www.transurban.com.au
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$5.8 b*
$1.8 b
$594 m
1996
2000
2005
market capitalisation
*excluding CARS
all figures at June 30 of the relevant year
delivering
Annual Report 2005
for investors
Transurban’ s appeal to investors is
based on:
A low risk diversified portfolio of toll
road assets generating strong cash
flows over the long term
The growing, predictable, inflation
protected nature of those cash flows
The significant opportunities for
sustainable growth as governments
increasingly turn to the private sector
to fund and manage new roads
Transurban’s skills in actively
managing the risks associated with
those opportunities.
Our track record
Transurban listed on the Australian
Stock Exchange in 1996 with a market
capitalisation of $510 million. Today it is a
Top 50 company and one of Australia’s
largest infrastructure groups with a
market cap of $5.8 billion.
The company is committed to
continually increasing distributions to
investors – and we are delivering on that
commitment with 25.5 cents per security
in FY04, 35 cents in FY05, and forecasts
of 50 cents per security in FY06 and
54 cents in FY07.
CityLink
100% Ownership and
Operations
M2
100% Ownership
WM7
40% Ownership
100% Customer Service
and Tolling
65%
26%
9%
Asset mix
Our assets
Transurban’s assets have been described
by Sanjay Magotra of Citigroup as
“all the bright jewels of the Australian
toll road market”.
Our future
Transurban is a pioneer in a young, but
rapidly growing global industry. In the
next 10 years, McKinsey & Company
estimates up to US$200 billion worth of
new toll projects will be privately funded.
With a healthy balance sheet and the core
competencies developed in Sydney and
Melbourne, Transurban is well placed to
compete for carefully selected projects.
Our key selection criteria are simple:
We will only invest in projects that
add value for investors
We will only take on risks we believe
we can manage.
Transurban (TCL)
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Annual Report 2005
achieving
Annual Report 2005
in
2004/2005
Chairman and Managing Director’s Overview
Active management is a feature of the
key events over the year:
The announcement of a new capital
management strategy
Transurban’s successful takeover
of Hills Motorway, owner of the M2
in Sydney
Continued progress in the
development of Westlink M7, our
40 per cent owned new motorway
in Sydney, which at the time of this
report was scheduled to open in
April next year
Continued traffic growth and
increased cost efficiencies on
CityLink in Melbourne, still our
cornerstone asset
A ground breaking agreement
with the State of Victoria to fund
the upgrade of the Tullamarine/Calder
interchange, a critical feeder on
to CityLink
Early success in pursuing new
projects in the United States.
2004-05 was an excellent year for
Transurban investors. Our company’s
security price increased significantly.
Distributions grew strongly, and
growth is set to continue.
On the last day of Financial Year 04,
Transurban securities traded at $4.87.
One year later, they were at $7.45.
The company paid total distributions
of 35 cents in FY2005, an increase of
37 per cent over FY2004. The forecast
for FY2006 is 50 cents per security
and for FY2007 it is 54 cents. That is
a 54 per cent increase over the next
two years.
With road congestion escalating
in much of the world, governments
are increasingly turning to the private
sector to meet the demand for
new infrastructure.
Our forecasts reflect more than the
wealth of opportunities in a young,
expanding industry. They are the
result of careful, disciplined selection
of the opportunities we pursue, a good
understanding of the risks involved
and active management of the assets
we develop and manage. These are
Transurban’s core skills and the basis
for our success in 2004-05.
Westlink M7’s Light Horse Interchange – the biggest
interchange in the southern hemisphere
Annual Report 2005
achieving in 2004/2005
Chairman and Managing Director’s Overview
Financial
results
Capital management
structure
M2 Hills Motorway
acquisition
Transurban has always taken a
conservative view of its capital structure.
During the year, the Board conducted
a review of the structure in the light of
strong growth in both the value of our
assets and the cash flows they generate.
As a result of the review, we carried
out a conservative regearing of
the business, using our growing debt
capacity to deliver a share of future
expected revenue growth to investors
earlier than originally planned. The new
structure allowed us to announce higher
distribution forecasts for investors.
As part of the Hills acquisition, we
announced an increase in our forecast
distributions from the October 2004
regearing to 50 cents a stapled security
in 2006 and 54 cents in 2007.
These announcements were well
received by the market and by the
ratings agencies. Our security price
increased and we maintained our
A- credit rating on our senior debt.
Transurban’s successful takeover bid
for Hills Motorway, owner of the M2
in Sydney, was a company transforming
event. The original offer was 1.47
Transurban securities for each Hills
security. The offer was improved by
adding a cash component of 25 cents
for each Hills security. The increase
amounted to just over 2 per cent and,
as a result, the Hills Board of Directors
supported the takeover.
As a result of the takeover, there are some
4,000 new investors on the Transurban
register. We take this opportunity to
welcome you and look forward to
meeting many of you at our Annual
General Meeting, to be held in Sydney
on 25 October.
The merging of Hills and Transurban will
extract substantial value for all investors.
When we launched the takeover,
we estimated the synergies and the cost
savings they generate would be worth
between $5 million and $6 million
a year. We now believe these estimates
are conservative.
Transurban will move the M2 to high
speed electronic tolling as quickly as
possible, allowing us to extract maximum
value for investors. Transurban is working
with the Roads and Traffic Authority
(RTA) of NSW to have electronic express
lanes without boom gates in operation
by the end of December 2005.
The key figure in our financial results
is the free cash flow before non-cash
items - $182.8 million, up 35 per cent
from $135.4 million in the previous year.
This is the figure that underwrites
our capacity to pay distributions
to security holders.
The accounting loss before tax was
$87.8 million, compared to $61.5 million
the year before. The higher loss reflects
the additional depreciation of $15.5
million due to the acquisition of
the M2 Hills Motorway in Sydney.
Non-cash items do not impact our
ability to pay distributions.
Revenue was $511.7 million, up from
$467.7 million the prior corresponding
period. The $511.7 million is made up
of $297.8 million from tolling and fees,
$3.6 million from outdoor advertising,
$185.7 million from interest and
$24.6 million in other revenue.
While tolls on existing assets
generated the bulk of our revenue,
the development teams delivered
significant value for investors. In 2004-05,
they were responsible for the takeover
of Hills Motorway and the Tullamarine/
Calder interchange agreement.
Operating costs were $92.4 million,
compared to $77.1 million in the prior
corresponding period.
Annual Report 2005
Distributions grew strongly this year, and growth is
set to continue.
Laurie Cox Chairman
Higher forecast
distributions
The merger of Transurban and Hills
has enabled a further increase in forecast
distributions to investors.
Both companies had under-geared
balance sheets, allowing us to increase
gearing and optimise the merged
balance sheet. We again took a cautious
approach, maintaining conservative
debt covenants and an A-rating on
senior debt.
Westlink M7
In 2003 Transurban invested $400 million
for a 40 per cent stake in Westlink M7,
the new motorway currently under
development in western Sydney.
Successful management of the risks
involved in the project should see
the value of our investment significantly
re-rated when the project is completed.
As in all new toll roads, the major risks
are construction, tolling and customer
service, and traffic.
Transurban is the tolling contractor
for the M7, ensuring lessons learned
on CityLink are applied to the new
project. Both the Westlink Board and
the RTA have accepted our tolling,
customer management and marketing
plans. Tolling gantries and the tolling
system have been installed and are
undergoing acceptance testing.
The final risk is the traffic forecast.
Since financial close, there has been
enormous growth in the Westlink
corridor. The project is attracting
significant economic development,
with major national companies moving
to take advantage of the road. The NSW
Government has announced that homes
for 250,000 people will be built in growth
areas near Westlink M7 within the next
30 years.
We are confident that the road will prove
to be a very successful investment for our
security holders.
CityLink
CityLink continues to deliver for our
investors. In 2004-05, traffic on the road
grew by 4.6 per cent and revenue by
8 per cent. This takes into account
an extra day for the leap year.
CityLink’s ongoing focus on cost control
and improvement initiatives resulted in a
14 per cent cost efficiency improvement
in the customer service business.
Tullamarine/Calder
interchange agreement
In January 2005, Transurban and
the Victorian Government reached
an agreement to fund the upgrade
of the Tullamarine/Calder interchange,
a badly congested traffic blackspot that
feeds directly on to CityLink. Transurban
is bringing forward the payment of
Concession Fees payable to the State
under the CityLink Concession Deed
to pay for the upgrade.
The upgrade is scheduled for completion
in July 2007 and Transurban will benefit
from increased traffic on CityLink.
This upgrade will be done in cooperation
with the State Government, which
demonstrates the importance of active,
ongoing management of toll road
concessions. Transurban is committed to
working with governments over the life
of its concessions to ensure we continue
to respond to changing community
needs and expectations.
Annual Report 2005
achieving in 2004/2005
Chairman and Managing Director’s Overview
International
opportunities
People
In the US, we are targeting projects
that play to our strengths - the acquisition
of existing roads and High Occupancy
Toll (HOT) lanes. HOT lanes are
electronically tolled lanes constructed
adjacent to congested motorways
so drivers have the choice to pay for
travel time savings. There is an added
incentive in that cars with three or more
passengers travel free of charge.
HOT lane projects on existing roads have
relatively low traffic risk, as traffic patterns
are already established.
Such projects require skills in traffic
forecasting and tolling - skills we have
demonstrated in Australia.
Transurban has established an office
in New York and we are assessing three
potential projects in the State of Virginia.
Two of these are HOT lane projects and
one is the acquisition of an existing
road. We are in an exclusive negotiating
position on two projects and are
shortlisted for one.
If successful in these projects, Transurban
will be involved in tolling and operations
and will have the opportunity of
investing equity if the projects meet
our investment criteria.
In the United Kingdom, we have opened
an office in London, where we are
building relationships with potential
partners and monitoring emerging
project opportunities.
In previous years, we have paid tribute
to the ability of Transurban employees to
respond to new challenges. In 2004-05,
they once again demonstrated that
they thrive in an environment of change
and growth. At year’s end we had 490
employees, and this number is rising
as we gear up for the opening of
Westlink M7.
Employees have played a crucial role
in the development of the company’s
Corporate Social Responsibility programs.
They have been active in reviews
to better understand our environmental
and social impacts and the roll-out
of programs to enhance our performance
in these areas.
Deputy Managing Director, Geoff Phillips,
retired in 2005. For over nine years
he played a major role in our success.
Geoff will continue to represent
Transurban on the Westlink Motorway
Board and will undertake consultancy
work for us from time to time.
In anticipation of Geoff’s retirement
we recruited Chris Brant as Chief Finance
Officer during the year. Before joining us,
Chris had a long and successful career
at Deloitte Touche Tohmatsu, where
he most recently headed up the Asia
Pacific Energy & Resources Industry
Group. During his time with Deloitte,
he was involved in a number of public
floats, capital raisings and domestic
and international financing for major
Australian corporations.
Mitcham-Frankston Freeway
One disappointing aspect of 2004-05
was our failure to win the concession
to develop and manage the Mitcham-
Frankston Freeway (since renamed
Eastlink) in Melbourne.
We submitted a competitive offer which
reflected our determination to protect
the interests of investors. We are not
interested in winning projects if there
is a risk that they may undermine
security holder value.
Transurban’s share of our consortium’s
costs in bidding for Mitcham-Frankston
was approximately $9.4 million, less
a reimbursement due from the State.
This amount has been expensed
in 2004-05, and includes $7 million which
had been deferred in prior periods.
0
Annual Report 2005
Our succesful takeover of M2 Hills Motorway was a
company transforming event this year.
Kim Edwards Managing Director
We will continue to actively manage
our existing assets.
We are optimistic about the future.
And our optimism is based on a sound
understanding of the business we are
in and the opportunities it provides.
Recently, Christopher J S Renwick joined
the Transurban Board. Chris has a wealth
of experience in mining, operational
business management and law. He is
the Chairman of Coal and Allied
Industries Limited and the Rio Tinto
Aboriginal Foundation. From 1969 to
2004, he held senior positions in CRA
Limited and then Rio Tinto Limited.
Conclusion
Transurban is now a Top 50 company
on the ASX. We are one of Australia’s
largest infrastructure groups with a market
capitalisation of $5.8 billion.
We have a low risk, diversified portfolio
of three toll roads, widely recognised
as the best in Australia and incorporating
the main freight corridors in Sydney
and Melbourne.
Our roads generate strong cash flows
and underpin substantial funding
capacity. We are well placed to win
new projects in the United States.
In the coming years, many new toll
road projects will come on to the market
in Australia, the United States and
Europe. We have a cautious approach
to competing for those projects. We will
only participate where we are confident
we can add value for our investors.
Laurence G Cox AO
Chairman
Kimberley Edwards
Managing Director
Full electronic tolling – allowing traffic to flow freely
Annual Report 2005
shaping
2
Annual Report 2005
the Sydney
road network
This year Transurban successfully
acquired M2 Hills Motorway,
a 21 kilometre motorway in Sydney
that will link to our Westlink M7 project
when it opens in 2006. This will create
61 kilometres of Transurban-operated
motorway in Australia’s highest growth
transport corridor.
As a 40 per cent owner of the M7,
100 per cent owner of the M2 and the
tolling operator for both motorways,
Transurban now has a major stake
in around half of Sydney’s overall
motorway network.
Our priority over the coming year
is to provide motorists with a seamless
journey from Liverpool in the south
to Lane Cove in the north. Transurban
will introduce electronically tolled
express lanes on the M2 by the end
of 2005.
By operating both the M7 and M2
we will create one free-fl owing corridor
that will benefi t motorists and local
industry, and deliver value for investors.
of the M2 to investors, motorists and
the community. We expect to deliver
signifi cant synergies, savings and traffi c
growth through active management
of the road.
Our forecasts indicate Transurban’s
integration of the M2 Hills Motorway
will generate synergies and costs savings
of about $5-6 million per year.
M2 Hills Motorway
Transurban acquired the M2 in June
2005, just fi ve months after announcing
an off er to take over the company.
Transurban’s current priority is to deliver
immediate benefi ts from the acquisition
Sydney Metropolitan Road Network
M2 Hills Motorway
– Key Facts
21 kilometre roadway in
Sydney, Australia
Acquired by Transurban
June 2005
Electronically tolled express lanes
introduced by December 2005
Concession until 2042
Strong residential growth from
the northwest
Will link to the M7 and Lane
Cove Tunnel
Annual Report 2005 13
shaping the Sydney road network
Towards free flowing
traffic on M2
Subject to government approval, the
M2 will move to 100 per cent electronic
tolling by 2007. This will bring it in line with
the Westlink M7 and Lane Cove Tunnel
motorways, which link directly to the M2.
Transurban plans to expand electronic
tolling on the M2 by the end of 2005 by
creating two new express lanes to reduce
congestion at toll booths and reduce the
need to slow down or stop to pay tolls.
The M2 express lanes will allow motorists
to travel 61 kilometres along the M2 and
Westlink M7 from Liverpool to Lane Cove
without stopping at a single traffic light
or toll booth.
Fully electronic express lanes on M2 will
help create value for investors by increasing
road capacity – and hence traffic
revenuevv and decreasing the number
of uncollected tolls. A manual toll booth
can handle approximately 600 vehicles per
hour while one fully electronic toll lane can
process around 2,200 vehicles per hour.
Transurban will introduce a new robust
enforcement system on the M2 to stem
revenue leakage from current operations.
The development of a single customer
service brand – soon to be operating
across both M2 and Westlink M7 –
will encourage even greater use of both
roads as well as providing smooth
connections to the surrounding
road network.
Westlink M7
Westlink M7 can be described as
the missing link in Sydney’s orbital
motorway network since it joins three
motorways – M2, M4 and M5. It will
be Sydney’s first distance-based fully
electronic toll road when it opens to
traffic next year. Distance-based tolling
means motorists only pay for the distance
travelled. This is a new and fairer concept
in Sydney and will require a strong
emphasis on community education
about cost and travel time benefits.
The M7 will significantly improve access
to western Sydney and save motorists time
and petrol by avoiding up to 48 sets of
traffic lights. At the time of this report, the
road was scheduled to open in April 2006.
Annual Report 2005
Transurban will operate tolling and
customer service functions on the M7,
and the company is on schedule to have
verified and tested tolling systems
in place to do this well ahead of the road’s
opening date.
This early delivery was only possible due
to the technical expertise we gained on
CityLink’s development.
The 40-kilometre M7 includes 17 access
points, which is a real benefit for local
businesses and commuters.
Westlink M7 - Key Facts
40 kilometre motorway in
Sydney, Australia
100 per cent electronically tolled
Concession until 2037
Toll increases in line with CPI
Construction ahead of schedule
Due for completion by April 2006
Consumer marketing and brand
launch last quarter of 2005
Strong industrial and residential
growth in corridor
Links the M2, M4 and
M5 motorways
M2 Hills Motorway meets Westlink M7
in Baulkam Hills
My job is to make sure Roam delivers an excellent
customer experience...every time.
Jan Lewis Head of Customer Operations - Roam
Corridor of Growth
Strong industrial growth continues
to exceed early forecasts for western
Sydney, and Westlink M7 is becoming
a magnet for economic development
and accelerated investment in the area.
Over the next five years almost half
of Sydney’s industrial construction
will occur around the M7’s Light Horse
Interchange at Eastern Creek.
Major national companies including LG
Electronics, Coles, Coca Cola, Woolworths,
TNT and Bluescope Steel have already
moved to take advantage of locations
in the business and industrial parks
in the M7 corridor.
Residential development is also gathering
momentum. In December the NSW
Government announced an additional
160,000 new homes will be built
in the region over the next 30 years
to accommodate at least 250,000
people. These new areas will contain
80 new neighbourhoods and represent
30 per cent of Sydney’s growth over
the next three decades.
The M7 will provide these communities
with access to the rapidly growing
industrial and business parks in western
Sydney and the major employment
centres, including Liverpool, Parramatta,
Blacktown, Fairfield and Castle Hill.
Transurban plans to expand full electronic tolling
on the M2 (designer’s impression)
Introducing Roam
A new tolling brand in NSW
This year Transurban will introduce
a new customer-focused tolling brand
in the NSW market.
– all backed by clear and effective
product information.
We know from CityLink that customer
service is vital for high road use. Our NSW
tolling brand offers a single contact
point for Sydney’s multiple toll roads,
an extensive range of easy-to-use
products and 24-hour customer service
The new brand – Roam – has been
developed well before opening
the M7 and will be launched before
the end of 2005.
Roam’s products are tailored to each
market segment and include e-TAGs
and a video-
based tolling
product called
e-PASS. Roam
will also provide
specialised services
for commercial customers
to make managing large fleets
easier, such as electronic billing
and business account management.
Annual Report 2005
moving
Annual Report 2005
Melbourne
motorists
CityLink showed strong growth
in 2004-05, again demonstrating
its value to Transurban investors.
Average daily traffic was up
4.6 per cent and revenue increased
by 8 per cent.
The company had further success
in reducing operational costs while
continuing to focus on refining
its approach to customer service.
Over the year, CityLink reached
several important milestones.
The one millionth e-TAG® device
was distributed, and there are now
more than 700,000 customer
accounts—a 7 per cent increase
on last year.
CityLink’s Gateway entrance to Melbourne
Revenue up, costs down
A number of programs across the business
contributed to CityLink’s strong revenue
growth and continued progress in lowering
costs in 2004-05.
The video tolling product for occasional
CityLink users—ACCESS—continues
to attract new customers. After just two
years, there are more than 60,000 ACCESS
accounts, double the number
12 months ago.
ACCESS now makes up 35 per cent
of all new CityLink accounts opened
each month and has generated more
than $4.7 million in toll and fee revenue
for the year. In 2005-06 CityLink
will further increase the efficiency
of video tolling by introducing rear image
cameras—a move that will also boost
revenue and reduce costs.
After five years, a new contract for CityLink’s
e-TAG retrieval, storage and dispatch
was signed and commenced operation
in August 2005. This is expected to deliver
significant annual savings.
What a year - we reduced
costs, improved our
customer service and
clocked over a million e-tags.
Bruce Anderson
Head of Operations - CityLink
Annual Report 2005
moving Melbourne motorists
CityLink customers continue to move
to electronic channels such as the web
and B-Pay for service, and this will help
to further reduce costs.
Overall, CityLink operating costs were
6 per cent lower than the previous year,
driven by a 14 per cent improvement
in customer service transaction cost.
CityLink - Key Facts
Putting the customer first
CityLink’s ‘Customer 1st’ policy is
designed to help the business deliver
superior service and give it a competitive
edge in tolling customer service for the
future. This should help CityLink retain
existing customers and attract new ones.
This year CityLink worked with the State
Government to move toward invoicing
motorists who use the road without first
obtaining an e-TAG or pass or opening
an ACCESS account. This is a significant
improvement for customers,
who previously received fines. A change
in Victorian legislation was required
to allow for the new approach, which
was implemented in July 2005.
Several other Customer 1st initiatives
had a positive impact on CityLink’s
operations. They include:
22 kilometre motorway in
CityLink Customer Charter
and Report Card – In most cases
CityLink met or exceeded
its performance targets in each
of the two reports released
in 2004-05.
Melbourne, Australia
Pioneer in full electronic tolling
Concession until 2034
Toll increases at 4.5 per cent
or inflation*
Traffic up 4.6 per cent and
revenue up 8 per cent in 2004-05
* Higher of 4.5 per cent or CPI until 2015 and
CPI for balance of concession
Annual Report 2005
CityLink Customer Ombudsman –
An independent Customer
Ombudsman was appointed
in 2004—a first for an Australian toll
road. In his first six-monthly report,
the Ombudsman had received
35 complaints. Thirty-four of these
were resolved, and one had
a determination issued.
CityLink Plus – This is a value-add
program developed exclusively
for CityLink customers. CityLink
has teamed with AGL, Australian
Unity, Shell autoserv, St John
Ambulance and the TAC to create
exclusive discount offers and special
deals for customers.
SMS service – The second stage
of CityLink’s SMS service—developed
in partnership with Telstra—
was launched in December 2004.
Registered customers now have the
option to top up their account via SMS.
CityLink continues to explore ways
to offer customers more value from
their e-TAGs. In November 2004,
the company conducted a world-first
trial using the e-TAG and a separate device
known as an i-TAG® as a convenient,
cashless way to shop and pay. CityLink
customers volunteered over the website
for the trial, which took place at two
McDonald’s sites in Melbourne.
Transurban now has a patent pending
for this system, which can be applied
at other outlets such as car parks and
service stations.
I like the interaction with customers. I always try to
look at things from the customer’s perspective
and take on board what’s happening in their life
and how they’re feeling.
Mark Halyburton Customer Service Offi cer, Infringement Assist Team - CityLink
Improvements to CityLink icons
including the Gateway and Bolte
Bridge and additional landscaping
on the Western Link—part of
CityLink’s eff ort to create a positive
impression of Melbourne during
the Commonwealth Games
Safety improvements to the in-tunnel
radio re-broadcast system and
the Bolte Bridge on-ramp from
the Westgate Freeway.
Enchancing road operations
In January 2005, Transurban
and the Victorian Government signed
an agreement that will fund a solution
to congestion problems at the Tullamarine/
Calder Freeway interchange.
The upgrade is aimed at improving
conditions for drivers approaching
CityLink from Melbourne’s northwest.
Travel times are expected to fall by up to
10 minutes when the improvements are
completed within three years. In addition,
the work is expected to increase traffi c
volume—and revenue.
Under the deal, Transurban will provide
$150 million to VicRoads to fund
the upgrade. In return, CityLink
Concession Fees payable to the State
will be assigned to Transurban.
In August 2005, CityLink extended its
existing incident response services to
the VicRoads sections of freeway between
the CityLink tunnels and the Westgate
Freeway / Western Link interchange,
and on the Tullamarine/Calder interchange.
This is expected to signifi cantly improve
peak period performance.
Other improvements introduced during
2004-2005 include:
Enhancements to business continuity
through the establishment of an
alternative traffi c control room that
can be activated within 24 hours
Melbourne Metropolitan Road Network
Freeways
Arterial Roads
Tunnels
Transurban Projects
Motorways
Committed Motorways
Planned
Committed Freeways
Annual Report 2005 19
expanding
20
Annual Report 2005
into new
markets
Australia
The demand for infrastructure—
including roads—is growing at a rapid
rate throughout the world.
Transurban is considering several
emerging developments along Australia’s
eastern seaboard.
In the US, the funding shortfall
for infrastructure has been estimated
at US$30 billion a year. Many states
are now looking to privatise existing
road infrastructure and develop
new projects using private finance.
In the UK, the Government is looking
at road user charging as a way of funding
new projects over the next 10 years.
In Europe, tolls are increasingly being
introduced for trucks.
Australia is grappling with similar
issues. We estimate congestion could
cost the country as much as $30 billion
a year in lost productivity by 2015
unless infrastructure spending
increases dramatically.
Over the past year, Transurban
has further positioned itself to pursue
some of the projects arising from
this demand.
In Queensland, the Brisbane City Council
has selected two consortiums to bid for
a 4.7 kilometre North South Bypass Tunnel
under the Brisbane River.
Transurban elected not to take a sponsor
role. This leaves us in a position to review
equity investment opportunities.
Transurban is also examining the proposed
7 kilometre Airport Link project
connecting the Inner City Bypass and
proposed North South Bypass Tunnel
with the Gateway Motorway at Brisbane
Airport. This is a joint State Government
and Brisbane City Council project.
An Environmental Impact Statement (EIS)
and business case are due for completion
in 2006.
In New South Wales, the state
government remains committed to
the M4 East Motorway in Sydney,
which will link the M4 at Strathfield and
the Anzac Bridge. The state is expected
to release an EIS for community
consultation in 2006.
The Federal Government has announced
its preferred option for a link between
the F3 and the M2 connecting the Central
Coast Region and the Sydney Motorway
network. Funding was allocated in this
year’s federal budget and the proposal is
expected to be subject to an EIS next year.
Managing the Risk
Transurban will continue
to take a measured approach to
any opportunities in Australia
or overseas.
The company is willing to
forgo a project if acceptable
returns cannot be obtained.
With a healthy balance sheet and
continuing growth, Transurban
is in a strong position to select
projects and consortia which add
value for investors.
Annual Report 2005 2
expanding into new markets
Key Opportunities in Virginia, USA
22
Annual Report 2005
USA
Less than three years after setting up
its fi rst overseas offi ce in New York,
Transurban is already a preferred bidder
for key projects in the state of Virginia.
In June 2005 Transurban signed
a Memorandum of Understanding
with the Pocahontas Parkway
Association and the Virginia
Department of Transportation
(VDOT). The memorandum gives
Transurban the exclusive right to
consider acquiring the association’s
rights and obligations to its nine
mile (approximately 15 kilometre)
toll road southeast of Richmond,
Virginia’s capital.
Transurban entered into an
agreement in May 2005 with VDOT
and Fluor Enterprises to exclusively
study the feasibility of introducing
High Occupancy Toll (HOT) lanes
along a 14 mile (approximately
23 kilometre) section of the Capital
Beltway (I-495) in northern Virginia.
The Capital Beltway is the ring road
around Washington, DC. If the project
reaches fi nancial close, Transurban
will act as toll operator and
project investor.
Transurban and Fluor have also
submitted a detailed proposal to
VDOT for a 56-mile (94-kilometre)
Bus Rapid Transit / HOT Lane System
on the I-95/395 in northern Virginia.
One other consortium is bidding for
the project. If successful, Transurban
plans to deliver the tolling system
design and handle operations.
The I-95/395 crosses the Capital
Beltway at the Springfi eld interchange,
which creates signifi cant synergies
through operating both projects.
Transurban is increasingly looking to overseas markets
for new business. The US and UK offer an exciting new
direction for us, and I’m thrilled to be part of the journey.
Ken Daley Vice President International Development
UK
Transurban has established a small
office in the UK, where it is building
relationships with clients and with
potential consortium partners.
The company will closely monitor
potential project opportunities
there and throughout western Europe.
Transurban is also shortlisted on two
projects in Dallas-Fort Worth, Texas.
The SH-183 HOT Lane Project involves
building managed lanes on a direct
connection freeway between Dallas
and Fort Worth that passes the major
airport in the region.
The SH-121 project involves completing
a partially built freeway and converting
it into a toll route to service the rapidly
expanding area north of Dallas.
Transurban is in partnership with Fluor
Enterprises on both these Texas projects.
View of the James River crossing on
Virginia’s Pocahontas Parkway
Annual Report 2005 23
caring
2
Annual Report 2005
for
communities
Transurban believes working to protect
the environment and developing
strong relationships with stakeholders
will help it further build its business.
Transurban continued to build on
its commitment to corporate social
responsibility in 2004-05, focusing
on four key areas:
Environment – minimising
the impacts of our operations on
the surrounding environment
Community – contributing
positively to the communities
surrounding Transurban roads
Customers – delivering on the
promises set out in our ‘Customer
1st’ policy
Employees – providing a
‘workplace of choice’ that ensures
safety, equity and opportunity.
Our approach was recognised by four
major corporate social responsibility
ratings agencies this year:
Environment
A comprehensive environmental review
completed in late 2004 showed that
Transurban has successfully addressed
the most significant environmental issues
for CityLink – tunnel vent stack emissions
and groundwater recharge..
Over the past year, Transurban:
Achieved 100 per cent compliance
with EPA environmental requirements
on CityLink
Operated the CityLink water recycling
and water treatment plant at more
than 90 per cent efficiency
Signed the company’s fleet of
vehicles to Greenfleet to help offset
carbon emissions
Became a founding member of
E-Tree, an initiative that offers security
holders the opportunity to receive
all communications electronically
Extended noise walls on sections
of the CityLink Southern Link to far
exceed compliance requirements
FTSE 4 Good Global Index –
Launched a company-wide ‘green
includes companies that meet Ethical
Investment Research Service (EIRIS)
corporate social responsibility standards
Reputex SRI Index – lists Transurban
as an A-rated company based on
social, environmental, governance
and workplace initiatives
AuSSI Index – includes the leading
40 per cent of ASX-listed companies
in terms of sustainability
Corporate Monitor’s List of Ethical
Funds – includes ASX200 companies
that have been assessed against
environmental, social engagement
and corporate governance criteria.
office’ program
Ensured the protection of local fauna
during the construction of Westlink
M7 by providing relocation and
refuge for species such as the Eastern
Long-Necked Turtle.
Transurban’s recent environment review
highlighted the company’s positive
environmental track record and found
that its management of environmental
issues could be improved by developing
a company-wide environment strategy
and management system.
Sustainability is not just
about doing good - it’s
about doing good business.
We’ve spent the past year
better understanding our
social and environmental
impacts and developing
CSR programs that will
make a difference.
Carley Freeman
Corporate Social Responsibility Advisor
Annual Report 2005 2
caring for communities
The first Transurban Environment
Strategy was developed this year.
The strategy articulates the environmental
values that guide the company’s decisions
on asset acquisition, development and
operation. It also identifies practical
initiatives to improve environmental
performance and impacts.
Eastern Long-Necked Turtle
Community
Review
During the first half of 2005, Transurban
conducted a comprehensive community
review to identify and measure company
impacts on the community. The outcomes
of the community review will assist in
the development of company-wide
community relations policies and
practices and help direct the focus of
Transurban’s community
partnership program.
04/05 Partnerships
Transurban invests in projects that deliver
real benefits to the communities in which
it operates and help it to respond
to local issues.
Over the past year, examples of
community partnerships include:
CityLink Schools for the
Environment – delivering an
environmental education program in
partnership with Greening Australia
Planned 05/06 initiatives
Develop an organisation-wide
environmental management system
Adopt environmental purchasing
procedures
Undertake a study of the greenhouse
gas risks and opportunities
associated with our business
Develop a model for measuring
storm water run-off from road assets.
2
Annual Report 2005
CityLink School Support Program
Transurban Excellence in
– funding student support
programs at 10 schools along
the CityLink corridor
Community art projects – involving
local schools, councils, artists and
community groups
Community sponsorships
– supporting local cultural festivals
and community initiatives
Red Cross support – Transurban
donated $50,000 to the Red Cross as
part of the Tsunami Disaster Appeal
Engineering Awards – awarding
prizes to recognise outstanding
students at Melbourne, Monash
and RMIT universities
Western Chances – funding
a program that provides
scholarships for talented young
people in Melbourne’s western
suburbs who may not have
the support to achieve their goals
Western Sydney Industry Awards
– supporting business and industry
in the Westlink M7 and M2 corridor.
Strategy
As Transurban moves from operating
a single asset to being the long term
owner and manager of multiple assets,
there is a growing need to formalise our
corporate-wide approach to stakeholder
management. Over the coming year,
Transurban will focus on developing
a Community Management Framework
to co-ordinate community relations
policies, procedures and initiatives and
manage community issues from
a company-wide perspective across
all Transurban assets.
CityLink joined with the City of Moonee Valley on
a unique strategy to tackle graffiti on walls along
CityLink
Annual Report 2005 2
caring for communities
Customers
Our commitment
Our performance
Transurban is committed to providing
a consistently high standard of service and
safety on our roads and ensuring fairness
in all our dealings with customers.
Since CityLink began measuring
its performance against targets set
out in the Customer Charter, the business
has consistently exceeded its goals.
To increase accountability and
transparency, Transurban has introduced
a Customer Charter on CityLink and will
introduce a similar charter for Westlink
M7 customers once the road has opened.
CityLink appointed an independent
ombudsman in September 2004,
making it the first Australian toll road
with this position. A similar independent
complaints resolution framework will
be introduced for WestLink M7 and M2
customers.
Initiatives
Transurban introduced a safety net
for customers who travel on CityLink
without valid arrangements to pay from
1 July 2005. Instead of an infringement,
customers who use the road without
being registered with CityLink will now
receive an invoice. This system will be in
place from Westlink M7’s road opening
and from the first day that electronic
tolling is introduced on the M2 (before
the end of 2005).
Transurban has consistently exceeded its Customer
Service Charter goals
2
Annual Report 2005
Employees
Overview
Transurban continues to focus on
attracting and retaining high calibre
employees and being an employer
of choice. The company provides
learning and development opportunities
for individual career growth and offers
a reward and recognition program that
rewards successful individuals in line with
business performance.
The company delivered several key
programs this year covering employee
safety, health and wellbeing, workplace
equity, privacy and security. We also
focused on improving employee
communication to create a shared
knowledge environment through
regular newsletters, updated online
information and more detailed employee
information forums.
Highlights
Transurban won the Australian
Human Resources Institute’s state
award for excellence in people
management for a private enterprise
with 200-1000 employees
The ASX200 Blue Ribbon list
(October 04) acknowledged
Transurban as a leading organisation
following the results of a census
of women in leadership positions
conducted by the Equal Opportunity
for Women in the Workplace
Agency (EOWA)
The company offered 77 different
internal and external learning
and development programs
for employees, with 75 per cent
participating throughout the year
The staff Good Company Group helps employees
contribute to the community and environment.
The amazing response to our workplace giving program
is proof of the compassionate, generous staff we have.
Stuart Webb Systems Architect and Good Company Group member
Many employees participated in
the company’s Health & Wellbeing
programs, including the Corporate
Games (115 participants), Healthy
Eating, Quit Smoking, Employee
Assistance, and the Walking and
Exercise Club
The company’s employee share
ownership scheme continued to
be very popular, with 98 per cent
of eligible employees holding
Transurban securities.
Over the year, Transurban employees
have contributed to:
Tsunami volunteering – 30 CityLink
customer service officers volunteered
at the Oxfam call centre in the days
following the Asian tsunami
Workplace giving – developing
a regular charitable giving program
through the payroll system
Green office – establishing an
ongoing campaign to reduce office
waste and support initiatives such
as sustainable transport to work and
green purchasing.
Staff initiatives
Transurban employees have played an
active role in the company’s corporate
social responsibility initiatives through
the staff ‘Good Company Group’.
The group is made up of employees
from across the company who
help communicate corporate social
responsibility to the business and engage
their colleagues in related projects.
The company works together with the local
community on environmental programs
Many Transurban employees participate in
workplace giving
Seventy-five per cent of employees took part in
learning and development programs this year
Annual Report 2005 2
steering
30
Annual Report 2005
for success
Corporate Governance
Transurban is committed to high
standards of corporate governance.
The Group’s corporate governance
framework was developed in the light
of the ‘Principles and Best Practice
Recommendations’ published by
the Corporate Governance Council of
the Australian Stock Exchange in March
2003. (See page 41 for a list of the
10 core principles.)
The relationship between the Board
and management is critical to the
achievement of the Group’s objectives.
The directors are responsible to the
security holders for the performance
of the Group and their key tasks are
to enhance the interests of the security
holders and other key stakeholders
and to ensure the Group is properly
managed.
Continuous Disclosure Policy
Shareholder Communication Strategy
Risk Management Framework
Corporate Social Responsibility
Program.
The Board and management
continue to monitor developments
in this important area to ensure best
practice standards are maintained.
This corporate governance statement
is formulated on a collective basis
and applies to all entities comprising
the Transurban Group as described
in the Directors’ Report. The “Board”
is a reference to the Board of each
relevant entity unless otherwise stated.
Day to day management of the Group’s
affairs and the implementation of
strategic and policy decisions made by
the Board are delegated to the Managing
Director and senior executives.
The Group’s main corporate governance
practices are described in the following
paragraphs. Unless otherwise stated,
these practices were in operation for
the entire year.
Material relating to the corporate
governance practices of the Group is
published on the corporate governance
section of the Group’s website at
www.transurban.com.au. The material
now available comprises summaries of
the following:
Board Charter
Nomination and Remuneration
Committee Charter
Audit Committee Charter
Remuneration Policy
Code of Conduct
Dealing in Securities Policy
Annual Report 2005 3
Laurence G Cox
Kim Edwards
Geoff R Phillips
Jeremy G A Davis
Peter C Byers
Susan M Oliver
Geoff O Cosgriff David Ryan
Chris Renwick
(retired 26 July 2005)
(appointed 26 July 2005)
Board Composition
The maximum and minimum number of
directors is currently set by the Board at
eight and three, respectively. The entity’s
constitution allows a maximum of 12.
The Board seeks to ensure that its
membership provides the mix of
qualifications, skills and experience
to effectively fulfill its responsibilities
and that its size facilitates effective
discussion and efficient decision making.
Board Members
Details of the members of the Board,
their experience, expertise, qualifications,
term of office and independence are
set out in the Directors’ Report under
the heading “Information on Directors”
(refer to page 51).
steering for success
corporate governance
Board of Directors
The Board operates in accordance with
the broad principles set out in its charter
which is available in summary form on
the Group’s website. The charter covers
the following matters:
Board Responsibilities
(Principal 1, Recommendation 1.1)
To ensure the efficient undertaking
of its overall responsibilities, the Board
has delegated certain aspects of them
(in particular, those relating to day-to-day
operations of the entity) to the executive
management of the entity.
The following responsibilities have been
retained by the Board:
Reviewing and ratifying the entity’s
business strategies and monitoring
their implementation
Appointing and removing the
Managing Director, regularly evaluating
his/her performance and determining
his/her remuneration
Appointing and removing the
Company Secretary and regularly
evaluating his/her performance
Reviewing the entity’s financial
reports and certifying that they
comply with Australian Accounting
Standards and present a true and fair
view of the affairs of the entity
Ensuring the financial integrity
of the entity through
Overseeing the entity’s systems
of internal control and
financial reporting
Establishing and reviewing
financial performance objectives
Approving operating and
capital budgets.
Approving distribution payments
Approving capital management
activities, including the issue and
redemption of equity and the
increase or reduction in borrowings
Approving significant changes to
the Group’s organisation structure
Reviewing and ratifying systems of risk
management and legal compliance
Ensuring that the entity complies
with all disclosure requirements
Approving changes to the authorities
delegated to management
Ratifying the appointment of
Assessing the performance of each
executives reporting to the Managing
Director, reviewing the Managing
Director’s assessment of the
performance of such executives and
determining their remuneration
based on the Managing Director’s
recommendations
Developing and approving succession
plans for the Managing Director and
reviewing and approving succession
plans for those executives reporting
to him
32
Annual Report 2005
individual director and of the
Board collectively
Selecting nominees for election
as directors
Providing strong leadership of
the entity on a continuing basis
Fostering a culture of compliance
with the highest legal, ethical
and environmental standards and
business practices.
Laurence G Cox
Kim Edwards
Geoff R Phillips
(retired 26 July 2005)
Jeremy G A Davis
Peter C Byers
Susan M Oliver
Geoff O Cosgriff David Ryan
Chris Renwick
(appointed 26 July 2005)
In addition Transurban Limited is
entitled to receive management fees
of $6.5 million from MBL in relation
to the extension of the term of the
Infrastructure Borrowing Facilities
provided by Macquarie Bank.
Directors’ Independence
(Principal 2, Recommendation 2.1)
It is the Board’s policy that a majority
of directors should be independent
directors and the Chairman should be
an independent director. The Board
regularly determines which directors
are considered to be independent
directors in the light of their interests
as disclosed to the Board. In making
this determination, the Board considers
whether a director’s security holding
in the entity, his or her relationship
with security holders, suppliers and
competitors and tenure as a director
would materially affect the director’s
ability to exercise unfettered and
independent judgment in the interests of
the entity’s security holders.
In considering whether a director’s
business or other relationships give rise
to any conflict, the Board believes it is
inappropriate to solely apply arbitrary
dollar, profit or turnover percentage
tests to define the material impact
of those business or other interests.
Instead, the Board seeks to determine
whether the director is generally free of
any interest and any business or other
relationship which could materially
interfere with the director’s ability to act
in the best interests of the Group.
With regard to these factors, the Board
has determined that all non–executive
directors are independent directors.
Mr L G Cox is an executive director
of Macquarie Bank Limited (‘MBL’).
It is considered Mr Cox’s relationship
with MBL does not have a material effect
on his ability to exercise unfettered and
independent judgement in the interests
of the Group’s security holders.
Over the past three years, the Group
has paid MBL the amounts shown
in the table below.
MBL has advised that each of these
amounts are not material in the context
of the total receipts of MBL in the
relevant category in each period. As a
result, the Board considers that these
payments would not materially affect
Mr Cox’s ability to exercise unfettered
and independent judgment in the
interests of the Group’s security holders.
Advisory fees
Underwriting fees
Interest
2002 - 03
$mill.
0.37
7.21
3.85
2003 - 04
$mill.
Nil
Nil
Nil
2004 - 05
$mill.
12.65
Nil
Nil
Annual Report 2005 33
steering for success
corporate governance
This fee was recognised during the year
ended 30 June 2004. During this year
$1.4 million was received with the
remainder due to be received quarterly
over the next two years. The Transurban
Group also contributes to the costs
of Mr Cox’s personal assistant and
office facilities.
Roles of the Chairman
and the Managing Director
(Principle 2, Recommendation 2.2 and 2.3)
The Chairman is responsible for leading
the Board, ensuring all directors are
properly briefed in all matters relevant
to their role and responsibilities,
facilitating effective discussion of matters
considered by the Board and managing
the Board’s relationship with the entity’s
executive management.
The Managing Director is the Chief
Executive Officer of the entity
and is responsible to the Board for
implementation of strategies and policies
determined by the Board.
The roles of Chairman and Managing
Director are undertaken by separate people.
Commitment
(Principle 2, Recommendation 2.5)
The Boards of the entities comprising
the Group held 57 meetings during
the year. Most of these meetings
were held concurrently. The number
of meetings held by the Boards of
each individual entity and by Board
committees is disclosed in the Directors’
3
Annual Report 2005
Report (refer to pages 54-55). In addition,
a corporate strategy workshop was held.
The commitments of non-executive
directors are reviewed by the Nomination
and Remuneration Committee prior
to their appointment and annually
thereafter to ensure that non-executive
directors are able to meet the Board’s
expectations concerning time
commitment. Directors are required
to consult with the Chairman prior
to accepting appointment as a director
of a non-Group entity.
Conflicts of Interest
(Principle 2, Recommendation 2.1)
The Group entities have developed
protocols, consistent with the
Corporations Act and ASX listing rules,
to require each director to disclose
contracts, offices held, interests in
transactions and other directorships
to signal any potential conflict.
Procedures have been adopted to ensure
that, where the possibility of a material
conflict arises, information is not provided
to the director, and the director does
not participate in, or vote at, the meeting
where the matter is considered. Further
information on this matter is set out
in the Board Charter summary.
Entities connected with Mr L G Cox
and Mr P C Byers had business dealings
with Group entities during the year (as
described in note 25 to the Group financial
statements). The Group entered into
contractual arrangements with entities
connected with Mr Cox in relation to the
provision of corporate advisory services
on the takeover of the Hills Motorway
Group. In addition, the entities
connected with Mr Cox were party to
a pre-bid agreement with a Transurban
Group entity regarding acceptance of
the Transurban Group’s offer for the Hills
Motorway Group.
In accordance with the Board Charter,
Mr Cox declared his interest in these
dealings and took no part in the
decisions made or in the discussions
preceding the decisions. Mr Byers was
excluded from the Hills Motorway
Review Committee overseeing the
takeover of the Hills Motorway Group
due to a perceived conflict of interest
arising from his position as a director
of Hills. No information was provided
to Mr Byers in relation to the Hills
acquisition and he did not attend Board
meetings dealing with this issue.
Independent External Advice
(Principle 2, Recommendation 2.5)
Independent external professional advice
in relation to their roles and responsibilities
is available to directors at the relevant
entity’s expense. Prior to seeking such
advice, directors are required to consult
with, and obtain the approval of, the
Chairman. The director must consult a
suitably qualified adviser in the relevant
field and inform the Chairman of the fee
payable for the advice.
A copy of the advice obtained must
be provided to the relevant Board.
Our acquisition of the M2 Hills Motorway
this year created a challenge for us: we had to
integrate the new entities’ compliance obligations with
Transurban’s own governance requirements.
Mark Licciardo Company Secretary
Performance Assessment
(Principle 8, Recommendation 8.1)
Each year, the following reviews of
performance are undertaken:
Certification of Financial
Reports and Risk
Management Systems
(Principle 4, Recommendation 4.1)
(Principle 7, Recommendation 7.2)
A review of the performance
of the Board against the requirements
of the Board Charter and any other
objectives arising from previous
reviews of performance
A review of the performance of each
Committee against the requirements
of its Charter and of the continuing
need for the Committee
The Managing Director and the Chief
Finance Officer have provided the
following certifications to the Board
in connection with the approval by
the Board of the financial reports for
the Group and the individual entities
comprising the Group for the year
ended 30 June 2005:
The financial reports are complete
and present a true and fair view,
in all material respects, of the financial
condition and operational results
of the entity and the Group and are
in accordance with relevant
accounting standards
The above statement is founded
on sound systems of risk management
and internal compliance and control
which implement the policies of
the Board
The systems of risk management and
internal compliance and control are
operating efficiently and effectively
in all material respects.
A review by the Chairman with
each director of the individual
performance of the director
A review of the performance
of the Chairman by a non-executive
director nominated by the Board
An external evaluation of the
performance and effectiveness
of the Board was undertaken during
July and August 2005. The results of
this review will be discussed by
the Board in September 2005.
Induction and Training
(Principle 1, Recommendation 1.1)
New directors are provided with
an induction program to familiarise
them with all aspects of the business
and each Group entity’s operations,
and they are kept informed of other
programs available to them. The Board
has given the Nomination and
Remuneration Committee responsibility
for recommending training and further
education it considers necessary to enable
the Board to meet its responsibilities.
Annual Report 2005 3
steering for success
corporate governance
Board Committees
(Principle 4, Recommendation 4.4)
The Board has presently established
the following committees of directors
to assist it in carrying out its responsibilities
and to allow detailed consideration
of complex issues:
Audit Committee
Risk Management and Compliance
Committee
Nomination and Remuneration
Committee
Special purpose Committees are
established where deemed necessary
to deal with specific projects such
as the Mitcham–Frankston Freeway
Project and the takeover of the Hills
Motorway Group.
The Board has also established
a committee consisting of directors
and external representatives to advise
it on matters relating to Corporate
Social Responsibility.
Each Committee operates under
a Committee Charter, approved by
the Board, which sets out the authority,
membership and responsibilities of the
committee, together with any relevant
administrative arrangements and any
other matters considered appropriate
by the Board. The Audit Committee
Charter and summaries of the Charters
of the Risk Management and Compliance
Committee and of the Nomination and
Remuneration Committee are available
on the Group’s website.
3
Annual Report 2005
At least once each year the Board reviews
the appropriateness of the existing
committee structure. For those
committees considered necessary,
it also reviews the membership and
the Committee Charter.
Minutes of committee meetings are
recorded by the Company Secretary
and circulated with the papers for
the next Board meeting. At the Board
meeting, the Chairman of the committee
highlights key issues under consideration
by the committee.
Audit Committee
(Principle 4, Recommendation 4.2,
4.3 and 4.5)
The Audit Committee consists of the
following non-executive directors:
P C Byers (Chairman)
L G Cox
J G A Davis
D J Ryan
Details of the qualifications of these
directors and of their attendance at
meetings of the Committee are set out
in the Directors’ Report (refer to page 51).
All members of the Audit Committee
have appropriate financial expertise
and an appropriate understanding of
the industry in which the Group operates.
The Managing Director, other
members of the management team
and representatives of the external
and internal auditor attend meetings
of the Committee by invitation.
The external auditor meets with
the Committee without management
present on a regular basis.
The duties and responsibilities
of the Audit Committee are set out
in its Charter, which is available on
the Group’s website. The primary
responsibility of the Committee is to
oversee the entity’s financial reporting
process on behalf of the Board and to
recommend to the Board appropriate
actions to ensure high quality financial
reporting, sound practices to manage
risks and ethical behaviour.
In discharging this responsibility,
the Committee:
Assesses the accounting, financial
and internal control systems used by
the entity and recommends to the
Board changes considered appropriate
on the basis of such assessments
Reviews the statutory financial reports
of the entity and management’s
representations in relation to them
and provides advice for consideration
by the Board in connection with
adoption of the statutory
financial reports
Makes recommendations to the Board
for the appointment, remuneration
and removal of the external auditor
and agrees the terms of the auditor’s
engagement
Ratifies all non-audit services
provided by the external auditor
Reviews the objectives, competence
and resourcing of the internal audit
function (including determining
whether the internal audit function
is to be provided by an internal
or external party)
Nomination and Remuneration
Committee
Monitors the program of internal
audit activity each financial year.
Risk Management and
Compliance Committee
(Principle 7, Recommendation 7.1)
The Risk Management and Compliance
Committee consists of the following
directors:
S M Oliver (Chairman)
G O Cosgriff
D J Ryan
G R Phillips (Executive Director, until
his retirement on 26 July 2005)
Details of the qualifications of these
directors and of their attendance at
meetings of the Committee are set out in
the Directors’ Report (refer to page 51).
The duties and responsibilities of the
Risk Management and Compliance
Committee are set out in its Charter,
a summary of which is available on
the Group’s website. The primary
responsibility of the Committee is to
assist the Board to:
Understand the nature of the risks to
which the entity is exposed
Prioritise those risks for management
Mitigate those risks to an acceptable
level
Communicate its performance
in managing risk to interested
stakeholders.
(Principle 2, Recommendation 2.4)
(Principle 9, Recommendation 9.1, 9.2,
9.3, 9.4 and 9.5)
The Nomination and Remuneration
Committee consists of the following
non-executive directors:
L G Cox (Chairman)
G O Cosgriff
J G A Davis
Details of the qualifications of these
directors and of their attendance
at meetings of the Committee are
set out in the Directors’ Report
(refer to page 51).
The duties and responsibilities of
the Nomination and Remuneration
Committee are set out in its Charter,
a summary of which is available on
the Group’s website.
The primary responsibilities of
the Committee are to provide advice to the
Board in connection with the appointment
of new directors, the measurement of
Board performance and the remuneration
of directors and senior executives.
In discharging this responsibility,
the Committee:
Makes recommendations on the
size and composition of the Board
and on procedures for identifying
and screening candidates for
appointment to the Board
Annual Report 2005 3
steering for success
corporate governance
Implements these identification and
screening procedures when required
Reviews at least annually the time
commitments of non-executive
directors to provide a basis for
assessing whether candidates for
appointment as directors can (having
regard to other commitments) meet
these commitments
Develops and oversees an
orientation and education program
for new directors
Makes recommendations regarding
succession plans for the Board
Recommends processes for
the review of the performance of
individual directors and the Board
as a whole
Makes recommendations on the
remuneration polices and practices to
be introduced and maintained by the
entity for the benefit of directors and
employees. To assist in making these
recommendations, the Committee
consults as necessary with external
remuneration consultants.
The remuneration of non-executive
directors consists entirely of directors’
fees, committee fees and (subject to
eligibility) retirement benefits. Directors
appointed after 25 March 2003 are not
eligible for retirement benefits, but
receive an additional director’s fee.
A summary of the Group’s remuneration
policies is available on the Group’s
website. Further information on directors’
and executives’ remuneration is set out
in the Remuneration Report, as part
3
Annual Report 2005
of the Directors’ Report (refer to page 56)
and in note 25 to the Group financial
statements (refer to page 98).
Mitcham–Frankston
Freeway Project Committee
The Mitcham–Frankston Freeway Project
Committee consisted of all directors
except Mr L G Cox.
Details of the attendance of these
directors at meetings of the Committee
are set out in the Directors’ Report (refer
to page 55).
An entity connected with Mr L G Cox
was a member of the ConnectEast
consortium. That consortium was
a respondent during the year to a
Request for Proposals (“RFP”) issued by
the Southern and Eastern Integrated
Transport Authority (“SEITA”)—an
authority of the State of Victoria—
for the Mitcham–Frankston Freeway
project. Under information protocols
agreed with SEITA, the Group was
required to:
Establish a committee of the Board,
of which Mr Cox was not a member,
to consider all matters relating to
the response to the RFP
Ensure that no information relating
to the response to the RFP was
provided to Mr Cox.
Compliance with these requirements
was subject to audit by a probity auditor
appointed by SEITA.
Hills Motorway Project
Review Committee
The Hills Motorway Project Review
Committee consisted of all directors
except Mr P C Byers.
Details of the attendance of these
directors at committee meetings
are set out in the Directors’ Report
(refer to page 55).
Mr Byers was a director of the Hills
Motorway Group during the takeover
bid by the Transurban Group. The Board
established a committee, of which Mr
Byers was not a member. No information
relating to the takeover was provided to
Mr Byers.
External Auditors
(Principle 6, Recommendation 6.2)
The policy of the Group is to appoint
external auditors who are suitably
qualified and whose independence is
unequivocal.
The performance of the external
auditors is reviewed annually by the
Audit Committee, which is responsible
for making recommendations to the
Board in relation to the appointment,
remuneration and removal of the
external auditors.
PricewaterhouseCoopers was initially
appointed as the Group’s external
auditor in 1996 and was subsequently
re-appointed in December 2001.
Good corporate governance is about looking after
stakeholders’ interests and ensuring decisions are sound
and enhance business performance. I think Transurban
clearly demonstrates its commitment to those ideals.
Susan Oliver Board member
The appointment of the external auditors
has been approved by security holders
as required by the Corporations Act.
PricewaterhouseCoopers is required to
rotate audit engagement partners on
listed entities at least every five years. In
accordance with that policy, a new audit
engagement partner was introduced for
the year ended 30 June 2003.
Details of the fees paid to the external
auditors, including a break down of fees
paid for non-audit services, are set out in
note 26 to the Group financial statements
(refer to page 112).
All non-audit services provided
by the external auditors are reported
to the Audit Committee. It is the policy
of the external auditors to provide an
annual declaration of their independence
to the Audit Committee. The Board
has considered the non-audit services
provided by the external auditors and
is satisfied they are compatible with
the general standard of independence
of auditors.
The external auditors attend the Annual
General Meeting and are available to
answer questions raised by security
holders in relation to the conduct of the
audit and the preparation and content of
the audit report.
Risk Assessment and
Management
(Principle 7, Recommendation 7.1 and 7.3)
The Board—assisted by the Risk
Management and Compliance
Committee—is responsible for ensuring
that the Group has an effective framework
for managing the risks to which the Group
is exposed and that the elements of
the framework are operating efficiently.
A summary of the Group’s Risk
Management Framework is available
on the Group’s website. The framework
is consistent with the Australian/New
Zealand Standard for Risk Management
AS/NZS 4360:2004 and is subject to
regular review by the internal and
external auditor.
Oversight of the Group’s risk
management and compliance systems
is handled by the Risk Management
Group, which consists of senior executives
and is chaired by the Group’s General
Counsel. Key responsibilities of the Risk
Management Group are:
Ensuring that the Group’s risk
management and compliance
systems are operating in a
comprehensive and efficient manner
Monitoring the activities of specialised
risk management and compliance
working groups
Promoting a culture of risk awareness
across the Group.
The Working Group provides quarterly
reports to the Risk Management and
Compliance Committee.
All major proposals submitted to the Board
for decision include a comprehensive
risk assessment and a description of
the strategies proposed to mitigate the
identified risks.
Annual Report 2005 3
steering for success
corporate governance
Transactions proposed to be undertaken
in Transurban stapled securities, CARS and
in the securities of other entities specified
from time to time under the policy must
be notified to the Company Secretary in
advance. A summary of the securities
trading policy is available on the Group’s
website.
The Code requires employees who
become aware of unethical behaviour
or breaches of the securities trading
policy to report these to senior
management. The Code provides
protection for employees who report
such occurrences.
The directors are satisfied that during
the year ended 30 June 2005 the Group
has complied with the requirements
of the Code, including the securities
trading policy.
Continuous Disclosure and
Shareholder Communication
(Principle 5, Recommendation 5.1 and 5.2)
(Principle 6, Recommendation 6.1)
The Board’s policy on information
disclosure covers:
Continuous disclosure of any
information concerning the Group
that a reasonable person would
expect to have a material effect
on the price of Transurban stapled
securities or CARS
Arrangements to promote
communication with security holders.
A summary of this policy is available on
the Group’s website.
The Company Secretary is the person
with primary responsibility for operation
of the Continuous Disclosure Policy and
for all communication with the ASX in
relation to the continuous disclosure
obligations of Group entities.
The Group publishes information on
its website as soon as it is disclosed
to the ASX. All material used in briefing
analysts on the Group’s operations
is released to the ASX and placed
on the Group’s website.
The Group’s notices of security holder
meetings provide all relevant information
consistent with best practice. Security
holders are encouraged to participate at
these meetings.
Information on the Group’s compliance
with the environmental regulation to
which it is subject is set out in the Directors’
Report (refer to page 50).
Code of Conduct
(Principle 3, Recommendation 3.1,
3.2 and 3.3)
(Principle 10, Recommendation 10.1)
The purpose of the Code is to nurture
the values underpinning the corporate
culture which has played an important
role in the success achieved by the Group
to date and in the establishment of its
reputation.
The Code is discussed with each new
employee as part of his or her induction
training and “refresher” training is
provided on a regular basis.
In summary, the Code requires that all
employees act with integrity, fairness
and respect for others and in compliance
with the letter and spirit of all relevant
laws and Group policies. The Code is
available on the Group’s website.
The Code specifies the procedures
for dealing by directors and employees
in securities issued by the Group and
securities of entities with whom
the Group has an existing or potential
business relationship. Dealing in
Transurban stapled securities and
CARS is only permitted during the thirty
day periods following the release of
the annual and half year results to the ASX
and following the Annual General Meeting.
0
Annual Report 2005
International Financial
Reporting Standards
(“IFRS”)
The Australian Accounting Standards
Board (“AASB”) is adopting International
Financial Reporting Standards (“IFRS”)
for application to reporting periods
beginning on or after 1 January 2005.
The adoption of the Australian
equivalents to IFRS will be first reflected
in the consolidated entities’ financial
statements for the half year ending
31 December 2005 and the year
ending 30 June 2006.
The known or predictable impacts on
the financial report for the year ending
30 June 2005 had it been prepared using
the Australian equivalents to IFRS are
set out in note 36 to the Group financial
statements (refer to page 124).
ASX Principles of Good Corporate Governance
Principle 1
Lay solid foundations for management and oversight
Principle 2
Structure the board to add value
Principle 3
Promote ethical and responsible decision-making
Principle 4
Safeguard integrity in financial reporting
Principle 5 Make timely and balanced disclosure
Principle 6
Respect the rights of shareholders
Principle 7
Recognise and manage risk
Principle 8
Encourage enhanced performance
Principle 9
Remunerate fairly and responsibly
Principle 10 Recognise the legitimate interests of stakeholders
Annual Report 2005
financials
2
Annual Report 2005
The Transurban Group
The Transurban Group Financial Report consisting of the aggregate Financial Statements of
Transurban Holdings Limited and Controlled Entities (ABN 86 098 143 429) and
Transurban Holding Trust and Controlled Entities (ABN 30 169 362 255) and
Transurban Limited (formerly Transurban Infrastructure Developments Limited)
and Controlled Entities (ABN 96 098 143 410)
For the Year Ended 30 June 2005
Contents
Directors’ Report
Statement of Financial
Performance
Statement of Financial
Position
Statement of Cash Flows
Notes to the Financial
Statements
Directors’ Declaration
Independent Audit Report
to the members
Security Holder Information
44
67
68
69
70
127
128
130
This financial report covers the
Transurban Group which consists of
Transurban Holdings Limited, Transurban
Holding Trust and Transurban Limited
and their controlled entities as described
in Note 1 to the Financial Statements.
The equity securities of the parent
entities are stapled and cannot be
traded separately.
All entities within the group are
domiciled in Australia. Its registered
office and principal place of business is:
Level 43 Rialto South Tower
525 Collins Street
Melbourne VIC 3000
Through the use of the internet,
we have ensured that our corporate
reporting is timely, complete, and
available globally. All releases to the
ASX and the media, financial reports
and other information are available on
our website: www.transurban.com.au
Annual Report 2005 43
financials
Directors’ Report
The directors of Transurban Limited
(formerly Transurban Infrastructure
Developments Limited), Transurban
Infrastructure Management Limited
as Responsible Entity for Transurban
Holding Trust and Transurban Holdings
Limited present their report on the
Transurban Group Accounts for the year
ended 30 June 2005.
Group Accounts
These Group Accounts have been
prepared as an aggregation of the
financial statements of Transurban
Holdings Limited and controlled
Non-executive Directors
Laurence G Cox
Peter C Byers
Geoffrey O Cosgriff
Jeremy G A Davis
Susan M Oliver
David J Ryan
Christopher J S Renwick (1)
Executive Directors
Kimberley Edwards (2)
Geoffrey R Phillips (3)
Directors
With the exception of the changes
noted below, the following persons
were directors of Transurban Limited,
Transurban Holdings Limited and
Transurban Infrastructure Management
Limited during the whole of the financial
year and up to the date of this report:
entities (“THL”), Transurban Holding
Trust and controlled entities (“THT”),
and Transurban Limited and controlled
entities (“TL”) as if all entities operate
together. They are therefore treated as a
combined entity (“the combined entity”
or “Group”), notwithstanding that none
of the entities controls any of the others.
The financial statements have been
aggregated in recognition of the fact
that the securities issued by THL, THT
and TL are stapled into parcels (“Stapled
Securities”), comprising one share in
THL, one share in TL and one unit in THT.
None of the components of the Stapled
Security can be traded separately.
Transurban
Limited
Transurban
Holdings
Limited
Transurban
Infrastructure
Management
Limited
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
(1)
(2)
(3)
Christopher J S Renwick was appointed a non-executive director of TL, THL and TIML on 26 July 2005 and continues in office at the date of this report.
Kimberley Edwards was appointed an executive director of Transurban Infrastructure Management Limited on 26 July 2005 and continues in office at
the date of this report.
Geoffrey R Phillips was an executive director of TL, THL and TIML from the beginning of the financial year until his resignation on 26 July 2005.
44
Annual Report 2005
The Transurban Group
Directors’ Report
Principal Activities
(d) Tendering for participation in and/
Results
or acquisition of other toll roads;
During the year the principal continuing
activities of the group were:
(a) Operation of the Melbourne
CityLink (“CityLink”) and the M2
Hills Motorway (“M2”) following
its successful acquisition;
(b) Participation in the direction of
the activities responsible for the
development of the Westlink M7
Motorway project;
(c) Provision of the tolling and customer
management system for the
Westlink M7 Motorway project;
(e) Development of electronic tolling
and other intelligent transport
systems for implementation
in both the domestic and
international markets; and
(f )
Identification and development of
infrastructure projects in accordance
with the investment strategies of
Transurban Holdings Limited and
Transurban Holding Trust.
The result of operations for the
financial year ended 30 June 2005
was an operating loss of $87.8 million
(2004: $61.5 million).
Distributions
Distributions paid to members during
the financial year were as follows:
Distributions proposed
Final distribution payable and recognised as a liability:
18.0 cents per fully paid stapled security payable 2 September 2005
Distributions paid during the year
Final distribution for 2004 financial year of 13.5 cents (2003 – 10.0 cents)
per fully paid Stapled Security paid 8 October 2004
Interim distribution for 2005 financial year of 17.0 cents cents (2004 – 12.0 cents)
per fully paid Stapled Security paid 25 March 2005
Total distributions paid
Distributions paid in cash or satisfied by the issue of Stapled Securities under the
distribution reinvestment plan during the years ended 30 June 2005 and 30 June 2004
Paid in cash
Satisfied by issue of Stapled Securities
2005
$’000
2004
$’000
142,455
-
71,983
51,847
91,745
62,823
163,728
114,670
131,686
32,042
54,145
60,525
163,728
114,670
Annual Report 2005 45
financials
Directors’ Report
Review of Operations
a) CityLink Melbourne
Traffic
Transaction volume for the year
ended 30 June 2005 was 227.6 million
transactions, representing a 4.6 per cent
increase on the prior year. Traffic growth
was marginally stronger in the second
six months with 4.7 per cent being
achieved, compared to 4.5 per cent in
the first six months. Growth in usage
by heavy and light commercial vehicle
classes was above the average at 5.4
per cent and 5.1 per cent respectively.
The growth in transaction volumes
combined with the toll escalation as
provided for in the Concession Deed
resulted in toll and fee revenue (net of
GST) of $274.8 million, an increase of
8.0 per cent over the previous year.
Customer Service
CityLink’s continued focus on cost
control and continuous improvement
initiatives which included the call centre
contract renegotiation, transition of
transaction banking arrangements and
process improvement have resulted in
customer service expenditure decreasing
by 5.0 per cent ($1.4 million) on the prior
year to $26.4 million.
Cost reductions were achieved in an
environment of increased transaction
volume and continued growth in
customer accounts and e-TAG’s on issue.
At 30 June 2005, there were 719,190
46
Annual Report 2005
accounts (including 59,822 Access
accounts), with 1,014,348 e-TAGs linked
to e-TAG accounts. This represents
increases of 7.0 per cent and 8.0 per cent
respectively, over the previous year.
As in the prior year Customer Services
will continue the focus on operational
improvements while enhancing service
standards.
Infrastructure Group Operations
CityLink successfully completed the
Alternate Traffic Control Room (“ATCR”)
project during the year at a capital cost
of $2.4 million. The ATCR enables the
tunnels to remain open in the event
the primary control centre becomes
unavailable.
CityLink entered into an agreement with
VicRoads as part of the Tullamarine/
Calder Freeway Interchange Upgrade
to administer extended incident
response from July 2005 on the
Westgate Freeway between the
tunnels and the Bolte Bridge, as well
as the Tullamarine Freeway and Calder
Freeway interchange. The additional
cost associated with the extended
incident response will be offset by a
compensatory payment from VicRoads.
The Infrastructure group continues to
review the operations and maintenance
of the road and has renegotiated this
contract achieving ongoing savings
of up to $1.0 million per annum, along
with improvements in service level.
Recycling of water drained from the
tunnels continues to meet the 95
per cent reuse targets.
b) Hills Motorway Group
Transurban achieved effective control
of the Hills Motorway Group (“Hills”)
on 12 April 2005. The net contribution
of Hills to the result was a loss of
$10.7 million. The loss represents Hills
operational contribution from the date
of deemed control (12 April 2005) to
30 June 2005. Included in this result
is additional depreciation of $15.5
million as a result of the reflection of
the revaluation of the Hills asset on
acquisition of the Hills Motorway Group
recorded in the financial statements
of Transurban Holdings Limited and
Transurban Holding Trust. Excluding
the effect of the additional depreciation,
Hills net contribution for the period was
a profit of $4.8 million.
c) Westlink M7
The Westlink M7 Project, in which the
Transurban Group has a 40 per cent
interest, is now expected to be fully
operational no later than April 2006.
Assisted by prevailing dry weather
conditions, concrete paving and bridge
construction is progressing well ahead of
schedule. All gantries have been installed
and landscaping, noise walls and safety
barriers are nearing completion along
most of the roadway.
Transurban contracts for the
development and implementation of
the GATe electronic tolling system and
the tolling and customer management
(“TCM”) system for the Westlink project
continue to be on target for completion
in line with the expected April 2006
completion date. TCM have finalised
Directors’ Report
development of the product suite
and approvals for the marketing and
implementation plans have been
received from the NSW RTA.
d) ROAM
During the year ROAM was selected
as the retail brand for the Westlink
M7 Motorway.
e) Business Development
During the year Transurban Limited
has continued to pursue new business
development opportunities on both
the domestic and international markets.
Opportunities pursued during the
period include:
(i)
I95 Virginia USA Proposal
Transurban is a part of a consortium
headed by Fluor Corporation
that has been selected as one of
two consortiums by The Virginian
Department of Transportation
(“VDOT”) for the provision of
Bus Rapid Transit (“BRT”)/High
Occupancy Toll (“HOT”) lanes for
the I95 Motorway in Virginia.
The two selected consortiums
are currently in the process of
preparing required submissions to
VDOT and if successful Transurban
would undertake the design and
operation of the tolling system.
The Transurban Group
(ii) Tullamarine / Calder Freeway
(iii) Transurban Takeover of the Hills
Interchange Upgrade
Motorway Group
On 27 January 2005, the Transurban
Group reached agreement with the
State of Victoria and VicRoads to use
CityLink Concession Notes to fund
an upgrade of the Tullamarine/
Calder Freeway interchange.
Under the agreement, Transurban
will provide $151.0 million to
VicRoads which will be used to
fund the upgrade. The agreement
provides the amount be payable
to Vic Roads in two installments
on 1 July 2005 ($100.8 million)
and 1 July 2006 ($50.2 million).
In exchange, the State will assign
to Transurban $305.3 million
($328.0 million pending the
outcome of the appeal to the High
Court of Australia on deductibility
of concession fees) of the
Concession Notes issued by
CityLink to the State under the
provisions of the Melbourne
CityLink Concession Deed.
The State also received on 1 July
2005 an upfront benefit of $11.0
million dollars representing the
estimated net present value of
the State’s share of the expected
increase in net tolling revenue
following completion. The quantum
of the benefit to the State will
be reviewed 30 months after
completion with any additional
revenue realised to be paid to
the State.
The Transurban Group announced
a takeover offer for all the stapled
securities in Hills Motorway
Group (“Hills”) on 31 January
2005. A Bidders Statement was
subsequently issued to the holders
of ordinary stapled securities in the
Hills Motorway Group in February
2005. Transurban’s offer to Hills
holders of 1.47 Transurban securities
for each Hills security together with
a cash component of 25 cents per
Hills security was unanimously
recommended by the independent
directors of Hills on 12 April 2005.
The final offer closed on 20 May
2005 and from 10 June 2005,
Hills Motorway became a 100
per cent owned subsidiary of
the Transurban Group.
(iv) Participation in Capital Beltway
project – Virginia USA
Transurban, through its wholly
owned subsidiary Transurban
USA Inc, has joined a consortium
lead by Fluor Corporation for the
provision of High Occupancy Toll
(“HOT”) lanes along a 22.4 kilometre
segment of the Capital Beltway
(I 495) in Northern Virginia, USA.
The Virginia Department of
Transportation (“VDOT”) estimates
the project will cost approximately
US $900 million (A$1,200 million).
It is expected that Transurban’s
contribution to the project will
approximate A$200 million.
Annual Report 2005 47
financials
Directors’ Report
Currently an environmental impact
study is being undertaken prior to
commencement of a full financial
feasibility evaluation of the project.
In the event that a Financial Close
is achieved in late 2006 Transurban
will provide support for the design
and operation of the tolling system.
Transurban and DEPFA. Transurban
has commenced due diligence on
the project as it is contemplated
that any such agreement would be
expected to be completed before
the end of 2005.
(vi) Mitcham Frankston Freeway
(“MFF”) Project
(v) Pocahontas Parkway-
Memorandum of
Understanding-Virginia USA
On 17 June 2005 Transurban
(USA), Inc. and DEPFA Bank, Plc.
announced they had entered into
a confidential Memorandum of
Understanding (“MOU”) with the
Pocahontas Parkway Association
(“PPA”) and VDOT.
PPA was created in August 1997 for
the financing and operation of the
Pocahontas Parkway (route 895)
which was fully opened to traffic
in September 2002. The Parkway
is a nine mile (approximately 15
kilometre), four lane toll road
located southeast of the city
of Richmond in Virginia which
provides a crossing of the James
River and facilities access to the
Richmond International Airport.
The MOU provides for the
exclusive investigation of the
feasibility of acquiring PPA’s rights
and obligations in relation to
the Parkway and in the event
of a favorable outcome of such
investigation, the negotiation
of an agreement to transfer the
PPA’s rights and obligations to
48
Annual Report 2005
On 14 October 2004, the State
of Victoria advised the Mitcham
Frankston Motorway (“MFM”)
Consortium of which Transurban
was a sponsor, that the consortium’s
proposal for the Mitcham Frankston
Freeway project had not been
accepted.
In accordance with the Group’s
accounting policies, $9.4 million,
representing costs incurred in
preparation of the proposal less
a reimbursement due from SEITA,
has been charged to expense in
the period. This amount includes
$7.0 million which had been
capitalised in the prior year.
f)
Income Tax
Transurban has advice from Senior
Counsel that the concession fees paid
to the State of Victoria by Transurban
under the CityLink Concession Deed are
immediately deductible expenditure for
taxation purposes. The Group Accounts
have been prepared on this basis for
the year ended 30 June 2005 and all
prior years.
The Australian Taxation Office (“ATO”)
and Transurban have been unable to
agree on the treatment to be applied to
concession fees and as a consequence,
the ATO issued an assessment in respect
of CityLink Melbourne’s income tax
return for the year ended 30 June 1998.
Transurban’s appeal against the ATO’s
decision to disallow its objection to
the assessment was heard before
Mr Justice Merkel in the Federal Court
on 3 October 2002. On 2 February
2004, Mr Justice Merkel dismissed
Transurban’s appeal.
Transurban lodged a Notice of Appeal
against the dismissal which was heard
before a Full Court of the Federal Court
on 12 October 2004. The Full Court of
the Federal Court unanimously ruled
in favor of Transurban confirming that
concession fees are deductible.
The Australian Taxation Office
subsequently sought special leave to
appeal to the High Court of Australia
against the Full Court’s decision.
This was granted in April 2005.
Determination of the appeal is
unlikely to occur before early 2006.
Until a definitive resolution of this
matter has been achieved, Transurban
intends to continue preparing the
Group financial statements on the
basis that the concession fees are
deductible. If the High Court of Australia
over turns the decision and finds in
favour of the Australian Taxation Office,
certain items in the Group financial
statements will require amendment.
These amendments are quantified in
the following table, assuming that the
amendments were applicable for the
year ended 30 June 2005:
Directors’ Report
Item
Statement of Financial Performance
The Transurban Group
Current Amended
$000
$000
Concession Note Valuation Adjustment (Expense)/Benefit
(41,121)
6,476
Statement of Financial Position
Non-interest bearing non-current liabilities
Accumulated losses
Carried forward tax loss at 30 June 2005
Significant Changes in the
State of Affairs
a) Refinancing
During the year Transurban entered into
refinancing arrangements to replace
existing medium and short term debt
facilities. The Group completed the
following debt issues:
A US private placement of USD
$247.5 million and AUD $72.0
million to US institutional investors.
The placement consisted of four
tranches with maturities ranging
from December 2014 to December
2019, providing a weighted average
maturity of 12.9 years
An issue of AUD $150 .0 million
of medium term notes maturing
in December 2009 to domestic
institutional investors
$600.0 million working capital
facility, comprising $150.0 million
for a three year term from March
2005, $255.0 million for a three
year term from June 2005 and
$195.0 million for a five year term
from June 2005. $252.5 million was
drawn down as at 30 June 2005
In addition, Transurban announced
plans in May 2005 to issue USD
$380.0 million (AUD $500.0 million)
of senior debt into the US private
placement market. The proceeds
of the issue have been used to
repay bonds issued in the debt
capital markets which matured
on 8 August 2005.
b) Enhanced Distribution
Profile
The Bidders Statement issued to Hills
security holders as part of the acquisition
of the Hills Motorway Group outlined
an enhanced distribution profile for
the Transurban Group. The distribution
forecast for the financial year ended
30 June 2006 is 50.0 cents per stapled
security. This represents an 11.0 cent
127,277
79,830
(747,975)
(668,595)
891,883
229
increase on the previous estimate of
39.0 cents per stapled security outlined
in an Australian Stock Exchange release
on 29 October 2004.
c) Mitcham Frankston
Freeway (“MFF”) Project
Refer to Item (e)(vi) of Review of
Operations.
d) Tullamarine / Calder
Freeway Interchange
Upgrade
Refer to Item (e)(ii) of Review of
Operations.
e) Transurban Takeover of
Hills Motorway Group
Refer to Item (e)(iii) of Review of
Operations
f) Participation in Capital
Beltway project
(Virginia USA)
Refer to item (e) (iv) of Review of
Operations.
Annual Report 2005 49
financials
Directors’ Report
g) Pocahontas Parkway
– Memorandum of
Understanding
(Virginia USA)
Refer to item (e) (v) of Review of
Operations.
Matters Subsequent to
the End of the Financial
Year
Capital markets debt totaling $590.0
million matured on 8 August 2005. The
debt was replaced by an issue of USD
$380.0 million (AUD $500.0 million) of
senior debt in the US private placement
market and $90.0 million from existing
facilities. The refinanced debt matures
between 2015 and 2020.
With exception of the refinancing,
the directors are not aware of any
circumstances that have arisen since
30 June 2005 that have significantly
affected or may significantly affect
the operations, and results of those
operations or the state of affairs, of the
consolidated entity in financial years
subsequent to 30 June 2005.
Likely Developments
and Expected Results of
Operations
Information on likely developments in
the operations of the Group and the
expected results of operations have not
been included in this report because
the directors believe it would be likely
to result in unreasonable prejudice to
the Group.
50
Annual Report 2005
Environmental Regulation
CityLink Melbourne Limited is
subject to regulation by the Victorian
Environmental Protection Authority
(“EPA”) in respect of:
discharges from the tunnel
ventilation system
discharges from the tunnel
drainage systems, and
groundwater quality in the aquifers
surrounding the tunnels.
The main regulation relates to the
Waste Discharge Licence (EA41502)
that regulates the operation of the
tunnel ventilation system and imposes
requirements to monitor the emissions
of carbon monoxide, oxides of nitrogen
and particulate matter.
This monitoring is undertaken by
several specialist organisations
under the supervision of the CityLink
operator, Translink Operations Pty
Ltd. The monitoring organisations are
certified by the National Association of
Testing Authorities.
Monitoring verifies that emission
levels are well below the maximum
levels specified in the Waste Discharge
Licence and that there has been an
improvement in ambient air quality
since the tunnels opened.
Following discussions with the
Environmental Management Committee
which includes representatives from
CityLink, Translink Operations, EPA
Victoria, local councils and community
representatives, Translink Operations
sought an amendment to the Waste
Discharge Licence.
Accordingly, on 7 June 2005, EPA
Victoria issued an amended Waste
Discharge Licence (Licence EA41502)
which materially altered the licence
conditions. Under the amended
licence, CityLink is no longer required
to monitor ambient air quality in the
vicinity of the tunnel ventilation stacks.
Monitoring of emissions within the
tunnels and from the ventilation stacks
will continue unchanged.
Monitoring of groundwater quality
verifies that the requirements of the
EPA are being met.
Monitoring of tunnel drainage water
quality verifies that the requirements
of the EPA are being met.
The operator of the M2 Motorway
has implemented a comprehensive
environmental management plan
to monitor the performance of the
motorway and takes remedial steps
where necessary. There have not been
any reported breaches for the year
ended 30 June 2005.
The Transurban Group
Directors’ Report
Information on Directors
Laurence G Cox AO, B. Con, FCPA,
FSIA. Chairman – non-executive.
Kimberley Edwards BE, MAdmin
(Bus), FIE (Aust), MAICD. Managing
Director
Peter C Byers B Com (Hons).
Independent non-executive
director
Experience and expertise
Experience and expertise
Experience and expertise
A former business manager and deputy
principal of the University of Tasmania.
Other current directorships
Non–executive director of Airport
Motorway Management Limited and
Foundation Capital Limited.
Former directorships in last 3 years
Alternate non-executive director of
Hancock Victorian Plantations Holdings
Limited (1995 to 2005).
Non-executive director of The Hills
Motorway Group (1995 to 2005).
Date of initial appointment
2 January 1996
Special responsibilities
Chairman of Audit Committee
Over 40 years’ experience in Australian
and International financial markets,
including Chairman of the Australian
Stock Exchange Limited from 1989 to
1994 and executive Chairman of the
Potter Warburg Group from 1989
to 1995.
Other current directorships
Non-executive Chairman of The Murdoch
Children’s Research Institute and SMS
Management and Technology Limited,
executive director of Macquarie Bank
Limited and non-executive director of
Smorgon Steel Group.
Former directorships in last 3 years
Non-Executive Director of Hills Motorway
Limited and Hills Motorway Management
Limited from 18 April 2005 to 12 August
2005.
Date of initial appointment
Held senior management positions on
major commercial and infrastructure
projects in Australia, the United Kingdom
and the Middle East. Joined Transurban
when it was originally bidding for the
CityLink project and recently led the
development of the Transurban Group
into other toll road opportunities and
the deployment of its electronic tolling
technology in Australia and overseas.
Other current directorships
None
Former directorships in last 3 years
WestLink Motorway Limited
(2002 to 2005). WSO Co Pty Limited
(2002 to 2005). WSO Finance Pty Limited
(2002 to 2005). Executive Director of Hills
Motorway Limited and Hills Motorway
Management Limited from 18 April 2005
to 12 August 2005.
13 February 1996
Date of initial appointment
Special responsibilities
Chairman of Board, Chairman
of Nomination and Remuneration
Committee and Member of
Audit Committee.
29 October 1996
Special responsibilities
Managing Director
Annual Report 2005 51
financials
Directors’ Report
Geoffrey O Cosgriff BAppSc,
Company Director Diploma, FIE(Aust),
FAICD. Independent non-executive
director
Jeremy G A Davis BEc, MBA, Ma,
FAICD. Independent non-executive
director
Susan M Oliver Build. Prop. &
Const, FAICD. Independent
non-executive director
Experience and expertise
Experience and expertise
Experience and expertise
Formerly held executive management
roles with Melbourne and Metropolitan
Board of Works and has had extensive
experience in the information
technology industry, including the
founding Managing Director of
MITS Limited. MITS grew to 600 staff
and nearly $100 million in sales of
information technology solutions from
its formation until December 2000 when
it was acquired by Logica Pty Limited.
Other current directorships
Non-executive director of UXC
Limited. Executive director of
LogicaCMG Pty Limited.
Holds the AMP Chair of Management
in the Australian Graduate School of
Management at the University of New
South Wales and the University of
Sydney. Academic interests in the fields
of corporate strategy and negotiation
and a fellow of the Australian Institute of
Company Directors.
Other current directorships
Non-executive Chairman of XRT Limited.
Non-executive director of SP Australia
Networks (Transmission) Pty Ltd, SP
Australia Networks (Distribution) Pty Ltd,
CHAMP Ventures Pty Ltd, and AMWIN
Management Pty Ltd.
Former directorships in last 3 years
Former directorships in last 3 years
None
Date of initial appointment
19 December 2000
Special responsibilities
Member of Risk Management
and Compliance Committee,
Member of Nomination and
Remuneration Committee.
Non-executive director of SPI Australia
Group Pty Ltd (2004 to 2005).
Non-executive director of Gradipore
Limited (2002 to 2003).
Date of initial appointment
16 December 1997
Special responsibilities
Member of Audit Committee,
Member of Nomination and
Remuneration Committee.
Former Senior Manager of Andersen
Consulting and former Managing
Director of the Australian Commission
for the Future Limited.
Other current directorships
Non-executive director of MBF
Australia Ltd, non-executive director
of Programmed Maintenance Services
Limited, non-executive director of
Methodist Ladies College Limited,
non-executive director of The Australian
Business Foundation Limited, executive
director wwITe Pty Limited and Governor
of The Smith Family Ltd.
Former directorships in last 3 years
Non-executive director of The Smith
Family Ltd (2002 to 2005). Non-executive
Chairman of ScreenSound Australia
(The National Screen and Sound Archive)
(1998 to 2003).
Date of initial appointment
25 June 1996
Special responsibilities
Chairperson of Risk Management
and Compliance Committee,
Chairperson of Corporate Social
Responsibility Committee.
52
Annual Report 2005
The Transurban Group
Directors’ Report
Geoffrey R Phillips BE (Chem), MBA,
MAICD. Executive director
Christopher J S Renwick BA, LLB,
FAIM, FAIE, FTSE. Independent
non-executive director
David J Ryan AO, BBus, FCPA, FAICD.
Independent non-executive
director
Experience and expertise
Experience and expertise
Experience and expertise
Joined Transurban in 1996 as Executive
General Manager, Finance and was
subsequently appointed Finance
Director. Prior to joining Transurban,
worked for the Potter Warburg Group
(now UBS Australia) for 6 years as director
in both the Corporate Finance and Fixed
Interest Divisions.
Other current directorships
Non-executive director and Deputy
Chairman of Yarra Valley Water Limited.
Former directorships in last 3 years
None
Date of initial appointment
28 August 1998
Special responsibilities
Deputy Managing Director,
Member of Risk Management
and Compliance Committee.
Date of retirement
26 July 2005
Over 35 year’s experience covering
mining, operational business
management and law.
Experience covers commercial
banking, investment banking and
operational business management
in a range of sectors.
Other current directorships
Non-executive Chairman of Coal and
Allied Industries Limited and Rio Tinto
Aboriginal Foundation, non-executive
director of Downer – EDI Limited
and Governor of the Ian Clunies Ross
Foundation. Vice President of the
Australia Japan Business Co-operation
Committee.
Former directorships in last 3 years
Multiple executive directorships within
Rio Tinto Group (1986 to 2004).
Date of initial appointment
26 July 2005
Special responsibilities
None
Other current directorships
Non-executive Chairman of Residual
Assco Limited, DJL Limited, Tooth & Co
Limited and Industrial Equity Limited.
Non-executive director of ABC Learning
Centres Limited, Lend Lease Corporation
Limited, Caliburn Partnership and
Virgin Management Asia-Pacific Pty Ltd
Advisory Board.
Former directorships in last 3 years
Non-executive director of Virgin Blue
Holdings Limited (2003 to 2005) and
Managing Director of Adsteam Marine
Limited (1997 to 2002).
Date of initial appointment
23 April 2003
Special responsibilities
Member of the Audit Committee
and the Risk Management and
Compliance Committee.
Annual Report 2005 53
financials
Directors’ Report
Company Secretary
Paul O’Shea B.Ec, LLB, FCIS.
Meetings of directors
Mark Licciardo B.Bus (Acc), GradDip
CSP, ASA, ACIS.
Mr Licciardo was appointed to the
position of Company Secretary with
effect from 17 January 2005. Before
joining Transurban he held the position
of company secretary with a group
of listed investment companies, the
major one being Australian Foundation
Investment Company Limited, for just
over 7 years. Prior to that he held various
finance roles with investment companies
and major banks.
Mr O’Shea is a Company Secretary and
General Counsel, Transurban Legal. He
has been General Counsel since March
1996 and a Company Secretary since
March 1998. Before joining Transurban
he held a senior legal role at Transfield for
18 months and prior to that worked as a
solicitor with two major legal firms.
The number of meetings of the board
of directors of Transurban Limited,
Transurban Holdings Limited and
Transurban Infrastructure Management
Limited held during the year ended 30
June 2005, and the numbers of meetings
attended by each director were:
Geoffrey R Phillips BE (Chem), MBA,
MAICD.
Geoffrey R Phillips was a company
secretary from the beginning of the
financial year until his resignation on
26 July 2005.
Name
Board of Directors
Transurban Limited
Board of Directors
Transurban
Holdings Limited
Board of Directors
Transurban Infrastructure
Management Limited
L G Cox
P C Byers (1)
G O Cosgriff
J G A Davis
S M Oliver
D J Ryan
K Edwards
G R Phillips
A
18
14
19
18
19
18
18
19
B
19
19
19
19
19
19
19
19
A
16
13
18
18
17
17
17
18
B
18
18
18
18
18
18
18
18
A
18
15
20
19
19
19
x
20
B
20
20
20
20
20
20
x
20
A = Number of meetings attended
B = Number of meetings held during the time the director held office
x = Not a director of the relevant company
(1) Mr Byers did not participate in 5 board meetings dealing with the takeover of the Hills Motorway Group due to a conflict of interest arising from
his position as a Hills director.
54
Annual Report 2005
The Transurban Group
Directors’ Report
The number of meetings of each board committee of Transurban Limited, Transurban Holdings Limited and Transurban
Infrastructure Management Limited held during the year ended 30 June 2005, and the numbers of meetings attended
by each director are set out in the following table. All meetings were held jointly.
Name
Audit
Committee
Mitcham
Frankston
Freeway
Committee
Nomination &
Remuneration
Committee
Risk
Management
& Compliance
Committee
Hills
Motorway
Review
Committee
A
B
A
B
A
B
A
B
A
B
L G Cox (5)
P C Byers (1)
G O Cosgriff
J G A Davis
S M Oliver (2)
D J Ryan (3)
K Edwards (4)
G R Phillips (4)
4
5
x
5
x
2
x
x
5
5
x
5
x
2
x
x
x
4
4
4
3
4
4
4
x
4
4
4
4
4
4
4
3
x
3
3
x
x
x
x
3
x
3
3
x
x
x
x
x
x
3
x
3
2
x
3
x
x
3
x
3
3
x
3
4
x
4
4
4
4
4
4
4
x
4
4
4
4
4
4
A = Number of meetings attended
B = Number of meetings held during the time the director held office
x = Not a member of the relevant committee
(1)
(2)
(3)
(4)
(5)
Mr Byers did not participate in the Hills Review Committee due to a conflict of interest arising from his position as a Hills director.
Ms Oliver chaired 3 meetings of the Corporate Social Responsibility Committee held during the year ended 30 June 2005. This committee is not a committee
of the board. Ms Oliver is not a member of the Audit Committee but attended 3 of these meetings in her capacity as Chair of the Risk Management and
Compliance Committee.
Mr Ryan was appointed to the Audit Committee on 22 February 2005. He attended all meetings held during the year, including 3 prior to his appointment.
Messrs Edwards and Phillips are not members of the Audit and Nomination and Remuneration Committee but attend these meetings.
Mr Cox did not participate in the Mitcham-Frankston freeway Committee due to a conflict of interest arising from his position as a director of
Macquarie Bank Limited.
Annual Report 2005 55
financials
Directors’ Report
Directors’ Interests
The directors of the Group have disclosed relevant interests in Stapled Securities, options over Stapled Securities and Convertible
Adjusting Rate Securities (“CARS”) as follows:
Number of
Stapled Securities
Options over
Stapled Securities
Number
of CARS
1,142,500
70,580
24,910
50,000
62,540
-
21,577
61,000
508,820
-
-
-
-
-
-
-
1,500,000
-
-
-
121
-
-
-
-
-
-
limit, remuneration structure and
amounts for non-executive directors
are recommended to the Board by
the Nomination & Remuneration
Committee with assistance from
external remuneration consultants.
Liability for the Superannuation
Guarantee Contribution is met from
gross remuneration. The current fee
arrangements were last reviewed
with effect from 1 January 2005.
In 1997, the Board implemented a
policy to provide retirement allowances
to non-executive directors. The policy
provides for an entitlement to a lump sum
payment (not exceeding the maximum
allowable under the Corporations Act
2001) if the non-executive director has
completed a minimum of three years
service. The lump sum is equivalent to
the total emoluments received during
the Relevant Period. The Relevant Period
is one-third of the director’s total period
of service or three years (both calculated
to the day of retirement), whichever is the
lesser. This policy was reviewed in April
2003 and it was resolved to continue the
policy for directors appointed prior to 29
April 2003, but not to extend the policy
to appointments made after that date.
Non–executive directors not entitled to
retirement benefits receive an additional
director’s fee.
Executive Directors and Executives
The key objectives of the Group’s policy
for executive remuneration are:
To secure employees with the skills
and experience necessary to meet
business objectives
Name
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
C J S Renwick
D J Ryan
K Edwards
G R Phillips
Remuneration Report
Principles used to determine
the nature and amount of
remuneration
Non-Executive Directors
The remuneration of non-executive
directors consists of director’s fees,
committee fees and (subject to eligibility)
retirement benefits. Non-executive
directors are not provided with any form
of equity-based compensation.
The constitutions of the entities
comprising the Transurban Group
(“the Group”) provides that the total
remuneration paid in a year to non-
executive directors may not exceed
$950,000 per entity. Subject to this
56
Annual Report 2005
Directors’ Report
To motivate employees to the
highest levels of performance
To align employee incentives with
increased shareholder value.
The policy seeks to support the Group’s
objective to be perceived as “an
employer of choice” by:
Offering remuneration levels which
are attractive relative to those
offered by comparable employers
Providing strong, transparent
linkages between individual and
group performance and rewards.
In consultation with external
remuneration consultants, the
Group has structured its executive
remuneration to reward both longer
term growth and the achievement of
short term performance targets.
Executives are remunerated through a
combination of base salary and benefits,
short-term incentives (“STI”) in the
form of cash bonuses and long-term
incentives (“LTI”). Until 30 June 2005, LTIs
were provided via either the Executive
Option Plan or the Executive Long Term
Incentive Plan. Revised LTI arrangements
have been introduced for the period
beyond 30 June 2005.
The proportion of each component
of an executive’s total remuneration is
established by reference to remuneration
survey data for comparable companies.
As executives progress in seniority, the
proportion of remuneration which is
dependent on the performance of the
entity increases.
The incentive component of executive
remuneration is primarily determined by
financial performance relative to short-
term profitability targets and by Total
Shareholder Return (“TSR”) relative to the
companies comprising the ASX200 index
over the longer term. Over the past five
years Total Shareholder Return (“TSR”) for
the Transurban Group was 149.4 per cent
compared with the Standard and Poors /
ASX 200 accumulation index of 57.0 per
cent for the same period. Distributions
paid from commencement of operations
have risen consistently, evidenced in the
final result for the financial year ended
30 June 2005 of 35.0 cents per security
(“cps”) representing a 25.0 per cent
increase over that recorded for the prior
corresponding period (28.0 cps).
Transurban’s ability to grow distributions
arises from a combination of strong
cash generation and increased debt
capacity. Since commencement of
operations, Transurban’s annual cash
contribution from operations has
increased from a surplus in 2001 of
$0.02 million to $146.7 million for the
current period.
Further evidence of strong performance
was provided during the year with the
acquisition of the Hills Motorway Group
which contributed to an increase in
market capitalisation between 2004 and
2005 of $2,594 million and $5,896 million
respectively. Transurban is currently
ranked in the top 40 public companies
listed on the ASX.
The remuneration of the Managing
Director is established by the Board,
based on the recommendation of the
Nomination & Remuneration Committee.
The remuneration of senior executives
The Transurban Group
reporting to the Managing Director
is established by the Nomination and
Remuneration Committee, based
on the recommendation of the
Managing Director.
The components of executive
remuneration are described below:
Base Pay
Base pay represents the fixed component
of executive remuneration and is
structured as a Total Employment Cost
(“TEC”). TEC consists of a mix of cash,
superannuation and prescribed benefits.
An executive’s TEC is reviewed annually
against market rates for comparable
roles. There are no guaranteed base pay
increases fixed in any executive’s contract
of employment.
Benefits
Executives receive benefits including
death and disability insurance, salary
continuance insurance and car parking.
Short-term Incentives
On an annual basis, the Group makes
available Short-term Incentive (“STI”)
payments to executives for the
achievement of Group and individual
performance (Key Performance
Indicators). A target STI amount,
expressed as a percentage of the
executive’s TEC, is specified for each
executive, but this amount is subject
to further adjustment for:
Annual Report 2005 57
financials
Directors’ Report
The extent to which a profit-related
Financial Performance Measure
(“FPM”) is achieved
The extent to which the executive
has achieved his/her Key
Performance Indicators (“KPIs”).
Such adjustments can result in the
actual STI payment received by the
executive being above or below the
target. STI payments are made annually
in September following the annual
performance reviews.
The adjustment ensures that STI
payments are only made when value
has been created for security holders
and profit is consistent with the business
plan.
Each year, the FPM and the KPIs for
senior executives are established by the
Nomination & Remuneration Committee,
based on recommendations made by
the Managing Director. The KPIs for the
Managing Director are established by
the Board based on recommendations
made by the Nomination & Remuneration
Committee.
The Nomination & Remuneration
Committee is also responsible for
assessing the extent to which the FPM
and the KPIs set for senior executives have
been achieved. To assist in making these
assessments, the Committee receives
reports from the Chief Finance Officer and
the Managing Director.
58
Annual Report 2005
Long Term Incentives
Business Generation Incentive Plan
Two forms of Long-term Incentives (“LTI”)
are currently in operation. The Executive
Option Plan (“EOP”) provides equity
rewards, while the Executive Long Term
Incentive Plan (“ELTIP”) provides cash
rewards linked to equity performance.
Both plans utilise Total Shareholder
Return as the basis for determining
payment. The EOP was introduced with a
five year term in 2001. Following a review
in 2003, it was decided to make no
further issues of options under the EOP
and to introduce the ELTIP to provide
long-term incentives beyond the period
when all options issued under the EOP
had vested. No options were granted
under the EOP during this financial year.
Details of the EOP and ELTIP are set out
below under the heading “Share-based
Options” (Note 25).
A further review of LTIs was undertaken
in the current year and as a result a
revised Plan will be introduced later in
the year. The objective of the revised Plan
is to implement a more cost effective
Plan to the Group for a given amount
of incentive. In addition, the revised
Plan will take into consideration those
Plans which have been introduced by
a number of other companies whose
equity securities are stapled.
The Group also operates a Business
Generation Incentive Plan (“BGIP”)
in which executives may participate,
depending upon their level of
involvement in generating new business
activities. The BGIP provides for cash
bonuses to be paid from a bonus pool
determined by the risk adjusted net
present value of a project or business
venture. The BGIP is intended to reward
executives for successful business
generation activities, based on the
increase in security holder value derived
from new business. BGIP payments are
determined and awarded by the Board,
on the recommendation
of the Managing Director to the
Nomination & Remuneration Committee.
Employee Security Ownership Plan
Executives may elect to participate in
the Employee Security Ownership Plan
on the same basis as that offered to
all permanent employees. Executive
Directors do not participate
in the Plan.
Details of remuneration
Details of the nature and amount of
each element of the emoluments of
each director of the Transurban Group
and each of the 5 officers of the Group
receiving the highest emoluments for
the year ended 30 June 2005 are set
out in the following tables.
The Transurban Group
Directors’ Report
Directors of the Transurban Group
Primary
Post-employment
Equity
Name
Cash salary
and fees
Cash Long Term
Non-
Bonus
Incentive (1) monetary annuation
Super- Retirement Options (2)
benefits
Total
$
$
benefits
$
$
$
$
$
$
Non-executive directors
L G Cox
Chairman
P C Byers
J G A Davis
S M Oliver
265,718
100,935
77,013
97,918
G O Cosgriff
101,852
D J Ryan
117,566
Executive directors
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,331
168,992
9,085
78,822
80,000
79,311
8,812
82,340
9,167
47,078
10,581
-
-
-
-
-
-
-
455,041
188,842
236,324
189,070
158,097
128,147
K Edwards
Managing
Director
G R Phillips
Deputy
Managing
Director
1,154,259
1,000,000
2,545,620
7,300
95,940
-
183,999
4,987,118
538,509
262,500
-
7,300
11,585
-
61,333
881,227
Total
2,453,770
1,262,500
2,545,620
14,600
245,501
456,543
245,332
7,223,866
Annual Report 2005 59
financials
Directors’ Report
Other executives of the Transurban Group
Primary
Post-employment
Equity
Name
Cash salary
and fees
Cash Long Term
Non-
Super- Options (2)
Total
bonus
Incentive (1) monetary annuation
$
$
benefits
$
$
$
$
$
B Bourke
CEO CityLink
Melbourne Limited
K Daley
Vice President,
International Development
V Howard
General Manager,
Corporate Finance
P O’Shea
General Counsel
L Hunt
General Manager NSW
385,342
230,000
485,490
7,300
46,660
35,791
1,190,583
321,352
230,000
482,286
6,083
27,337
30,544
1,097,602
254,315
432,500
350,699
7,300
15,000
21,817
1,081,631
304,319
225,000
387,751
7,300
27,312
26,181
977,863
305,473
137,000
375,935
13,400
26,511
11,742
870,061
Total
1,570,801
1,254,500
2,082,161
41,383
142,820
126,075
5,217,740
(1)
(2)
The amount shown as Long Term Incentives is that part of the units issued under the ELTIP which is attributable to the current year portion of the vesting
period for each current allocation.
No options were granted during the year over Transurban Group Stapled Securities. Option remuneration relates to options granted to Executive Directors
and Executives in prior financial years. The amounts disclosed as remuneration in the current year is that part of the value of the options which is attributable
to the current year portion of the vesting period.
To calculate remuneration from options, the options were valued as at grant date using a Black-Scholes derived option valuation model taking into
consideration the exercise price, the term of the option, the market price of Transurban Group Stapled Securities on the date of granting the option, the
expected price volatility of Transurban Group Stapled Securities, expected future distributions and the risk free rate of interest over the term of the options.
Cash Bonuses and options
Remuneration of the Group’s executives
includes a short term incentive (“STI”)
component and each executive has the
potential to receive 100 per cent of his
or her target STI payment. The actual STI
payment received by each executive is
determined by the extent to which the
executive’s KPIs are met.
Cash bonuses aggregating $3.8 million
were incurred*- under the Business
Generation Incentive Plan in relation to
the takeover offer for the Hills Motorway
Group and the project to upgrade the
interchange between the Tullamarine
and Calder Freeways.
For each cash bonus paid to the directors
and executives listed in the above
tables, the percentage of the available
bonus that was paid in the financial year
and the percentage that was not paid
because the person did not meet his or
her performance criteria is set out below.
No part of the cash bonuses are payable
in future years.
60
Annual Report 2005
Directors’ Report
Name
K Edward
G R Phillips
B Bourke
K Daley
V Howard
P O’Shea
L Hunt
Options
All options issued to the executives
and directors listed in the above tables
and which were due to vest during
the current year have now vested. No
options which were due to vest during
the current year have been forfeited.
For options issued under the EOP and
vesting in the current year, the rank of
Transurban’s TSR relative to the TSRs
of the companies comprising the ASX
200 index over the relevant Exercise
Condition Test Period was at the 69.6th
percentile. As this rank was above the
threshold required for 100 per cent
vesting, all options which vested in
the current year, together with options
which had vested in prior periods but
whose exercise had been precluded
by operation of the Exercise Condition,
became exercisable.
Long Term Incentive Units
No long term incentive units issued
during this year or prior years were due
to vest during this reporting year.
The Transurban Group
Cash Bonus
Paid
%
Not Paid
%
100
87
102
92
100
105
85
-
13
-
8
-
-
15
Service agreements
Remuneration for the Managing Director,
the Deputy Managing Director and
the executives specified above are
formalised in service agreements. Each of
these agreements provides for access to
performance-related cash bonuses, other
benefits including death and disability
insurance, salary continuance insurance
and car parking, and participation,
when eligible, in the Employee Share
Ownership Plan, the Executive Option
Plan, the Executive Long Term Incentive
Plan and the Business Generation
Incentive Plan. Other major provisions
of the agreements, relating to
remuneration, are set out below:
Executive Directors
K Edwards, Managing Director
Term of Agreement – permanent,
subject to 3 months notice of
termination by either party
Fixed remuneration including base
salary and superannuation, for
the year ended 30 June 2005 of
$1,250,000 to be reviewed annually
by the remuneration committee
and the Board
On 25 July 2005, the terms of
Mr Edwards’ service agreement
was varied to provide for a payment
of one year’s fixed remuneration
upon termination.
G R Phillips, Deputy Managing
Director
Term of Agreement – until
31 July 2005
Base salary, including
superannuation, for the year ended
30 June 2005 of $550,000
On 25 July 2005, Mr Phillips’
service agreement was varied to
provide for a termination benefit of
$990,000 in recognition of his long
service to the Group and his non-
participation in the Executive Long
Term Incentive Plan.
Annual Report 2005 61
financials
Directors’ Report
Other Executives
The major provisions contained in
the service agreements of the other
executives listed in the table in the
section headed ‘Details of Remuneration”
are the same for all executives except
for the base salary component. These
provisions are:
Term of agreement – permanent,
subject to termination on 3 months
notice by either party
Stapled Securities under
option
Unissued stapled securities of the
Transurban Group, under option at the
date of this report are as follows. No
options were issued during the year.
Eligible to participate in the
Transurban Group’s Employee Share
Ownership Plan and Executive Long
Term Incentive Plan
Total Employment Cost is reviewed
annually by the Nomination and
Remuneration Committee.
Date options granted
Expiry date
26 April 2001
23 October 2001
1 February 2002
9 April 2002
20 May 2002
30 April 2006
31 October 2006
30 April 2007
30 April 2007
30 April 2007
Issue price
of stapled
securities
$3.817
$4.404
$4.280
$4.030
$4.220
Number
under
option
390,000
1,500,000
-
237,300
744,852
Options have no voting or distribution entitlements and have no rights to participate in any other issues of the Group.
Issued Long Term Incentives
The terms and conditions of each grant of ELTI units affecting remuneration in this or future reporting periods are as follows.
Grant
date
Expiry
date
Grant
price
Units on
issue
30 Sept 2003
30 Sept 2005
30 Sept 2004
30 Sept 2006
$4.23
$5.45
1,912,000
2,965,000
Value per
unit at
grant
date
$0.46
$0.54
Value per
unit at
reporting
date
Date
Payable
$2.98
$1.79
30 Nov 2005
30 Nov 2006
62
Annual Report 2005
The Transurban Group
Directors’ Report
Further details relating to options and long term incentives are set out below.
Name
K Edwards – options
K Edwards – ELTI
G R Phillips – options
G R Phillips – ELTI
B Bourke – options
B Bourke – ELTI
K Daley – options
K Daley – ELTI
V Howard – options
V Howard – ELTI
P O’Shea – options
P O’Shea – ELTI
L Hunt – options
L Hunt – ELTI
A
Remuneration
consisting of
options/ELTI
%
-
35
-
-
-
20
-
20
-
20
-
20
-
20
B
Value at
grant date
C
Value at
grant date
D
Value at
lapse date
$
-
437,500
$
-
-
-
-
-
1,483,000
-
1,069,550
84,000
-
-
181,300
66,000
-
-
716,706
55,000
-
-
730,039
66,000
-
64,000
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
E
Total of
columns
B to D
$
-
437,500
1,483,000
-
1,069,550
84,000
181,300
66,000
716,706
55,000
730,039
66,000
-
64,000
A = The percentage of the value of remuneration consisting of options/ELTIs, based on the value at grant date set out in column B.
B =
The value at grant date calculated in accordance with AASB 1046 Director and Executive Disclosures by Disclosing Entities of options/ETLIs granted
during the year as part of remuneration.
C = The value at exercise date of options/ELTIs that were granted as part of remuneration and were exercised/matured during the year.
D = The value at lapse date of options/ELTIs that were granted as part of remuneration and that lapsed during the year.
Shares issued on the exercise of options
The following Transurban Stapled Securities were issued during the year ended 30 June 2005 on the exercise of options granted
under the Transurban Group’s Employee Option Plan. No further securities have been issued since that date. No amounts are
unpaid on any of the securities.
Annual Report 2005 63
financials
Directors’ Report
Date options granted
26 April 2001
23 October 2001
1 February 2002
9 April 2002
20 May 2002
Indemnification and
Insurance
The officers of the Group are indemnified
against liability incurred by the person
in their capacity as an officer unless
the liability arises out of conduct on
the part of the officer which involves
a lack of good faith. The Group also
indemnifies each person who is or has
been an officer against liability for costs
or expenses incurred by the person in his
or her capacity as an officer in defending
civil or criminal proceedings in which
judgment is given in favour of the
person or the person is acquitted or in
connection with an application in which
the Court grants relief to the person
under the Corporations Act 2001.
Pursuant to this indemnification, the
individual entities of the Group have
paid premiums for an insurance policy
for the benefit of directors, secretaries
and executive officers and related bodies
corporate of the Group, in the case of
the Trusts within the Group the officers
are indemnified out of the assets of the
Trusts. In accordance with common
practice, the insurance policies prohibit
disclosure of the nature of the liability
covered and the amount of
the premium.
64
Annual Report 2005
Issue price
of securities
$3.817
$4.404
$4.280
$4.030
$4.220
Number
of securities
issued
1,493,231
500,000
89,867
62,700
715,598
Rounding off
The Group is of a kind referred to in Class
Order 98/0100, issued by the Australian
Securities & Investment Commission,
relating to the ‘rounding off’ of amounts
in the Directors’ Report. Amounts in the
Directors’ Report have been rounded off
in accordance with that Class Order to
the nearest thousand dollars.
Non-audit Services
The combined entity may decide to
employ the auditor on assignments
additional to their statutory audit duties
where the auditor’s expertise and
experience with the combined entity
are important.
Details of the amounts paid or payable
to the auditor (PricewaterhouseCoopers)
for audit and non-audit services provided
during the year are set out in note 26 of
the financial report.
The Board of Directors has considered
the position and, in accordance with the
advice received from the audit committee
is satisfied that the provision of the non-
audit services is compatible with the
general standard of independence for
auditors imposed by the Corporations
Act 2001. The directors are satisfied that
the provision of non-audit services by
the auditor, did not compromise the
auditor independence requirements
of the Corporations Act 2001 for the
following reasons:
All non-audit services have been
reviewed by the audit committee
to ensure they do not impact the
impartiality and objectivity of the
auditor
None of the services undermine
the general principles relating to
auditor independence as set out in
professional statement F1, including
reviewing or auditing the auditor’s
own work, acting in a management
or a decision making capacity for the
combined entity, acting as advocate
for the combined entity or jointly
sharing economic risk and rewards.
A copy of the auditor’s independence
declaration as required under section
307C of the Corporation Act 2001 is set
out on page 66.
Auditor
PricewaterhouseCoopers continues in
office in accordance with section 327
of the Corporations Act 2001.
The Transurban Group
Directors’ Report
This report is made in accordance with a resolution of the directors.
Laurence G Cox
Chairman
Kimberley Edwards
Managing Director
Melbourne
23 August 2005
Annual Report 2005 65
financials
Directors’ Report
Auditors’ Independence Declaration
As lead auditor for the audit of the Transurban Group for the year ended 30 June 2005, I declare that,
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of the Transurban Group and the entities it controlled during the year.
Tim Goldsmith
Partner
Melbourne
23 August 2005
66
Annual Report 2005
The Transurban Group
Statements of financial performance for the year ended 30 June 2005
Revenue from ordinary activities
Expenses from ordinary activities:
Operational costs
Corporate costs
Business Development
Corporate and Community Relations
Concession Fees
Net valuation adjustment on Concession Notes
Net valuation adjustment on Promissory Notes
Depreciation and amortisation expenses
Borrowing costs expense
Loss from ordinary activities before income tax
Income tax expense
Loss from ordinary activities after income tax
Basic earnings per Stapled Security
Diluted earnings per Stapled Security
Notes
3
4
4
5
35
35
2005
$’000
511,652
(74,222)
(26,730)
(18,158)
(3,523)
(95,600)
54,179
(541)
(179,396)
(255,054)
(87,393)
(444)
(87,837)
Cents
(14.8)
(6.4)
2004
$’000
467,666
(67,899)
(18,504)
(9,172)
(2,454)
(95,600)
58,615
-
(152,400)
(241,742)
(61,490)
-
(61,490)
Cents
(11.7)
(4.1)
The above statements of financial performance should be read in conjunction with the accompanying notes.
Annual Report 2005 67
financials
Statements of financial position as at 30 June 2005
CURRENT ASSETS
Cash assets
Receivables
Other
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Financial assets
Investments accounted for using the equity method
Other
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Current tax liabilities
Interest bearing liabilities
Non-Interest bearing liabilities
Provisions
Total Current Liabilities
NON-CURRENT LIABILITIES
Deferred tax liabilities
Interest bearing liabilities
Non-Interest bearing liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Accumulated losses
TOTAL EQUITY
Notes
6
7
8
9
10
11
12
13
14
5
15
16
17
5
18
19
20
21
22
The above statements of financial position should be read in conjunction with the accompanying notes.
68
Annual Report 2005
2005
$’000
395,561
25,394
9,178
430,133
5,943,389
8,252
392,000
6,236
35,061
6,384,938
6,815,071
104,301
5,429
8,000
129,578
157,601
404,909
5,024
2,865,976
206,796
3,999
3,081,795
3,486,704
3,328,367
4,127,228
(798,861)
3,328,367
2004
$’000
207,452
25,757
6,914
240,123
3,604,281
8,752
486,419
6,236
29,920
4,135,608
4,375,731
79,422
-
8,000
25,585
5,570
118,577
-
2,210,248
207,681
2,036
2,419,965
2,538,542
1,837,189
2,242,030
(404,841)
1,837,189
The Transurban Group
Statements of cash flows for the year ended 30 June 2005
Notes
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Other revenue
Income taxes paid
Borrowing costs
Net cash inflows from operating activities
33
Cash flows from investing activities
Net cash acquired from purchase of controlled entities
Payments for property, plant and equipment
Payments for project development
Payments for deferred borrowing costs
Payments for investments
Payment for release from single purpose
Distributions received
Proceeds from sale of assets
Loans to related parties
Repayment of loans by related parties
Net cash inflows/(outflows) from investing activities
Cash flows from financing activities
Proceeds from issue of stapled securities
Security issue transaction costs
Unclaimed compulsory acquisition funds
Interest capitalised against cash collateral
Proceeds from borrowings
Repayment of borrowings
Distributions paid
Net cash inflows from financing activities
Net increase in cash at bank and cash collateral
Cash at bank and cash collateral at the beginning of the financial year
Effects of exchange rate changes on cash
Cash at bank and cash collateral at the end of the financial year
Less cash collateral
Cash at bank at the end of the financial year
6
6
The above statements of cash flows should be read in conjunction with the accompanying notes.
2005
$’000
379,532
(171,174)
223,554
15,258
(2,720)
(297,478)
146,972
332,024
(29,361)
(4,400)
(10,394)
-
(3,150)
4,650
-
(2,576)
3,778
290,571
11,559
(146)
556
35,007
810,321
(590,000)
(131,686)
135,611
573,154
1,456,452
30
2,029,636
(1,634,075)
395,561
2004
$’000
309,806
(146,034)
173,553
15,687
-
(214,768)
138,244
-
(22,602)
(5,334)
-
(96,347)
(3,150)
-
6
(2,801)
909
(129,319)
365
-
-
-
80,000
-
(54,145)
26,220
35,145
1,421,277
30
1,456,452
(1,249,000)
207,452
Annual Report 2005 69
financials
Notes to the financial statements for the year ended 30 June 2005
1 Summary of
Significant Accounting
Policies
in Transurban Limited and one unit in
Transurban Holding Trust. None of the
components of the Stapled Security
are able to be traded separately.
This general purpose financial report
has been prepared in accordance
with Accounting Standards, other
authoritative pronouncements of the
Australian Accounting Standards Board,
Urgent Issues Group Consensus Views
and the Corporations Act 2001.
Unless otherwise stated, the accounting
policies adopted are consistent with
those of the previous year.
a) Principles of aggregation
The Group Financial Report consists
of the aggregated financial statements
of the combined entity comprising
Transurban Holdings Limited and
controlled entities, Transurban Holding
Trust and controlled entities and
Transurban Limited and controlled
entities, notwithstanding that none of
the entities controls the others.
The aggregated accounts incorporate
an elimination of inter-entity transactions
and balances and other adjustments
necessary to present the financial
statements on a combined basis.
The accounting policies adopted in
preparing the financial statements
have been consistently applied by the
individual entities comprising the Group
Accounts except as otherwise indicated.
The financial statements have been
aggregated in recognition of the fact
that the securities issued by the parent
entities were stapled into parcels
during the year ended 30 June 2005. A
Stapled Security comprises one share in
Transurban Holdings Limited, one share
70
Annual Report 2005
Where control of an entity is obtained
during a financial year, its results are
included in the combined statement
of financial performance from the date
on which control commences. Where
control of an entity ceases during a
financial year its results are included
for that part of the year during which
control existed.
Investments in associates are accounted
for in the combined financial statements
using the equity method. Under this
method, the combined entity’s share
of post acquisition profits or losses of
associates is recognised in the combined
statement of financial performance, and
its share of post acquisition movements
in reserves is recognised in combined
reserves. The cumulative post acquisition
movements are adjusted against the
cost of the investment. Associates are
those entities over which the combined
entity exercises significant influence, but
not control.
b) Historical Cost Convention
The financial statements are prepared
on the basis of the historical cost
convention and, except where stated, do
not take into account current valuations
of non-current assets. Cost is based on
the fair values of the consideration given
in exchange for assets. The fair value
of cash consideration with deferred
settlement terms is determined by
discounting any amounts payable in
the future to their present value as at
the date of acquisition. Present values
are calculated using rates applicable to
similar borrowing arrangements of the
Group. The Group has not adopted a
policy of revaluing its non-current assets
on a regular basis.
c)
Income Tax
Income tax is brought to account
in respect of the Group, which has
adopted the liability method of tax
effect accounting. Income tax expense
is calculated on the operating profit
of the Group, adjusted for permanent
differences between taxable and
accounting income. The tax effect of
timing differences which arise from
items being brought to account in
different periods for income tax and
accounting purposes is carried forward
in the balance sheet as a future income
tax benefit or a deferred tax liability.
However, the future tax benefit relating
to timing differences and tax losses is not
carried forward as an asset unless the
benefit is virtually certain of realisation.
The tax losses are shown in aggregate for
the Group. However, the losses remain
with the legal entities and cannot be
transferred between entities comprising
the Stapled Security.
Tax consolidation legislation
The Transurban Group has completed
an analysis of the tax consolidation
legislation and its applicability to the
Group. In reaching a decision on the
extent to which it would adopt the
provisions of the legislation, the
Group considered the following:
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
the ability of entities comprising the
stapled security to consolidate
are recognised in determining the profit
or loss for the year.
the effect of the legislation on each
entity’s carry-forward loss position,
and
transitional concessions available to
entities electing to consolidate at
1 July 2004.
Based on its analysis, the Group has
elected to implement tax consolidation
legislation for Transurban Limited and its
wholly owned entities with effect from
1 July 2003.
As a consequence, Transurban Limited,
as the head entity in the tax consolidated
group recognises events and
transactions of its wholly owned entities
as if those transactions were its own.
Transurban Holdings Limited has elected
not to participate in the tax consolidation
legislation.
The impact on the income tax expense
for the year is disclosed in note 5.
d) Foreign currency
translation
Transactions
Foreign currency transactions are initially
translated into Australian currency at
the rate of exchange at the date of the
transaction. At balance date amounts
payable and receivable in foreign
currencies are translated to Australian
currency at rates of exchange current at
the date. Resulting exchange differences
e) Acquisition of assets
The purchase method of accounting is
used for all acquisitions of assets. Cost is
measured as the fair value of the assets
given up, shares issued or liabilities
undertaken at the date of acquisition
plus incidental costs directly attributable
to the acquisition.
f) Revenue recognition
Toll charges and related fees are
recognised when the charge is
incurred by the user.
Interest income is recognised on a
time proportionate basis that takes
into account the effective yield on
the financial assets. Rental income
is recognised as it accrues.
g) Receivables
Collectibility of trade debtors is reviewed
on an ongoing basis. Debts which are
known to be uncollectible are written
off. A provision for doubtful debts is
raised when reasonable doubt as to
collection exists.
h) Recoverable Amount
of Non-Current Assets
The recoverable amount of an asset
is the net amount expected to be
recovered through the cash inflows
and outflows arising from its continued
use and subsequent disposal.
Where the carrying amount of a
non-current asset is greater than its
recoverable amount, the asset is written
down to its recoverable amount. The
decrement in the carrying amount is
recognised as an expense in net profit or
loss in the reporting period in which the
recoverable amount write-down occurs.
In assessing recoverable amounts of
non-current assets, the relevant cash
flows have been discounted to their
present value.
i) Amortisation and
Depreciation of Fixed
Assets
CityLink Fixed Assets
Amounts classified as CityLink fixed
assets are amortised over the estimated
term of the right granted to the
Company to operate CityLink (32 years),
or the estimated useful lives of the
assets, whichever is less. Amortisation
by the combined entity commenced
on 18 December 2001 and is calculated
on a straight line basis. The period of
amortisation will be assessed annually.
M2 Motorway Fixed Assets
Amounts classified as M2 Motorway
fixed assets are amortised over 28 years,
being the estimated term of the right
to operate the M2 Motorway or the
estimated useful lives of the assets,
whichever is less. Amortisation by the
combined entity commenced on
12 April 2005 and is calculated on
a straight line basis. The period of
amortisation is assessed annually.
Annual Report 2005 71
financials
Notes to the financial statements for the year ended 30 June 2005
Other Plant and Equipment
l)
Intangible Assets
The excess of the cost over the
identifiable net assets acquired is
brought to account as goodwill and
amortised on a straight line basis over
the period during which the benefits are
expected to arise. This period is presently
estimated to be 20 years.
m) Trade and other creditors
Trade and other creditors represent
liabilities for goods and services provided
to the consolidated entity prior to the
end of the financial year and which are
unpaid. The amounts are unsecured
and are usually paid within 45 days of
recognition.
n)
Interest bearing liabilities
Loans are carried at their principal
amounts which represent the present
value of future cash flows associated
with servicing the debt. Interest is
accrued over the period it becomes due
and is recorded as part of other creditors.
o) Deferred Expenditure
Deferred expenditure relates to The Hills
Motorway Trust’s annual lease liability
to the Roads and Traffic Authority of
New South Wales (“RTA”). Payments
under these leases can be made at the
discretion of the Responsible Entity,
by means of the issue of non-interest
bearing promissory notes to the RTA.
These promissory notes are classified as a
prepayment on their issue which is then
charged as an expense over the relevant
12 month period.
Depreciation is calculated on a straight
line basis so as to write off the net cost
of items of plant and equipment over
their expected useful lives. Estimates of
remaining useful lives will be made on a
regular basis for all assets.
The expected useful lives are as follows:
Plant and Equipment 2.5 – 20 years
j) Leased Non-Current Assets
Leases of plant and equipment where
the consolidated entity assumes all
the risks and benefits of ownership are
classified as finance leases. Other leases
are classified as operating leases.
Other operating lease payments are
charged to the statement of financial
performance in the periods in which
they are incurred, as this represents the
pattern of benefits derived from the
leased assets.
k) Non-current assets
constructed by the
consolidated entity
The cost of non-current assets
constructed by the consolidated entity
includes the cost of all materials used in
construction, direct labour on the project
and an appropriate proportion of directly
attributable variable and fixed overheads.
72
Annual Report 2005
p)
Infrastructure Loan
Facilities
The consolidated entity has three
Infrastructure Loan facilities. Under the
terms of these facilities, the consolidated
entity must provide cash collateral equal
to the utilised amounts of the facilities.
This cash collateral has been set-off
against the outstanding infrastructure
borrowing facilities so that no asset or
liability in respect of those facilities has
been recorded in the balance sheet of
the consolidated entity. (refer note 18).
q) Concession and RTA
Promissory Notes
Non-interest bearing long term debt
represented by the Concession and RTA
Promissory Notes has been included
in the financial statements at the
present value of the expected future
repayments. As the timing and profile of
these repayments is largely determined
by the available equity cash flows of
the underlying assets (CityLink and the
Hills M2 Motorway), the present value
of the expected future repayments is
determined using a discount rate which
recognises their subordinated nature.
r) Employee Entitlements
(i)
Wages, salaries and annual leave
Liabilities for wages and salaries,
including non-monetary benefits
and annual leave expected to be
settled within 12 months of the
reporting date are recognized
in other creditors in respect of
employees’ services up to the
reporting date and are measured at
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
the amounts expected to be paid
when the liabilities are settled. An
expense for non-accumulating sick
leave is recognised when the leave
is taken and measured at the rates
paid or payable.
(ii) Long service leave
The liability for long service leave
expected to be settled within 12
months of the reporting date is
recognized in the provision for
employee benefits and is measured
in accordance with (i) above.
The liability for long service leave
expected to be settled more than
12 months from the reporting date
is recognized in the provision for
employee benefits and measured
as the present value of expected
future payments to be made in
respect of services provided by
employees up to the reporting date.
Consideration is given to expected
future wages and salary levels and
periods of service. Expected future
payments are discounted using
market yields at the reporting date
on national government bonds
with terms to maturity and currency
that match, as closely as possible,
the estimated future cash outflows.
(iii) Equity-based compensation
benefits
Equity based compensation
benefits are provided to employees
via the Transurban Group Executive
Option Plan. Information relating to
this scheme is set out in note 29.
No accounting entries are made
in relation to the Option Plan until
options are exercised, at which
time the amounts receivable from
employees are recognised in the
statement of financial position as
share capital. The amounts disclosed
for remuneration of directors and
executives in note 25 include the
assessed fair value of options at the
date they were granted.
(iv) Share-based compensation
benefits
Share based compensation benefits
are provided to employees via
the Transurban Group Long Term
Incentive Plan. Information relating
to this plan is set out in note 29.
Units are allocated to reporting
periods on a pro-rata basis from
the grant date to the maturity
date. Units allocated to a particular
reporting period are valued on the
reporting date and an employee
benefit expense and an employee
benefit liability are recognised at
the amount of the valuation for
each unit allocated.
On each reporting date, the
units allocated to prior periods
are revalued and the liability is
adjusted to the new valuation.
The movement in the liability is
recognised as an employee benefits
expense. This revaluation occurs
until all the units are exercised
or lapse.
On the exercise date where a
cash bonus is paid, any difference
between the cash payment
and the liability in relation to
those units is recognised as an
adjustment to employee benefits
expense in that period.
(v) Superannuation
Superannuation is contributed
to plans as nominated by the
employee. The contribution is not
less than the statutory minimum.
The superannuation plans are all
accumulation funds.
The cost of current and deferred
employee compensation and
contributions to employee
superannuation plans were
charged to the statements of
financial performance.
s) Distributions
Provision is made for the amount of any
distribution declared, determined or
publicly recommended by the directors
on or before the end of the financial year
but not distributed at balance date.
t)
Joint venture entity
The interest in a joint venture partnership
is accounted for using the equity
method. Under this method, the share
of the profits or losses of the partnership
is recognised in the statement of
financial performance, and the share of
movements in reserves is recognised
in reserves in the statement of financial
position. Details relating to the
partnership are set out in note 32.
Annual Report 2005 73
financials
Notes to the financial statements for the year ended 30 June 2005
u) Maintenance and Repairs
x) Project Development
Costs incurred in developing proposals
for specific projects are charged to the
Statement of Financial Performance in
the period in which they are incurred
except where:
(i)
(ii)
the outcome of the proposal has
been determined and the outcome
will result in the acquisition of an
asset; or
the outcome of the proposal
has not been determined but
it is considered reasonably
probable that the outcome,
when determined, will result
in the acquisition of an asset.
Unrealised gains and losses on interest
rate swaps and foreign exchange swaps
not effectively hedging an underlying
exposure are recognised in the
statement of financial performance.
z) Earnings per Share
(i) Basic Earnings per Share
Basic earnings per share is
determined by dividing the
profit after income tax attributable
to shareholders by the weighted
average number of shares
outstanding during the
financial period.
Costs meeting these criteria are deferred.
(ii) Diluted Earnings per Share
Diluted earnings per share
adjusts the figures used in the
determination of basic earnings
per share by taking into account the
weighted average number of shares
assumed to have been issued for no
consideration in relation to dilutive
potential shares.
y) Financial Instruments
Financial instruments, in the form of
interest rate swap contracts and foreign
exchange rate swaps, are used to
manage financial risk.
Gains and losses on interest rate and
foreign exchange swaps used as hedges
are accounted for on the same basis
as the interest and foreign exchange
payments they are hedging. Realised
hedge gains and losses are brought to
account in the statement of financial
performance when the gains and losses
arising on the related physical exposures
are recognised.
The cost of maintenance is charged
as expenses as incurred, except where
they relate to the replacement of a
component of an asset, in which case
the costs are capitalised and depreciated
in accordance with note 1i. Other routine
operating maintenance, repair and
minor renewal costs are also charged as
expenses as incurred.
v) Borrowing Costs
Borrowing costs are recognised as
expenses in the period in which they
are incurred, except to the extent to
which they relate to the construction
of qualifying assets in which case
borrowing costs are capitalised into
the cost of the asset. Borrowing costs
include interest on short term, long term
borrowings and amortisation of deferred
borrowing costs.
Costs incurred in connection with the
arrangement of borrowings are deferred
and amortised over the effective period
of the funding.
w) Cash
For the purposes of the statement of
cash flows, cash includes cash deposits
held at call with financial institutions
and other highly liquid investments
with short periods to maturity which
are readily convertible to cash on hand
and are subject to an insignificant risk
of changes in value, net of outstanding
bank overdrafts.
74
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
aa) Rounding of amounts
ab) Trust Formation
2 Segment Information
The combined entity is of a kind
referred to in Class Order 98/0100
issued by the Australian Securities and
Investments Commission, relating
to the ‘rounding off’ of amounts in
the financial report. Amounts in the
financial report are rounded off to the
nearest thousand dollars in accordance
with that Class Order.
The Transurban Holding Trust was
established on 15 November 2001.
The Trust was due to terminate on
20 December 2081 unless terminated
earlier. However amendments made to
the Trust Deed have extended the Trust
to perpetuity.
The Trust was registered as a managed
investment scheme by the Australian
Securities and Investments Commission
on 28 November 2001.
The Combined Entity’s primary business
segment for the year ending 30 June
2005 was the operation of the toll roads
being Melbourne City Link and the Hills
Motorway M2 in Sydney following the
acquisition of Hills Motorway Group
and a 40 per cent interest in the Westlink
M7 project.
Geographical segment information
is provided in the table below and
reflects the Transurban Group’s activities
in relation to geographically unique
locations.
Segment Revenues
Segment Assets
Segment Liabilities
2005
$’000
2004
$’000
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Victoria
436,749
431,033
3,843,061
3,960,431
2,482,680
2,091,096
New South Wales
74,903
36,633
2,970,082
415,300
1,004,024
447,446
Other
-
-
1,928
-
-
-
511,652
467,666
6,815,071
4,375,731
3,486,704
2,538,542
Annual Report 2005 75
financials
Notes to the financial statements for the year ended 30 June 2005
2005
$’000
2004
$’000
291,138
248,097
6,672
3,594
12,206
943
6,361
3,451
9,245
-
314,553
267,154
185,704
180,480
-
6
2,025
1,044
714
59
8,656
18,923
197,099
200,512
511,652
467,666
3 Revenue
Revenue from operating activities
Toll revenue
Fee revenue
Advertising revenue
IT development fees
Other
Revenue from outside operating activities
Interest
Proceeds from sale of non-current assets
Equity investment distributions
Foreign exchange gains (net) (note 4)
Other
Revenue from ordinary activities
76
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
4 Operating Loss from Ordinary Activities
Net gains and expenses
Loss from ordinary activities before income tax expense includes the following
specific net gains and expense:
Net gains
Net gain on disposal of property, plant and equipment
Net foreign exchange gains recognised in the profit from ordinary activities
for the year (as either revenue or expense)
Expenses
Losses from ordinary activities before income tax expense includes the following specific expenses:
Depreciation and amortisation
CityLink
M2 Motorway
Other fixed assets
Amortisation
Goodwill
Total depreciation/amortisation
Bad and doubtful debts – trade debtors
Mitcham Frankston Freeway bid costs
Borrowing costs
Interest and finance charges paid/payable
Interest rate hedging charges paid/payable
Total borrowing costs
Rental expenses relating to operating leases
2005
$’000
2004
$’000
-
714
6
59
140,871
141,200
23,161
-
14,864
10,700
500
500
179,396
152,400
1,287
9,423
635
-
245,828
230,650
9,226
11,092
255,054
241,742
2,555
2,284
Annual Report 2005 77
financials
Notes to the financial statements for the year ended 30 June 2005
5
Income Tax
Tax consolidation legislation
The Transurban Group has elected to implement tax consolidation legislation for Transurban Limited and its wholly owned entities
with effect from 1 July 2003. The accounting policy on implementation of the legislation is set out in note 1(c).
The impact on the income tax expense for the year is disclosed in the tax reconciliation below.
Transurban Holdings Limited has elected not to adopt the tax consolidation legislation.
a)
The income tax expense for the financial year differs from the amount
calculated on the loss. The differences are reconciled as follows:
Loss from ordinary activities before income tax expense
Income tax calculated at 30% (2004-30%)
Tax effect of permanent differences:
Infrastructure borrowing facility interest not deductible
Non-deductible depreciation and amortisation
Other
Income tax adjusted for permanent differences
Benefit of (tax losses of prior year recouped)/tax losses not recognised
Income tax expense
2005
$’000
2004
$’000
(87,393)
(61,490)
(26,218)
(18,447)
27,561
26,439
150
732
150
170
2,225
8,312
(1,781)
(8,312)
444
-
78
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
b) Transurban Holding Trust
Tax losses at beginning of year
Tax (income) for the year
Tax losses at end of year
Transurban Holdings Limited
Tax losses at beginning of year
Tax (income)/losses for the year
Tax losses at end of year
Transurban Limited
Tax losses at beginning of year
Tax (income) for the year
Tax losses at end of year
Income tax liabilities
Current tax payable
Current tax liabilities
Future income tax benefit – non-current
Provision for deferred income tax non-current
Deferred tax liabilities
2005
$’000
2004
$’000
152,903
197,957
(50,554)
(45,054)
102,349
152,903
824,236
830,722
(34,855)
(6,486)
789,381
824,236
17,267
12,178
(17,114)
5,089
153
17,267
5,429
5,429
(2,022)
7,046
5,024
-
-
-
-
-
Potential future income tax benefits at
30 June 2005 for tax losses not brought
to account for the combined entity are
$267.6 million (2004: $298.3 million).
These future income tax benefits are not
being brought to account as an asset
as they do not meet the requirements
described in note 1c. The gross tax losses
in relation to the Trust are $102.3 million
as at 30 June 2005 (2004: $152.9 million).
These losses can not be used directly by
the Trust for the reason outlined in note
1c, but may be available for the benefit
of unit holders in the future.
(ii)
the entity continues to comply
with the conditions for deductibility
imposed by tax legislation; and,
The benefit of tax losses will only be
realised by each individual entity if:
(i)
the entity derives future assessable
income of a nature and of an
amount sufficient to enable the
benefit from the deductions for the
losses to be realised; and
(iii) no changes in tax legislation
adversely affect the entity in
realising the benefit from the
deductions for the losses.
Annual Report 2005 79
financials
Notes to the financial statements for the year ended 30 June 2005
The above tax position is based on the
tax treatment proposed in tax ruling
requests relating to borrowing costs
and interentity transactions. However,
the Australian Taxation Office (“ATO”) has
not given its opinion in relation to all of
these requests.
The Australian Taxation Office (“ATO”)
and Transurban have been unable to
agree on the treatment to be applied to
concession fees and as a consequence
the ATO issued an assessment in respect
of CityLink Melbourne’s income tax
return for the year ended 30 June 1998.
Transurban has advice from Senior
Counsel that the concession fees are
immediately deductible expenditure.
The Group Accounts have been prepared
on this basis for the year ended 30 June
2005 and all prior years. Deductions in
respect of concession fees account for
$891.7 million of the combined entity’s
carried forward loss of $891.9 million at
30 June 2005.
Transurban’s appeal against the ATO’s
decision to disallow its objection to the
assessment was heard before Mr Justice
Merkel in the Federal Court on 3 October
2002. On 2 February 2004, Mr Justice
Merkel dismissed Transurban’s appeal.
Transurban lodged a Notice of Appeal
against the dismissal which was heard
before a Full Court of the Federal Court
on 12 October 2004. The Full Court of
the Federal Court unanimously ruled
in favor of Transurban confirming that
concession fees are deductible.
The Australian Taxation Office
subsequently sought special leave to
appeal to the High Court of Australia
against the Full Court’s decision. This was
granted in April 2005. Determination of
the appeal is unlikely to occur before
early 2006.
Until a definitive resolution of this
matter has been achieved, Transurban
intends to continue preparing the Group
financial statements on the basis that
the concession fees are deductible.
If the finding of Mr Justice Merkel is
finally confirmed, certain items in the
Group financial statements will require
amendment.
6 Current Assets – Cash Assets
Cash at bank
The above figures are reconciled to cash at the end of the financial period as
shown in the statement of cash flows as follows:
Cash at bank – as above
Cash collateral, Infrastructure Loan Facility (note 1p)
Cash collateral, Infrastructure Note Facility (note 1p)
Cash collateral, Refinancing Infrastructure Bonds (note 1p)
2005
$’000
2004
$’000
395,561
207,452
395,561
207,452
395,561
207,452
795,000
795,000
454,000
454,000
385,075
-
2,029,636
1,456,452
The amount shown in Cash at Bank includes $28.1 million comprising the amount required under the CityLink Concession Deed to
be held in the maintenance reserve account and the amount held in the CARS funding reserve. These amounts were not available
for general use at 30 June 2005 (2004: $36.2 million).
80
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
7 Current Assets – Receivables
Trade Debtors
Less: Provision for Doubtful Debts
Other Debtors
8 Current Assets – Other
Prepayments
Deferred expenditure
Debtors from related parties
9 Non-current Assets – Property, Plant and Equipment
a) CityLink Fixed Assets
CityLink at cost
Less: Accumulated depreciation
M2 Motorway Fixed Assets
M2 at cost
Less: Accumulated depreciation
Equipment and Fittings
Equipment and fittings at cost
Less: Accumulated depreciation
Total Property, plant and equipment
2005
$’000
2004
$’000
12,509
11,508
(1,429)
11,080
14,314
25,394
3,792
1,898
3,488
9,178
(755)
10,753
15,004
25,757
3,627
-
3,287
6,914
3,937,269
3,910,616
(500,031)
(359,160)
3,437,238
3,551,456
2,446,819
(23,161)
2,423,658
-
-
-
124,625
80,116
(42,132)
(27,291)
82,493
52,825
5,943,389
3,604,281
Annual Report 2005 81
financials
Notes to the financial statements for the year ended 30 June 2005
Non-current assets pledged as security
Refer to note 18 for information on non-current assets pledged as security by the Group.
b) Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the
current financial period is set out below:
CityLink Equipment
& Fittings
$’000
$’000
M2
Total
$’000
$’000
2005
Carrying amount at 1 July 2004
3,551,456
52,825
-
3,604,281
Additions
26,653
44,532
2,446,819
2,518,004
Depreciation/amortisation expense charged to
statement of financial performance
(140,871)
(14,864)
(23,161)
(178,896)
Carrying amount at 30 June 2005
3,437,238
82,493
2,423,658
5,943,389
2004
Carrying amount at 1 July 2003
Additions
Depreciation/amortisation expense charged
to statement of financial performance
Carrying amount at 30 June 2004
3,692,648
35,603
8
27,922
(141,200)
(10,700)
3,551,456
52,825
-
-
-
-
3,728,251
27,930
(151,900)
3,604,281
10 Non-current Assets – Intangible Assets
Goodwill
Less: Accumulated amortisation
2005
$’000
2004
$’000
10,000
10,000
(1,748)
(1,248)
8,252
8,752
82
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
11 Non-current Assets – Other Financial Assets
Investments traded on organised markets
Shares in other corporations
Other financial assets
Investment in Construction Phase Loan Notes
2005
$’000
2004
$’000
-
94,419
392,000
392,000
392,000
486,419
During the year, the Transurban Group acquired the remaining 91.9 per cent interest in the Hills Motorway Group, creating a wholly
owned Group subsidiary. The 2004 comparison is the investment in the Hills Motorway Group held by Transurban Holding Trust
prior to the takeover (refer note 30).
Investment in Construction Phase Loan Notes (“CPLN”)
The CPLN represent Transurban’s funding contribution to the Westlink Motorway Partnership. The CPLN earn interest at the fixed
rate of 6.27 per cent for the period from the financial close of the Westlink M7 project (“the Project”) to the date of completion of
the Project, or 3.5 years which, ever is the lesser, at which time they convert to Term Loan Notes.
12 Investments Accounted for Using the Equity Method
Interest in joint venture partnership (note 32)
Shares in associates (note 31)
13 Non-current Assets – Other
Debtor from related party
Prepayments
Project development
Deferred borrowing costs
2005
$’000
6,236
-
2004
$’000
6,236
-
6,236
6,236
2,114
1,973
8,163
22,811
35,061
5,128
2,913
9,139
12,740
29,920
Annual Report 2005 83
financials
Notes to the financial statements for the year ended 30 June 2005
14 Current Liabilities – Payables
Trade creditors
CARS coupon payment
Other creditors
2005
$’000
2004
$’000
29,434
14,926
59,941
104,301
7,355
15,009
57,058
79,422
CARS coupon payment represents the interest payment due to holders of Convertible Adjusting Rate Securities (“CARS”). The
distribution on these securities of 7.0 per cent for the period 1 January 2005 to 30 June 2005 totalling $14.9 million has been
charged to the statement of financial performance as a borrowing cost due to the CARS being classified as a liability. This coupon
was paid to CARS holders on 31 July 2005.
Other Creditors
Other creditors represents accruals for operating expenses and interest on the Group’s borrowings.
15 Current Liabilities – Interest Bearing Liabilities
Secured
Bank loan
This loan facility was fully utilised at 30 June 2005.
16 Current Liabilities – Non-interest Bearing Liabilities
Prepaid tolls
Unearned income
Release from Single Purpose
Tullamarine/Calder freeway upgrade
84
Annual Report 2005
2005
$’000
2004
$’000
8,000
8,000
8,000
8,000
21,083
20,121
7,677
-
100,818
2,314
3,150
-
129,578
25,585
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
17 Current Liabilities – Provisions
Employee entitlements
Distribution to security holders
18 Non-current Liabilities – Interest Bearing Liabilities
Secured
Infrastructure Loan facility
Less: Cash collateral (note 1p)
Infrastructure Note facility
Less: Cash collateral (note 1p)
Refinancing Infrastructure Bonds
Less: Cash collateral (note 1p)
Term Debt
U.S. Private Placement
Working Capital Facilities
Land Transport Notes
Project Debt - Tranche B
Capital Markets Debt
Convertible Adjusting Rate Securities
Subordinated Debt Facility
2005
$’000
2004
$’000
15,146
5,570
142,455
-
157,601
5,570
795,000
795,000
(795,000)
(795,000)
454,000
454,000
(454,000)
(454,000)
385,075
(385,075)
440,000
396,080
259,500
-
-
-
-
-
396
248
-
510,000
1,340,000
1,190,000
430,000
430,000
-
80,000
2,865,976
2,210,248
Annual Report 2005 85
financials
Notes to the financial statements for the year ended 30 June 2005
Set-off of Assets and
Liabilities
A legal right of set-off exists in respect
of the specific cash deposits of $795.0
million, representing collateralisation of
liabilities under the Infrastructure Loan
facility, $454.0 million, representing
collateralisation of liabilities under the
Infrastructure Note facility and $385.0
million representing collateralisation of
the Refinancing Infrastructure Bonds.
Financing Arrangements
and Credit Facilities
Credit facilities are provided as part of
the overall debt funding structure of the
Transurban Group.
Details of each facility are as follows:
Legislation. The loan is secured by cash
collateral equal to the amount of the
loan which is set-off against the loan
liability. The principal of the Infrastructure
Loan facility will be repaid from the cash
collateral on 15 April 2007. The facility
was fully drawn as at 30 June 2005.
bonds are secured by cash collateral
equal to the amount of the loan which
is set off against the loan facility, the
principal of the refinancing bonds will
be repaid from the cash collateral on
31 December 2009. The facility was fully
drawn down as at 30 June 2005.
b)
Infrastructure Note Facility
d) Term Debt
$454 million facility certified by the
Development Allowance Authority to
qualify for concessional tax treatment
under the Income Tax Legislation. The
loan is secured by cash collateral equal to
the amount of the loan which is set-off
against the loan liability. The principal
of the infrastructure note facility will be
repaid from the cash collateral on 15
April 2007. The facility was fully drawn as
at 30 June 2005.
$440 million bank facility, maturing in
June 2009. The facility was fully utilised at
30 June 2005. This facility is fully secured
against the respective rights of Hills
Motorway Ltd and Hills Motorway Trust
in the M2 Motorway and their assets.
e) U.S. Private Placement
The Tranche B bank debt facility was
repaid utilising Capital Markets Debt
and a US Private Placement consisting
of medium and long term debt facilities
on 7 December 2004. The placement
consists of four tranches with maturities
ranging from December 2014 to
December 2019.
c) Refinancing Infrastructure
a)
Infrastructure Loan Facility
Bonds
$795.0 million facility certified by the
Development Allowance Authority to
qualify for concessional tax treatment
under Division 16L of the Income Tax
$385.0 million facility certified by the
Development Allowance Authority to
qualify for concessional tax treatment
under the Income Tax Legislation. The
86
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
The composition of the US Private Placement is outlined below:
Fixed Interest Rate
Tranche A
Tranche B
Tranche C
Total
Floating Interest Rate
Tranche D
Total
Total US Private Placement
USD
$’000
100,000
38,900
108,600
247,500
-
-
247,500
These facilities are secured by a first ranking charge over the cash flows of the Group.
f) Working Capital Facilities
During the year, the following facilities
were entered into:
$30.0 million facility which is
available for use until June 2009.
At 30 June 2005, $7.0 million of this
facility was drawn-down.
$150.0 million facility which is for a
term of 3 years from 18 March 2005.
At 30 June 2005, $82.5 million of this
facility was drawn-down
$450.0 million facility which is
composed of two Tranches from
27 June 2005. Tranche A ($255.0
million) which is for a term of 3 years
and Tranche B ($195.0 million) which
is for a term of 5 years. At 30 June
2005, $170.0 million of the Tranche
A facility was drawn-down. The
Tranche B facility remained unused
The $150.0 million and $450.0 million
facilities are secured by a first ranking
charge over the cash flows of the Group.
g) Land Transport Notes
The class A land Transport Notes were
repaid on 30 June 2004. The class B Land
Transport Notes are carried at a present
value of $0.4 million and will be repaid
no later than 30 days prior to the last day
of the concession period.
Maturity
December 2014
December 2016
December 2019
December 2019
AUD
$’000
130,942
50,936
142,202
324,080
72,000
72,000
396,080
h) Capital Markets Debt
Comprises bonds issued by Transurban
Finance Company with terms of 3, 5,
and 7 years from 8 August 2002. An
additional $150.0 million was raised in
December 2004 through the issuance
of non-credit wrapped fixed rate
Medium Term Notes.
These facilities are secured by a first
ranking charge over the cash flows
of the Group.
Annual Report 2005 87
financials
Notes to the financial statements for the year ended 30 June 2005
Maturing Maturing Maturing
2009
$‘000
2007
$‘000
2005
$‘000
Total
$‘000
Fixed interest rate
Credit wrapped
Non-credit wrapped
Floating interest rate
Credit wrapped (1)
Non-credit wrapped
175,000
260,000
435,000
-
-
-
-
175,000
150,000
410,000
150,000
585,000
65,000
240,000
360,000
665,000
90,000
-
-
90,000
155,000
240,000
360,000
755,000
Total Capital Markets Debt
590,000
240,000
510,000
1,340,000
(1)
The Group has the option to redeem the 5 year and 7 year facilities after 3 years.
The debt due for repayment on the 8 August 2005 was refinanced on 10 August 2005 by US $380.0 million (AU $500.0 million)
and AU $90.0 million from existing facilities. This replacement debt matures between 2015-2020.
i) Convertible Adjusting Rate Securities
$430.0 million raised via the issue of 4.3 million securities. Semi annual interest is paid at a fixed rate of 7.0 per cent per annum until
the first re-set date on 14 April 2007. These securities are generally convertible into Transurban Securities at a discount of 2.5 per
cent and rank ahead of Transurban Stapled Securities on a winding up of Transurban in conjunction with a winding up
of Transurban CARS Trust.
Transurban Holding Trust acts as guarantor for Transurban CARS Trust in relation to the interest payments to holders of CARS.
The term of this guarantee is until the first reset date, 14 April 2007, at which time the guarantee may or may not be extended.
Loans
Total facilities
Used at balance date
Unused at balance date
88
Annual Report 2005
2005
$’000
2004
$’000
4,448,155
3,087,000
4,077,655
3,037,000
370,500
50,000
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
19 Non-currrent Liabilities – Non-interest Bearing Liabilities
Forward exchange contract
Concession notes
Promissory notes
Tullamarine/Calder freeway upgrade
2005
$’000
2004
$’000
11,741
-
127,277
207,681
22,116
45,662
-
-
206,796
207,681
The face value of Concession Notes on
issue at 30 June 2005 is $586.4 million
(2004: $796.1 million). The Net Present
Value at 30 June 2005 of the redemption
payments relating to these Concession
Notes is $127.3 million (2004: $207.7
million). The indicative timing of these
redemption payments is set out in the
following table.
Concession Notes
CityLink Melbourne Limited issues
Concession Notes annually in satisfaction
of its obligations to pay Concession Fees
to the State of Victoria (“the State”) equal
to $95.6 million. The notes are due for
redemption at the end of the Concession
Period, but may be presented earlier
where a Notional Initial Equity Investor
has achieved a real after tax internal rate
of return on its equity investment in the
Project equal to 10 per cent per annum.
Once the threshold rate of return is
achieved, subsequent Concession Note
redemption payments are limited to not
more than 30 per cent of the distributable
cash flow for the previous year. Based
on forecast cash flows which assume
that concession fees are deductible
as incurred, the first Concession Note
payment is presently expected to occur
in the 2012 financial year.
Concession Notes have been included
in the Financial Report as non interest
bearing liabilities at the present value of
the expected future repayments. As the
timing and profile of these repayments
is largely determined by the available
equity cash flows of CityLink, the present
value of the expected future repayments
is determined using a discount rate
of 12 per cent which recognises their
subordinated nature.
Annual Report 2005 89
financials
Notes to the financial statements for the year ended 30 June 2005
Concession Note Redemption
Estimated Concession Note payments
Later than 5 years but not later than 10 years
Payable to the State
Receivable from the State
Later than 10 years but not later than 15 years
Payable to the State
Receivable from the State
Later than 15 years but not later than 20 years
Payable to the State
Receivable from the State
2005
$’000
2004
$’000
263,334
155,152
(263,334)
-
628,320
525,903
(41,920)
-
-
-
114,999
-
586,400
796,054
On 27 January 2005, the Transurban Group reached agreement with the State of Victoria and VicRoads to use CityLink Concession
Notes to fund an upgrade of the Tullamarine/Calder Freeway interchange.
Under the agreement, Transurban will provide $151.0 million to VicRoads which will be used to fund the upgrade. The agreement
provides the amount be payable to VicRoads in two installments on I July 2005 ($100.8 million, as per note 16) and 1 July 2006
($50.2 million being a present value of $45.7 million, as per note 19). In exchange, the State will assign to Transurban $305.3 million
of the Concession Notes issued by CityLink to the State under the provisions of the Melbourne CityLink Concession Deed.
Reconciliation
Reconciliation of movement in the Concession Note liability.
Concession Note liability at the start of the year
Concession Notes issued during the year
Valuation adjustments for the year:
Charge/(credit) for Concession Notes on issue at beginning of period
Credit for Concession Notes issued during the year
Tullamarine/Calder freeway upgrade adjustment
Concession Note liability at the end of the year
90
Annual Report 2005
2005
$’000
2004
$’000
207,681
170,696
95,600
95,600
24,851
20,483
(79,029)
(79,098)
(121,826)
-
127,277
207,681
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Promissory Notes
The Hills Motorway Trust has entered
into leases with the Roads and Traffic
Authority of New South Wales (“RTA”).
Annual lease liabilities under these leases
total $7.0 million, indexed annually to the
Consumer Price Index over the estimated
period that the M2 Motorway will be
used. Until such time as a threshold
return is achieved, payments under these
leases can be made at any time at the
discretion of the Responsible Entity of
the Trust, by means of the issue of non-
interest bearing promissory notes to the
RTA. Promissory Notes to the value of
$69.2 million have been issued by
the Trust since the beginning of the
M2 operations.
Promissory Notes have been included
in the Financial Report as non-interest
bearing liabilities at the present value
of expected future repayments. As the
timing and profile of these repayments
is largely determined by the available
equity cash flows of the M2 Motorway,
the present value of the expected
future repayments is determined using
a discount rate of 12 per cent which
recognises their subordinated nature.
The face value of promissory Notes on
issue at 30 June 2005 is $69.2 million.
The Net Present Value at 30 June 2005
of the redemption payments relating
to these Concession Notes is $22.1
million. The indicative timing of these
redemption payments is set out in the
following table.
Promissory Note Redemption
Estimated Promissory Note payments
Later than 5 years but not later than 10 years
Later than 10 years but not later than 15 years
Reconciliation
Reconciliation of movement in the Promissory Note liability.
Promissory Notes liability at the start of the year
Promissory Notes acquired
Promissory Notes issued during the year
Discount of Promissory Notes issued during the year
Promissory Note liability at the end of the year
20 Non-current Liabilities – Provisions
Employee entitlements
2005
$’000
2004
$’000
37,332
31,900
69,232
-
20,001
8,583
(6,468)
22,116
-
-
-
-
-
-
-
-
3,999
3,999
2,036
2,036
Annual Report 2005 91
financials
Notes to the financial statements for the year ended 30 June 2005
21 Contributed Equity
a) Stapled Securities
fully paid
2005
Number
2004
Number
2005
2004
‘000
‘000
$’000
$’000
791,416
532,630
4,127,228
2,242,030
791,416
532,630
4,127,228
2,242,030
b) Date
Details
Notes
Number of
Securities
Issue
Price
$’000
1 July 2004
Opening Balance
532,630
-
2,242,030
7 Sep 2004
Exercise of April 2001 Options
7 Sep 2004
Exercise of April 2002 Options
7 Sep 2004
Exercise of May 2002 Options
8 Oct 2004
Dividend Reivestment Plan Issue
26 Nov 2004
Exercise of April 2001 Options
26 Nov 2004
Exercise of May 2002 Options
24 Dec 2004
Exercise of February 2002 Options
21 Jan 2005
Exercise of April 2001 Options
16 Feb 2005
Exercise of April 2001 Options
16 Feb 2005
Exercise of May 2002 Options
12 Apr 2005
Hills Motorway Group Acquisition
1 June 2005
Exercise of May 2002 Options
2 June 2005
Exercise of April 2001 Options
2 June 2005
Exercise of May 2002 Options
7 June 2005
Exercise of May 2002 Options
8 June 2005
Exercise of October 2001 Options
8 June 2005
Exercise of May 2002 Options
8 June 2005
Exercise of April 2001 Options
e
e
e
d
e
e
e
e
e
e
f
e
e
e
e
e
e
e
449
63
63
$3.8170
1,714
$4.0300
$4.2200
253
265
6,024
$5.3194
32,042
60
30
90
129
132
10
$3.8170
$4.2200
$4.2800
$3.8170
$3.8170
$4.2200
229
128
385
492
505
44
249,901
$7.3699
1,841,743
46
150
46
142
500
99
121
$4.2200
$3.8170
$4.2200
$4.2200
193
573
193
600
$4.4042
2,202
$4.2200
$3.8170
419
462
92
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Date
Details
Notes
9 June 2005
Exercise of April 2001 Options
9 June 2005
Exercise of May 2002 Options
15 June 2005
Exercise of April 2001 Options
15 June 2005
Exercise of May 2002 Options
e
e
e
e
Number of
Securities
250
46
202
233
Issue
Price
$3.8170
$4.2200
$3.8170
$4.2200
Less: Transaction costs arising on
stapled security issues
30 June 2005
Closing Balance
791,416
$’000
954
193
770
985
146
4,127,228
c) Stapled Securities
d) Distribution
e) Options
Reinvestment Plan
The Transurban Group had established
a distribution reinvestment plan under
which holders of Stapled Securities elect
to have all or part of their distribution
entitlements satisfied by the issue of
new Stapled Securities rather than by
cash. Securities where issued under the
plan at a 2.5 per cent discount to the
market price. A decision to suspend the
plan until further notice was made and
reported to the ASX on 23 February 2005.
Stapled Securities entitle the holder
to participate in distributions and the
winding up of the Transurban Group
in proportion to the number of and
amounts paid on the securities held.
In the event that Transurban and
Transurban CARS Trust are wound
up simultaneously, then holders of
Transurban CARS securities would rank
ahead of Transurban Group Stapled
Security holders.
On a show of hands every holder of
Stapled Securities present at a meeting
in person or by proxy, is entitled to
one vote.
Information relating to the Transurban
Group Executive Option Plan, including
details of options issued, exercised, and
lapsed during the financial year and
options outstanding at the end of the
financial year are set out in note 29.
f) Hills Motorway Group
Acquisition
The consideration given to holders of Hills
Motorway Group securities on acquisition
by the Transurban Group consisted of 1.47
Transurban Group stapled securities and
a cash component of 25 cents per Hills
Motorway Group security.
Annual Report 2005 93
financials
Notes to the financial statements for the year ended 30 June 2005
2005
$’000
2004
$’000
(404,841)
(228,681)
(87,837)
(61,490)
(306,183)
(114,670)
(798,861)
(404,841)
142,455
-
71,983
51,847
91,745
62,823
163,728
114,670
131,686
32,042
54,145
60,525
163,728
114,670
22 Accumulated Losses
Accumulated losses
Accumulated losses at the beginning of the year
Net losses incurred during the year
Trust distributions to security holders
Accumulated losses at the end of year
23 Distributions
Distributions proposed
Final distribution payable and recognised as a liability:
18.0 cents per fully paid stapled security payable 2 September 2005
Distributions paid during the year
Final distribution for 2004 financial year of 13.5 cents (2003 – 10.0 cents)
per fully paid Stapled Security paid 8 October 2004
Interim distribution for 2005 financial year of 17.0 cents cents (2004 – 12.0 cents)
per fully paid Stapled Security paid 25 March 2005
Total distributions paid
Distributions paid in cash or satisfied by the issue of Stapled Securities under
the distribution reinvestment plan during the years ended 30 June 2005
and 30 June 2004
Paid in cash
Satisfied by issue of Stapled Securities
94
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
24 Financial Instruments
Interest rate swap contracts
The combined entity is party to financial
instruments with off-balance sheet
risks in the normal course of business in
order to hedge exposure to interest rate
and exchange rate fluctuations. These
instruments are not included in assets
or liabilities.
It is Transurban Group policy to protect
floating rate facilities from exposure to
increasing interest rates. Accordingly,
the consolidated entity has entered
into interest rate swap contracts under
which it is obliged to receive interest at
variable rates and to pay interest at fixed
rates. The contracts are settled on a net
basis and the net amount receivable or
payable at the reporting date is included
in other debtors or other creditors.
Swaps currently in place cover
approximately 81 per cent (2004: 86
per cent) of the floating rate loan
principal outstanding.
At 30 June 2005, the notional principal
amounts and periods of expiry of the
interest rate swap contracts are as follows:
1 - 5 years
Greater than 5 years
2005
$’000
132,000
2004
$’000
-
1,380,021
1,160,000
1,512,021
1,160,000
Cross-currency interest rate
swap contracts
fixed rates and to pay AUD interest at
floating rates.
The U.S. Private Placement in December
2004 involved raising fixed rate USD
debt. It is company policy to protect
foreign currency facilities from exposure
to unfavourable exchange rate
movements. Accordingly, the entity has
entered into cross-currency interest rate
swap contracts under which it is obliged
to receive foreign currency interest at
Swaps currently in place cover 100 per
cent of the foreign currency facilities.
These contracts are marked to market
by comparing the contractual rate to the
current market rate. As these contracts
are hedging anticipated principal and
interest payments, any unrealised
gains and losses on the contracts, are
deferred and will be recognised in
the measurement of the underlying
transaction provided the underlying
transaction is still expected to occur
as originally designated. The contracts
are settled on a net basis and the net
amount receivable or payable at the
reporting date is included in other
debtors or other creditors.
The following gains, losses and costs
have been deferred at 30 June 2005:
Notional Amount
Unrealised loss (note 19)
2005
$’000
335,821
(11,741)
324,080
2004
$’000
-
-
-
Annual Report 2005 95
financials
Notes to the financial statements for the year ended 30 June 2005
Interest Rate Risk
The combined entity’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in
the following tables.
2005
Floating Fixed Interest Maturity in:
interest
rate
1 year
or less
between
1 and 5
years
$’000
more
than 5
years
$’000
Financial Assets
Cash
Debtors
Debtors from related party
Construction Phase Loan Notes
Note
$’000
$’000
6
7
8, 13
11
395,561
-
-
-
-
-
-
392,000
Total Financial Assets
395,561
392,000
Weighted average interest rate
4.60%
6.27%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non
interest
bearing
Total
$’000
$’000
-
395,561
25,394
5,602
25,394
5,602
-
392,000
30,996
818,557
104,301
104,301
21,083
21,083
146,480
146,480
127,277
127,277
22,116
-
-
-
-
-
-
-
-
-
-
-
22,116
8,000
440,000
259,500
1,340,000
396,080
-
11,741
1,634,075
(1,634,075)
430,000
-
396
-
396
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
435,000
150,000
-
-
-
-
-
-
-
-
-
-
324,080
(335,821)
11,741
1,634,075
(1,634,075)
430,000
-
-
-
132,000
1,380,021
Financial Liabilities
Creditors
Prepaid tolls
14
16
Tullamarine/Calder freeway upgrade 16,19
Land Transport Notes
Concession Notes
Promissory Notes
Bank loan
Term Debt
Working Capital Facilities
Capital Markets Debt
US Private Placement
Cross-currency interest rate swaps
Forward Exchange Contract
Infrastructure loan facility
Cash collateral
CARS
Interest rate swaps
18
19
19
15
18
18
18
18
24
19
18
18
18
24
-
-
-
-
-
-
8,000
440,000
259,500
755,000
72,000
335,821
-
-
-
-
(1,512,021)
Total Financial Liabilities
358,300
435,000
712,000
1,380,417
421,257
3,306,974
Weighted average interest rate
6.23%
6.25%
7.40%
6.08%
Net Financial Assets / (Liabilities)
37,261
(43,000)
(712,000)
(1,380,417)
(390,261)
(2,488,417)
96
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Floating Fixed Interest Maturity in:
interest
rate
1 year
or less
between
1 and 5
years
$’000
more
than 5
years
$’000
2004
Financial Assets
Cash
Debtors
Other
Debtors from related party
Construction Phase Loan Notes
Total Financial Assets
Weighted average interest rate
Financial Liabilities
Creditors
Prepaid tolls
Release from single purpose
Land Transport Notes
Concession Notes
Bank loan
Tranche B Debt
Capital Markets Debt
Subordinated Debt Facility
Infrastructure loan facility
Cash collateral
CARS
Interest rate swaps
Total Financial Liabilities
Weighted average interest rate
Net Financial Assets / (Liabilities)
Note
$’000
$’000
6
207,452
7, 13
8, 13
8
11
14
16
16
18
19
15
18
18
18
18
18
18
24
-
-
-
-
207,452
5.05%
-
-
-
-
-
8,000
510,000
755,000
80,000
-
-
-
(1,160,000)
193,000
5.97%
14,452
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
392,000
392,000
6.27%
-
-
-
-
-
-
-
435,000
-
1,249,000
(1,249,000)
430,000
1,160,000
-
-
-
-
-
-
-
-
-
-
Non
interest
bearing
Total
$’000
$’000
-
207,452
30,885
30,885
6,540
3,287
6,540
3,287
-
392,000
40,712
640,164
79,722
20,121
3,150
79,722
20,121
3,150
248
248
-
-
-
-
-
-
-
-
-
-
207,681
207,681
-
-
-
-
-
-
-
-
8,000
510,000
1,190,000
80,000
1,249,000
(1,249,000)
430,000
-
2,025,000
248
310,674
2,528,922
3.76%
6.50%
(1,633,000)
(248)
(269,962)
(1,888,758)
Annual Report 2005 97
financials
Notes to the financial statements for the year ended 30 June 2005
Reconciliation of Net Financial Liabilities to Net Assets
Notes
24
9
8, 10, 12, 13
5, 16, 17, 19
As these contracts are hedging
anticipated future interest payments
and foreign exchange movements,
any unrealised gains and losses on the
contracts, together with the cost of
the contracts, are deferred and will be
recognised in the measurement of the
underlying transaction.
The valuation of interest rate swaps
reflects the estimated amounts which
the entity expects to pay or receive to
terminate the contracts or replace the
contracts at their current market rates
as at 30 June 2005.
2005
$’000
2004
$’000
(2,488,417)
(1,888,458)
5,943,389
53,125
(179,730)
3,328,367
3,604,281
131,286
(9,920)
1,837,189
Chairman – non-executive
Laurence G Cox
Non-executive directors
Peter C Byers, Geoffrey O Cosgriff,
Jeremy GA Davis, Susan M Oliver,
David J Ryan, Christopher C J Renwick (1)
Executive directors
Kimberley Edwards (2),
Geoffrey R Phillips (3)
25 Director and Executive
Disclosures
Directors
The following persons were directors
of entities within the Transurban Group
during the financial year:
(1)
(2)
(3)
Christopher J S Renwick was appointed a
non-executive director of TL, THL and TIML
on 26 July 2005 and continues in office at
the date of this report.
Kimberley Edwards was appointed
an executive director of Transurban
Infrastructure Management Limited on
26 July 2005 and continues in office at the
date of this report.
Geoffrey R Phillips was an executive director
of TL, THL and TIML from the beginning of
the financial year until his resignation on
26 July 2005.
Net financial liabilities as above
Non-financial assets and liabilities
– Property, plant and equipment
– Other assets
– Other liabilities
Net assets per balance sheet
Credit Risk
Credit risk represents the loss that would
be recognised if counterparties failed to
perform as contracted. The credit risk on
financial assets is the carrying amount
net of any provisions for doubtful debts.
Net Fair Values of Financial
Assets and Liabilities
The carrying amount and net market
value of financial assets and liabilities
brought to account at balance date are
the same.
The aggregate net fair value of interest
rate swaps not recognised in the
balance sheet (refer note 1y) held at
30 June 2005 is a liability of $49.8
million (2004: $0.3 million).
98
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Specified Executives
The following persons were the 6 executives with the greatest authority for the strategic direction and management of the Group
(“specified executives”) during the financial year.
Name
Chris Brant
Position
Chief Finance Officer
Brendan Bourke
CEO CityLink Melbourne Limited
Ken Daley
Paul O’Shea
Lisa Hunt
Vic Delosa
All of the above persons were also
specified executives of the Transurban
Group during the year ended 30
June 2004, except for Chris Brant
who commenced employment on 22
November 2004.
The specified executives identified
above, differ from those disclosed
in the Financial Report for the year
ended 30 June 2004 due to changes
in responsibility for the strategic and
operational direction of the Group.
Management considers the changes
to be appropriate due to the extent
of growth and maturity of the group
in the past 12 months.
Vice President International Development
General Counsel
General Manager, New South Wales
General Manager, Victoria/New Zealand
Remuneration of directors
and executives
Principles used to determine
the nature and amount of
remuneration
Non-Executive Directors
The remuneration of non-executive
directors consists of director’s fees,
committee fees and (subject to
eligibility) retirement benefits. Non-
executive directors are not provided
with any form of equity-based
compensation.
The constitutions of the entities
comprising the Transurban Group
(“the Group”) provides that the total
remuneration paid in a year to non-
executive directors may not exceed
$950,000 per entity. Subject to this
limit, remuneration structure and
amounts for non-executive directors
are recommended by the Nomination
& Remuneration Committee of the
Board with assistance from external
remuneration consultants. Liability
for the Superannuation Guarantee
Contribution is met from gross
remuneration. The current fee
arrangements were last reviewed
with effect from 1 January 2005.
In 1997, the Board implemented a
policy to provide retirement allowances
to non-executive directors. The policy
provides for an entitlement to a
lump sum payment (not exceeding
the maximum allowable under the
Corporations Act 2001) if the non-
executive director has completed a
minimum of three years service. The
lump sum is equivalent to the total
emoluments received during the
Relevant Period. The Relevant Period
is one-third of the director’s total
period of service or three years (both
calculated to the day of retirement),
whichever is the lesser. This policy
was reviewed in April 2003 and it was
resolved to continue the policy for
directors appointed prior to 29 April
2003, but not to extend the policy to
Annual Report 2005 99
financials
Notes to the financial statements for the year ended 30 June 2005
appointments made after that date.
Non–executive directors not entitled
to retirement benefits receive an
additional director’s fee.
Executive Directors and Executives
The key objectives of the Group’s policy
for executive remuneration are:
To secure employees with the skills
and experience necessary to meet
business objectives
To motivate employees to the
highest levels of performance
To align employee incentives with
increased shareholder value.
The policy seeks to support the Group’s
objective to be perceived as “an
employer of choice” by:
Offering remuneration levels which
are attractive relative to those
offered by comparable employers
Providing strong, transparent
linkages between individual and
group performance and rewards.
In consultation with external
remuneration consultants, the
Group has structured its executive
remuneration to reward both longer
term growth and the achievement
of short term performance targets.
Executives are remunerated through
a combination of base salary and
benefits, short-term incentives (“STI”)
in the form of cash bonuses and long-
term incentives (“LTI”). Until 30 June
2005, LTIs were provided via either the
Executive Option Plan or the Executive
Long Term Incentive Plan. Revised LTI
arrangements have been introduced
for the period beyond 30 June 2005.
The proportion of each component
of an executive’s total remuneration
is established by reference to
remuneration survey data for
comparable companies. As executives
progress in seniority, the proportion of
remuneration which is dependent on
the performance of the entity increases.
The incentive component of executive
remuneration is primarily determined
by financial performance relative to
short-term profitability targets and by
Total Shareholder Return relative to
the companies comprising the ASX200
index over the longer term.
The remuneration of the Managing
Director is established by the Board,
based on the recommendation of
the Nomination & Remuneration
Committee. The remuneration of
senior executives reporting to the
Managing Director is established by
the Nomination and Remuneration
Committee, based on the
recommendation of the Managing
Director.
The components of executive
remuneration are described below:
Base Pay
Base pay represents the fixed
component of executive remuneration
and is structured as a Total Employment
Cost (“TEC”). TEC consists of a mix of cash,
superannuation and prescribed benefits.
An executive’s TEC is reviewed annually
against market rates for comparable
roles. There are no guaranteed base pay
increases fixed in any executive’s contract
of employment.
Benefits
Executives receive benefits including
death and disability insurance, salary
continuance insurance and car parking.
Short-term Incentives
On an annual basis, the Company
makes available Short-term Incentive
(“STI”) payments to executives for
the achievement of Company
and individual performance (Key
Performance Indicators). A target STI
amount, expressed as a percentage of
the executive’s TEC, is specified for each
executive, but this amount is subject to
further adjustment for:
The extent to which a profit-related
Financial Performance Measure
(“FPM”) is achieved
The extent to which the executive
has achieved his/her Key
Performance Indicators (“KPIs”).
100
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Such adjustments can result in the
actual STI payment received by the
executive being above or below the
target. STI payments are made annually
in September following the annual
performance reviews.
The intent of the adjustment for the
extent to which the FPM is achieved is
to ensure that STI payments are only
made when value has been created for
securityholders and profit is consistent
with the business plan.
Each year, the FPM and the
KPIs for senior executives are
established by the Nomination &
Remuneration Committee, based
on recommendations made by the
Managing Director. The KPIs for the
Managing Director are established by
the Board based on recommendations
made by the Nomination &
Remuneration Committee.
The Nomination & Remuneration
Committee is also responsible for
assessing the extent to which the
FPM and the KPIs set for senior
executives have been achieved.
To assist in making these assessments,
the Committee receives reports from
the Chief Finance Officer and the
Managing Director respectively.
Business Generation Incentive Plan
The Group also operates a Business
Generation Incentive Plan (“BGIP”)
in which executives may participate,
depending upon their level of
involvement in generating new business.
The BGIP provides for cash bonuses to
be paid from a bonus pool determined
by the risk adjusted net present value of
a project or business venture. The BGIP
is intended to reward executives for
successful business generation activities,
based on the increase in security holder
value derived from new business. BGIP
payments are determined and awarded
by the Board, on the recommendation
of the Managing Director.
Long Term Incentives
Two forms of Long-term Incentives (“LTI”)
are currently in operation. The Executive
Option Plan (“EOP”) provides equity
rewards, while the Executive Long Term
Incentive Plan (“ELTIP”) provides cash
rewards linked to equity performance.
Both plans utilise Total Shareholder Return
as the basis for determining payment.
The EOP was introduced with a five
year term in 2001. Following a review in
2003, it was decided to make no further
issues of options under the EOP and to
introduce the ELTIP to provide long-term
incentives beyond the period when all
options issued under the EOP had vested.
No options were granted under the EOP
during this financial year. Details of the
EOP and ELTIP are set out below under
the heading “Share-based Options”.
A further review of the options available
to provide executives with LTIs was
undertaken in the current year and as a
result a revised Plan will be introduced
later in the year. The objective of the
revised Plan is to implement a more cost
effective Plan to the Group for a given
amount of incentive. In addition, the
revised Plan will take into consideration
those Plans which have been introduced
by a number of other companies whose
equity securities are stapled.
Employee Security Ownership Plan
Executives may elect to participate in
the Employee Security Ownership Plan
on the same basis as that offered to
all permanent employees. Executive
Directors do not currently participate
in the Plan.
Details of remuneration
Details of the remuneration of each
director of the Transurban Group and
each specified executives of the Group
for the financial year, including their
personally related entities, are set out
in the following tables:
Annual Report 2005 101
financials
Notes to the financial statements for the year ended 30 June 2005
Directors of the Transurban Group
Primary
Post-employment
Equity
Cash Long Term
Non-
Incentive (1) monetary annuation
Super- Retirement Options (2)
benefits
2005
Name
L G Cox
P C Byers
J G A Davis
S M Oliver
Cash salary
and fees
$
265,718
100,935
77,013
97,918
G O Cosgriff
101,852
D J Ryan
117,566
2004
Name
Cash salary
and fees
L G Cox
P C Byers
J G A Davis
S M Oliver
G O Cosgriff
$
250,043
96,347
89,997
95,429
86,253
D J Ryan
100,935
Bonus
$
-
-
-
-
-
-
Bonus
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
benefits
$
-
-
-
-
-
-
7,300
7,300
$
$
20,331
168,992
9,085
78,822
80,000
79,311
8,812
9,167
10,581
95,940
11,585
82,340
47,078
-
-
-
benefits
$
-
-
-
-
-
-
7,300
7,300
$
$
22,504
157,393
8,671
47,705
12,020
37,767
8,589
44,186
7,763
105,774
9,084
87,000
11,002
-
-
-
Total
$
455,041
188,842
236,324
189,070
158,097
128,147
Total
$
429,940
152,723
139,784
148,204
199,790
110,019
$
-
-
-
-
-
-
$
-
-
-
-
-
-
K Edwards
1,154,259
1,000,000
2,545,620
G R Phillips
538,509
262,500
-
183,999
4,987,118
61,333
881,227
Total
2,453,770
1,262,500
2,545,620
14,600
245,501
456,543
245,332
7,223,866
Primary
Post-employment
Equity
Cash Long Term
Non-
Incentive (1) monetary annuation
Super- Retirement Options (2)
benefits
K Edwards
1,013,000
550,000
204,528
G R Phillips
463,998
225,000
-
184,503
2,046,331
61,501
768,801
Total
2,196,002
775,000
204,528
14,600
166,633
392,825
246,004
3,995,592
102
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Specified executives of the Group
2005
Name
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
Total
2004
Name
B Bourke
K Daley
P O’Shea
K Reynolds
F Browne
L Hunt
V Delosa
J Barber
M Roberts
C Tizi
Total
Primary
Post-employment
Equity
Cash salary
and fees
$
Cash
Bonus
$
Long Term
Non-
Incentive (1) monetary
$
$
265,936
220,000
114,060
385,342
230,000
485,490
321,352
230,000
482,286
304,319
225,000
387,751
4,867
7,300
6,083
7,300
Super- Options (2)
Total
annuation
$
23,934
$
-
$
628,797
46,660
35,791
1,190,583
27,337
30,544
1,097,602
27,312
26,181
977,863
305,473
137,000
375,935
13,400
26,511
11,742
870,061
263,121
217,500
73,804
7,300
48,860
29,355
639,940
1,845,543
1,259,500
1,919,326
46,250
200,614
133,613
5,404,846
Primary
Post-employment
Equity
Cash salary
and fees
$
Cash
Bonus
$
Non-
Long Term
Incentive (1) monetary
$
$
Super- Options (2)
Total
annuation
$
$
$
332,057
150,000
38,499
15,942
42,943
43,664
623,105
218,851
100,000
40,906
18,532
91,149
37,264
506,702
193,851
130,000
31,281
9,778
91,149
31,940
487,999
261,469
90,000
30,078
18,434
23,531
31,940
455,452
348,530
-
-
18,585
31,470
47,798
446,383
261,379
100,000
30,078
15,110
23,621
11,774
441,962
261,379
90,000
-
18,527
23,621
29,435
422,962
203,246
100,000
24,062
18,520
36,754
26,617
409,199
229,270
100,000
229,270
-
-
-
18,821
20,730
29,435
398,256
12,187
20,730
31,940
294,127
2,539,302
860,000
194,904
164,436
405,698
321,807
4,486,147
(1)
(2)
The amount disclosed as Long Term Incentive remuneration is that part of the value of the incentive which is attributable to the current year portion of the
vesting period for each current allocation.
No options were granted during the year over Transurban Group Stapled Securities. Option remuneration relates to options granted to Executive Directors
and Executives in prior financial years. The amounts disclosed as remuneration in the current year is that part of the value of the options which is attributable
to the current year portion of the vesting period.
Annual Report 2005 103
financials
Notes to the financial statements for the year ended 30 June 2005
Service agreements
Remuneration for the Managing Director,
the Deputy Managing Director and
the executives specified above are
formalised in service agreements. Each of
these agreements provides for access to
performance-related cash bonuses, other
benefits including death and disability
insurance, salary continuance insurance
and car parking, and participation,
when eligible, in the Employee Share
Ownership Plan, the Executive Option
Plan, the Executive Long Term Incentive
Plan and the Business Generation
Incentive Plan. Other major provisions
of the agreements, relating to
remuneration, are set out below:
Executive Directors
K Edwards, Managing Director
Term of Agreement – permanent,
subject to 3 months notice of
termination by either party
Fixed remuneration including base
salary and superannuation, for
the year ended 30 June 2005 of
$1,250,000 to be reviewed annually
by the remuneration committee
and the Board
On 25 July 2005, the terms of
Mr Edwards’ service agreement
was varied to provide for a payment
of one year’s fixed remuneration
upon termination.
G R Phillips, Deputy Managing
Director
Term of Agreement –
until 31 July 2005
Base salary, including
superannuation, for the year ended
30 June 2005 of $550,000
On 25 July 2005, Mr Phillips’
service agreement was varied to
provide for a termination benefit of
$990,000 in recognition of his long
service to the Group and his non-
participation in the Executive Long
Term Incentive Plan.
Other Executives
The major provisions contained in
the service agreements of the other
executives listed in the table in the
section headed ‘Details of Remuneration”
are the same for all executives except
for the base salary component. These
provisions are:
Term of agreement – permanent,
subject to termination on 3 months
notice by either party
Eligible to participate in the
Transurban Group’s Employee Share
Ownership Plan and Executive Long
Term Incentive Plan
Total Employment Cost is reviewed
annually by the Nomination and
Remuneration Committee.
The components of Total Employment
Cost, comprising base salary,
superannuation and benefits for these
executives for the year ended 30 June
2005 is set out in the above tables.
Share-based compensation – options
The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows:
Grant date
Expiry date
Exercise
price
Value per
option at
grant date
Date exercisable
26 April 2001
30 April 2006
23 October 2001
31 October 2006
1 February 2002
30 April 2007
9 April 2002
30 April 2007
20 May 2002
30 April 2007
104
Annual Report 2005
$3.817
$4.404
$4.280
$4.030
$4.220
$0.425
$0.491
$0.477
$0.449
$0.470
One-third after 28/04/03, 26/04/04, 26/04/05
One-third after 28/04/03, 26/04/04, 26/04/05
One-third after 01/02/04, 01/02/05, 01/02/06
One-third after 20/05/04, 20/05/05, 20/05/06
One-third after 20/05/04, 20/05/05, 20/05/06
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Under the ELTIP, participants are
allocated “ELTI units”. Each ELTI unit
entitles the holder to a cash payment
on the maturity date, which will be
approximately two years after the date
of allocation. The cash payment per
unit will be equal to the increase in the
stapled security price over the period
between the date of allocation and the
maturity date. The proportion of ELTI
units which vest with the executive at
maturity is dependent on the Transurban
Group’s ranking in the Total Shareholder
Returns (“TSRs”) of the companies within
the ASX 200 Industrials over the two
years prior to maturity. If Transurban’s TSR
ranking is below the 40th percentile, no
payment will be made. For TSR rankings
between the 40th and 70th percentiles,
the proportion increases linearly from 25
per cent to 100 per cent. If Transurban’s
TSR ranking is above the 70th percentile,
the proportion is 100 per cent.
The terms and conditions of each
grant of long term incentive plan units
affecting remuneration in this or future
reporting periods are as follows:
The exercise price of options is the
volume weighted average price of the
Group’s stapled securities over a period
of 5 business days immediately prior to
granting the options. When exercised,
each option is converted into one
stapled security, comprising one ordinary
share in Transurban Limited, one ordinary
share in Transurban Holdings Limited
and one unit in Transurban Holding Trust.
Options can be exercised at any time
after vesting.
Fair values at grant date are
independently determined, using a
Black-Scholes derived option valuation
model taking into consideration the
exercise price, the term of the option,
the market price of Transurban Group
stapled securities on the grant date, the
expected price volatility of Transurban
Group stapled securities, expected future
distributions and the risk free rate of
interest over the term of the options.
Share-based compensation
– Executive long term incentive
(“ELTI”) plan
The ELTIP was introduced in 2003 to
provide long term incentives to executive
directors and executives in the period
after issued options have fully vested.
Options are issued at no cost to the
Option holder and vest in three equal
tranches on the second, third and fourth
anniversaries of their issue. The Exercise
of the options is subject to an Exercise
Condition. The Exercise Condition
involves a comparison between Total
Shareholder Return (“TSR”) of The
Transurban Group’s Stapled Securities
over the two years prior to a vesting date
of options and the TSR of each of the
other companies in the S&P/ASX 200
Industrials as at the end of the relevant
Exercise Condition Test Period which
have been in the S&P/ASX 200 Industrials
for the full term of the Exercise Condition
Test Period (“Test Companies”) measured
over the same period.
TSR measures the total return on
investment of a security. It takes into
account both capital appreciation and
distribution income. The Transurban
Group and each of the Test Companies
are ranked according to their respective
TSRs over the Exercise Condition Test
Period. The ranking determines the
extent to which vested options may be
exercised. If the Group’s TSR exceeds
the 65th percentile of the ranking, 100
per cent of the vested options may be
exercised. If Transurban Group’s TSR is
below the 25th percentile of the ranking,
none of the vested options may be
exercised. If the TSR falls between these
percentiles, the percentage of vested
options that may be exercised will be
calculated according to a formula.
Annual Report 2005 105
financials
Notes to the financial statements for the year ended 30 June 2005
Grant
date
Expiry
date
Grant
price
Units on
issue
Value per
unit at
grant date
Value per
unit at
reporting
date
Date
Payable
30 Sept 2003
30 Sept 2005
30 Sept 2004
30 Sept 2006
$4.23
$5.45
1,912,000
2,965,000
$0.46
$0.54
$2.98
30 Nov 2005
$1.79
30 Nov 2006
Name
Directors of the Transurban Group
K Edwards
G Phillips
Specified executives of the Transurban Group
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
Number of ELTIs
granted during the year
Number of ELTIs
paid during the year
800,000
-
170,000
160,000
120,000
120,000
120,000
110,000
-
-
-
-
-
-
-
-
Equity instrument disclosures relating to directors and executives
Options provided as remuneration
Details of options over stapled securities provided as remuneration to each director of the Transurban Group and each specified
executives of the Group are set out below.
106
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Name
Directors of the Transurban Group
K Edwards
G R Phillips
Specified executives of the Transurban Group
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
Number of options
granted during the year
Number of options
vested during the year
-
-
-
-
-
-
-
-
500,000
166,667
-
116,667
116,667
100,000
33,333
83,333
Stapled Securities provided on exercise of remuneration options
Details of stapled securities provided as a result of the exercise of remuneration options to each director of the Transurban Group
and each specified executives of the Group are set out below.
Name
Date of exercise of options
Number of stapled
securities issued
on exercise of options
during the year
Directors of Transurban Limited
K Edwards
G R Phillips
Specified executives of the consolidated entity
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
-
8 June 2005
-
7 September 2004
9 June 2005
7 September 2004
16 February 2005
8 June 2005
-
15 June 2005
-
500,000
-
100,000
250,000
100,000
83,231
121,069
-
166,667
Annual Report 2005 107
financials
Notes to the financial statements for the year ended 30 June 2005
The amounts paid per stapled security by each director and executive on the exercise of options at the date of exercise
were as follows:
Exercise date
7 September 2004
16 February 2005
8 June 2005
8 June 2005
9 June 2005
15 June 2005
15 June 2005
Amount paid per stapled security
$3.817
$3.817
$4.404
$3.817
$3.817
$3.817
$4.220
No amounts are unpaid on any shares issued on the exercise of options.
Option holdings
The number of options over stapled securities held during the financial year by each director of the Transurban Group and each
specified executive of the Group, including their personally-related entities, are set out below.
Name
Balance at
the start of
the year
Granted
during
the year as
remuneration
Exercised
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Directors of Transurban Group
K Edwards
G R Phillips
1,500,000
500,000
Specified executives of the combined entity
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
-
350,000
350,000
204,300
100,000
250,000
108
Annual Report 2005
-
-
-
-
-
-
-
-
-
1,500,000
1,500,000
500,000
-
350,000
100,000
204,300
-
-
-
-
-
-
250,000
250,000
-
-
-
100,000
100,000
166,667
83,333
-
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Stapled Security holdings
The number of Transurban Group Stapled Securities and Convertible Adjusting Rate Securities (“CARS”) held during the financial
year by each director of the Transurban Group and each specified executive of the Group, including their personally-related entities,
are set out below.
Stapled Securities
Name
Directors of Transurban Limited
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
D J Ryan
K Edwards
G R Phillips
Specified executives of the consolidated entity
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
Balance at
the start of
the year
Received
during the
year on the
exercise of
options
Other
changes
during
the year
Balance at
the end of
the year
775,000
50,000
24,910
50,000
60,993
21,043
61,000
-
-
5,493
14,536
179,055
1,964
4,475
-
-
-
-
-
-
-
500,000
-
350,000
100,000
204,300
-
166,667
367,500
20,580
-
-
1,547
534
-
8,820
-
2,217
3,028
(2,616)
-
2,159
1,142,500
70,580
24,910
50,000
62,540
21,577
61,000
508,820
-
357,710
117,564
380,739
1,964
173,301
Annual Report 2005 109
financials
Notes to the financial statements for the year ended 30 June 2005
CARS
Name
Directors of Transurban Limited
Balance at
the start of
the year
Received
during the
year on the
exercise of
options
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
D J Ryan
K Edwards
G R Phillips
Specified executives of the consolidated entity
C Brant
B Bourke
K Daley
P O’Shea
L Hunt
V Delosa
1,000
-
121
-
-
-
-
-
-
400
750
400
200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other
changes
during
the year
(1,000)
-
-
-
-
-
-
-
-
-
(750)
(400)
-
-
Balance at
the end of
the year
-
-
121
-
-
-
-
-
-
400
-
-
200
-
Other transactions with
directors and specified
executives
Mr Cox is a director of Macquarie
Corporate Finance Limited (a wholly
owned subsidiary of Macquarie Bank
Limited). Transurban Limited is entitled to
receive management fees of $6.5 million
from Macquarie Bank in relation to the
extension of the term of the Infrastructure
Borrowing Facilities provided by
Macquarie Bank. This fee was recognised
during the year ended 30 June 2004.
During this year $1.4 million was received
with the remainder due to be received
quarterly over the next 2 years. The
Transurban Group also shares the cost
of Mr Cox’s personal assistant.
Macquarie Bank Limited acted as principal
financial advisor during the acquisition
of the Hills Motorway Group by the
Transurban Group and was involved in
the financial arrangements concerning
the Land Transport Notes of which
Mr Cox holds 51,188 Class B Land
Transport Notes.
Mr Byers is a director of Hills Motorway
Limited, in which Transurban Holding
Trust held a 8.1 per cent interest until
the Transurban Group gained control
on 12 April 2005 (refer note 30).
110
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Aggregate amounts of each of the above types of other transactions with directors of the Transurban Group:
Amounts recognised as revenue
Management fees
Distribution from Hills Motorway Group
Amounts recognised as expenses
Assistant fees
Amounts recognised as acquisition costs
Current liabilities – Macquarie Bank Limited
2005
$’000
2004
$’000
-
2,025
2,025
31
31
12,649
12,649
6,523
1,044
7,567
-
-
-
-
All of the above amounts represent payments on normal commercial terms made in relation to the provision of goods and services.
Aggregate amounts payable to or receivable from director related entities of the Transurban Group at balance date relating to the
above types of transactions.
Current assets – Hills Motorway Group
Current assets – other related parties
Current assets – Macquarie Bank Limited
Non-current assets – Macquarie Bank Limited
2005
$’000
-
690
2,798
2,114
5,602
2004
$’000
2,625
-
1,395
5,128
9,148
Annual Report 2005 111
financials
Notes to the financial statements for the year ended 30 June 2005
26 Remuneration of Auditors
During the year the following services were paid to the auditor of the Transurban Group and its related practices:
Assurance services
1 Audit services
Audit and review of financial reports and other audit work
under the Corporations Act 2001.
Fees paid to non-PricewaterhouseCoopers audit firms for the audit
or review of financial reports
Total remuneration for audit services
2 Other assurance services
Due diligence
Compliance plan audit
Other assurance services
IFRS accounting services
Fees paid to non-PricewaterhouseCoopers audit firms
2005
$
2004
$
335,750
297,150
40,000
-
375,750
297,150
432,500
168,430
24,700
-
115,000
12,360
21,200
20,100
-
-
Total remuneration for other assurance services
584,560
209,730
Taxation services
Tax compliance services, including review of income tax returns
Indirect taxes services
Fees paid to non-PricewaterhouseCoopers audit
Total remuneration for taxation services
191,865
200,320
619,530
26,436
-
-
837,831
200,320
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers’ expertise and experience with the consolidated entity are important. These assignments are principally
tax advice and financial due diligence.
112
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
27 Contingent
Liabilities/Assets
Contingent Liabilities
(a)
In May 2003, VicRoads submitted
an invoice to CityLink Melbourne
Limited for costs of approximately
$5.0 million for rectification works
associated with the Swan Street
Bridge. CityLink Melbourne Limited
does not believe that it has any
liability to VicRoads to pay those
costs. In January 2005, VicRoads
served a writ in the Supreme Court
of Victoria on CityLink Melbourne
Limited and the entities forming
the Transfield Obayashi joint
venture, claiming certain damage
was sustained by the Swan Street
Bridge. VicRoads claim that this
damage was due to tunnelling,
roadworks and associated
infrastructure works on and in the
vicinity of the Swan Street Bridge,
arising from the Melbourne CityLink
project. The parties are currently
discussing the claim.
(b) The Transurban Group has
established a bank guarantee of
$5.0 million in favour of a controlled
entity in a form prescribed by ASIC
to accommodate the net tangible
asset conditions of the controlled
entity’s Australian Financial Services
Licence. The controlled entity is
unable to act as a Responsible
Entity for certain Transurban Group
entities if the bank guarantee
conditions are not satisfied.
Contingent Asset
CityLink Melbourne Limited (“CML”) is
seeking compensation from the State
of Victoria, claiming that Wurundjeri
Way (Docklands) has had a Material
Adverse Effect on the toll revenue
earning capacity by CML. The claim
is approximately $36.0 million (net
present value at the time of the initial
claim under the Concession Deed).
CML has appealed against the Expert
Determination handed down on
3 July 2002. The appeal will be heard
by a panel of arbitrators.
28 Commitments for Expenditure
Lease commitments
Commitments for minimum payments in relation to non-cancellable operating
lease contracted for at the reporting date but not recognised as liabilities payable:
Within one year
Later than one year but not later than 5 years
Later than 5 years
2005
$’000
2004
$’000
2,706
9,354
-
1,905
8,488
-
12,060
10,393
Annual Report 2005 113
financials
Notes to the financial statements for the year ended 30 June 2005
Concession Fees
Promissory Notes
The Melbourne CityLink Concession
Deed between the Transurban Group
and the State of Victoria provides for
annual concession fees of $95.6 million
during the construction phase and
for the first 25 years of the operations
phase, $45.2 million for years 26 to
34 of the operations phase and $1.0
million thereafter if the concession
continues beyond year 34. Until a
certain threshold return is achieved,
payments of concession fees due under
the Concession Deed will be satisfied
by means of the issue of non-interest
bearing Concession Notes to the State.
Refer to note 19 for details.
The Responsible Entity, on behalf of the
Hills Motorway Trust, has entered into
leases with the Roads and Traffic Authority
of New South Wales (“RTA”). Annual lease
liabilities under these leases total $7.0
million indexed annually to the Consumer
Price Index over the estimated period that
the M2 Motorway will be used. Until such
time as a threshold return is achieved,
payments under these leases can be
made at the discretion of the Responsible
Entity, by means of the issue of non-
interest bearing promissory notes to the
RTA. Refer to note 19 for details.
Options Over Further Interest
in Westlink M7 Motorway
Project
Wholly-owned entities of the Transurban
Group have options to acquire an
additional 10.0 per cent interest (5.0
per cent for $49.0 million and 5.0 per
cent at market value) in the Westlink
M7 project, which would take its overall
holding to 50.0 per cent. These options
are with Leighton Group and Abigroup,
the construction partners in the project.
Macquarie Infrastructure Group has
similar options to take their holding to
50.0 per cent.
29 Employee Entitlements
Employee benefit and related on-costs liabilities
Current (note 17)
Non-current (note 20)
2005
$’000
2004
$’000
15,146
3,999
19,145
5,570
2,036
7,606
2005
Number
2004
Number
Employee numbers
Average number of employees during the financial year
460
407
114
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
a) Transurban Group Executive Option Plan
Refer to note 25 for details of the Transurban Group Executive Option plan.
Set out below are summaries of options granted under the plan.
Grant date
Expiry date
Exercise Balance at
at start of
the year
price
Issued
during
the year
Exercised
during
the year
Lapsed
during
the year
Balance
at end of
the year
2005
26 April 2001
April 2006
$3.817
2,004,300
23 October 2001
October 2006
$4.404
2,000,000
1 February 2002
April 2007
$4.280
400,000
9 April 2002
20 May 2002
Total
2004
April 2007
$4.030
300,000
April 2007
$4.220
1,500,000
6,204,300
26 April 2001
April 2006
$3.817
2,100,000
23 October 2001
October 2006
$4.404
2,000,000
1 February 2002
April 2007
$4.280
400,000
9 April 2002
20 May 2002
Total
April 2007
$4.030
300,000
April 2007
$4.220
1,550,000
6,350,000
-
-
-
-
-
-
-
-
-
-
-
-
1,493,231
121,069
390,000
500,000
-
1,500,000
89,867
310,133
-
62,700
-
237,300
715,598
39,550
744,852
2,861,396
470,752
2,872,152
95,700
-
-
-
-
-
-
-
-
2,004,300
2,000,000
400,000
300,000
50,000
1,500,000
95,700
50,000
6,204,300
Annual Report 2005 115
financials
Notes to the financial statements for the year ended 30 June 2005
Options exercised during the financial year and number of stapled securities issued to employees on the exercise of options.
Exercise date
26 February 2004
7 September 2004
26 November 2004
24 December 2004
21 January 2005
21 February 2005
15 June 2005
Fair value
of issue shares
at issue date
Number
2005
Number
2004
$4.465
-
95,700
$5.630
574,510
$5.410
90,300
$6.540
89,867
$6.760
128,931
$7.420
142,791
$7.370
1,834,997
-
-
-
-
-
-
2,861,396
95,700
The fair value of stapled securities issued on the exercise of options is the week weighted extra space average price at which
the Transurban Group’s stapled securities were traded on the Australian Stock Exchange during the week prior to the exercise
of the options.
Options vested since commencement of the scheme to the reporting date
5,316,667
2,100,000
2005
Number
2004
Number
Aggregate proceeds received from employees on the exercise of options
and recognised as issued capital
Fair value of shares issued to employees on the exercise of options as at their issue date
2005
$
2004
$
11,558,898
365,287
2005
$’000
19,859
2004
$’000
427
116
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
b) Employee share scheme
The Transurban Employee Security Ownership Plan (“the Plan”) was introduced in March 2002. The scheme offers employees the
opportunity to participate in the success of the Company by investing in securities of the Group.
All current full-time and permanent part-time (excluding directors) and fixed term staff on contracts greater than 12 months are
eligible to participate. Offers under the scheme are at the discretion of the Transurban Group, taking into account the Group’s
success and market performance.
Stapled Securities issued under the scheme may only be sold once the employee has ceased employment with the company.
In all other aspects the Stapled Securities rank equally with other fully-paid securities on issue.
In December 2004, each participant was issued 100 stapled securities (2004 - 120 stapled securities) at a value of $7.65 per stapled
security (2004 – $4.44).
Shares purchased on market under the plan and provided to
participating employees on 18 February 2005
c) Employee Long Term Incentive (“ELTI”) Plan
Refer to note 25 for details of the Transurban ELTI Plan.
2005
Number
2004
Number
37,000
40,440
The terms and conditions of each grant of long term incentive plan units affecting remuneration in this or future reporting periods
are as follows:
Grant
date
Expiry
date
Grant
price
Units on
issue
30 Sept 2003
30 Sept 2005
30 Sept 2004
30 Sept 2006
$4.23
$5.45
1,912,000
2,965,000
Value per
unit at
grant
date
$0.46
$0.54
Value per
unit at
reporting
date
Date
Payable
$2.98
$1.79
30 Nov 2005
30 Nov 2006
Annual Report 2005 117
financials
Notes to the financial statements for the year ended 30 June 2005
30 Investment in Controlled Entities
Name of Entity
Country of
Incorporation
Class of
Security
Equity
Holding
2005 %
Equity
Holding
2004 %
Date
Acquired
The CityLink Trust
CityLink Melbourne Limited
City Link Extension Pty Ltd
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Transurban Infrastructure Management Limited
Australia
Ordinary
Transurban Collateral Security Pty Ltd
Transurban Finance Trust
Transurban Finance Company Pty Ltd
Transurban Nominees Pty Ltd
Transurban Nominees 2 Pty Ltd
Transurban WSO Pty Ltd
Transurban AL Trust
Transurban CARS Trust
Transurban WSO Trust
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Transurban Infrastructure Developments WSO Pty Ltd
Australia
Ordinary
Transurban MF 1 Pty Ltd
Transurban MF 2 Pty Ltd
Transurban Asset Management Pty Ltd
Transurban Operations Pty Ltd
Transurban MF Holdings Pty Ltd
Transurban Investments Pty Ltd
Transurban (USA) Inc
The Hills Motorway Ltd
Hills Motorway Management Ltd
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
USA
Ordinary
Australia
Ordinary
Australia
Ordinary
Hills Motorway Construction Company Pty Ltd
Australia
Ordinary
Hills Motorway Underwriting No.1 Pty Ltd
Australia
Ordinary
Hills Motorway Underwriting No.2 Pty Ltd
Australia
Ordinary
Hills Motorway Trust
Hills Motorway Holdings Trust
Australia
Ordinary
Australia
Ordinary
118
Annual Report 2005
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
5/04/2004
- 25/01/2005
- 26/04/2005
8.1 12/04/2005
8.1 12/04/2005
8.1 12/04/2005
8.1 12/04/2005
8.1 12/04/2005
8.1 12/04/2005
8.1 12/04/2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Acquisition of Controlled Entities
On 12 April 2005 the Transurban Group gained control of The Hills Motorway Group. This occurred through the acquisition of the
remaining 91.9 per cent of the stapled securities of The Hills Motorway Group for a total consideration of $1,907.8 million. This was
satisfied by the issue of 249.9 million Transurban Group stapled securities for $1,841.7 million, a cash component of $42.5 million
being 25 cents per stapled security acquired and the incidental costs of acquisition.
The operating results of this newly controlled entity have been included in the aggregated Transurban Group statement of financial
performance since the date of acquisition. At the date of this financial report no additional payments are anticipated.
Details of the acquisition are as follows:
Fair value of identifiable net assets of controlled entities acquired
M2 Motorway
Equipment & fittings
Cash
Prepayments
Other debtors
Deferred expenditure
Trade creditors
Unearned income
Accrued interest
Other creditors
Employee provisions
Tax provisions
Promissory notes
Bank debt
Refinancing Infrastructure Bonds
Cash collateral
Less: existing investment of 8.1 per cent
Deemed consideration paid
2005
$’000
2,445,306
9,621
27,425
1,738
47,211
324
(7,723)
(638)
(10,757)
(32,389)
(9)
(10,882)
(20,001)
(447,000)
(350,068)
350,068
2,002,226
(94,419)
1,907,807
Annual Report 2005 119
financials
Notes to the financial statements for the year ended 30 June 2005
Total consideration comprised:
Units issued
Cash consideration paid to Hills security holders
Incidental costs settled by cash
Incidental costs included in current liabilities
Net cash acquired from purchase of controlled entity
Cash consideration
Less: Balances acquired
Inflow of cash
31 Investment in Associates
2005
$’000
1,841,744
42,500
2,969
20,594
1,907,807
45,469
(377,493)
(332,024)
Investments in associates are accounted for in the combined financial statements using the equity method of accounting.
Information relating to the associates is set out below.
Name of company
WSO Company Pty Limited
Westlink Motorway Limited
WSO Finance Company
Ownership interest
2005
%
2004
%
40
40
40
40
40
40
Combined entity
carrying amount
2005
$’000
2004
$’000
-
-
-
-
-
-
WSO Company, Westlink Motorway Limited and WSO Finance Company are presently non-operational and are carried at cost
of $80 each. WSO Company will be the operator of Westlink M7 Motorway which is presently under construction and is due for
completion in April 2006. Westlink Motorway Limited is the nominee manager of the Westlink Motorway Partnership and WSO
Finance Company will arrange debt facilities for the Westlink Motorway Project. The associates are not expected to have an impact
on the combined entity’s equity accounted profits until operations commence.
120
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Summary of performance and financial position of associates
Aggregate net profits of associates after tax
Assets
Liabilities
32 Interest in Joint Ventures
Name of company
Westlink Motorway Partnership
2005
$’000
2004
$’000
-
-
382,325
108,501
382,325
108,501
Ownership interest
2005
%
40
2004
%
40
Combined entity
carrying amount
2005
$’000
6,236
2004
$’000
6,236
The combined entity has a 40% interest in the Westlink Motorway Partnership, the principal activity of which is the construction
of the Westlink M7 Motorway in Sydney. The M7 is presently in the construction phase and is due for completion in April 2006.
The partnership is unlikely to have an impact on the combined entity’s equity accounted profits until operations commence.
Share of partnership assets and liabilities
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Share of Profits
Share of partnership commitments
Capital commitments
2005
$’000
2004
$’000
5,225
2,932
580,709
355,834
585,934
358,766
28
31,306
585,906
327,460
585,934
358,766
-
-
-
-
522,288
327,484
Annual Report 2005 121
financials
Notes to the financial statements for the year ended 30 June 2005
33 Reconciliation of Operating Loss After Income Tax to Net Cash Flow
from Operating Activities
Operating loss after income tax
Depreciation and amortisation
Net exchange differences
Project expenses written off
Change in operating assets and liabilities
Increase in Concession Note liability
(Decrease)/increase in creditors
Decrease/(increase) in debtors
Increase in provisions
Net cash inflow from operating activities
34 Non-cash Financing and Investing Activities
Pre-acquisition portion of distribution receivable from
Hills Motorway Group Ltd offsetting the cash purchase price
Distributions satisfied by the issue of stapled securities under the
distribution reinvestment plan
Issue of stapled securities to acquire the Hills Motorway Group (refer note 30).
2005
$’000
2004
$’000
(87,837)
(61,490)
179,396
152,400
(714)
9,423
-
-
43,537
(74,818)
36,985
13,290
66,884
(4,501)
11,101
1,560
146,972
138,244
-
1,581
32,042
60,525
Agreement with the State of Victoria and VicRoads in relation to the Tullamarine/Calder Freeway Interchange (refer note 19).
122
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
35 Earnings per Stapled Security
Basic earnings per Stapled Security
Diluted earnings per Stapled Security
Weighted average number of Stapled Securities used as
the denominator in calculating basic earnings per Stapled Security
Weighted average number of Stapled Securities and potential
Stapled Securities used as the denominator in calculating diluted
earnings per Stapled Security
2005
2004
(14.8) cents
(11.7) cents
(6.4) cents
(4.1) cents
591,871,852 524,512,875
1,044,264,422 985,000,351
Reconciliation of earnings used in calculating diluted earnings per stapled security
Net loss
Interest savings on CARS
Earnings used in calculating diluted earnings per stapled security
Information concerning the
classification of securities
stapled security. The options have not
been included in the determination of
basic earnings per stapled security.
2005
$’000
2004
$’000
(87,837)
(61,490)
21,128
21,128
(66,709)
(40,362)
for the purpose of conversion of CARS
is determined to be less than $0.98. The
directors consider conversion of this basis
to be a highly unlikely event. The CARS
have not been included in the calculation
of basic earnings per stapled security.
(a) Stapled Securities
All Stapled Securities are fully paid.
They carry the right to participate in
distributions and have been included in
the determination of basic and diluted
earnings per stapled security.
(b) Options
Options granted to executives under
the Transurban Executive Option Plan
are considered to be potential stapled
securities and have been included in the
determination of diluted earnings per
(c) Convertible Adjusting Rate
Securities (“CARS”)
CARS on issue are convertible to stapled
securities at a maximum conversion
ratio of 105, at the first reset date 14
April 2007. CARS are considered to be
potential stapled securities and have
been included in the determination of
diluted earnings per stapled security at
their maximum conversion ratio. This ratio
will be applicable if the volume weighted
average price of stapled securities
during the period over which the price
36 Event Occuring After
Reporting Date
Capital markets debt totaling $590.0
million matured on 8 August 2005. The
debt was replaced by an issue of USD
$380.0 million (AUD $500.0 million) of
senior debt in the US private placement
market and AUD$90.0 million from
existing facilities. The refinanced debt
matures between 2015 and 2020.
Annual Report 2005 123
financials
Notes to the financial statements for the year ended 30 June 2005
was on schedule for completion by 30
June 2005 until the acquisition of Hills
Motorway Group added a further level
of complexity that has not yet been fully
determined. It is now expected that the
project will be completed (including the
calculation of the impact of AIFRS) by
the first AIFRS reporting date being the
period ending on 31 December 2005.
The project team is undertaking a
detailed analysis of AIFRS and the Group’s
accounting policies to determine the
effects on the opening balance sheet
to be prepared on the date of transition
to AIFRS and future accounting policy
differences. The project team has
identified a number of accounting policy
choices which have been analysed by
management to determine the most
appropriate accounting policy for the
Group on transition to IFRS.
The known or reliably estimable impacts
on the financial report for the year ended
30 June 2005 had it been prepared using
AIFRS are set out below. As mentioned
above, this may not be all of the impacts
that may arise. The expected financial
effects of adopting AIFRS are shown
for each item with descriptions of the
differences. No material impacts are
expected in relation to the statements
of cash flows.
Although the adjustments disclosed in
this note are based on management’s
best knowledge of expected standards
and interpretations, and current facts
and circumstances, these may change.
For example, amended or additional
standards or interpretations may be
issued by the AASB and the IASB.
Therefore, until the company prepares its
first full AIFRS financial statements, the
possibility cannot be excluded that the
accompanying disclosures may have to
be adjusted.
(i)
Income Tax
Under AASB 112 Income Taxes, deferred
tax balances are determined using the
balance sheet method which calculates
temporary differences based on the
carrying amounts of an entity’s assets
and liabilities in the statement of
financial position and their associated tax
bases. In addition, current and deferred
taxes attributable to amounts recognised
directly in equity are also recognised
directly in equity.
This will result in a change to the current
accounting policy, under which deferred
tax balances are determined using the
income statement method, items are
only tax-effected if they are included in
the determination of pre-tax accounting
profit or loss and/or taxable income
or loss and current and deferred taxes
cannot be recognised directly in equity.
At the reporting date, the Group is
in the process of quantifying the full
impact of the adoption of AASB 112
on the financial statements. The Group
currently has deferred tax liabilities
which are offset by tax losses. Whether
this will still be the case will depend
on the treatment of a number of items
including:
Treatment of the difference
between the carrying value and
tax value of the CityLink asset
36 Impacts of Adopting
Australian Equivalents
to International
Financial Reporting
Standards (“IFRS”)
The Australian Accounting Standards
Board (“AASB”) is adopting International
Financial Reporting Standards (“IFRS”)
for application to reporting periods
beginning on or after 1 January
2005. The AASB has issued Australian
equivalents to IFRS, and the Urgent
Issues Group has issued interpretations
corresponding to IASB interpretations
originated by the International Financial
Reporting Interpretations Committee
or the former Standing Interpretations
Committee. The adoption of Australian
equivalents to IFRS will be first reflected
in the consolidated entity’s financial
statements for the half year ending
31 December 2005 and the year ending
30 June 2006.
Entities complying with Australian
equivalents to IFRS (“AIFRS”) for the
first time will be required to restate
their comparative financial statements
to amounts reflecting the application
of AIFRS to that comparative period.
Most adjustments required on transition
to AIFRS will be made, retrospectively,
against opening retained earnings as
at 1 July 2004.
The Group established an AIFRS
transition project team in October
2003. The project team prepared a
plan to manage the transition to AIFRS
and reports regularly on progress to
the audit committee. The project plan
124
Annual Report 2005
The Transurban Group
Notes to the financial statements for the year ended 30 June 2005
Treatment of the difference
between the carrying value and tax
value of the concession notes
Treatment of the losses currently
not recognised to the extent that
they are “probable” of recoverability.
(ii) Intangible Assets
– Goodwill
The Group has recognised goodwill,
which is presently being amortised over
a 20 year period, which arose upon the
payment of an amount to the Victorian
State Government to be released from
the Single Purpose Entity restrictions.
The treatment upon adoption of AIFRS
is still being determined.
(iii) Employee Entitlements
– Executive Option Plan
Under AASB 2 Share-based Payments,
equity based compensation to
employees under the Executive Option
Plan will be recognised as an expense in
respect of the services provided.
This will result in a change in accounting
policy, under which no expense is
currently recognised. However, the
Group will be taking advantage of the
exemption under AASB 1 whereby
AASB 2 does not have to be applied to
options granted prior to 7 November
2002. Therefore, in relation to the options
currently on issue, there would be no
impact if the policy required by AASB 2
had been applied during the year ended
30 June 2005.
(iv) Employee Entitlements
– Long Term Incentive Plan
AASB 139 and AASB 132 are likely to have
the following impacts:
Under AASB 2, share-based
compensation to employees under
the Long Term Incentive Plan will be
recognised as an expense in respect
of the services provided.
The Group currently adopts the
requirements of AASB 2 and therefore
there would be no impact if the policy
required by AASB 2 had been applied
during the year ended 30 June 2005.
(v) Financial Instruments
The group will be taking advantage of
the exemption available under AASB 1
to apply AASB 132 Financial Instruments:
Disclosure and Presentation and AASB
139 Financial Instruments: Recognition
and Measurement only from 1 July
2005. This allows the group to apply
previous Australian generally accepted
accounting principles (Australian GAAP)
to the comparative information of
financial instruments within the scope of
AASB 132 and 139 for the 30 June 2005
financial report.
As a result of the application of this
exemption, there would have been
no adjustment to the classification
or measurement of financial assets
or liabilities from the application of
AIFRS during the year ended 30 June
2005. Changes in classification on
measurement will be recognised from
1 July 2005.
We have noted below the likely impacts
from 1 July 2005 of the adoption of AASB
132 and AASB 139.
Financial assets held by the
consolidated entity will be
classified as either fair value
through profit and loss, held-to-
maturity, available for sale or loans
receivable and, depending upon
classification, measured at fair
value or amortised cost
The Group enters into interest
rate swaps to hedge the
Group’s exposure to interest
rate movements. Presently
the fair value of the hedges is
not recognised in the financial
statements. Under AASB 139, the
fair value of the hedges will be
recognised on the balance sheet
at each reporting date and the
change in fair value during the
reporting period reflected directly
in equity to the extent hedging
criteria are met, or in profit and loss
if the hedging criteria are not met
The change in policy will lead to
greater volatility in the reported
balance sheet and if the hedging
criteria are not met, in the reported
profit and loss
Under AGAAP, units in fixed
life trusts are considered to be
contributed equity of the trust.
Under AASB 132, fixed life trusts
will be required to classify units on
issue as a financial liability rather
than equity. This would result in
the distributions to unit holders
being classified as interest expense
rather than as distributions to
equity holders.
Annual Report 2005 125
financials
Notes to the financial statements for the year ended 30 June 2005
The Group has amended the trust
deeds of all of its trusts from a fixed
life to a perpetuity so that this
potential change in practice will
have no impact
AASB 128 had been applied during the
year ended 30 June 2005, there would be
no financial impact as Westlink has not
yet commenced operations. However, it
may lead to greater volatility in earnings
in future reporting periods.
Under AIFRS, borrowings must
be measured at fair value net of
transaction costs incurred. Any
difference between the proceeds
(net of transaction costs) and the
redemption amount is recognised
in the income statement over the
period of the borrowings using the
effective interest method.
(vi) Accounting for Associates
Under AASB 128 Investments in
Associates, a long term loan to an
associate can be considered as part
of the investment. This is a change in
present accounting policy where only
the equity component of the investment
is included in equity accounting and
long term loans are a separate class of
asset subject to recoverable amount
testing. This will affect the Group’s
investment in the Westlink project
which is presently equity accounted.
The investment is substantially
represented by a long term loan rather
than an equity investment. If the Westlink
project incurs accounting losses from the
commencement of operations greater
than the Group’s equity investment,
the receivable balance may be reduced
to the extent of the Group’s remaining
share of accounting losses. This may
occur despite the recoverable amount of
the long term loan not being impaired
due to the expected cashflow from the
Westlink project. If the policy required by
126
Annual Report 2005
(vii) Business Combinations
(Pre AIFRS Transition Date)
The group has elected under AASB 3
Business Combinations that all business
combinations that occurred prior to 1
July 2004 be grandfathered to reflect
AGAAP acquisition accounting and
as such there will be no impact from
restating these business combinations
upon adoption of AIFRS.
(Post AIFRS Transition Date)
Under AIFRS, business combinations
which have occurred post 1 July 2004
need to be restated to reflect the
requirements of AASB 3. This applies
to the acquisition of Hills Motorway
Group. The full impact of AIFRS on this
acquisition is being assessed and as
such the impacts on the financial report
are not known or reliably estimable.
This will be finalised by the first AIFRS
reporting date being the period ending
31 December 2005.
(viii)
Identifying the Parent
Upon the adoption of AIFRS, the Group
must apply the requirements of UIG
Interpretation 1013 “Consolidated
Financial Reports in relation to Pre-Date-
of-Transition Stapling Arrangements”.
UIG 1013 requires that where a stapling
arrangement is effected prior to the
date of transition, one of the combining
entities shall be identified as the
parent for the purposes of preparing
consolidated financial reports. Further,
it requires that the consolidated financial
report of the “parent” under the stapling
arrangement shall be the combined
financial report of the entities whose
securities are stapled, prepared on the
same basis as the combined financial
report for those entities immediately
before adopting AIFRS. As such, there
will be no financial impact as a result
of this upon the adoption of AIFRS.
The Group is in the process of identifying
which entity will be the parent and
will finalise this prior to the first AIFRS
reporting date being 31 December 2005.
(ix) Service Concession
Arrangements
The International Financial Reporting
Interpretations Committee (“IFRIC”)
has issued three draft interpretations
in relation to service concession
arrangements. The draft interpretations
propose that concession operators will
recognise either a financial asset or
intangible asset rather than recognising
the infrastructure as property, plant and
equipment. If adopted by the IASB and
AASB, draft interpretation D14 would be
applicable to the Group and require that
the road asset be shown as an intangible
asset and amortised over the concession
period. This issue continues to be
monitored by the Group.
The Transurban Group
Directors’ Declaration
In the directors’ opinion:
a)
The financial statements and notes set out on pages 67 to 126 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii)
giving a true and fair view of the combined entity’s financial position as at 30 June 2005 and of its performance, as
represented by the results of its operations and its cashflows, for the financial year ended on that date; and
b)
There are reasonable grounds to believe that the combined entity will be able to pay its debts as and when they become
due and payable.
The directors have been given the declarations by the chief executive officer and chief finance officer required by section 295A of
the Corporations Act 2001.
This declaration is made in accordance with separate resolutions of the directors of Transurban Limited, Transurban Infrastructure
Management Limited and Transurban Holdings Limited.
Laurence G Cox
Chairman
Kimberley Edwards
Managing Director
Melbourne
23 August 2005
Annual Report 2005 127
financials
Independent audit report to the members
128
Annual Report 2005
The Transurban Group
Independent audit report to the members
Annual Report 2005 129
financials
Security Holder Information
The security holder information set out below was applicable as at 31 August 2005.
A Distribution of Stapled Securities
1.
The number of holders of Stapled Securities, which comprise one share in Transurban Holdings Limited, one share in
Transurban Limited and one unit in Transurban Holding Trust, was 46,369.
2.
The voting rights are one vote per Stapled Security.
3.
At 31 August 2005 the percentage of the total holdings held by or on behalf of the twenty largest holders of these
securities was 63.03 per cent.
4.
The distribution of holders was as follows:
Security Grouping
Number of Holders
Stapled Securities
Held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
9,748
27,481
5,865
3,055
220
46,369
6,580,615
70,521,787
42,800,341
67,491,763
604,021,042
791,415,548
There were 205 holders of less than a marketable parcel of ordinary shares.
5.
Substantial Shareholder’s as at 31 August 2005 are as follows:
Name
Commonwealth Bank of Australia
Ontario Teacher’s Pension Plan Board
Number of
Stapled Securities
107,188,884
48,153,103
%
0.83
8.91
5.41
8.53
76.32
100
% of
Total
13.54
6.08
130
Annual Report 2005
TheTransurban Group
Security Holder Information
B Twenty Largest Holders of Stapled Securities
WESTPAC CUSTODIAN NOMINEES LIMITED
118,207,692
14.94
Number of Stapled
Securities Held
% of Issued
Stapled Securities
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED
TRUST COMPANY OF AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
QUEENSLAND INVESTMENT CORPORATION
CITICORP NOMINEES PTY LIMITED
ANZ NOMINEES LIMITED
COGENT NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
ANZ NOMINEES LIMITED
WESTPAC FINANCIAL SERVICES LIMITED
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
COGENT NOMINEES PTY LIMITED
UBS PRIVATE CLIENTS AUSTRALIA NOMINEES PTY LTD
RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED
75,645,378
64,337,783
24,198,938
23,225,615
22,050,000
21,080,894
21,053,835
18,669,443
16,044,024
13,018,140
12,702,787
11,842,238
11,810,313
9,724,422
8,988,534
8,471,554
6,378,507
6,320,211
5,030,380
9.56
8.13
3.06
2.93
2.79
2.66
2.66
2.36
2.03
1.64
1.60
1.50
1.49
1.23
1.13
1.07
0.81
0.80
0.64
Total
498,800,688
63.03
Annual Report 2005 131
financials
132
Annual Report 2005
Contents
Directors’ Report
Statement of Financial
Performance
Statement of Financial
Position
Statement of Cash Flows
Notes to the Financial
Statements
Directors’ Declaration
Independent Audit Report
to the members
Security Holder Information
134
140
141
142
143
163
164
166
Transurban CARS Trust and Controlled Entity
The Financial Report of
Transurban CARS Trust and Controlled Entity (ABN 81 656 633 158)
For the Year Ended 30 June 2005
This financial report covers both
Transurban CARS Trust as an individual
entity and the consolidated entity
consisting of Transurban CARS Trust
and its controlled entity.
Transurban CARS Trust is a Trust formed
and domiciled in Australia. Its registered
office and principal place of business is:
Transurban CARS Trust
Level 43 Rialto South Tower
525 Collins Street
Melbourne VIC 3000
Through the use of the internet,
we have ensured that our corporate
reporting is timely, complete, and
available globally. All releases to the
ASX and the media, financial reports
and other information are available on
our website: www.transurban.com.au
Annual Report 2005 133
financials
Directors’ Report
The directors of Transurban Infrastructure
Management Limited, the Responsible
Entity of Transurban CARS Trust, present
their report on the consolidated entity
consisting of Transurban CARS Trust
(“the Trust”), and the entity it controlled
at the end of, and during, the year ended
30 June 2005.
Directors
With exception to the changes noted
below, the following persons were
directors of TIML during the whole of
the financial year and up to the date of
this report:
(1)
(2)
(3)
Christopher J S Renwick was appointed a
non-executive director on 26 July 2005 and
continues in office at the date of this report.
Kimberley Edwards was appointed an
executive director on 26 July 2005 and
continues in office at the date of this report.
Geoffrey R Phillips was an executive director
from the beginning of the financial year until
his resignation on 26 July 2005.
Non-executive directors
Responsible Entity
Transurban CARS Trust is registered as
a managed investment scheme under
Chapter 5C of the Corporations Act 2001
and as a result, requires a Responsible
Entity. Transurban Infrastructure
Management Limited (“TIML”) is the
Responsible Entity of Transurban CARS
Trust and is responsible for performing
all functions that are required under the
Corporations Act 2001.
Laurence G Cox
Geoffrey O Cosgriff
Jeremy G A Davis
Peter C Byers
Susan M Oliver
David J Ryan
Christopher J S Renwick (1)
Executive directors
Kimberley Edwards (2)
Geoffrey R Phillips (3)
Distributions
Principal Activities and
Operations
During the year, the Trust continued
to hold the investment in the Westlink
Motorway Partnership which it made
in February 2003. The Trust holds a 40%
interest in the partnership which was
formed to undertake the Westlink M7
Motorway Project in Sydney NSW.
There were no significant changes in
the nature of the Trust’s activities during
the year.
Distributions paid to holders of Convertible Adjusting Rate Securities (“CARS”) during the financial year were as follows:
Convertible Adjusting Rate Securities
Distribution payment for the period 1 January 2004 to 30 June 2004 of 7.0 per cent paid on 31 July 2004
Distribution payment for the period 1 July 2004 to 31 December 2004 of 7.0 per cent paid on 31 January 2005
A further distribution for the period 1 January 2005 to 30 June 2005 of $14.9 million was paid on 31 July 2005.
2005
$’000
15,009
15,091
30,100
134
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Directors’ Report
Review of Operations
The investment policy of the Trust continues to be that detailed in the prospectus and in accordance with the provisions of the
governing documents of the Trust.
During the year CARS became eligible for conversion to Transurban triple stapled securities after the second anniversary of the
issue date on 14 April 2005. To participate in the conversion, CARS holders were required to submit an exchange notice not less
than 35 business days prior to the record date of 30 June 2005.
No exchange notices were submitted during the period.
Results
A summary of the consolidated revenue and overall result is set out below:
Revenue from ordinary activities
Net loss from ordinary activities
a) Construction Phase Loan Notes
(“CPLN”)
During the period, Transurban CARS
Trust (“TCT”) received distributions
from its wholly owned entity,
Transurban WSO Trust (“TWT”).
The distributions are funded from
interest received by TWT from the
CPLN’s which it acquired to fund
Transurban’s contribution to the
Westlink Motorway Partnership.
The CPLN’s are subordinated loan
notes which pay interest at the rate
of 6.27 per cent per annum.
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
26,030
26,259
26,030
26,259
(8,939)
(8,085)
(8,928)
(8,085)
The income received by way
of distribution from TWT is the
principal source of cash to fund
distributions payable by TCT on
the Convertible Adjusting Rate
Securities (“CARS”) issued by TCT.
paid twice annually with payment
dates of 31 July and 31 January
respectively were 100 per cent
tax deferred for the year ended
30 June 2005.
b) Convertible Adjusting Rate
Securities (“CARS”)
During the period, TCT paid
distributions to CARS holders at
the fixed rate of 7.0 per cent per
annum. The distributions which are
Significant Changes in the
State of Affairs
In the opinion of the Directors there
were no significant changes in the state
of affairs of the consolidated entity that
occurred during the financial year.
Annual Report 2005 135
financials
Directors’ Report
Subsequent to the End of
the Financial Period
At the date of this report the directors
are not aware of any circumstances
that have arisen since 30 June 2005
that has significantly affected, or may
significantly affect:
(a)
the consolidated entity’s operations
in future financial years, or
have not been included in this report
because the directors believe it would be
likely to result in unreasonable prejudice
to the consolidated entity.
Fees paid to and interest
held in the Trust by the
Responsible Entity or its
Associates
Environmental Regulation
No significant environmental
regulations apply.
Fees paid to the responsible entity and
its associates out of Trust property during
the year are disclosed in Note 21.
No fees were paid out of Trust property
to the directors of the Responsible Entity
during the year.
The number of securities held by the
Responsible Entity or its associates as at
the end of the financial year are disclosed
in Note 19 of the financial statements.
(b)
the results of those operations in
future financial years, or
Insurance and
Indemnification of officers
(c)
the consolidated entity’s state of
affairs in future financial years.
Likely Developments
and Expected Results of
Operations
Information on likely developments in
the operations of the consolidated entity
and the expected results of operations
No insurance premiums are paid for
out of the assets of the Trust in regards
to insurance cover provided to the
Responsible Entity or any of its agents.
So long as the officers of the Responsible
Entity act in accordance with the Trust
Constitution and the Act, they remain
fully indemnified out of the assets of the
Trust against any losses incurred while
acting on behalf of the Trust. The auditor
of the Trust is in no way indemnified out
of the assets of the Trust.
Interests in the Trust issued during the financial year
Consolidated
Parent
2005
2004
2005
2004
CARS on issue at the beginning of the year
4,300,000
4,300,000
4,300,000
4,300,000
CARS issued during the year
CARS on issue at 30 June 2005
-
-
-
-
4,300,000
4,300,000
4,300,000
4,300,000
136
Annual Report 2005
Directors’ Report
Ordinary units on issue at the
beginning of the year
Ordinary units issued during the year
Ordinary units on issue at the end of the year
Value of Assets
Transurban CARS Trust and Controlled Entity
Consolidated
Parent
2005
Units
2004
Units
2005
Units
2004
Units
12
-
12
12
-
12
12
-
12
12
-
12
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Value of Trust assets at 30 June
437,236
445,813
437,247
445,813
The value of the Trust’s assets is derived using the basis of accounting set out in Note 1 to the financial statements.
Directors’ Interests
Security Holdings
As at the date of this Directors’ Report, the directors of the Responsible Entity have disclosed relevant interests in Stapled Securities,
options over Stapled Securities and Convertible Adjusting Rate Securities (“CARS”) issued by the Transurban Group as follows:
Name
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
C J S Renwick
D J Ryan
K Edwards
Number of CARS Number of Transurban
Stapled Securities
Options issued over
Transurban
Stapled Securities
-
-
121
-
-
-
-
-
1,142,500
70,580
24,910
50,000
62,540
-
21,577
61,000
-
-
-
-
-
-
-
1,500,000
Annual Report 2005 137
financials
Directors’ Report
Rounding of amounts
The Trust is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with
that Class Order to the nearest thousand dollars, unless otherwise indicated.
Auditor
PricewaterhouseCoopers continues in office in accordance with the Corporations Act 2001.
This report is made in accordance with a resolution of the directors of Transurban Infrastructure Management Limited.
Laurence G Cox
Chairman
Kimberley Edwards
Managing Director
Melbourne
23 August 2005
138
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Directors’ Report
Auditors’ Independence Declaration
As lead auditor for the audit of the Transurban Group for the year ended 30 June 2005, I declare that,
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of the Transurban Group and the entities it controlled during the year.
Tim Goldsmith
Partner
Melbourne
23 August 2005
Annual Report 2005 139
financials
Statements of financial performance for the year ended 30 June 2005
Consolidated
Parent
Notes
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Revenue from ordinary activities
Expenses from ordinary activities
Administration
Borrowing costs
4
5
26,030
26,259
26,030
26,259
(3,843)
(2,483)
(3,832)
(2,483)
(31,126)
(31,861)
(31,126)
(31,861)
Net loss from ordinary activities
(8,939)
(8,085)
(8,928)
(8,085)
Basic earnings per ordinary unit
Diluted earnings per ordinary unit
Dollars
Dollars
27
27
(744,917)
(673,750)
(744,917)
(673,750)
The above statements of financial performance should be read in conjunction with the accompanying notes.
140
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Statements of financial position as at 30 June 2005
CURRENT ASSETS
Cash assets
Receivables
Other
Total Current Assets
NON-CURRENT ASSETS
Financial assets
Other
Total Non-Current Assets
Total Assets
CURRENT LIABILITIES
Payables
Non-interest bearing liabilities
Total Current Liabilities
NON-CURRENT LIABILITIES
Interest bearing liabilities
Total Non-Current Liabilities
Total Liabilities
NET ASSETS
UNITHOLDERS’ FUNDS
Accumulated losses
Total Unitholders’ Funds
Consolidated
Parent
Notes
2005
$’000
2004
$’000
2005
$’000
2004
$’000
7
8
9
10
11
12
13
32,531
40,707
32,531
40,707
262
92
366
-
262
103
366
-
32,885
41,073
32,896
41,073
392,000
392,000
392,000
392,000
12,351
12,740
12,351
12,740
404,351
404,740
404,351
404,740
437,236
445,813
437,247
445,813
14,941
15,026
14,941
15,026
2,178
2,420
2,178
2,420
17,119
17,446
17,119
17,446
14
449,785
449,096
449,785
449,096
449,785
449,096
449,785
449,096
466,904
466,542
466,904
466,542
(29,668)
(20,729)
(29,657)
(20,729)
15
(29,668)
(20,729)
(29,657)
(20,729)
(29,668)
(20,729)
(29,657)
(20,729)
The above statements of financial position should be read in conjunction with the accompanying notes.
Annual Report 2005 141
financials
Statements of cash flows for the year ended 30 June 2005
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Distributions received
Borrowing costs
Net cash (outflows)/inflows from
operating activities
Cash flows from investing activities
Loans to related parties
Net cash outflows from investing
activities
Cash flows from financing activities
Loans from related parties
Repayment of loans to related parties
Net cash inflows from financing activities
Consolidated
Parent
Notes
2005
$’000
2004
$’000
2005
$’000
2004
$’000
355
(4,503)
838
(431)
26,051
26,221
355
(4,492)
1,473
838
(431)
1,575
-
-
24,578
24,646
(30,135)
(21,528)
(30,135)
(21,528)
25
(8,232)
5,100
(8,221)
5,100
(92)
(92)
171
(23)
148
-
-
368
-
368
(103)
(103)
171
(23)
148
-
-
368
-
368
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
(8,176)
5,468
40,707
35,239
Cash at the end of the financial year
7
32,531
40,707
(8,176)
40,707
32,531
5,468
35,239
40,707
The above statements of cash flows should be read in conjunction with the accompanying notes.
142
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
1 Summary of
a) Principles of consolidation
Significant Accounting
Policies
This financial report covers Transurban
CARS Trust and its controlled entity.
The responsible entity of Transurban
CARS Trust is Transurban Infrastructure
Management Limited. The responsible
entity’s registered office is Level 43,
525 Collins Street, Melbourne VIC 3000.
Transurban CARS Trust (the “Trust”) was
constituted on 20 December 2002.
The Trust was due to terminate on
20 December 2082 unless terminated
earlier. However, amendments made to
the Trust Deed have extended the Trust
to perpetuity.
This general purpose financial report has
been prepared in accordance with the
requirements of the Trust Constitution,
Accounting Standards and other
authoritative pronouncements of the
Australian Accounting Standards Board,
Urgent Issues Group Consensus Views,
and the Corporations Act 2001
in Australia.
It is prepared in accordance with the
historical cost convention, except for
certain assets which, as noted, are at
valuation. The accounting policies
adopted are consistent with those of the
previous year. Comparative information
is reclassified where appropriate to
enhance comparability.
The consolidated financial statements
incorporate the assets and liabilities
of all entities controlled by Transurban
CARS Trust (“trust” or “parent entity”)
as at 30 June 2005 and the results of
all controlled entities for the period
then ended. Transurban CARS Trust
and its controlled entity together are
referred to in this financial report as
the consolidated entity. The effects of
all transactions between entities in the
consolidated entity are eliminated in full.
Where control of an entity is obtained
during the financial period, its results are
included in the consolidated statement
of financial performance from the date
on which control commences. Where
control of an entity ceases during a
financial year its results are included
for that part of the year during which
control existed.
b) Historical Cost Convention
The financial statements are prepared
on the basis of the historical cost
convention and, except where stated, do
not take into account current valuations
of non-current assets. Cost is based on
the fair values of the consideration given
in exchange for assets. The fair value
of cash consideration with deferred
settlement terms is determined by
discounting any amounts payable in
the future to their present value as at
the date of acquisition. Present values
are calculated using rates applicable to
similar borrowing arrangements of the
consolidated entity.
The entity has not adopted a policy of
revaluing its non-current assets on a
regular basis.
c)
Income Tax
Income tax has not been brought to
account in the financial statements
of the Trust as under the terms of
the Constitution and pursuant to the
provisions of the Income Tax Legislation,
the Trust is not liable to income tax
provided that its taxable income
(including assessable realised capital
gains) is fully distributed to unit holders.
d) Recoverable Amount of
Non-Current Assets
The recoverable amount of an asset
is the net amount expected to be
recovered through the net cash inflows
and outflows arising from its continued
use and subsequent disposal.
Where the carrying amount of a
non-current asset is greater than its
recoverable amount, the asset is written
down to its recoverable amount. Where
net cash inflows are derived from a
group of assets working together, the
recoverable amount is applied to the
relevant group of assets. The decrement
in the carrying amount is recognised
as an expense in net profit or loss in
the reporting period in which the
recoverable amount write-down occurs.
In assessing recoverable amounts of non-
current assets, the relevant cash flows
have been discounted to their present
value, except where specifically stated.
Annual Report 2005 143
financials
Notes to the financial statements for the year ended 30 June 2005
e)
Investments
h) Distributions
l) Earnings per Unit
Interests in listed and unlisted securities,
other than controlled entities and
associates in the consolidated financial
statements, are brought to account
at cost and distribution income is
recognised in the statement of financial
performance when receivable.
The interest in the joint venture
partnership is accounted for as set
out in Note 1(i).
f) Trade and other creditors
Trade and other creditors represent
liabilities for goods and services
provided to the consolidated entity
prior to the end of the financial period
and which are unpaid. The amounts are
unsecured and are usually paid within
45 days of recognition.
g)
Interest bearing liabilities
On issue of CARS, the fair value of the
liability component, being the obligation
to make future payments of principal
and interest to security holders, is
calculated using a market interest rate for
an equivalent non-convertible security.
The residual amount, representing the
fair value of the conversion option,
is included in equity as other equity
securities with no recognition of any
change in the value of the option in
subsequent periods. The liability is
included in borrowings and carried on
an amortised cost basis with interest on
the securities recognised as borrowing
costs on an effective yield basis until the
liability is extinguished on conversion or
maturity of the securities.
144
Annual Report 2005
Provision is made for the amount of any
distribution declared, determined or
publicly recommended by the directors
on or before the end of the financial
period but not distributed at balance date.
i)
Joint Venture entity
The interest in the joint venture
partnership is accounted for using the
equity method. Under this method,
the share of the profits or losses of
the partnership is recognised in the
statement of financial performance, and
the share of movements in reserves is
recognised in reserves in the statement
of financial position. Details relating to
the partnership are set out in note 23.
j) Borrowing Costs
Borrowing costs are recognised as
expenses in the period in which they
are incurred, except to the extent to
which they relate to the construction of a
qualifying asset in which case borrowing
costs are capitalised into the cost of the
asset. Borrowing costs include interest
on short term, long term borrowings and
amortisation of deferred borrowing costs.
Cost incurred in connection with the
arrangement of borrowings are deferred
and amortised over the effective period
of funding.
k) Cash
For the purpose of the statement of cash
flows, cash includes cash on hand.
(i) Basic Earnings per Unit
Basic earnings per unit is
determined by dividing the net
result from ordinary activities by the
weighted average number of units
outstanding during the period.
(ii) Diluted Earnings per Unit
Diluted earnings per unit
adjusts the figures used in the
determination of basic earnings
per unit to take into account the
weighted average number of units
assumed to have been issued for no
consideration in relation to dilutive
potential units.
m) Rounding of amounts
The Trust is of a kind referred to in Class
Order 98/0100, issued by the Australian
Securities and Investments Commission,
relating to the “rounding off” of amounts
in the financial report. Amounts in the
financial report have been rounded off in
accordance with that Class Order to the
nearest thousand dollars.
2 Trust Formation and
Termination
The Trust was established on
20 December 2002 through the issue
of 12 ordinary units at $1 per unit to
Transurban Holding Trust. The Trust was
due to terminate on 20 December 2082
unless terminated earlier. However,
amendments made to the Trust Deed
have extended the Trust to perpetuity.
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
3 Segment Information
The Trust’s sole business segment for the period ending 30 June 2005 was investing in the Westlink Motorway Partnership.
All revenues and expenses are directly attributable to this sole purpose. Internal financial reporting is based on this sole
business segment.
4 Revenue
Revenue from operating activities
Interest
Trust distributions
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
26,030
26,259
1,451
1,613
-
-
24,578
24,646
Revenue from ordinary activities
26,030
26,259
26,030
26,259
5 Loss From Ordinary Activities
Expenses
Borrowing costs
Interest and finance charges paid/payable
(30,732)
(31,467)
(30,732)
(31,467)
Capitalised underwriting fees expensed
(394)
(394)
(394)
(394)
(31,126)
(31,861)
(31,126)
(31,861)
6
Income Tax
Tax losses at beginning of period
Tax losses for the period
Tax losses at end of period
36,403
26,079
35,723
10,324
36,403
35,723
26,079
10,324
72,126
36,403
72,126
36,403
Potential future income tax benefits at 30 June 2005 for tax losses not brought to account for the consolidated entity are
$21.6 million (2004: $10.9 million). These losses cannot be used directly by the consolidated entity for the reason outlined
in note 1c, but may be available for the benefit of unit holders in the future.
Annual Report 2005 145
financials
Notes to the financial statements for the year ended 30 June 2005
These benefits of tax losses will only be realised for the benefit of security holders in the consolidated entity if:
(i)
the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from
the deductions for the losses to be realised; and
(ii)
the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) no changes in tax legislation adversely affect the ability of the entity to realise the benefit from the deductions for the losses.
7 Current Assets – Cash Assets
Cash at bank
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
32,531
40,707
32,531
40,707
32,531
40,707
32,531
40,707
Included in the above amount is $20.1 million (2004: $28.2 million) which is held in a reserve account to fund future CARS
distributions and was not available for general use at 30 June 2005.
8 Current Assets – Receiveables
Sundry debtors
9 Current Assets – Other
Loans to related parties
262
262
366
366
92
92
-
-
262
262
103
103
366
366
-
-
10 Non-current Assets – Other Financial Assets
Non traded investments
Units in controlled entity
-
-
392,000
392,000
Construction Phase Loan Notes
392,000
392,000
-
-
392,000
392,000
392,000
392,000
146
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Investment in controlled entity
The investment in controlled entity represents 100% ownership of the issued ordinary units of The Transurban WSO Trust
(registered in Australia).
Investment in Construction Phase Loan Notes (“CPLN”)
The CPLN represent Transurban’s funding contribution to the Westlink Motorway Partnership. The CPLN earn interest at the fixed
rate of 6.27 per cent for the period from the financial close of the Westlink M7 project (“the Project”) to the date of completion of
the Project, or 3.5 years, which ever is the lesser, at which time they convert to Term Loan Notes.
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
11 Non-Current Assets – Other
Deferred Borrowing Costs
12,351
12,740
12,351
12,740
12,351
12,740
12,351
12,740
12 Current Liabilities – Payables
Trade creditors
CARS coupon payment
Other creditors
4
5
4
5
14,926
15,009
14,926
15,009
11
12
11
12
14,941
15,026
14,941
15,026
CARS coupon payment represents the interest payment due to holders of Convertible Adjusting Rate Securities (“CARS”).
The distribution on these securities of 7.0 per cent for the period 1 January 2005 to 30 June 2005 totalling $14.9 million has been
charged to the statement of financial performance as a borrowing cost because the CARS are classified as a liability. This coupon
was paid to CARS holders on 31 July 2005.
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
13 Current Liabilities – Non-interest Bearing Liabilities
Loans from related parties
2,178
2,178
2,420
2,420
2,178
2,178
2,420
2,420
Annual Report 2005 147
financials
Notes to the financial statements for the year ended 30 June 2005
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
14 Non-current Liabilities – Interest Bearing Liabilities
Loan from related parties
19,785
19,096
19,785
19,096
Convertible Adjusting Rate Securities
430,000
430,000
430,000
430,000
449,785
449,096
449,785
449,096
Financing Arrangements and
Credit Facilities Convertible
Adjusting Rate Securities
(“CARS”)
Transurban CARS Trust issued 4.3 million
convertible securities for $430 million
on 14 April 2003. Semi-annual interest
is paid at a fixed rate of 7 per cent per
annum until the first reset date on
14 April 2007. On a reset date, certain
terms of the CARS may be reset and
Holders will be given the option of:
(i)
taking no action and therefore, be
bound by the new terms from the
reset date; or
(ii)
submitting an Exchange Notice.
The term of the Guarantee may also
be extended on terms and conditions
determined by Transurban Holding
Trust (“THT”) in its absolute discretion.
The interest payments are guaranteed
by THT until the first reset date.
Following the submission of an
Exchange Notice, Transurban will
elect to either:
convert the CARS into Transurban
Securities
arrange the acquisition of CARS
by a third party and deliver to the
Holder, the cash proceeds and
to the extent there is a shortfall,
Transurban Securities, or
a combination of both.
It is the present intention of Transurban
that Exchange will be satisfied by
conversion into Transurban Securities.
These securities will rank ahead of
Transurban Stapled Securities on the
winding up of Transurban, in conjunction
with the winding up of the Transurban
CARS Trust.
Other Loans
The loan from Transurban Holding
Trust does not have any fixed date for
repayment and bears interest at 7.05
per cent (2004 – 7.05 per cent)
148
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
15 Accumulated Losses
Accumulated losses at the beginning
of the financial year
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
(20,729)
(12,644)
(20,729)
(12,644)
Net loss from ordinary activities after tax
(8,939)
(8,085)
(8,928)
(8,085)
Available for distribution
Dividends provided for or paid
(29,668)
(20,729)
(29,657)
(20,729)
-
-
-
-
Accumulated losses carried forward
(29,668)
(20,729)
(29,657)
(20,729)
16 Unitholders’ Funds
Consolidated
Parent
2005
Units
2005
$’000
2004
Units
2004
$’000
2005
Units
2005
$’000
2004
Units
2004
$’000
Units fully paid
12
-
12
-
12
-
12
-
The Trust has issued 12 ordinary units at $1 each. Each unit represents a right to an individual unit in the Trust and does not extend
to a right to the underlying assets of the scheme. There are no separate classes of units and each unit has the same rights attaching
to it as all other units of the Trust. There were no movements in the number of units during the financial year.
17 Distributions
Convertible Adjusting Rate Securities
Distribution payment for the period 1 January 2004 to 30 June 2004 of 7.0 per cent paid on 31 July 2004
Distribution payment for the period 1 July 2004 to 31 December 2004 of 7.0 per cent paid on 31 January 2005
The coupon payment for the half year ended 30 June 2005 of $14.9 million was paid on 31 July 2005.
2005
$’000
15,009
15,091
30,100
Annual Report 2005 149
financials
Notes to the financial statements for the year ended 30 June 2005
18 Remuneration of Auditors
During the year the following services were paid to the auditor, PricewaterhouseCoopers Australian Firm:
Audit Services
Audit or review of financial reports
14,900
13,800
14,900
13,800
Consolidated
Parent
2005
$
2004
$
2005
$
2004
$
Taxation Services
Review of income tax returns
14,900
13,800
14,900
13,800
12,705
19,000
12,705
19,000
12,705
19,000
12,705
19,000
19 Director Disclosures
Executive directors
Details of remuneration
The following persons were directors of
Transurban Infrastructure Management
Limited during the financial year:
Chairman – non-executive
Laurence G Cox
Non-executive directors
Peter C Byers, Geoffrey O Cosgriff, Jeremy
GA Davis, Susan M Oliver, David J Ryan
Geoffrey R Phillips
Kimberley Edwards was appointed
an executive director on 26 July 2005
and continues in office at the date of
this report.
Geoffrey R Phillips was an executive
director from the beginning of the
financial year until his resignation on
26 July 2005.
Details of the remuneration of each
director of Transurban Infrastructure
Management Limited, including their
personally related entities, are set out
in the following tables. The Options
granted, relate to the Transurban
Group as a whole. A reasonable basis of
apportionment is not available, resulting
in the full amount being disclosed.
150
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Directors of Transurban Infrastructure Management Limited
2005
Name
Cash salary
and fees
L G Cox
P C Byers
J G A Davis
S M Oliver
G O Cosgriff
D J Ryan
G R Phillips
$
55,362
19,309
15,128
18,571
21,502
21,797
-
Total
151,669
2004
Name
Cash salary
and fees
L G Cox
P C Byers
J G A Davis
S M Oliver
G O Cosgriff
D J Ryan
G R Phillips
$
55,009
21,196
19,799
20,994
18,976
18,168
-
Total
154,142
Bonus
$
-
-
-
-
-
-
-
-
Bonus
$
-
-
-
-
-
-
-
-
Primary
Post-employment
Equity
Cash Long Term
Non-
Incentive monetary annuation
benefits
$
$
$
Super- Retirement
benefits
$
33,606
15,675
4,236
1,738
15,714
15,772
1,671
1,935
1,962
-
16,374
9,362
-
-
Options
Total
$
-
-
-
-
-
-
61,333
$
93,204
36,722
46,614
36,616
32,799
23,759
61,333
27,256
90,789
61,333
331,047
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Primary
Post-employment
Equity
Cash Long Term
Non-
Incentive monetary annuation
benefits
$
$
$
Super- Retirement
benefits
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,951
1,908
2,644
1,889
1,708
1,635
-
Options
Total
$
-
-
-
-
-
-
61,501
$
94,586
33,599
30,752
32,604
43,954
19,803
61,501
$
34,626
10,495
8,309
9,721
23,270
-
-
14,735
86,421
61,501
316,799
Annual Report 2005 151
financials
Notes to the financial statements for the year ended 30 June 2005
Share-based compensation – options
The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows:
Grant date
Expiry date
Exercise
price
Value per
option at
grant date
Date exercisable
26 April 2001
30 April 2006
23 October 2001
31 October 2006
1 February 2002
30 April 2007
9 April 2002
30 April 2007
20 May 2002
30 April 2007
$3.817
$4.404
$4.280
$4.030
$4.220
$0.425
$0.491
$0.477
$0.449
$0.470
One-third after 28/04/03, 26/04/04, 26/04/05
One-third after 28/04/03, 26/04/04, 26/04/05
One-third after 01/02/04, 01/02/05, 01/02/06
One-third after 20/05/04, 20/05/05, 20/05/06
One-third after 20/05/04, 20/05/05, 20/05/06
Options are issued at no cost to the
Option holder and vest in three equal
tranches on the second, third and fourth
anniversaries of their issue. The Exercise
of the options is subject to an Exercise
Condition. The Exercise Condition
involves a comparison between Total
Shareholder Return (“TSR”) of The
Transurban Group’s Stapled Securities
over the two years prior to a vesting date
of options, and the TSR of each of the
other companies in the S&P/ASX 200
Industrials as at the end of the relevant
Exercise Condition Test Period which
have been in the S&P/ASX 200 Industrials
for the full term of the Exercise Condition
Test Period (“Test Companies”) measured
over the same period.
TSR measures the total return on
investment of a security. It takes into
account both capital appreciation and
distribution income. The Transurban
Group and each of the Test Companies
will be ranked according to their
respective TSRs over the Exercise
Condition Test Period. The ranking
determines the extent to which vested
options may be exercised. If the Group’s
TSR exceeds the 65th percentile of the
ranking, 100% of the vested options may
be exercised. If Transurban Group’s TSR is
below the 25th percentile of the ranking,
none of the vested options may be
exercised. If the TSR falls between these
percentiles, the percentage of vested
options that may be exercised will be
calculated according to a formula.
The exercise price of options was the 5
day variable weighted average price of
the Group’s stapled securities prior to
granting the options. When exercised,
each option is converted into one
stapled security, comprising one ordinary
share in Transurban Limited, one ordinary
share in Transurban Holdings Limited
and one unit in Transurban Holding Trust.
Options can be exercised at any time
after vesting.
The amounts disclosed as remuneration
in the above tables are the assessed
fair values of the options granted to
executive directors allocated evenly
over the period from grant date to
vesting date. Fair values at grant date
are independently determined, using a
Black-Scholes derived option valuation
model taking into consideration the
exercise price, the market price of
Transurban Group Stapled Securities on
the date of grant, the expected price
volatility of Transurban group Stapled
Securities, expected future distributions
and risk free rate of interest over the term
of the options.
152
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Equity instrument disclosures relating to directors
Options provided as remuneration
Details of options over Transurban Group stapled securities provided as remuneration to each director of Transurban Infrastructure
Management Limited are set out below.
Name
Number of options
granted during the year
Number of options
vested during the year
Directors of Transurban Infrastructure Management Limited
G R Phillips
Option holdings
-
166,667
The number of options over Transurban Group stapled securities during the financial year held by each director of Transurban
Infrastructure Management Limited, including their personally-related entities, are set out below.
Name
Balance
at the
start of
the year
Granted
during
the year as
remuneration
Exercised
during
the year
Other
changes
during
the year
Balance
at the end
of the year
Vested and
Vested and
exercisable unexercisable
at the end
of the year
at the end
of the year
Directors of Transurban Infrastructure Management Limited
G R Phillips
500,000
-
500,000
-
-
-
-
Annual Report 2005 153
financials
Notes to the financial statements for the year ended 30 June 2005
Share holdings
The number of Transurban Group Stapled Securities and Covertible Adjusting Rate Securities (“CARS”) held during the financial year
by each director of Transurban Infrastructure Management Limited, including their personally-related entities, are set out below.
Stapled Securities
Name
Balance at
the start of
the year
Received
during
the year on
the exercise
of options
Other
changes
during
the year
Balance
at the
end of
the year
Directors of Transurban Infrastructure Management Limited
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
D J Ryan
G R Phillips
CARS
Name
775,000
50,000
24,910
50,000
60,993
21,043
-
-
-
-
-
-
-
500,000
367,500
1,142,500
20,580
-
-
1,547
534
8,820
70,580
24,910
50,000
62,540
21,577
508,820
Balance at
the start of
the year
Received
during
the year on
the exercise
of options
Other
changes
during
the year
Balance
at the
end of
the year
Directors of Transurban Infrastructure Management Limited
L G Cox
P C Byers
G O Cosgriff
J G A Davis
S M Oliver
D J Ryan
G R Phillips
154
Annual Report 2005
1,000
-
121
-
-
-
-
-
-
-
-
-
-
-
(1,000)
-
-
-
-
-
-
-
-
121
-
-
-
-
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Company directors and their director-
related entities received normal
distributions on these securities. All
transactions relating to securities were
on the same basis as similar transactions
with other security holders.
Other transactions with
directors and director-related
entities
Fees have been paid to Transurban
Infrastructure Management Limited
in its capacity as Responsible Entity
of the Transurban CARS Trust.
The Responsible Entity is also the
Responsible Entity for the Transurban
Holding Trust which provides financial
assistance and acts as guarantor to the
consolidated entity.
Aggregate amounts of each of the above
types of other transactions with directors
of the consolidated entity and their
director related entities:
Amounts recognised as expense
Interest
Responsible Entity Fee
Aggregate amounts payable to director-related
entities at balance date:
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
685
3,500
1,281
2,200
685
3,500
1,281
2,200
Non-interest bearing current liability
2,178
2,420
2,178
2,420
Interest bearing non-current liability
19,785
19,096
19,785
19,096
20 Contingent Liabilities
As at the reporting date there are no contingent liabilities.
21 Related Parties
Responsible entity’s fees
Transurban Infrastructure Management Limited (“TIML”) is the Responsible Entity of the Trust and is entitled to receive a fee
calculated at the rate of up to 2.0 per cent per annum of the Gross Asset Value of the Trust. For the 2005 financial year, the
responsibility entity fee paid by the Trust was calculated at a rate of 0.8 per cent (2004: 0.5 per cent) of the value of the Trust’s
assets at 30 June 2005.
Annual Report 2005 155
financials
Notes to the financial statements for the year ended 30 June 2005
Responsible
Entity
2005
$000
Responsible
Entity
2004
$000
Fees for the year paid by the Trust
Fees earned by the responsible entity in respect of its role as
responsible entity of other entities within the Transurban Group
Management fees earned by the responsible entity which are reimbursed in
accordance with the Constitution
Aggregate amounts payable to the responsible entity at reporting date
3,500
2,009
25,949
26,783
Wholly-owned group
2,200
4,187
8,577
7,839
The wholly-owned group consists of The Transurban CARS Trust and its wholly-owned controlled entity, The Transurban WSO Trust.
Details of this controlled entity are set out in note 22.
Transactions between Transurban CARS Trust and the other entity in the wholly-owned group during the years ended 30 June 2004
and 30 June 2005 consisted of:
(a) Loans from Transurban WSO Trust
(b) Loans to Transurban WSO Trust
(c) Distribution paid to Transurban CARS Trust
Aggregate amounts included in the determination of
profit from ordinary activities before income tax that
resulted from transactions with entities in the wholly
owned group:
Distribution revenue
Aggregate amounts receivable from entities in the
wholly-owned group:
Current receivable
156
Annual Report 2005
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
-
-
-
-
24,578
9,158
11
-
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Other related parties
Aggregate amounts included in the determination of
profit from ordinary activities before related income tax
that resulted from transactions with each class of other
related parties:
CPLN’s interest revenue
24,578
24,646
Aggregate amounts receivable from other related parties
at balance date:
Non-current receivable
Controlling entities
392,000
392,000
-
-
-
-
The ultimate parent entity is Transurban Holding Trust which owns 100% of the issued ordinary units of Transurban CARS Trust.
Ownership interests in related parties
Transurban CARS Trust, through its wholly owned subsidiary Transurban WSO Trust, has a 40.0 per cent interest in the joint venture
partnership Westlink Motorway. Details of this interest is set out in Note 22.
22 Investments in Controlled Entity
Name of Entity
Country of
Incorporation
Class of
Security
Equity Holding
2005 2004
Transurban WSO Trust
Australia
Ordinary
100%
100%
The investment in the partnership is carried at cost of $80 (2004: $80). Refer note 23 for details.
23 Interest in Joint Venture
Westlink Motorway Partnership
Ownership Interest
2005
$’000
40
2004
$’000
40
Combined entity
carrying amount
2005
$’000
6,236
2004
$’000
6,236
Annual Report 2005 157
financials
Notes to the financial statements for the year ended 30 June 2005
The consolidated entity has a 40.0 per cent interest in the Westlink Motorway Partnership. The principal activity of the partnership
is the construction of the Westlink M7 Motorway in Sydney. The M7 is presently in the construction phase and is due for completion
in April 2006. The partnership is unlikely to have any impact on the consolidated entity’s equity accounted profits until construction
is completed and the operations commence.
Information relating to the joint venture partnership, presented in accordance with the accounting policy described in note 1(i),
is set out below:
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Share of partnership assets and liabilities
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Share of Profits
5,225
2,932
580,709
355,834
585,934
358,766
28
31,306
585,906
327,460
585,934
358,766
-
-
-
-
Share of partnership commitments
Capital commitments
522,288
327,484
24 Financial Instruments Disclosure
Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
158
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Interest rate risk
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set
out in the following table.
2005
Fixed Interest Rate Maturing in:
Floating
Interest
Rate
Note
$’000
1 year
or
less
$’000
between
1 to 5
years
more
than
5 years
Non
interest
bearing
$’000
$’000
$’000
TOTAL
$’000
Financial Assets
Cash
Sundry debtors
Loans to related parties
7
8
9
Construction Phase Loan Notes
10
32,531
-
-
-
-
-
-
392,000
Total Financial Assets
32,531
392,000
Weighted average interest rate
4.81%
6.27%
Financial Liabilities
Creditors
CARS
12
14
Loan from related parties
13, 14
Total Financial Liabilities
Weighted average interest rate
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
430,000
-
430,000
7.00%
Net Financial Liabilities
32,531
392,000
(430,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
32,531
262
92
-
262
92
392,000
354
424,885
14,941
14,941
-
430,000
21,963
21,963
36,904
466,904
(36,550)
(42,019)
Annual Report 2005 159
financials
Notes to the financial statements for the year ended 30 June 2005
2004
Fixed Interest Rate Maturing in:
Floating
Interest
Rate
$’000
1 year
or
less
$’000
between
1 to 5
years
$’000
more
than
5 years
$’000
Non
interest
bearing
$’000
Note
TOTAL
$’000
Financial Assets
Cash
Sundry debtors
Construction Phase Loan Notes
Total Financial Assets
Weighted average interest rate
Financial Liabilities
Creditors
CARS
7
8
10
12
14
40,707
142
-
40,849
5.08%
-
-
Loan from related parties
13, 14
19,096
Total Financial Liabilities
Weighted average interest rate
Net Financial Liabilities
19,096
7.05%
21,753
-
-
-
-
-
-
-
-
-
-
-
-
-
392,000
392,000
6.27%
-
430,000
-
430,000
7.00%
(38,000)
-
-
-
-
-
-
-
-
-
-
-
-
40,707
224
366
-
392,000
224
433,073
-
-
15,026
15,026
-
430,000
2,420
21,516
17,446
466,542
-
-
(17,222)
(33,469)
Reconciliation of net financial liabilities to net liabilities
Net financial liabilities as above
Non-financial assets
Deferred borrowing costs
Net liabilities per Balance Sheet
Notes
2005
$’000
2004
$’000
(42,019)
(33,469)
11
12,351
12,740
(29,668)
(20,729)
Net fair values of financial assets and liabilities
The carrying amount and net market value of financial assets and liabilities brought to account at balance date are the same.
160
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
25 Reconciliation of Loss from Ordinary Activities to Net Cash (Outflow)/Inflow
from Operating Activities
Net loss from ordinary activities
Deferred borrowing costs
Amortisation deferred borrowing costs
Change in operating assets and liabilities
(Decrease)/increase in creditors
Decrease in debtors
Increase in loans from related parties
Consolidated
Parent
2005
$’000
2004
$’000
2005
$’000
2004
$’000
(8,939)
(8,085)
(8,928)
(8,085)
(6)
394
(85)
104
300
-
394
8,513
577
3,701
5,100
(6)
394
(85)
104
300
(8,221)
394
8,513
577
3,701
5,100
Net cash (outflow)/inflow from operating activities
(8,232)
26 Economic Dependency
Transurban CARS Trust is reliant on the receipt of distributions from Transurban WSO Trust for its ongoing viability. Transurban
CARS Trust has $20.1 million (2004: $28.2 million) in reserve to fund future Convertible Adjusting Rate Securities (“CARS”) coupon
payments which is not available for general use. The CARS coupon payments are guaranteed by Transurban Holding Trust (parent
entity) until the first reset date 14 April 2007.
27 Earnings Per Unit
Net tangible asset backing per ordinary unit
Basic earnings per unit
Diluted earnings per unit
Weighted average number of units used as the denominator in
calculating basic earnings per unit
Weighted average number of unit and potential units used
used as the denominator in calculating diluted earnings per unit
Consolidated
2005
2004
($2,472,333)
($1,727,417)
($744,917)
($673,750)
($744,917)
($673,750)
12
12
12
12
Annual Report 2005 161
financials
Notes to the financial statements for the year ended 30 June 2005
28 Impacts of Adopting
Australian Equivalents
to IFRS
The Australian Accounting Standards
Board (“AASB”) is adopting International
Financial Reporting Standards (“IFRS”)
for application to reporting periods
beginning on or after 1 January
2005. The AASB has issued Australian
equivalents to IFRS, and the Urgent
Issues Group has issued interpretations
corresponding to IASB interpretations
originated by the International Financial
Reporting Interpretations Committee
or the former Standing Interpretations
Committee. The adoption of Australian
equivalents to IFRS will be first reflected
in the consolidated entity’s financial
statements for the half year ending
31 December 2005 and the year ending
30 June 2006.
Entities complying with Australian
equivalents to IFRS (“AIFRS”) for the first
time will be required to restate their
comparative financial statements to
amounts reflecting the application of
AIFRS to that comparative period. Most
adjustments required on transition to
AIFRS will be made, retrospectively,
against opening retained earnings as
at 1 July 2004.
2005 until the acquisition of the Hills
Motorway Group added a further level
of complexity that has not yet been fully
determined. It is now expected that the
project will be completed (including the
calculation of the impact of AIFRS) by
the first AIFRS reporting date being the
period ending on 31 December 2005.
The project team is undertaking a
detailed analysis of AIFRS and the Group’s
accounting policies to determine the
effects on the opening balance sheet
to be prepared on the date of transition
to AIFRS and future accounting policy
differences. The project team has
identified a number of accounting policy
choices which have been analysed by
management to determine the most
appropriate accounting policy for the
Group on transition to IFRS.
The known or reliably estimable impacts
on the financial report for the year ended
30 June 2005 had it been prepared using
AIFRS are set out below. As mentioned
above, this may not be all of the impacts
that may arise. The expected financial
effects of adopting AIFRS are shown
for each item with descriptions of the
differences. No material impacts are
expected in relation to the statements
of cash flows.
The Transurban Group established an
AIFRS transition project team in October
2003. The project team prepared a plan
to manage the transition to AIFRS and
reports regularly on progress to the
audit committee. The project plan was
on schedule for completion by 30 June
Although the adjustments disclosed in
this note are based on management’s
best knowledge of expected standards
and interpretations, and current facts
and circumstances, these may change.
For example, amended or additional
standards or interpretations may be
issued by the AASB and the IASB.
Therefore, until the company prepares
its first full AIFRS financial statements,
the possibility cannot be excluded that
the accompanying disclosures may
have to be adjusted.
Accounting for Associates
Under AASB 128 Investments in
Associates, a long term loan to an
associate can be considered as part
of the investment. This is a change in
present accounting policy where only
the equity component of the investment
is included in equity accounting and
long term loans are a separate class of
asset subject to recoverable amount
testing. This will affect the Group’s
investment in the Westlink project
which is presently equity accounted.
The investment is substantially
represented by a long term loan rather
than an equity investment. If the Westlink
project incurs accounting losses from the
commencement of operations greater
than the Group’s equity investment,
the receivable balance may be reduced
to the extent of the Group’s remaining
share of accounting losses. This may
occur despite the recoverable amount of
the long term loan not being impaired
due to the expected cashflow from the
Westlink project. If the policy required by
AASB 128 had been applied during the
year ended 30 June 2005, there would be
no financial impact as Westlink has not
yet commenced operations. However, it
may lead to greater volatility in earnings
in future reporting periods.
162
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Notes to the financial statements for the year ended 30 June 2005
Directors’ Declaration
In the directors’ opinion:
a)
The financial statements and notes set out on pages 140 to 162 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2005 and of their
performance, as represented by the results of their operations and their cashflows, for the financial year ended on that
date; and
b)
There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations by the chief executive officer and chief finance officer required by section 295A of
the Corporations Act 2001,
This declaration is made in accordance with a resolution of the directors of Transurban Infrastructure Management Limited.
Laurence G Cox
Chairman
Kimberley Edwards
Managing Director
Melbourne
23 August 2005
Annual Report 2005 163
financials
Independent audit report to the members
164
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Independent audit report to the members
Annual Report 2005 165
financials
Security Holder Information
The security holder information set out below was applicable as at 31 August 2005.
A Distribution of Convertible Adjusting Rate Securities
1.
The number of holders of Convertible Adjusting Rate Securities, which are preference units in Transurban CARS Trust,
was 5,803.
2.
The voting rights are one vote per security.
3.
At 31 August 2005 the percentage of the total holdings held by or on behalf of the twenty largest holders of these
securities was 70.46 per cent.
4.
The distribution of holders was as follows:
Security Grouping
Number of Holders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
5,670
102
6
15
10
5,803
Number of
Convertible
Securities Held
971,526
193,410
40,785
415,210
2,679,069
4,300,000
There were 43 holders of less than a marketable parcel of preference units.
5.
Substantial Holders as at 31 August 2005 are as follows:
Name
UBS Nominees Pty Ltd
Number of
Convertible Securities
680,746
%
22.59
4.50
0.95
9.66
62.30
100
% of
Total
15.8
166
Annual Report 2005
Transurban CARS Trust and Controlled Entity
Security Holder Information
B Twenty Largest Holders of Convertible Adjusting Rate Securities
Number of Convertible
Securities Held
% of Issued
Convertible Securities
BRISPOT NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
FORTIS CLEARING NOMINEES P/L
RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
ANZ NOMINEES LIMITED
RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED
WESTPAC CUSTODIAN NOMINEES LIMITED
ANZ NOMINEES LIMITED
GOLDMAN SACHS JBWERE CAPITAL MARKETS LTD
UBS PRIVATE CLIENTS AUSTRALIA NOMINEES PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
PAN AUSTRALIAN NOMINEES PTY LIMITED
SANDHURST TRUSTEES LTD
CAMBOOYA PTY LIMITED
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
IRREWARRA INVESTMENTS PTY LTD
PERPETUAL TRUSTEE COMPANY LIMITED
COGENT NOMINEES PTY LIMITED
794,188
310,243
295,857
247,469
233,277
203,115
197,678
149,030
148,138
100,074
59,252
53,713
52,700
43,585
26,751
25,900
24,360
24,044
19,798
19,739
18.47
7.21
6.88
5.76
5.43
4.72
4.60
3.47
3.45
2.33
1.38
1.25
1.23
1.01
0.62
0.60
0.57
0.56
0.46
0.46
Total
3,028,911
70.46
Annual Report 2005 167
financials
This page is intentionally left blank
168
Annual Report 2005
enquiries and information
Removal from Annual Report
mailing list
Security Holders can nominate not to
receive an Annual Report by written notice
to the Stapled Securities Register. Security
holders will continue to receive all other
shareholder information, including Notice
of Annual General Meeting and proxy form.
Tax File Number (‘TFN’)
information
While it is not compulsory for security holders
to provide a TFN, the Company is obliged to
deduct tax from distributions or dividends
to holders resident in Australia who have not
supplied such information. If you have not
already supplied your TFN, you may do so by
writing to the Stapled Securities Register.
Change of address or name
A security holder should notify the Register
immediately, in writing, if there is any
change in his or her registered address
or name.
Auditors
PricewaterhouseCoopers
Freshwater Place
2 Southbank Boulevard
Melbourne Victoria 3006
Telephone +613 8603 1000
Facsimile +613 8603 1999
Enquiries about your stapled
securities
The Stapled Securities Register is
maintained by Computershare Investor
Services Pty Limited. If you have a question
about your Transurban Securities, transfer
of securities or distributions, please contact:
Computershare Investor
Services Pty Limited.
Yarra Falls, 452 Johnston Street,
Abbotsford Victoria 3067
GPO Box 2975
Melbourne Victoria 3001
|(within Australia) 1300 850 505
(outside Australia) +613 9415 4000
Facsimile +613 9473 2500
Enquiries about Transurban
Contact Transurban’s Investor Relations:
Manager, Investor Relations
Telephone +613 9612 6999
Facsimile +613 9649 7380
Email via our website:
www.transurban.com.au
Transurban Group
Transurban Holdings Limited
ABN 86 098 143 429
Transurban Holding Trust
ABN 30 169 362 255
Transurban Limited
ABN 96 098 143 410
Transurban Infrastructure
Management Limited
ABN 27 098 147 678 (as responsible entity of the
Transurban CARS Trust ARSN 103 090 928)
Registered Office
Level 43 Rialto South Tower
525 Collins Street
Melbourne Victoria 3000
Telephone +613 9612 6999
Facsimile +613 9649 7380
www.transurban.com.au
Or write to:
Manager, Investor Relations,
Transurban Group
Level 43 Rialto South Tower
525 Collins Street,
Melbourne Victoria 3000
Stock Exchange listing
The Stapled Securities are listed on the
Australian Stock Exchange under the name
Transurban Group and under the code ‘TCL’.
Transurban CARS Trust: the securities are
listed on the Australian Stock Exchange
under the name Transurban CARS Trust
and under the code ‘TCS’.
The securities participate in the Clearing
House Electronic Subregister System
(‘CHESS’).
Directors
Laurence G Cox, Chairman
Kim Edwards, Managing Director
Peter C Byers
Geoffrey O Cosgriff
Jeremy G A Davis
Susan M Oliver
Christopher J S Renwick
David J Ryan
Company Secretary
Mark Licciardo
Paul O’Shea
www.transurban.com.au
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