment to Connect A1-M1 Limited is based. When data is missing or corrupted, a patching procedure to which the U.K. Highways Agency has agreed is used to estimate the missed vehicles. In addition, traffic flows are recorded on video and compared with loop data for consistency.

      Connect M1-A1 Limited subcontracted the design and building of Yorkshire Link to a construction joint venture consisting of Balfour Beatty CE Ltd. and Skanska Construction U.K. Ltd. In addition to the construction of the new route, the initial construction works included improvements to sections of the existing road.

      The construction joint venture is obligated under a twelve-year warranty for latent defects that expires in 2011. The construction joint venture also has extended the warranty to cover defects in the sections of the road that were in existence when its works began. The construction joint venture has indemnified Connect M1-A1 Limited in respect of any consequential losses, except in relation to the sections of the existing road, and any lane closure charges that may be incurred as a result of such defects. The obligations of the construction joint venture partners are joint and several, and they are supported by guarantees from Balfour Beatty and Skanska AB. Cracking defects have been identified on the road surface on certain sections of Yorkshire Link and these have required resurfacing repairs to be carried out at the construction joint venture’s expense. Connect M1-A1 Limited believes any such further defects would be the responsibility of the construction joint venture, which is investigating the problem with the help of its consultants. Connect M1-A1 Limited is waiting to receive a proposal from the construction joint venture as to how the construction joint venture intends to deal with the problem in the longer term.

      Connect M1-A1 Limited has no employees. All operational staff are either employed by Balfour Beatty and seconded to Connect M1-A1 Limited or employed by the various subcontractors.

      We are a party to a shareholders’ agreement with Balfour Beatty that governs the relationship of the shareholders in CHL (formerly Yorkshire Link (Holdings) Limited) and Connect M1-A1 Limited (formerly Yorkshire Link Limited). The shareholders’ agreement effectively requires the consent of Macquarie Yorkshire and Balfour Beatty for any decisions relating to these companies.

      Based on current shareholdings, Macquarie Yorkshire and Balfour Beatty are each allowed to appoint three directors to the boards of CHL and Connect M1-A1 Limited. Currently, each has appointed two directors. Voting is pro rata with the shareholding being represented. All routine matters are decided by majority vote. Certain matters are reserved and determined on the basis of approval by not less than 90% of total shares. Such matters include amending the shareholders’ agreement or the constitutional documents of CHL or Connect M1-A1 Limited, the winding up of CHL or Connect M1-A1 Limited, acquisitions and disposals of companies by CHL or Connect M1-A1 Limited, and tendering for new work by CHL or

      In addition, the shareholders’ agreement requires all post-tax profits to be paid to shareholders as dividends, to the extent permitted by law and subject to making prudent reserves.

Our Investment in MCG

      MCG is an investment vehicle that has been listed on the Australian Stock Exchange, or ASX, since August 2002. MCG’s mandate is to acquire investments in communications infrastructure, such as broadcast transmission towers, wireless communications towers and satellite infrastructure, around the world. We have invested in MCG because it seeks to provide investors with sustainable dividend yields and the potential for capital growth through investments in communications infrastructure businesses or assets. Currently, MCG has two investments. MCG owns a 100% holding in Broadcast Australia, an Australian television and radio broadcast transmission provider, and a 54% interest in Arqiva (formerly ntl:Broadcast) that it acquired on January 31, 2005. Arquiva is a provider of broadcast transmission and site leasing infrastructure operator in the United Kingdom and the Republic of Ireland.

      On December 22, 2004 we acquired 16.5 million stapled securities issued by MCG from Macquarie Investments Australia Pty Limited, for a total purchase price of USD $70 million. Our investment represents a 4% interest in Macquarie Communications Infrastructure Group.

      Broadcast Australia is the owner and operator of the most extensive broadcasting tower network in Australia and provides transmission services to the Australian Broadcasting Corporation, or ABC, and Special Broadcasting Service Corporation, or SBS, plus other services to regional television and other media, telecommunications and community organizations. Broadcast Australia operates approximately 600 transmission tower sites located across metropolitan, regional and rural Australia. Broadcast Australia owns or operates under leases at the majority of its sites.

      Broadcast Australia derived approximately 87% of its revenue for the fiscal year ended June 30, 2005 from contracts with ABC and SBS. Generally, the contracts with ABC and SBS are over the long term, often 10 to 15 years. ABC and SBS receive most of their funding from the Australian Commonwealth government under a triennial funding arrangement. The funding allocated by the Commonwealth government for the purposes of broadcast transmission cannot be applied to other uses. Revenue from Broadcast Australia increased 14.3% for the fiscal year ended June 30, 2005.

      Broadcast Australia is in the process of rolling out digital transmission services that it is contracted to introduce under its agreements with ABC and SBS. Under the agreements, as Broadcast Australia rolls out digital transmission services across its sites, it will earn additional revenue from the provision of digital broadcasts. The rollout of digital transmission will require significant capital expenditure, which is expected to be funded through an existing AUD $150 million Broadcast Australia debt facility. This debt facility has AUD $20 million outstanding at June 30, 2005. It is expected that future drawdowns may be made depending on Broadcast Australia’s future capital expenditure requirements. To the extent that the facility is drawn on its maturity date on June 26, 2006, it will need to be renewed or refinanced.

      Arqiva is one of the leading national broadcast transmission and site leasing infrastructure operators in the United Kingdom and provides coverage to 98.5% of the U.K. population. It is also the second largest independent wireless site leasing provider. The business comprises three operating divisions. The Media

      It is expected that MCG will make investments in other communications infrastructure businesses or assets in the future, although it will need to raise new equity to fund any significant acquisitions. It is possible that these investments will be partly funded through the issue of new MCG securities. We may have the opportunity to purchase additional MCG securities in such instances; however, we will have no obligation to do so.

      MCG is managed by Macquarie Communications Infrastructure Management Limited, an affiliate of our Manager. MCG’s manager earns a base fee and may earn a performance fee. The base fee is calculated and paid quarterly based on the net investment value (market capitalization plus borrowings and commitments less cash and cash equivalents). The performance fee is paid semi-annually if MCG’s performance exceeds that of the S&P ASX 200 Industrials Accumulation Index.

      Base fees payable by us to our Manager are reduced by the fees paid by MCG to its manager to the extent that they are attributable to our interest in MCG. As a result, there is no duplication of base management fees received by members of the Macquarie Group with respect to MCG.

      The securities of MCG were listed on the ASX on August 13, 2002 at an issue price of AUD $2.00. The table below outlines the quarterly trading history of MCG securities in Australian dollars from listing through the quarter ended December 31, 2005. Since its inception, MCG has paid distributions per stapled security of AUD $0.075 on February 12, 2003, AUD $0.08 on August 12, 2003, AUD $0.112 on February 12, 2004, AUD $0.118 on August 12, 2004, AUD $0.144 on February 14, 2005, AUD $0.146 on August 12, 2005, and AUD $0.195 on February 13, 2006.

      South East Water, or SEW, is a regulated clean water utility located in southeastern England and is the sole provider of water to almost 600,000 households and industrial customers. It is the second largest water-only company in England, supplying approximately 105 million gallons of water per day to 1.4 million people across two sub-regions. Its supply area covers approximately 1,390 square miles of Kent, Sussex, Surrey, Hampshire and Berkshire.

      We own 17.5% of SEW through an equivalent holding in Macquarie Luxembourg Water SarL, or Macquarie Luxembourg, the indirect holding company for SEW. We acquired this investment because we believe that the cash yields and total returns available from investments in regulated utilities in the United Kingdom are attractive given the mature and transparent regulatory environment. A 50.1% controlling interest in SEW is held through a controlling interest in Macquarie Luxembourg by the Macquarie European Infrastructure Fund, or MEIF, a vehicle that is managed by an affiliate of our Manager. MEIF is an unlisted infrastructure investment fund focused on making medium-term investments in infrastructure assets in Europe. We believe MEIF’s approach to the ownership and oversight of SEW is consistent with our approach. Three other institutional investors, including another investment vehicle managed by the Macquarie Group holding 7.4%, have minority interests in SEW through minority interests in Macquarie Luxembourg. Members of the Macquarie Group are paid fees for providing management services to SEW. The base fees payable by us to our Manager under the management services agreement will be reduced by the portion of such non-performance-based management fees paid by SEW to the Macquarie Group that are attributable to our interest in SEW. As a result, there will be no duplication of base management fees received by members of the Macquarie Group with respect to SEW.

      The water sector of the public utilities industry in England and Wales was privatized by the U.K. government in 1989 and 1990. It consists of ten water and sewerage companies and thirteen water-only companies. Water supply activities in England and Wales are principally regulated by the provisions of the Water Industry Act of 1991 and the Water Act of 2003, which we together refer to as the Water Industry Act, and regulations made under the Water Industry Act. Water-only companies are granted a license pursuant to that legislation. The provisions of the Water Industry Act, together with the license, are administered by the Director General of Water Services, who is aided by the Office of Water Services, or Ofwat. The responsibilities of Ofwat include the setting of limits on allowed water charges and monitoring and enforcing license obligations. From April 1, 2006, regulatory responsibilities will be taken over by the new Water Services Regulation Authority, with an improved board structure. The current Director General of Ofwat has been appointed Chairman of the new body. In addition to compliance with Ofwat regulations, water companies in England and Wales are also required to meet drinking water quality standards monitored by the U.K. Drinking Water Inspectorate and general environmental law enforced by the U.K. Environment Agency.

      As water and sewage companies and water-only companies are natural monopolies, the prices that they are allowed to charge their customers for water are regulated by Ofwat. Every five years, Ofwat determines prices for the provision of water services for the upcoming five years based on an inflation and efficiency calculation. On December 2, 2004, Ofwat released its determination with respect to the prices that English and Welsh water companies, including SEW, are permitted to charge for the current price review period, which runs from April 1, 2005 to March 31, 2010. See “— Business — Regulation” below.

      Approximately 70% of SEW’s water is supplied from boreholes and aquifers, 20% is supplied from rivers and reservoirs and 10% is supplied under bulk supply contracts with neighboring water utilities Three Valleys Water plc and Southern Water Services Ltd. SEW’s security of supply rating from Ofwat, is currently rated C, but improvement is expected through the provision of enhanced bulk supply infrastructure.

      SEW has a sophisticated telemetry-based system for monitoring water quality, flows, pressures and reservoir levels. Each water treatment works has a local monitoring system that checks these variables and relays data to an outstation unit that regulates activity levels at the treatment works and feeds data to a centralized operation center at the Haywards Heath headquarters. The headquarters is manned constantly.

      SEW balances supply and demand in line with industry best practices and is required to establish a 25-year plan for sustainable water resources acceptable to the U.K. Environment Agency and Ofwat. This plan is a combination of resource development and demand management measures, all of which are assessed on an economic basis before inclusion.

      Following one of the driest winters on record, on July 30, 2005 South East Water implemented its first hosepipe ban since 1995. A long, dry summer and persistently low rainfall this winter has meant that the ban is still in force, with a continued minimal impact on the regulatory score. With the drought showing little sign of abating, further water conservation options are under consideration.

      Leakage detection and control continues to play an important role in demand management within SEW. SEW had the greatest percentage reduction of leakage levels in the year ended March 31, 2002 compared to any other water company in England and Wales. SEW met its leakage targets for March 2004 and 2005 and is on target to reach Ofwat’s economic level of leakage target for March 2006.

      In common with other water companies in England and Wales, SEW’s assets vary widely in age (with some over 100 years old), size and type but are generally constructed using industry-standard materials and technology in use at the time of their construction. SEW has developed a sophisticated system for the management and replacement of its assets based principally on the assessed risk and consequences of failure. Overall capital investment levels are targeted at maintaining a constant average level of risk across SEW’s area of supply. Individual programs aim to reduce risk in high risk areas. Water industry assets tend to be long-lived and SEW’s assets are no exception. Major assets are rarely completely replaced; short- to medium-life items (e.g., pumps, electrical switch-gear, instruments) can be replaced several times during the life of a treatment facility and a new plant can be fitted into existing buildings. Higher quality standards are often met by incrementally adding new treatment processes. Further capacity can be met by adding additional process streams to existing facilities. SEW is planning £174 million of investment to improve the reliability of supply and to fund expansion during the April 2005 to March 2010 regulatory period. SEW expects to finance this investment through drawings under its existing debt facilities. As discussed below, pursuant to the approach utilized by Ofwat to determine SEW’s pricing, SEW will be entitled to earn sufficient revenue from its customers to enable it to adequately service this increased indebtedness.

      Ofwat determines the prices that SEW can charge its customers using an approach designed to enable SEW to earn sufficient revenues to recover operating costs, capital infrastructure renewal and taxes and to generate a return on invested capital, while creating incentives for SEW to operate efficiently. The outcome of the regulatory review process is the publication of k-factors by Ofwat for each year in the price review period. The k-factor is the amount that SEW is allowed to adjust its prices for water services for each year relative to inflation. For example, a k-factor of 5% in a given year would mean that SEW is allowed to increase its prices by inflation plus 5% in that year.

      The use of the k-factor also is designed to create incentives for water-only companies and water and sewage companies to generate efficiencies that can later be passed on to customers. Performance targets

      In determining the annual k-factors, Ofwat is under a statutory duty to consider:

      The following annual k-factors were set for SEW in the 1999 price review for the April 1, 2000 to March 31, 2005 price review period:

      The reduction in prices for the year to March 31, 2001 reflected the return to customers of efficiencies achieved by SEW in the five years prior to March 31, 2000, together with a new target for further efficiencies. SEW has to date outperformed this regulatory target for the 1999 price review period. On December 2, 2004, Ofwat issued its final determination for the April 1, 2005 to March 31, 2010 price review period. The determination establishes an average k-factor over the period of 3.7% (i.e., SEW is permitted to increase prices at an annual rate of inflation plus 3.7%) with the following k-factor for each year in the period:

      SEW is required to comply with various environmental legislation, including the U.K. Wildlife and Countryside Act of 1981, and the environmental requirements of the Water Industry Act. These obligations are proactively managed pursuant to SEW’s sustainable development policy.

      As of December 2005, SEW had approximately 420 employees. A minority of SEW’s employees are members of trade unions.

      At January 31, 2005, SEW’s defined benefit plans had assets of £106.5 million (USD $189.9 million). At March 31, 2005, SEW had a deficit against the actuarial assessment of liabilities of £15 million (USD $28 million). SEW has taken a number of steps to address this deficit, including closing the plan to new members in July 2002 and increasing employer contributions from 13.8% to 20.0% of pensionable remuneration beginning January 1, 2004 and to 30% beginning April 2005. SEW also increased employee contributions from 6% to 7% of pensionable remuneration beginning January 1, 2004. In addition, SEW raised the age required to qualify for an unreduced pension upon redundancy to 55 for those who were not yet 50 years old by July 1, 2003. Also SEW limited the conditions to qualify for an incapacity pension. Currently, the company is in discussion with its employees, trade unions and staff council to increase member contributions to 8% at April 2006 and 9% at April 2007.

      SEW believes they have efficiently managed their defined benefit pension plans. In addition to the measures discussed above, in its final determination Ofwat has permitted SEW to recover half of its deficit as of March 31, 2004 through increased prices. To the extent that future funding costs increase beyond the level of funding provided by Ofwat, these future costs may be recoverable in future pricing.

      Following the acquisition of our interest in SEW, we became a party to a shareholders’ agreement relating to Macquarie Luxembourg. The other parties to the agreement are MEIF, which holds 50.1% of Macquarie Luxembourg, and three other minority investors, which hold a combined 32.4% of Macquarie Luxembourg including another investment vehicle managed by the Macquarie Group, which holds 7.4%.

      We have no influence over the choice of the board of directors of Macquarie Luxembourg. The board of directors is authorized to make all decisions necessary to manage the affairs of Macquarie Luxembourg, except for certain reserved matters that require approval of 75% of the shareholders and other matters that require approval of all shareholders.

      The shareholders’ agreement requires all shareholders to use their powers to cause Macquarie Luxembourg’s directly owned subsidiary to make the maximum possible distribution to shareholders each year. This provision cannot be changed without our consent.

      The shares of Macquarie Luxembourg are subject to preemption rights. Our ability to subsequently transfer our interest in Macquarie Luxembourg is subject to rights of first refusal that are exercisable by MEIF in priority to the other shareholders (with whom we have the right to exercise such rights on the same terms). In the event that MEIF sells all (but not some) of its interest in Macquarie Luxembourg, all other shareholders are required to sell their interests to the same buyer on the same terms. In the event that MEIF sells some but not all of its interest in Macquarie Luxembourg, all other shareholders may sell some or all of their interests on the same terms.

Our Employees

      We have a total of 2,124 employees in our consolidated businesses of which 21% in the aggregate are subject to collective bargaining agreements. The company and the trust do not have any employees.

AVAILABLE INFORMATION

      We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the operations of the public reference room. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Macquarie Infrastructure Company) file electronically with the SEC. The SEC’s website is www.sec.gov.

      Our website is www.macquarie.com/mic. You can access our Investor Center through this website. We make available free of charge, on or through our Investor Center, our proxy statements, annual reports to shareholders, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available through our Investor Center statements of beneficial ownership of the trust stock filed by our Manager, our directors and officers, any 10% or greater shareholders and others under Section 16 of the Exchange Act.

      You can also access our Governance webpage through our Investor Center. We post the following on our Governance webpage:

      Our Code of Ethics and Conduct applies to all of our directors, officers and employees as well as all directors, officers and employees of our Manager. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, or NYSE, on our website. The information on our website is not incorporated by reference into this report.

      You can request a copy of these documents at no cost, excluding exhibits, by contacting Investor Relations at 125 West 55th Street, 22nd Floor, New York, NY 10019 (212-231-1000).

      An investment in shares of trust stock involves a number of risks. Any of these risks could result in a significant or material adverse effect on our results of operations or financial condition and a corresponding decline in the market price of the shares.

Risks Related to Our Business

      We completed our initial public offering and the acquisition of our initial businesses and investments in December 2004 and completed additional acquisitions in our airport services business and airport parking business during 2005. Furthermore, with the exception of our district energy business, prior to our acquisition all of our businesses were privately owned and not subject to financial and disclosure requirements and controls applicable to U.S. public companies. We have expended significant time and resources throughout our operations to develop and implement effective systems and procedures, including accounting and financial reporting systems, in order to manage our operations on a combined basis as a consolidated U.S. public company. As a result, these businesses have been limited, and may continue to be limited, in their ability to pursue strategic operating initiatives and achieve our internal growth expectations. In addition, due to our short operating history as a consolidated U.S. public company, the performance of our consolidated business during its first year of operations may not be an accurate indicator of our prospects for future years.

      Under the terms of the management services agreement, our Manager must significantly underperform in order for the management services agreement to be terminated. The company’s board of directors cannot remove our Manager unless:

      Our Manager’s performance is measured by the market performance of our shares relative to a weighted average of two benchmark indices, a U.S. utilities index and a European utilities index, weighted in proportion to our U.S. and non-U.S. equity investments. As a result, even if the absolute market performance of our shares does not meet expectations, the company’s board of directors cannot remove our Manager unless the market performance of our shares also significantly underperforms the weighted average of the benchmark indices. If we were unable to remove our Manager in circumstances where the absolute market performance of our shares does not meet expectations, the market price of our shares could be negatively affected.

      Our Manager has the right, under the management services agreement, to resign at any time on 90 days’ notice, whether we have found a replacement or not. Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require that subsidiaries of Australian banks providing management services have these resignation rights.

      If our Manager resigns, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses and investments are likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.

      Furthermore, if our Manager resigns, the trust, the company and its subsidiaries will be required to cease using the Macquarie brand entirely, including changing their names to remove any reference to “Macquarie.” This may cause the value of the company and the market price of our shares to decline.

      The company is a holding company with no operations. Therefore, it is dependent upon the ability of our businesses and investments to generate earnings and cash flows and distribute them to the company in the form of dividends and upstream debt payments to enable the company to meet its expenses and to make distributions to shareholders. The ability of our operating subsidiaries and the businesses in which we will hold investments to make distributions to the company is subject to limitations under the terms of their debt agreements and the applicable laws of their respective jurisdictions. If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our businesses and investments, the company may not be able to declare or may have to delay or cancel payment of distributions on its shares.

      As of December 31, 2005, on a consolidated basis, we had total long-term debt outstanding of $611 million, excluding affiliated debt relating to our toll road business, all of which is currently at the operating company level. All of this debt has recourse only to the relevant business. The companies in which we have investments also have debt. The terms of this debt generally require our operating businesses and the companies in which we have investments to comply with significant operating and financial covenants. The ability of each of our businesses and investments to meet their respective debt service obligations and to repay their outstanding indebtedness will depend primarily upon cash produced by that business.

      This indebtedness could have important consequences, including:

      If we are unable to comply with the terms of any of our various debt agreements, we may be required to refinance a portion or all of the related debt or obtain additional financing. We may be unable to refinance or obtain additional financing because of our high levels of debt and debt incurrence restrictions under our debt agreements. We also may be forced to default on any of our various debt obligations if cash flow from the relevant operating business is insufficient and refinancing or additional financing is unavailable, and, as a result, the relevant debt holders may accelerate the maturity of their obligations.

      The audited financial statements of the company at and for the year ended December 31, 2004 include consolidated results of operations and cash flows only for the period from the date of acquisition to year end. Only our audited financial statements for our 2005 fiscal year contain full-year consolidated results of operations and cash flows. As a result, we cannot provide meaningful year-to-year comparisons until after the end of our 2006 fiscal year and cannot provide investors with a year over year comparative analysis of our business on a consolidated basis. The comparative analysis of our operating segments that we do present may not reflect all matters that a consolidated comparative analysis would.

      We own minority positions in the investments in MCG and SEW and have limited legal rights to influence the management of those businesses or any other businesses in which we make minority investments. MCG is managed by an affiliate of our Manager and SEW is majority owned by an entity that is managed by an affiliate of our Manager. These entities may develop different objectives than we have and may not make distributions to us at levels that we anticipate. Our inability to exercise significant

      A major component of our strategy is to acquire additional infrastructure businesses both within the sectors in which we currently operate and in sectors where we currently have no presence. Acquisitions involve a number of special risks, including failure to successfully integrate acquired businesses in a timely manner, failure of the acquired business to implement strategic initiatives we set for it and/or achieve expected results, failure to identify material risks or liabilities associated with the acquired business prior to its acquisition, diversion of management’s attention and internal resources away from the management of existing businesses and operations, and the failure to retain key personnel of the acquired business. We expect to face competition for acquisition opportunities, and some of our competitors may have greater financial resources or access to financing on more favorable terms than we will. This competition may limit our acquisition opportunities, may lead to higher acquisition prices or both. While we expect that our relationship with the Macquarie Group will help us in making acquisitions, we cannot assure you that the benefits we anticipate will be realized. The successful implementation of our acquisition strategy may result in the rapid growth of our business which may place significant demands on management, administrative, operational and financial resources. Furthermore, other than our Chief Executive Officer and Chief Financial Officer, the personnel of ISF performing services for us under the management services agreement are not wholly dedicated to us, which may result in a further diversion of management time and resources. Our ability to manage our growth will depend on our maintaining and allocating an appropriate level of internal resources, information systems and controls throughout our business. Our inability to successfully implement our growth strategy or successfully manage growth could have a material adverse effect on our business, cash flow and ability to pay distributions on our shares.

      In order to make acquisitions, we will generally require funding from external sources. Since the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive opportunities. Debt to fund an acquisition may not be available on short notice or may not be available on terms acceptable to us. Although we have a revolving credit facility at the MIC Inc. level primarily to fund acquisitions and capital expenditures, we may require more funding than is available under this facility and the level of our subsidiary indebtedness may limit our ability to expand this facility if needed or incur additional borrowings at the holding company level. This facility matures in 2008 and we may be unable to refinance any borrowing under this facility or enter into a new facility, which could impede our ability to pursue our acquisition strategy.

      In addition to debt financing, we will likely fund or refinance a portion of the consideration for future acquisitions through the issuance of additional shares. If our shares do not maintain a sufficient market value, issuance of new shares may result in dilution of our then-existing shareholders. In addition, issuances of new shares, either privately or publicly, may occur at a discount to our stock price at the time. Our equity financing activities may cause the market price of our stock to decline. Alternatively, we may not be able to complete the issuance of the required amount of shares on short notice or at all due to a lack of investor demand for the shares at prices that we find acceptable. As a result, we may not be able to pursue our acquisition strategy successfully.

      Our businesses and investments generally are, and our future businesses and investments may be, subject to substantial regulation by governmental agencies. In addition, their operations do and may rely on government permits, licenses, concessions, leases or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage over us in their contractual and regulatory relationships with us that they may exercise in a manner that causes us delays in the operation of our business or pursuit of our strategy, or increased administrative expense. Furthermore, government permits, licenses, concessions, leases and contracts are generally very complex, which may result in periods of non-compliance, or disputes over interpretation or enforceability. If we fail to comply with these regulations or contractual obligations, we could be subject to monetary penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate an infrastructure business is subject to a concession or lease from the government, the concession or lease may restrict our ability to operate the business in a way that maximizes cash flows and profitability. Further, our ability to grow our current and future businesses will often require consent of numerous government regulators. Increased regulation restricting the ownership or management of U.S. assets, particularly infrastructure assets, by non-U.S. persons, given the non-U.S. ultimate ownership of our Manager, may limit our ability to pursue acquisitions. Any such regulation may also limit our Manager’s ability to continue to manage our operations, which could cause disruption to our business and a decline in our performance. In addition, any required government consents may be costly to seek and we may not be able to obtain them. Failure to obtain any required consents could limit our ability to achieve our growth strategy.

      Our contracts with government entities may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, a lease, concession or general service contract may enable the government to terminate the agreement without requiring them to pay adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses. Because our businesses provide basic, everyday services, and face limited competition, governments may be influenced by political considerations to take actions that may hinder the efficient and profitable operation of our businesses and investments.

      Where our businesses or investments are sole or predominant service providers in their respective service areas and provide services that are essential to the community, they are likely to be subject to rate regulation by governmental agencies that will determine the prices they may charge. We may be subject to unfavorable price determinations that may be final with no right of appeal or that, despite a right of appeal, could result in our profits being negatively affected. In addition, we may have very little negotiating leverage in establishing contracts with government entities, which may decrease the prices that we otherwise might be able to charge or the terms upon which we provide products or services. Businesses and investments we acquire in the future may also be subject to rate regulation or similar negotiating limitations.

      Our businesses can be subject to seasonal variations. Our district energy business generally experiences greater revenues and profitability in the summer months. Accordingly, our operating results for any particular quarter may not be indicative of the results that can be expected for any other quarter or for the entire year.

      Our interests in CHL, MCG and SEW are subject to risk from fluctuations in currency exchange rates, as the reporting currencies of CHL and SEW are Pounds Sterling, and the reporting currency of MCG is Australian dollars. We receive distributions from CHL, MCG and SEW denominated in these currencies. Fluctuations in the currency exchange rates for Pounds Sterling and Australian dollars against the U.S. dollar resulting in losses from any such fluctuations will be reflected in our results. A strengthening of the U.S. dollar against these currencies would reduce the U.S. dollar amount of the distributions we receive from these foreign operations.

      In addition to the limited circumstances in which our Manager can be terminated under the terms of the management services agreement, the management services agreement provides that in circumstances where the trust stock ceases to be listed on a recognized U.S. exchange or on the Nasdaq National Market as a result of the acquisition of trust stock by third parties in an amount that results in the trust stock ceasing to meet the distribution and trading criteria on such exchange or market, the Manager has the option to either propose an alternate fee structure and remain our Manager or resign, terminate the management services agreement upon 30 days’ written notice and be paid a substantial termination fee. The termination fee payable on the Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our shares could delay or prevent a change in control that may favor our shareholders. Furthermore, in the event of such a delisting, any proceeds from the sale, lease or exchange of a significant amount of assets must be reinvested in new assets of our company. We are also prohibited from incurring any new indebtedness or engaging in any transactions with the shareholders of the company or its affiliates without the prior written approval of the Manager. These provisions could deprive the shareholders of the trust of opportunities to realize a premium on the shares of trust stock owned by them.

      The operating agreement of the company, which we refer to as the LLC agreement, and the trust agreement contain a number of provisions that could have the effect of making it more difficult for a third party to acquire, or discouraging a third party from acquiring, control of the trust and the company. These provisions include:

      Our airport parking business has $126 million of senior debt due in 2006. This loan will have to be extended or refinanced on the maturity date or repaid. While our airport parking business has the option to extend the senior debt for up to two additional one-year periods, we cannot assure you that we will meet the criteria necessary to exercise these extensions at that time or that replacement loans will be available. If available, replacement loans may only be available at substantially higher interest rates or margins or with substantially more restrictive covenants. Either event may limit the operational flexibility of the business and its ability to upstream dividends and distributions. We also cannot assure you that we or the other owners of Macquarie Parking will be able to make capital contributions to repay some or all of the debt if required. If our airport parking business were unable to repay its debts when due, this business would become insolvent. If interest rates or margins increase, our businesses will pay higher rates of interest on any debts that they raise to refinance existing debt, thereby reducing their profitability and, consequently, having an adverse impact on their ability to pay dividends to us and our ability to pay dividends to shareholders.

      In addition, we do not currently have any interest rate hedges in place to cover any borrowings under our MIC Inc. revolving credit facility. If we draw down on our MIC Inc. revolving credit facility, an increase in interest rates would directly reduce our profitability and cash available for distribution to shareholders. Our MIC Inc. revolving credit facility matures in 2008 and we expect to repay or refinance any borrowing outstanding at that time and enter into a similar facility. An increase in interests rates or margins at that time may significantly increase the cost of any repayment or the terms associated with any refinancing.

      The operations of our businesses and investments are, and businesses we acquire or investments we make in the future may be, subject to numerous statutes, rules and regulations relating to environmental protection. In particular, our airport services business is subject to environmental protection requirements relating to the storage, transport, pumping and transfer of fuel, and our district energy business is subject to requirements relating mainly to its handling of significant amounts of hazardous materials. Certain statutes, rules and regulations might also require that our businesses, or businesses we acquire in the future, address possible prior or future environmental contamination, including soil and groundwater contamination, that results from the spillage of fuel, hazardous materials or other pollutants.

      Under various federal, state, local and foreign environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability, whether or not the owner or operator knew of, or was responsible for, the presence of hazardous materials. The presence of these hazardous materials on a property could also result in personal injury or property damage or similar claims by private parties.

      Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person.

      We operate our businesses on a stand-alone basis, relying on existing management teams for day-to-day operations. Consequently, our operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of our businesses, who have extensive experience in the day-to-day operations of these businesses. Furthermore, we will likely be dependent on the operating management teams of businesses that we may acquire in the future. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, financial condition and results of operations.

      A large part of the revenues at our airport services business is generated from fuel sales and other services provided to general aviation customers. Air travel and air traffic volume of general aviation customers can be affected by airport-specific occurrences as well as events that have nationwide and industry-wide implications. The events of September 11, 2001 had a significant adverse impact on the aviation industry, particularly in terms of traffic volume due to forced closures. Immediately following September 11, 2001, thousands of general aviation aircraft were grounded for weeks due to the FAA’s “no-fly zone” restrictions imposed on the operation of aircraft. Airport specific circumstances include situations in which our major customers relocate their home base or preferred fueling stop to alternative locations. Additionally, the general economic conditions of the area where the airport is located will impact the ability of our FBOs to attract general aviation customers or generate fuel sales, or both. Significant increases in fuel prices may also decrease the demand for our services, including refueling services, or result in lower fuel sales margins, or both, leading to lower operating income.

      Changes in the general aviation market as a whole may adversely affect our airport services business. General aviation travel is more expensive than alternative modes of travel. Consequently, during periods of economic downturn, FBO customers may choose to travel by less expensive means, which could impact the earnings of our airport services business. In addition, changes to regulations governing the tax treatment relating to general aviation travel, either for businesses or individuals, may cause a reduction in general aviation travel. Travel by commercial airlines may also become more attractive for general aviation travelers if the cost of commercial airline travel decreases or if service levels improve. Under these circumstances, our FBOs may lose customers to the commercial air travel market, which may decrease our earnings.

      FBO operators at a particular airport compete based on a number of factors, including location of the facility relative to runways and street access, service, value added features, reliability and price. Many of our FBOs compete with one or more FBOs at their respective airports, and, to a lesser extent, with FBOs at nearby airports. We cannot predict the actions of competitors who may seek to increase market share. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport.

      Our sole provider FBOs (including the heliport) do not have the right to be the sole provider of FBO services at any of our FBO locations. The authority responsible for each airport has the ability to grant other FBO leases at the airport and new competitors could be established at those FBO locations. The addition

      Our airport services revenues are derived from long-term FBO leases at airports and one heliport. If we default on the terms and conditions of our leases, the relevant authority may terminate the lease without compensation, and we would then lose the income from that location, and would be in default under the loan agreements of our airport services business and be obliged to repay our lenders a portion or all of our outstanding loan amount. Our leases at Chicago Midway, Philadelphia, North East Philadelphia, New Orleans International and Orange County, and the Metroport 34th Street Heliport in New York City allow the relevant authority to terminate the lease at their convenience. If the relevant authority were to terminate any of those leases, we would then lose the income from that location and be obliged to repay our lenders a portion or all of the then outstanding loan amount.

      Our airport parking business’ parking facilities are dependent upon parking traffic primarily generated by commercial airline passengers and are therefore susceptible to competition from other airports and to disruptions in passenger traffic at the airports at which we operate. For example, the events of September 11, 2001 had a significant impact on the aviation industry and, as a result, negatively impacted occupancy levels at parking facilities. In the first few days following September 11, 2001, revenue from our parking facilities was negligible and did not fully recover until some months after the event. Other events such as wars, outbreaks of disease, such as SARS, and terrorist activities in the United States or overseas may reduce airport traffic and therefore occupancy rates. In addition, traffic at an airport at which we have facilities may be reduced if airlines reduce the number of flights at that airport.

      At each of the locations at which our airport parking business operates, it competes with both on-airport parking facilities, many of which are located closer to passenger terminals, and other off-airport parking facilities. If an airport expands its parking facilities or if new off-airport parking facilities are opened or existing facilities expanded, customers may be drawn away from our sites or we may have to reduce our parking rates, or both.

      Parking rates charged by us at each of our locations are set with reference to a number of factors, including prices charged by competitors and quality of service by on-airport and off-airport competitors, the location and quality of the facility and the level of service provided. Additional sources of competition to our parking operations may come from new or improved transportation to the airports where our parking facilities are located. Improved rail, bus or other services may encourage our customers not to drive to the airport and therefore negatively impact revenue.

      Our airport parking business’ shuttle operations transport customers between the airport terminals and its parking facilities and are regulated by, and are subject to, the rules and policies of the relevant local airport authority, which may be changed at their discretion. Some airport authorities levy fees on off-airport parking operators for the right to transport customers to the terminals. There is a risk that airport authorities

      Further, the FAA and the Transportation Security Administration, or TSA, regulate the operations of all the airports at which our airport parking business has locations. The TSA has the authority to restrict access to airports as well as to impose parking and other restrictions around the airports. The TSA could impose more stringent restrictions in the future that would inhibit the ability of customers to use our parking facilities.

      In order to operate our district cooling system in downtown Chicago, we have obtained the right to use certain public ways of the City of Chicago under a use agreement, which we refer to as the Use Agreement. Under the terms of the Use Agreement, the City of Chicago retains the right to use the public ways for a public purpose and has the right in the interest of public safety or convenience to cause us to remove, modify, replace or relocate our facilities at our own expense. If the City of Chicago exercises these rights, we could incur significant costs and our ability to provide service to our customers could be disrupted, which would have an adverse effect on our business, financial condition and results of operations. In addition, the Use Agreement is non-exclusive, and the City of Chicago is entitled to enter into use agreements with our potential competitors.

      The Use Agreement expires on December 31, 2020 and may be terminated by the City of Chicago for any uncured material breach of its terms and conditions. The City of Chicago also may require us to pay liquidated damages of $6,000 a day if we fail to remove, modify, replace or relocate our facilities when required to do so, if we install any facilities that are not properly authorized under the Use Agreement or if our district cooling system does not conform to the City of Chicago’s standards. Each of these noncompliance penalties could result in substantial financial loss or effectively shut down our district cooling system in downtown Chicago.

      Any proposed renewal, extension or modification of the Use Agreement requires approval by the City Council of Chicago. Extensions and modifications subject to the City of Chicago’s approval include those to enable the expansion of chilling capacity and the connection of new customers to the district cooling system. The City of Chicago’s approval is contingent upon the timely filing of an Economic Disclosure Statement, or EDS, by us and certain of the beneficial owners of our stock. If any of these investors fails to file a completed EDS form within 30 days of the City of Chicago’s request or files an incomplete or inaccurate EDS, the City of Chicago has the right to refuse to provide the necessary approval for any extension or modification of the Use Agreement or to rescind the Use Agreement altogether. If the City of Chicago declines to approve extensions or modifications to the Use Agreement, we may not be able to increase the capacity of our district cooling system and pursue our growth strategy for our district energy business. Furthermore, if the City of Chicago rescinds or voids the Use Agreement, our district cooling system in downtown Chicago would be effectively shut down and our business, financial condition and results of operations would be materially and adversely affected as a result.

      In order to secure any amendment to the Use Agreement with the City of Chicago to pursue expansion plans or otherwise, or to enter into other contracts with the City of Chicago, the City of Chicago may require any person who owns or acquires seven and one half percent or more of our shares to make a number of representations to the City of Chicago by filing a completed EDS. Our LLC agreement and our trust agreement require that in the event that we need to obtain approval from the City of Chicago in the

      We are currently in discussions with the City of Chicago that would allow us to satisfy this requirement through an alternative solution. If we fail to reach agreement with the City of Chicago in a timely manner, we may need to extend the requirements in our LLC and trust agreements to seven and one half percent owners.

      Any EDS filed by an investor may become publicly available. By completing and signing an EDS, an investor will have waived and released any possible rights or claims which it may have against the City of Chicago in connection with the public release of information contained in the EDS and also will have authorized the City of Chicago to verify the accuracy of information submitted in the EDS. The requirements and consequences of filing an EDS with the City of Chicago will make compliance with the EDS requirements difficult for our investors. If an investor fails to provide us and the City of Chicago with the information required by an EDS, our LLC and trust agreements provide us with the right to seek specific performance by such investor. However, we currently do not have this right with respect to investors that own less than ten percent of our shares. In addition, any action for specific performance we bring may not be successful in securing timely compliance of every investor with the EDS requirements.

      If any investor fails to comply with the EDS requirements on time or the City of Chicago determines that any information provided in any EDS is false, incomplete or inaccurate, the City of Chicago may rescind or void the Use Agreement or any other arrangements Thermal Chicago has with the City of Chicago, and pursue any other remedies available to them. If the City of Chicago rescinds or voids the Use Agreement, our district cooling system in downtown Chicago would be effectively shut down and our business, financial condition and results of operations would be adversely affected as a result.

      The Illinois electricity markets are expected to deregulate beginning in January 2007 and we will be required to enter into new electricity purchase arrangements effective at that time as discussed under “Our Businesses and Investments — District Energy Business — Business — Thermal Chicago — Electricity Costs” in Item 1. Business. ComEd has proposed a procurement process referred to as a reverse-auction. The market prices of electricity available to us are likely to reflect prices established in the reverse-auction process. Market prices of electricity in Illinois are also affected by changes in natural gas prices, which have been very volatile, but overall have increased significantly over the past year. We cannot predict the market prices for electricity that we will face beginning in 2007 but we anticipate, based on current market dynamics, that our electricity will increase substantially in 2007. If these market dynamics change in a way that is adverse to us, our costs could be higher than we currently anticipate. In addition, on August 31, 2005, ComEd filed a rate case with the ICC, which seeks, among other things, to increase delivery rates in a manner that we believe disproportionately impacts larger users of electricity. If the rate case is approved as currently proposed, our electricity costs would increase by an additional $2 million annually.

      The index adjustment in our contracts is unlikely to fully offset these costs. In addition, because our contracts typically adjust consumption charges annually, there is likely to be a significant lag before changes in market prices of electricity are reflected in our contracts overall. As a result of these increased electricity costs, the performance of our district energy business is likely to decline, which could have a

      In the event of a shutdown of one or more of our district energy business’ plants due to operational breakdown, strikes, the inability to retain or replace key technical personnel or events outside its control, such as an electricity blackout, or unprecedented weather conditions in Chicago, our district energy business may be unable to continue to provide chilling and heating services to all of its customers. As a result, our district energy business may be in breach of the terms of some or all of its customer contracts. In the event that such customers elect to terminate their contracts with our district energy business as a consequence of their loss of service, its revenues may be materially adversely affected. In addition, under a number of contracts, our district energy business may be required to pay damages to a customer in the event that a cessation of service results in loss to that customer.

      Northwind Aladdin derives approximately 90% of its cash flows from a contract with the Aladdin resort and casino in Las Vegas to supply cold and hot water and back-up electricity. The Aladdin resort and casino emerged from bankruptcy immediately prior to MDE’s acquisition of Northwind Aladdin in September 2004, and, during the course of those proceedings, the contract with Northwind Aladdin was amended to reduce the payment obligations of the Aladdin resort and casino. If the Aladdin resort and casino were to enter into bankruptcy again and a cheaper source of the services that Northwind Aladdin provides can be found, our contract may be terminated or amended. This could result in a total loss or significant reduction in our income from Northwind Aladdin, for which we may receive no compensation.

      Since the shadow toll revenues payable by the U.K. government’s Secretary of State for Transport, or the Transport Secretary, are linked to the volume of traffic using the Yorkshire Link, our toll road business’ revenues will be adversely affected if traffic volumes decline. A decline in traffic volume could result from a number of factors, including recession, increases in fuel prices, attractive alternative transport routes or improvements in public transportation.

      In addition, pursuant to the formulas provided by the terms of the concession, shadow toll revenues will decrease through time if there is no growth in traffic volume or inflation. The magnitude of the decrease varies depending on the total volume of traffic; however, in the year ended March 31, 2005, in the absence of traffic volume growth or inflation, revenues of Yorkshire Link would have declined by approximately £0.6 million or 1.3% compared to revenues for the year ended March 31, 2004.

      Also, the concession provides for a significant reduction in the shadow toll revenues payable by the Transport Secretary from 2014.

      If our toll road business defaults on its obligations set out in the concession, the Transport Secretary may terminate the concession without compensation to our toll road business. Even if our toll road business does not default on its obligations under the concession, the Transport Secretary may terminate the concession in the event that:

      We are unable to predict if or when such circumstances might occur. The concession also may be terminated by the Transport Secretary in certain other circumstances, including an event of force majeure. The compensation required to be paid in such circumstances may be insufficient for us to recover our full investment in our toll road business. Failure to compensate our toll road business in the event of termination may result in the value of our investment in our toll road business being reduced to nothing since our toll road business would likely default on its debt obligations in these circumstances.

      We hold a 50% interest in our toll road business and the remaining 50% is held by Balfour Beatty. We are not in a position to control operations, strategies or financial decisions without the agreement of Balfour Beatty. Conflicts may arise in the future between our business objectives and those of Balfour Beatty. If this were to occur, decisions to take action necessary, in our view, for the proper management of the business might not be made.

      MCG’s only investments at present are 100% ownership of Broadcast Australia and a 54% stake in Arqiva. Broadcast Australia’s two key customers are the government-owned national broadcasters, the Australian Broadcasting Corporation, or the ABC, and Special Broadcasting Service, or SBS, which together accounted for approximately 87% of Broadcast Australia’s total revenue in its fiscal year ended June 30, 2005. ABC and SBS both currently receive Australian government funding to provide transmission services, but that funding could be reduced or withdrawn. Broadcast Australia has entered into a series of long-term contracts with ABC and SBS, with terms generally ending between 2008 and 2024. The majority of Arqiva’s revenue is earned under long-term contracts with a small number of customers, with terms generally ending between 2007 and 2015. If these contracts are terminated and Broadcast Australia or Arqiva are not adequately compensated, or the contracts are not renewed at their expiration, Broadcast Australia’s or Arqiva’s operations would be materially adversely affected.

      An event of default occurs under Broadcast Australia’s loan agreements if the Australian government ceases to own more than 50% of the issued shares of the ABC and if Broadcast Australia’s medium-term

      As the sole water-only supplier in its service areas, the prices that SEW charges for its services are subject to review and approval every five years by Ofwat, the water regulator for England and Wales. Ofwat has the power to deny recovery of certain operating expenses and/or capital expenditures. These are significant for SEW, in common with other water companies in England and Wales, due to the age of some parts of their water network. Similarly, Ofwat could determine that a reduced return on invested capital should be allowed. Taking these views and reducing the prices that SEW charges for its services would cause a negative impact on the future revenues of the company.

      SEW requires sufficient water to supply its customer base. The availability of water is subject to, among other things, SEW continuing to benefit from water abstraction licenses, contractual arrangements for the supply of water from neighboring water companies, investment in increasing water resources to match customer growth and short-term issues affecting water supply, such as drought. Ofwat has placed SEW, along with other southern water companies, in the lowest quartile in terms of security of water supply. As a result of the current water shortage and continuing housepipe ban, SEW has been exposed to additional costs and reputational damage. There are significant uncertainties beyond SEW’s control affecting the amount of water resources, including climate change, the amount of annual rainfall, the rate of house building and industrial development in SEW’s service areas and other factors. SEW could incur substantial costs to secure a sufficient water supply which, despite the existence of interim pricing review mechanisms, may not be adequately compensated.

      SEW’s water quality is required to meet standards set by the U.K. government’s Drinking Water Inspectorate. In addition, SEW is required to meet other U.K. government guidelines in relation to the security of its facilities. If SEW failed to comply with these guidelines, SEW could be fined, become subject to other punitive regulatory action and/or become liable for any injury caused to its customers by inadequate water quality, any of which could have a significant negative impact on SEW’s profitability.

      We believe that infrastructure businesses face a greater risk of terrorist attack than other businesses, particularly those businesses that have operations within the immediate vicinity of metropolitan and suburban areas. Any terrorist attacks that occur at or near our business locations would likely cause significant harm to our employees and assets. As a result of the terrorist attacks in New York on September 11, 2001, insurers significantly reduced the amount of insurance coverage available for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. A terrorist attack that makes use of our property, or property under our control, may result in liability far in excess of available insurance coverage. In addition, any further terrorist attack, regardless of location, could cause a disruption

      The market price of our shares may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our shares and may adversely affect our ability to raise capital through equity financings. These factors include the following:

      A significant and sustained increase in the price of oil could have a negative impact on the revenues of a number of our business. Higher prices for jet fuel could result in less use of aircraft by general aviation customers which would have a negative impact on the revenues of our airport services business. Higher prices for jet fuel will increase the cost of traveling by commercial aviation which could result in lower enplanements at the airports where our airport parking business operates and therefore less patronage of our parking facilities and lower revenues. Higher fuel prices could also result in less traffic using Yorkshire Link and therefore lower shadow toll payments and would increase the cost of power to our district energy business which it may not be able to fully pass on to customers pursuant to the terms of our contracts with them.

Risks Related to Taxation

      Shareholders may be subject to U.S. federal income taxation and, in some cases, state, local, and foreign income taxation on their share of our taxable income, whether or not they receive cash distributions from us. Shareholders may not receive cash distributions equal to their share of our taxable income or even the tax liability that results from that income. In addition, if we invest in the stock of a controlled foreign corporation (or if one of the corporations in which we invest becomes a controlled foreign corporation, an event which we cannot control), we may recognize taxable income, which shareholders will be required to take into account in determining their taxable income, without a corresponding receipt of cash to distribute to them.

      A publicly traded partnership will not be characterized as a corporation for U.S. federal income tax purposes so long as 90% or more of its gross income for each taxable year constitutes “qualifying income” within the meaning of Section 7704(d) of the Code. We refer to this exception as the qualifying income exception. The company has concluded that it is classified as a partnership for U.S. federal income tax purposes. This conclusion is based upon the fact that: (a) the company has not elected and will not elect to be treated as a corporation for U.S. federal income tax purposes; and (b) for each taxable year, the company expects that more than 90% of its gross income is and will be income that constitutes qualifying income within the meaning of Section 7704(d) of the Code. Qualifying income includes dividends, interest and capital gains from the sale or other disposition of stocks and bonds. If the company fails to satisfy the “qualifying income” exception described above, items of income and deduction would not pass through to shareholders and shareholders would be treated for U.S. federal (and certain state and local) income tax purposes as shareholders in a corporation. In such case, the company would be required to pay income tax at regular corporate rates on all of its income, including income derived from its non-U.S. assets. In addition, the company would likely be liable for state and local income and/or franchise taxes on all of such income. Distributions to shareholders would constitute ordinary dividend income taxable to such shareholders to the extent of the company’s earnings and profits, and the payment of these dividends would not be deductible by the company. Taxation of the company as a corporation could result in a material reduction in our shareholders’ cash flow and after-tax return and thus could result in a substantial reduction of the value of the shares.

      Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 15%. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time and is currently scheduled to expire for tax years beginning after December 31, 2008. We anticipate that we will report each shareholder’s distributive share of dividends we receive from SEW as qualified dividend income, but it is possible that the Internal Revenue Service, or the IRS, may take a contrary view under existing law or that regulations or other administrative guidance interpreting the qualified dividend income provisions will prevent dividends received by the company from SEW from constituting qualified dividend income. Further, because the ownership and activities of CHL, MCG and SEW are not within our control, each of such entities could experience a change of ownership or activities that could result in dividends we receive from such corporations no longer being considered qualified dividend income, and we will be unable to stop such a change from occurring.

      None.

Airport Services Business

      Our airport services business does not own any real property. Its operations are carried out under various leases. Our airport services business leases office space for its head office in Plano, Texas, and satellite offices in Baltimore, Maryland and at Teterboro Airport. For more information regarding our FBO

      At its FBO sites, our airport services business owns or leases a number of vehicles, including fuel trucks, as well as other equipment needed to service customers. Some phased replacement and routine maintenance is performed on this equipment. We believe that the equipment is generally well maintained and adequate for present operations.

Airport Parking Business

      Our airport parking business has 31 off-airport parking facilities located at 20 airports throughout the United States. The land on which the facilities are located is either owned or leased by us. The material leases are generally long-term in nature. Please see the description under “Business — Our Businesses and Investments — Airport Parking Business — Locations” in Part I, Item 1 for a fuller description of the nature of the properties where these facilities are located.

      Our airport parking business leases office space for its head office in Downey, California. The lease expires in 2010. We believe that the leased facility is adequate to meet current and foreseeable needs.

      Our airport parking business operates a fleet of shuttle buses to transport customers to and from the airports at which it operates. The buses are either owned or leased. The total size of the fleet is approximately 205 shuttle buses. Some routine maintenance is performed by its own mechanics, while we outsource more significant maintenance. We believe that these vehicles are generally well maintained and adequate for present operations. Our airport parking business replaces the shuttle fleet approximately every three to five years.

District Energy Business

      Thermal Chicago owns or leases six plants as follows:

      These six plants have sufficient capacity to currently serve existing customers. For new customers, a system expansion will be needed as discussed in the specific capital expenditure section. Please see “Our Businesses and Investments — District Energy Business — Business — Thermal Chicago — Overview” in Item 1. Business for a discussion of individual plant capacities.

Toll Road Business

      Connect M1-A1 Limited does not own any real estate. It has a license to occupy the land on which Yorkshire Link has been constructed, and it has a lease over the site used as the maintenance compound for the duration of the concession.

SEW

      SEW owns four reservoirs, 171 storage towers and 64 treatment plants. As of December 31, 2005, the unaudited book value of SEW’s tangible assets was £415.9 million (USD $715 million). Its main network extends some 6,000 miles. A review by SEW of the condition of its assets, which was accepted by Ofwat, indicated that 87% of SEW’s assets are in average or better-than-average condition with the majority of the balance nearing the end of their useful life and thus requiring replacement over the next ten years and a small percentage that require replacement in the short term.

Airport Services Business

      On or about May 15, 2002, the families of two pilots killed in a plane crash in 2000 filed complaints in the Supreme Court of New York against a number of parties, including EAS, a subsidiary within our airport services business, and a formerly owned subsidiary, Million Air Interlink, Inc., or Million Air Interlink, asserting claims for punitive damages, wrongful death and pain and suffering and seeking $100 million in punitive damages, $100 million for wrongful death and $5 million for pain and suffering. The plaintiffs’ claim arose out of a plane crash allegedly caused by one of the aircraft’s engines losing power, which caused the plane to crash, killing all on board. The engine lost power as a result of fuel starvation. The plaintiffs alleged this was caused by insufficient fuel or design fault. The plane had last been refueled prior to the accident at the Farmingdale FBO operated by Flightways of Long Island, Inc., or Flightways, on the day of the accident.

      EAS and Million Air Interlink moved to dismiss the complaints for lack of jurisdiction because Flightways, rather than EAS or Million Air Interlink, was the entity that operated the Farmingdale FBO, and that employed the person who refueled the plane in question. The court denied the motion, permitting discovery to go forward on the jurisdictional issues, and with leave for the defendants to refile the motion if discovery warranted doing so.

      Flightways was subsequently added as a defendant. USAIG, the insurer of Flightways under the primary insurance policy, assumed the defense on behalf of the three Atlantic defendants. On June 23, 2005, the defendants entered into a settlement agreement with the plaintiffs under which the three Atlantic defendants are liable for $325,000 of the total settlement amount, all of which is expected to be covered by insurance. The settlement is pending surrogate court approval.

      On February 28, 2005, Rohan Foster and Margaret Foster filed a complaint in the Supreme Court of New Jersey, Passaic County, naming several defendants, including various parties within our airport services business, based on injuries they allegedly suffered when a Challenger CL-600 aircraft failed to ascend during take off from the Teterboro Airport and ran off of the runway, the airport grounds, onto and across a public highway. The complaint alleges, among other things, negligence in the maintenance and control of the aircraft and maintenance, operation, management and control of the airport, and seeks an unspecified amount of compensatory and special damages. The plaintiffs have agreed to voluntarily dismiss the claim without prejudice against the AvPorts defendant. We are seeking a similar dismissal for

Toll Road Business

      Neither Macquarie Yorkshire, CHL nor Connect M1-A1 Limited is currently a party to any material legal proceedings.

      On March 20, 2004, a fatal road accident occurred on Yorkshire Link. The accident is currently the focus of an ongoing investigation by local police authorities. As part of their investigation, the police have interviewed several employees and, pursuant to a search warrant, have collected certain documentation from Connect M1-A1 Limited’s offices. Connect M1-A1 Limited has fully cooperated with the police investigation and, to date, has received no further information with respect to the outcome of the police investigation. Connect M1-A1 Limited has conducted an internal investigation and believes that its maintenance of the section of Yorkshire Link where the accident occurred was in compliance with its obligations under the concession. The seller to us of our interest in Yorkshire Link has indemnified us for our proportional share of any loss of revenue, penalties awarded by a court in potential civil or criminal proceedings or imposed by the Transport Secretary under the concession and legal expenses and other costs associated with any claim arising from this accident up to a maximum of £2.75 million.

SEW

      In 2003 and 2004, V.A.S. Maddison Ltd., a previous contractor of SEW, contacted SEW, claiming approximately £1.4 million with respect to the alleged incorrect allocation of two contracts during the period from 1997 to 2001, and £5.1 million in lost profits and bid costs with respect to alleged breaches of procurement rules in relation to the award of a contract in 2001. In addition, V.A.S. Madison claims that SEW owes an additional £2.6 million relating to work performed. SEW does not believe any additional amounts are owed. To date, no formal claim has been made.

      Saur International had been engaged by SEW, then owned by Saur UK and part of the Bouygues Group, to develop and implement a new billing system for SEW, for completion by the end of 2004. Following extended delays and technical problems with the software, SEW notified Saur International of its intention to terminate the project in December 2004. By the end of January, the parties were unable to reach agreement or agree to mediate the dispute. In March 2005, SEW initiated a claim against Saur International through arbitration with the International Chamber of Commerce in France for £13.2 million to recover amounts paid to Saur International for the purchase of the customer billing system and costs incurred as a result of having to terminate the project. On April 4, 2005, SEW was notified that Saur International had responded with a counterclaim of £4.6 million allegedly representing unpaid invoices, damages suffered and costs incurred. In December 2005, Saur International amended its counterclaim to £12.2 million, alleging loss of revenue opportunities and damage to brand image.

      None.

Part II

Market Information

      Our common stock is traded on the NYSE under the symbol “MIC.” Our common stock began trading on the NYSE on December 16, 2004. The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share of our common stock on the NYSE:

      As of February 16, 2006 we had 27,050,745 shares of trust stock outstanding that were held by approximately 120 holders of record; however, we believe the number of beneficial owners of our shares exceeds this number.

Disclosure of NYSE-Required Certifications

      Because our trust stock is listed on the NYSE, our Chief Executive Officer is required to make, and on June 23, 2005 did make, an annual certification to the NYSE stating that he was not aware of any violation by the company of the corporate governance listing standards of the NYSE. In addition, we have filed, as exhibits to this annual report on Form 10-K, the certifications of the Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 to be filed with the SEC regarding the quality of our public disclosure.

Distribution Policy

      We intend to declare and pay regular quarterly cash distributions on all outstanding shares. Our policy is based on the predictable and stable cash flows of our businesses and investments and our intention to pay out as distributions to our shareholders the majority of our cash available for distributions and not to retain significant cash balances in excess of prudent reserves in our operating subsidiaries. We intend to finance our internal growth strategy primarily with selective operating cash flow and using existing debt and other resources at the company level. We intend to finance our acquisition strategy primarily through a combination of issuing new equity and incurring debt and not through operating cash flow. If our strategy is successful, we expect to maintain and increase the level of our distributions to shareholders in the future.

      In 2005, we made the following per share distributions:

Securities Authorized for Issuance Under Equity Compensation Plans

      The table below sets forth information with respect to shares of trust stock authorized for issuance as of December 31, 2005:

      The selected financial data includes the results of operations, cash flow and balance sheet data of North America Capital Holding Company, or NACH, which was deemed to be our predecessor. We have included the results of operations and cash flow data of NACH for the years ended December 31, 2002 and December 31, 2003, for the period from January 1, 2004 through July 29, 2004 and for the period July 30, 2004 through December 22, 2004. The period from December 23, 2004 through December 31, 2004 includes the results of operations and cash flow data for our businesses and investments from December 23 through December 31, 2004 and the results of the company from April 13, 2004 through December 31, 2004. The year ended December 31, 2005 includes the full year of results for our consolidated group, with the results of businesses acquired during 2005 being included from the date of acquisition. We have included the balance sheet data of NACH at December 31, 2003, and our consolidated balance sheet data at December 31, 2004 and December 31, 2005.