Annual Report 2006
DELIVERING
VALUE
Cover image
The Light Horse intersection rises
23 metres above the ground creating
a striking architectural feature on Westlink
M7, the new motorway opened by Transurban
Group and its partners in Sydney, Australia,
in December 2005.
Westlink M7 completes the missing link
in Sydney’s orbital motorway network. It is
attracting new growth to an already booming
regional economy in western Sydney and is
set to deliver increasing revenues to
Transurban.
Dollar values are provided in Australian currency unless otherwise specifi ed.
e-TAG® is a registered trade mark of CityLink Melbourne Limited ACN 070 810 678
Roam® and Roam Express® are registered trade marks of Transurban Limited ACN 098 143 410
Contents
Delivering value
Key highlights
Delivering on promises
Chairman & Managing Director’s overview
Delivering new projects
Delivering congestion solutions
1
5
9
Delivering service and savings
13
Delivering benefits to
the community
Delivering in new markets
Delivering for success
Corporate Governance
Delivering financials
17
19
21
29
Transurban owns and
manages a diversified
portfolio of toll road
assets. They deliver
growing, predictable,
inflation protected
cash flows.
As a pioneer in its
business, Transurban
has developed the wide
range of skills required
to maximise the value
and successfully manage
the risks involved in
developing and managing
toll roads.
This annual report
demonstrates how
those skills delivered
for investors in FY06.
The Group is well placed
to carefully select new
opportunities as the global
market for electronic toll
roads rapidly expands.
annual report 2006
DELIVERING
VALUE
FY06 was a successful year for
WE OPENED
A NEW TOLL ROAD...
ACQUIRED A SECOND...
TOOK CONTROL
OF O&M ON A THIRD...
SIGNED A $903M DEAL...
AND INCREASED
DISTRIBUTIONS BY 43%.
ii
annual report 2006
Transurban with five significant highlights
Transurban and its partners opened
Westlink M7 in Sydney eight months early.
Transurban delivered the full electronic
tolling system ten months early and earned
a bonus of $8.3 million.
The Pocahontas Parkway in Richmond,
Virginia, became Transurban’s fi rst toll road
in the United States in June 2006.
Transurban bought out the operations
and maintenance contractor for Hills M2
in Sydney in May 2006, following the
acquisition of Hills Motorway Group
in FY05.
Transurban and the Victorian Government
agreed to add 75 kilometres of new lanes
to Melbourne’s major economic spine,
the West Gate-CityLink-Monash freeway
corridor. The project will greatly enhance
the value of our cornerstone asset.
Transurban paid total distributions
of 50 cents per security to its investors
for FY06.
annual report 2006
iii
DELIVERING
ON PROMISES
Transurban acquires its first US asset
The latest toll road in the Transurban portfolio is the Pocahontas Parkway. It crosses the James
River near Richmond in Virginia. The Parkway services an area poised for growth over the next
20 years making the road an attractive investment.
Transurban’s portfolio of toll road
assets has been built on a unique
combination of key capabilities:
– Traffi c modelling
Asset mix
Pocahontas Parkway
- 100% owned & operated
- Acquired Virginia, US, 2006
CityLink
- 100% owned & operated
- Opened Melbourne 2000
– Full electronic (open road) tolling
4%
54%
– Customer service
– Road performance
– Stakeholder engagement
11%
– Concession management
– Project delivery
– Financial management
Westlink M7
- 47.5% owned, customer
service & tolling provider
- Opened Sydney 2005
31%
Hills M2
- 100% owned & operated
- Acquired Sydney 2005
1
annual report 2006
Chairman and Managing Director’s overview
Delivering value for investors
Financial results
This has been a landmark year for
Transurban. We delivered for investors
with total distributions of 50 cents per
security. We acquired one new road,
enhanced existing ones and achieved
strong cash fl ows from our operating
assets.
In Sydney, we completed the operational
takeover of Hills M2, and opened
Westlink M7 eight months early and
delivered its full electronic tolling
system ten months early.
We acquired our fi rst toll road in the
United States, the Pocahontas Parkway,
and were named the preferred tenderer
for another project in the highly
populated Washington DC area.
We agreed to a $903 million
redevelopment of Melbourne’s premier
road link, a project that will greatly
enhance the value of our cornerstone
asset, CityLink.
As an owner and manager of toll roads
we focus on extracting value for our
investors over the life of long concessions.
Our business model is not just about
the development of high quality
infrastructure. It is about providing
services over many decades to the
stakeholders who use the infrastructure.
Employees in our operating businesses
have a strong customer service culture.
They work closely with people in our
business development teams to maximise
the community benefi ts we deliver on
our existing roads and in new projects.
We would like to pay tribute to the work
of all our employees in FY06—our results
are built on their efforts.
Transurban aims to deliver a growing
stream of distributions to investors.
Total distributions for 2006 were up
43 per cent on the previous year.
All previous Transurban distributions
were 100 per cent tax deferred which
meant they were not assessable for
income tax, but deducted from the
investor’s cost base for Capital Gains
Tax purposes. Because of the takeover
of Hills Motorway Group and other
Group developments, 80.6 per cent
of the distributions paid for FY06 are
now tax deferred. The remaining
19.4 per cent are assessable for income
tax. (Full details are published in your
Transurban Annual Tax Statement
mailed in August.)
On 20 July 2006, the High Court ruled in
favour of Transurban in a long running
tax dispute. The case revolved around
the tax treatment of Concession Fees
that we are required to pay to the State
of Victoria under the Melbourne CityLink
Concession Deed. The court ruled that
the fees are fully tax deductible when
issued and awarded costs to Transurban.
The ruling has no impact on the amount
of distributions Transurban pays
investors. Distributions will continue
to be substantially tax deferred in the
medium term.
Our distributions are underpinned by
the strong cash fl ows generated by our
toll roads and our capital management
strategy announced in FY05. Although
these are growing strongly, the Group
will continue to report accounting losses
for several years as we depreciate our
assets. Depreciation is a non-cash item
and the accounting loss therefore does
not affect our ability to pay cash
distributions to investors.
In FY06, we recorded a 22.2 per cent
increase in free cash fl ow. The fi gure
was $223.4 million, up from
$182.8 million in FY05.
n
o
i
l
l
i
m
$
annual report 2006
As a result of non-cash items such
as depreciation, the Group recorded
an accounting loss after tax of
$60.9 million, compared to $90.4 million
the year before.
The new international accounting rules
(AIFRS) reduced the loss by $3.4 million,
making the loss fi gures for 2005 and
2006 not directly comparable.
Total toll and fee revenues were
$404.1 million, up from $297.8 million,
an increase of 35.7 per cent.
Distribution growth
y
t
i
r
u
c
e
s
r
e
p
s
t
n
e
c
60
50
40
30
20
10
0
54.0
50.0
35.0
t
s
a
c
e
r
o
f
25.5
20.0
5.3
2002
2003
2004
2005
2006
2007
Toll and fee revenue growth
n
o
i
l
l
i
m
$
500
400
300
404.1
297.8
254.5
200
231.1
100
0
2003
2004
2005
2006
Free cash fl ow growth
250
200
150
100
50
0
223.4
182.8
127.9
97.3
2003
2004
2005
2006
2
Traffi c and revenue continued to grow in
line with our forecasts and did not appear
to be impacted by higher petrol prices.
A study commissioned by Transurban
in its two biggest markets, the Australian
cities of Melbourne and Sydney, found
that 74 per cent of people were ‘totally
reliant’ on their cars.
In Melbourne, we studied traffi c in
the CityLink corridor at a time of rising
petrol prices. CityLink traffi c grew
2.9 per cent in the period studied. Traffi c
on other roads in the same corridor
declined by 4.3 per cent. This suggests
people favoured our road, presumably
to save time and fuel, over alternate
congested routes.
CityLink
The biggest news on CityLink was
the announcement of a $903 million
agreement between Transurban and
the Government of Victoria to fund
a widening and upgrade of Melbourne’s
major economic spine, the West Gate-
CityLink-Monash freeway corridor.
The Southern Link section of CityLink
sits in the middle of the corridor which
connects Melbourne’s port and central
business district with industrial areas
west of the city and manufacturing
to the east.
Under the agreement, the State will
assign Transurban all remaining and
future Concession Note liabilities.
This means Transurban will effectively
bring forward the Concession Fees due
to the State over the life of the CityLink
concession. It will pay the State
$614 million over three years instead
of $2.9 billion between 2014 and 2034,
which is a signifi cant fi nancial benefi t
for our security holders.
The Government will use the $614 million
plus $123 million of their own funds to
upgrade the freeways that connect to
each end of Southern Link. Transurban
will invest a further $166 million on
enhancements to Southern Link.
The project will add extra lanes and
implement an advanced freeway
management system along the entire
corridor. The Government predicts it will
increase traffi c capacity by 55 per cent.
The project will encourage more traffi c
onto CityLink. The increased revenue
will be shared equally with the State,
but only after Transurban has recovered
its costs. These include the $166 million
invested on Southern Link and the cost
of traffi c disruption during construction.
This deal demonstrates the value that
we can deliver to the community and
investors through long term ownership
of major freight and commuter routes.
Westlink M7
Westlink M7 opened in Sydney in
December 2005, eight months ahead of
schedule. Transurban is the tolling and
customer service provider for the toll
road. We delivered the tolling system
ten months ahead of schedule and two
months ahead of construction completion.
The early delivery earned the Group
an $8.3 million performance bonus.
Transurban began FY06 with a 40 per cent
stake in Westlink M7. During the year
we purchased an additional 5 per cent
equity interest for $47.4 million.
After the end of FY06 we exercised our
pre-emptive right to purchase an
additional 2.5 per cent, taking our
holding to 47.5 per cent.
Westlink M7 is performing well,
with traffi c increasing by more than
16 per cent since the road opened.
While traffi c volumes are slightly below
forecast, the average tolled trip length
is 35 per cent higher than expected.
As a result revenue is achieving our
forecast levels for opening.
Industrial and commercial development
in the corridor continues to outstrip
predictions. An independent forecast
by CB Richard Ellis says one quarter
of all new industrial fl oor space in
metropolitan Sydney in the next two
years will be built in the Westlink M7
corridor. This will increase business and
freight traffi c.
Hills M2
The opening of Westlink M7 has
signifi cantly increased traffi c on Hills M2
which connects to it. Traffi c over the year
was up 7.8 per cent. In the second half,
following the opening of Westlink M7,
traffi c jumped 14.3 per cent.
The increased traffi c delivered to Hills M2
by Westlink M7 vindicates Transurban’s
decision to acquire Hills Motorway Group.
Our forecasts on how much Westlink M7
would increase Hills M2 traffi c have
proved to be accurate.
Hills M2 traffi c will receive a further boost
after the opening of the Lane Cove Tunnel,
expected to be late 2006–early 2007.
Transurban has made signifi cant
service improvements for Hills M2
customers. Six manual toll booths were
replaced by four full electronic express
lanes which began operating in January
2006. This delivers quicker, safer
journeys and increases traffi c capacity
and potential revenue growth.
Operating cost synergies for the Group
of $5.4 million have been delivered in
FY06. An additional $3.6 million has
been identifi ed for progressive delivery
over the next 24 months.
Pocahontas Parkway
Transurban acquired its fi rst toll road
in the United States, the Pocahontas
Parkway in Virginia, in June 2006.
The Parkway is a 14-kilometre road that
services an area near the city of Richmond
which is poised for signifi cant growth
over the next 20 years. Traffi c on
the road is forecast to substantially
increase over the next eight years as
the development of the surrounding
area takes place.
Our equity investment in Pocahontas
is up to A$249 million/US$191 million,
funded from our Distribution
Reinvestment Plan. The project is
expected to generate an equity internal
rate of return of 12.6 per cent and is
conservatively geared with a 70:30
debt-to-equity ratio.
3
annual report 2006
system and the development of our fi rst
Sustainability Report, due for publication
in late 2006.
CSR is an important strategy for aligning
our business with the long term interests
of our stakeholders. Without their
support, we won’t have a sustainable
business. Our aim is to understand our
impacts on society and the environment,
to enhance positive impacts and
minimise negative impacts.
Conclusion
In this overview, we have focussed
on the most signifi cant events of
the year. There were other important
achievements and these are covered
throughout this annual report.
Transurban has a low risk, diversifi ed
portfolio of toll road assets generating
strong cash fl ows over the long term.
The growing, predictable and infl ation
protected nature of those cash fl ows
is attractive to many investors.
There are signifi cant opportunities for
growth in the United States, a market
in which we are now well established.
We have taken the time to develop
the strong relationships with partners,
governments and road authorities that
help position us to take advantage of
future projects.
In Australia, the toll road industry will
continue to grow. The demand for new
road infrastructure in the next 20 to 30
years greatly exceeds the ability of
governments to pay without massive
increases in debt or taxes. Private sector
fi nancing is the alternative.
Research commissioned by Transurban
estimates government spending on
economic and social infrastructure
would have to increase by $14 billion
each and every year between now and
2020, if we want to wipe out Australia’s
infrastructure backlog through public
investment only.
The sheer size of the road infrastructure
challenge dictates the need for private
investment. Without it, critical road
projects will be delayed for many years
with a major loss of economic
development and growth opportunities.
Transurban has the combination of
operational, fi nancial, construction
management and technology skills to
roll out new projects and to maximise
returns from our existing assets.
Transurban investors can look forward
to a rewarding future.
Laurence G Cox AO
Chairman
Kimberley Edwards
Managing Director
US projects
In FY05, Transurban secured exclusive
negotiating rights for a 23 kilometre
HOT lane system that makes up part of
the Capital Beltway orbital road around
Washington. HOT lanes are tolled lanes
built next to free lanes which are often
heavily congested. Drivers can choose
to pay a toll to avoid the congestion
in the free lanes.
In FY06, Transurban was selected as
the preferred developer for the I-95/395
project, a 90 kilometre bus rapid transit
and HOT lane system just south of
Washington DC.
Transurban’s international business
development priority is to reach
fi nancial close on the Capital Beltway
project in FY07.
Our success in Virginia refl ects
the reputation we have earned on our
Australian roads. We work closely with
governments to ensure motorists enjoy
a seamless road experience across
networks with two or more different
road operators. Our pioneering experience
in electronic tolling and customer
service is well known and in demand
in the United States market.
New tolling businesses
Transurban introduced a new tolling
business under the Roam® and Roam
Express® brand names to service
the Sydney market. Roam was set up
to provide customer service on Westlink
M7. Roam Express serves Hills M2
customers. The Lane Cove Tunnel,
in which Transurban has no equity,
selected Roam Express as its preferred
tag and pass provider. Transurban now
has a 20 per cent share of Sydney’s tag
and pass market and we expect this
to grow in future years.
Corporate social responsibility
We made good progress in FY06 in
implementing corporate social
responsibility (CSR) programs
throughout the business. Initiatives
include the development of a Group
wide framework for community
relations, an environmental management
annual report 2006
4
DELIVERING
NEW PROJECTS
Westlink M7 creates economic growth
Westlink M7 has been a magnet for economic development in western Sydney—fast tracking
industrial, commercial and residential development that will drive more traffic and revenue
onto the road. More than 665,000 square metres of industrial land is being developed along
the M7 corridor. A 2,450 hectare western Sydney employment hub is planned with the potential
to create up to 36,000 jobs when fully developed. Westlink M7 also links the two largest residential
developments in New South Wales. Around 160,000 new homes will be built over the next 30 years
and will accommodate more than 350,000 people.
5
annual report 2006
This project is an excellent example of what can be
achieved through governments and the private sector
working together.
John Howard, Prime Minister of Australia, on Westlink M7
Around the time the road opened
Transurban:
Key facts – Westlink M7
– 40-kilometre motorway in Sydney,
– Purchased an additional 5 per cent
Australia
equity inerest in Westlink M7 for $47.4
million. After FY06, Transurban
exercised its pre-emptive right to
purchase an additional 2.5 per cent,
which will increase its holding to 47.5
per cent.
– Renegotiated its bank debt facilities
and secured a lower interest rate
because the motorway and tolling
system were successfully delivered.
Westlink Motorway successfully
negotiated early payment of the Abigroup
Leighton Joint Venture design and
construction bonus, paying $61 million
this year rather than approximately
$100 million in 2008.
– Construction completed December
2005—8 months ahead of schedule
– Tolling system delivered 10 months
ahead of schedule and 2 months
ahead of construction
– Owned 47.5% Transurban,
47.5% Macquarie Infrastructure
Group, 5% Leighton (September 2006)
– Revenue on track to meet forecasts
– Strong community & business support
– Key industrial and residential
growth corridor
– Toll increases in line with CPI
– Concession until 2037
During FY06, Transurban opened
Westlink M7 ahead of schedule and
fi nalised the operational takeover
of Hills M2. The Group also acquired
its fi rst United States asset, the
Pocahontas Parkway in Richmond,
Virginia.
Westlink M7 opens eight months ahead
of schedule
Transurban and its partners opened
Westlink M7 to traffi c in December 2005,
eight months ahead of schedule.
The early opening saved the Westlink
consortium $90 million on capitalised
interest.
Transurban earned a performance
bonus of $8.3 million for delivering
the tolling and customer service system
ahead of schedule and in time for the
Westlink M7 opening.
Westlink M7 is the missing link in
Sydney’s orbital motorway network.
The 40-kilometre, fully electronic toll
road joins three motorways—Hills M2,
the M4 and M5.
When tolling began in January 2006,
weekday traffi c averaged 89,174.
By June, this fi gure had increased by
more than 16 per cent to 103,912.
Major freight companies now have a
direct link to the signifi cant number of
new industrial parks along the road and
can bypass Sydney on the new route.
While reported traffi c volumes to date
are slightly below forecast, the average
tolled trip length—currently around
12.5 kilometres—is 35 per cent higher
than expected.
Westlink M7’s Light Horse interchange
MARSDEN
PARK
MT.DRUITT
TO PENRITH
EASTERN
CREEK
M7
TO NEWCASTLE
HORNSBY
F3
CASTLE HILL
M2
M2
PACIFIC
HIGHWAY
MONA VALE
Legend
Westlink M7
Transurban asset
Freeways
Toll roads
Secondary routes
Tunnel under
construction
MANLY
Tunnels
RYDE
LANE COVE
TUNNEL
PARRAMATTA
M4
HARBOUR
BRIDGE
HARBOUR
TUNNEL
LEICHHARDT
SYDNEY
CROSS CITY TUNNEL
BONDI JUNCTION
Sydney
Airport
EASTERN
DISTRIBUTOR
Hoxton Park
Airport
LIVERPOOL
Bankstown
Airport
HOXTON
PARK
HUME
HIGHWAY
M5
M5
EAST
Port
Botany
PRINCES
HIGHWAY
TO CANBERRA
TO WOLLONGONG
N
kms
mls
0
0
1
2
4
6
1
2
3
4
8
5
6
annual report 2006
The increase in traffi c is due to a number
of factors.
– The opening of Westlink M7 at the
western end of the motorway, and
– The opening of new Express Lanes
on the Hills M2 (see page 11 for more
details).
Construction of the Lane Cove Tunnel
has impacted M2 traffi c. However,
the new tunnel is expected to deliver
additional traffi c growth when it opens
in late 2006–early 2007.
Key facts – Hills M2
– 21-kilometre motorway in Sydney,
Australia
– Acquired by Transurban in June 2005
– Express Lanes introduced in
January 2006
– Tollaust (M2 operator) acquired in
May 2006
– $5.4 million in synergies delivered;
$3.6 million identifi ed for delivery
over next 24 months
– Direct link to Westlink M7 and
Lane Cove Tunnel (expected to
open late 2006–early 2007)
– Strong residential and commercial
growth corridor
– Concession until 2042
Hills M2 traffi c continues to increase
Since acquiring Hills M2 in June 2005,
Transurban has delivered increased
traffi c, synergies and cost savings for
investors, and signifi cant road and
service improvements for customers.
The M2 acquisition provided synergies
that Transurban estimated would deliver
cost savings of $5 million to $6 million
per annum. Actual cost savings of
$5.4 million have been delivered in FY06.
An additional $3.6 million has been
identifi ed for progressive delivery over
the next 24 months.
In December 2005, Transurban
announced the purchase of Tollaust,
the M2 operator, for $38.9 million
(including acquisition costs). Under its
contract, Tollaust was entitled to traffi c
incentive payments on Hills M2. These
payments, which are estimated to
exceed $200 million in nominal terms
over the life of the concession, will now
stay within Transurban.
Traffi c and revenue have both grown
strongly. Hills M2 toll revenue (net of
GST and provisioning for doubtful debts)
for FY06 was $95.8 million, an increase
of 7.9 per cent. Total traffi c numbers
increased by 7.8 per cent year on year.
MARSDEN
PARK
MT.DRUITT
TO PENRITH
EASTERN
CREEK
M7
HOXTON
PARK
HUME
HIGHWAY
TO NEWCASTLE
HORNSBY
F3
Legend
CASTLE HILL
M2
PACIFIC
HIGHWAY
CHATSWOOD
Hills M2
Transurban asset
Freeways
Toll roads
Secondary routes
Tunnel under
construction
MANLY
Tunnels
RYDE
LANE COVE
TUNNEL
PARRAMATTA
M4
HARBOUR
BRIDGE
HARBOUR
TUNNEL
LEICHHARDT
SYDNEY
CROSS CITY TUNNEL
BONDI JUNCTION
Sydney
Airport
EASTERN
DISTRIBUTOR
Hills M2 Express Lanes were introduced
in January 2006.
Hoxton Park
Airport
LIVERPOOL
Bankstown
Airport
M5
M5
EAST
Port
Botany
TO CANBERRA
TO WOLLONGONG
PRINCES
HIGHWAY
N
kms
mls
0
0
1
2
4
6
1
2
3
4
8
5
7
annual report 2006
WASHINGTON D.C.
Transurban acquires Pocahontas
Parkway in US
In June 2006, Transurban acquired
its fi rst US toll road—the Pocahontas
Parkway (Route 895), a four-lane,
hybrid cash/electronic toll road
in Richmond, Virginia.
The Group’s capital investment is
expected to generate an equity internal
rate of return of 12.6 per cent.
The project is conservatively geared
with a 70:30 debt-to-equity ratio.
Strong business and residential growth
in the region will drive revenue growth
on the Parkway.
Opened in 2002, it was designed to
facilitate development opportunities
south-east of Richmond.
In 2005, traffi c using the Parkway grew
at a rate of 6 per cent and revenue
increased by 22 per cent. Daily traffi c
is forecast to signifi cantly increase from
around 15,000 in 2005 to approximately
33,000 by 2012.
The 14-kilometre/9-mile toll road links
Interstates 95 and 295 and creates
a southern bypass of Richmond,
the capital of Virginia. It also provides
the only crossing of the James River
for 10 kilometres/6 miles in either
direction, and facilitates access
to Richmond International Airport.
The Parkway is a vital transport link
for a development called Wilton on the
James. It is expected to provide 3,200
dwellings for upper-middle income
households over the next 10 years,
as well as new commercial and retail
space. In addition, 12 commercial and
residential developments are underway
in the region. Strong population growth
is also predicted for Richmond’s
Chesterfi eld and Henrico counties,
where residents use the Parkway to
travel east-west.
Transurban will also arrange and manage
the construction of a direct link between
the Parkway and the airport, subject to
US federal fi nancial assistance.
The Parkway gives Transurban
the opportunity to apply its operational
expertise in the US, leveraging its
electronic tolling management and
customer communication capabilities.
The Group is also working with the
Commonwealth of Virginia on the
development of two High Occupancy Toll
(HOT) lane projects in Northern Virginia
on the I-95/395 and the I-495 Capital
Beltway (see pages 19 and 20 for more
details).
Key facts – Pocahontas Parkway
– 14-kilometre/9-mile toll road in
Richmond, Virginia
– Transurban holds 99-year concession
to manage and operate the roadway
– 100 per cent of equity owned by
Transurban
– Forecast equity internal rate of return
of 12.6%
– Total upfront funding of
A$817 million/US$604 million
– Equity commitment up to
A$249 million/US$191 million
– Represents 4 per cent of Transurban’s
portfolio
– Services a strong growth area
Pocahontas Parkway provides the only
crossing of the James River for
10 kilometres/6 miles in either direction.
76
60
195
RICHMOND
RICHMOND
64
60
150
360
1
5
95
895
TOLL
BOOTH
TOLL
PLAZA
5
150
1
WILTON ON
THE JAMES
95
Legend
Transurban asset
Freeways
288
Toll roads
Secondary routes
Tunnel under
construction
Richmond
International
Airport
60
AIRPORT
CONNECTOR
295
POCAHONTAS
PARKWAY
kms
mls
0
0
N
2
4
6
1
2
3
4
5
8
5
annual report 2006
8
PETERSBURG
DELIVERING
CONGESTION SOLUTIONS
$903 million improvement project for Melbourne’s economic spine
The West Gate-CityLink-Monash improvement project is one of the most significant upgrades
to Victorian road infrastructure since the opening of CityLink in 2000. The project will optimise
the corridor which links Melbourne’s manufacturing hub with the Port of Melbourne, CBD and
Melbourne Airport, and carries essential freight and hundreds of thousands of commuters daily.
The project will deliver a range of benefits including increased CityLink traffic and revenue,
and quicker travel times and improved safety for commuters.
Tidal fl ow lanes are just one of
the components of the advanced
freeway management system that
will be implemented as part of
the $903 million upgrade.
9
annual report 2006
Our latest Melbourne project is a sensational outcome—
it will slash travel times and increase traffic and revenue
on CityLink.
Vic Delosa, General Manager—Victoria
Key facts - West Gate-CityLink-Monash
– Transurban worked closely with
the Victorian Government to develop
the project
– The $903 million project will upgrade
CityLink’s Southern Link and two
state-managed freeways—the Monash
and West Gate
– Traffi c fl ow is expected to increase
by 55 per cent and generate higher
traffi c and revenue for CityLink
– It is estimated peak period travel
times will reduce by 50 per cent
– The project is estimated to generate
$14.5 billion in community benefi ts
– Completion scheduled December
2010
Revenue generated by the improvements
will be shared with the Government
once Transurban has recovered all
Southern Link capital costs and any lost
revenue during the construction period.
The project is expected to deliver
the most signifi cant, high-tech road
in Australia. The project includes tidal
fl ow lanes on the West Gate Bridge
during peak periods, controlled entry
to the freeways from ramps, and a
series of overpasses to separate traffi c
according to destination and eliminate
dangerous weaving.
The upgrades will allow CityLink’s
Burnley and Domain tunnels to operate
close to capacity during peak periods,
removing the need to artifi cially slow
traffi c fl ow due to bottlenecks created
at either end of the tunnels.
The Government predicts that peak
travel times will halve, accidents will
decrease by 20 per cent, and community
benefi ts will amount to approximately
$14.5 billion.
Legend
Tidal fl ow
Road widening
Freeway Management
System with ramp
metering
Transurban works closely with
governments to manage traffi c
across urban road networks.
The Group develops new projects
which will reduce congestion and
deliver benefi ts to both the
community and our investors.
West Gate-CityLink-Monash corridor
Transurban and the Victorian
Government reached a $903 million
agreement in May 2006 to improve
Melbourne’s most critical road link,
the West Gate–CityLink–Monash
corridor, without any new road tolls.
The project is a win-win-win for
government, the community and
Transurban security holders.
Together, Transurban and the Government
will add an additional 75 kilometres of
bitumen to the corridor—one new lane
in each direction for 37.5 kilometres.
The Group will also work with the
Government to implement a
state-of-the-art electronic freeway
management system along the entire
corridor. The overall result will be
an estimated additional capacity of
55 per cent, so extra traffi c will fl ow
onto the Southern Link section of
CityLink. It sits in the middle of the
corridor between the Government-
operated West Gate and Monash freeways.
Under the agreement, Transurban
will provide the Government with
$614 million over the next three years.
This will effectively bring forward future
payments due for the right to collect
tolls on CityLink, replacing a liability
worth $2.9 billion in nominal terms.
The Government will reinvest these
payments to upgrade the Monash and
West Gate freeways.
Transurban will also invest $166 million
to widen CityLink’s Southern Link to
accommodate the increased traffi c
in the corridor. The Group’s capital
investment is forecast to generate
an equity internal rate of return of
11.1 per cent.
annual report 2006
10
Key facts - Hills M2
– 7.8% increase in traffi c in FY06
Hills M2 express lanes keep
motorists moving
– Four express lanes replaced six
manual toll booths at the main toll
plaza in January 2006
– One full electronic lane can process
at least 2,000 vehicles an hour while
a cash-only booth can handle 400
CityLink road and safety improvements
Transurban has invested more than
$1.7 million on road and safety
improvement projects that are expected
to drive traffi c onto CityLink.
Improvements were made to exit ramps
at three locations to improve traffi c fl ow
during peak periods, reduce congestion
and increase service levels for
customers. These include:
– Flemington Road
– Punt Road and Batman Avenue, and
– Kings Way and Power Street.
Several safety improvement projects
have also been delivered.
– A Heavy Vehicle Speed Awareness
System was implemented on the West
Gate Freeway’s Bolte Bridge on-ramp.
The system has reduced the number
of truck rollovers.
– Variable Speed Limit signs have been
installed between the Burnley Tunnel
exit and Glenferrie Road to manage
vehicle speeds in the event of an
incident.
MONA VALE
Transurban acquired Hills M2 in June
2005 and immediately commenced
improvements to maximise traffi c fl ow
and revenue and optimise the customer
experience.
Transurban removed six toll booths at
the main toll plaza and introduced four
new express lanes to increase traffi c
capacity and provide a quicker, safer
experience for customers. The new
express lanes began operating in
January 2006.
One full electronic toll lane can process
at least 2,000 vehicles an hour, while a
cash-only booth can handle around 400.
The new express lanes have increased
the effi ciency of the motorway and
removed the toll transaction delays
for express lane users.
F3
I G H W A Y
H
D
N
A
L
R
E
B
PENNANT
PENNANT
PENNANT
HILLS
HILLS
HILLS
M
U
C
H I L L S R O A D
B
E
E
C
R
O
F
T
R
O
A
D
Legend
Hills M2
Toll roads
Freeways
Secondary routes
P
A
C
I
F
Tunnel under
construction
I
C
TOLL
PLAZA
D
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W
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RI
N
SYDNEY
annual report 2006
BONDI JUNCTION
G
A
H
F
W
Y
Y
W
H
D
L
E
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F
D
A
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EASTERN
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11
BRINGELLY
CASTLE HILL
CASTLE HILL
C
A
S
T
L
W
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D
S
O
BAULKHAM
BAULKHAM
BAULKHAM
HILLS
HILLS
HILLS
R
M7
R
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EPPING
P L Y M P T O N R O A D
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PARRAMATTA
PARRAMATTA
PARRAMATTA
G T W E S TERN HW
Y
M4
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A
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A
T
T
A
R
D
HOMEBUSH
HOMEBUSH
CAMPBELLTOWN
CRONULLA
Tullamarine-Calder freeway
interchange improvements
Works continue on the $150 million project
to improve one of Victoria’s worst traffi c
trouble spots—the Tullamarine Freeway
and Calder Freeway interchange.
Construction began in September 2005
and is progressing smoothly. Much of
the works are located beyond the road
carriageway and are having a negligible
impact on road availability and CityLink
revenue.
The project will alleviate the bottlenecks
that occur at the interchange. Traffi c fl ow
onto CityLink will be greatly improved.
Completion is scheduled for mid-2007.
Melbourne
Airport MEL
M79
40
43
TULLAMARINE
FREEWAY
M31
Legend
CALDER
FREEWAY
M80
Essendon
Airport
Freeways
Toll roads
Secondary routes
Under construction
Tunnels
Upgrades
31
PRESTON
TULLAMARINE
CALDER
INTERCHANGE
43
CityLink
CityLink
[Western Link]
[Western Link]
M80
SUNSHINE
8
8
83
79
83
Port of
Melbourne
MELBOURNE
MELBOURNE
MELBOURNE
CityLink
CityLink
[Southern Link]
[Southern Link]
34
WEST GATE
FREEWAY
M1
LAVERTON
ALT
1
ST KILDA
M1
BURWOOD
26
ALT
1
M1
Works continue on the $150 million upgrade
to the Tullamarine-Calder interchange.
GEELONG
annual report 2006
12
DELIVERING
SERVICE AND SAVINGS
Cashless parking adds value for customers
Transurban has developed a cashless parking system which allows customers to enter, park
and exit a car park without visiting the pay station. The secure and convenient system uses a
customer’s e-TAG® device and a new piece of technology called a Smartdisc® device. Both the
e-TAG and Smartdisc devices are read at the car park’s boom gates, allowing registered customers
to pay for their parking by debiting a nominated credit card. Cashless parking began operating at
Melbourne’s Federation Square in August 2006.
13
annual report 2006
e-TAG® is a registered trademark of CityLink Melbourne Limited.
Smartdisc® is a registered trademark of Transurban Limited.
We’ve demonstrated once again that active management
of our roads and operations creates additional value
for investors.
Brendan Bourke, Group General Manager - Operations
Now a fi ne is only issued after non-
payment of an invoice and fi nal notice.
CityLink increased taxi tolls by
30 per cent in January 2006, the fi rst
rise in almost six years. The approved
increase narrowed the gap between car
price tolls and the fi xed toll charge for
taxi passengers using CityLink.
Rear image cameras were introduced
to photograph the rear number plates
of vehicles using CityLink where drivers
have not made arrangements to pay.
Previously cameras could only take an
image of front number plates. The
introduction of rear image cameras has
increased the capture rate of number
plates leading to increased trips billed
to motorists.
Access Accounts for occasional CityLink
users who do not have an e-TAG account
continued to attract new customers.
They now comprise nearly 35 per cent of
CityLink accounts opened each month.
Access Accounts generated more than
$6.6 million in toll and fee revenue in FY06.
CityLink closed its Bulla Road customer
service centre in November 2005 and
consolidated over-the-counter services
at the Lorimer Street centre which is
close to both Western Link and Southern
Link. The closure delivers an annual cost
saving of $600,000. All permanent
employees at Bulla Road were offered
the opportunity for redeployment.
CityLink reports its performance on
customer service targets in the CityLink
Scorecard. It is published six monthly for
the periods ending June and December
each year. CityLink met or exceeded all
its service targets in FY06.
CityLink scorecard
CityLink customer service target
Incident response vehicle to arrive at scene within 10 minutes
80% of customer calls answered within 20 seconds
80% of customer issues resolved within 7 business days
99% of customer letters and emails responded to or acknowledged within
2 business days
95% of new e-TAG devices despatched within 4 business days
100% compliance with Environment Protection Authority Victoria environmental
requirements
FY06 avg. result
(4 min 7 sec)
(81%)
(91%)
(100%)
(95.5%)
(100%)
Transurban actively manages its
toll road businesses to continually
improve services to customers and
returns to investors.
Transurban has grown rapidly from
a company with one toll road to a Group
managing four major assets, three in
Australia and one in the United States.
The Group has restructured its
operations to contain costs and ensure
the lessons learned on CityLink are
applied in the new assets. Teams
supporting customer service and tolling
operations provide ‘shared services’
across all our businesses.
CityLink
Initiatives during the year have
demonstrated the benefi ts of active
management. Traffi c grew by
3.05 per cent. There was a 4.5 per cent
increase in toll prices. In addition, we
achieved an uplift of 3.4 per cent from
a number of revenue initiatives. The
additional uplift would not have been
realised if CityLink had a ‘set and forget’
manager. Revenue initiatives included
Late Toll invoicing, higher taxi tolls and
the rear camera project. Overall, revenue
grew by 10.9 per cent.
Late Toll invoicing was introduced in
August 2005. It is the most signifi cant
customer service improvement since
CityLink opened. Motorists who use
CityLink without making an arrangement
to pay are now issued with an invoice
payable within 14 days. Previously,
legislation governing CityLink prescribed
that motorists would be automatically
fi ned by Victoria Police if they did not
have a valid arrangement to use the road.
annual report 2006
14
Roam® tolling and customer service
launched for Westlink M7
In October 2005, Transurban launched
its New South Wales tolling brand Roam
in advance of the opening of Westlink M7.
Roam offers customers an extensive
range of easy-to-use products and
24-hour service accessible through
multiple payment channels including
phone, internet and kiosks.
Roam has followed CityLink’s lead,
introducing a Customer Charter with
performance targets that it reports on
every six months. The Customer Charter
applies to customers with a Roam
e-TAG or e-PASS account, or a visitor
e-PASS.
Westlink M7 have thought about Sydney motorists when
structuring their tolling products and have shown good
faith as suggested by NRMA Motoring and Services by
offering a month long toll-free period…
Alan Evans, President, National Road and Motorists Association (NRMA)
Roam scorecard
Roam customer service target
75% of customer calls answered within 20 seconds
90% of customer issues resolved on fi rst contact
80% of issues raised with Customer Resolutions Group fi nalised within 7 business days
99% of letters and emails responded to or acknowledged within 2 business days
95% of new tags despatched within 4 business days
Roam Express® rolled out for Hills M2
Transurban purchased Tollaust in May
2006 for $38.9 million, including
acquisition costs—the fi nal step in the
takeover of Hills M2. Tollaust performs
the cash tolling, road operations and
maintenance functions for Hills M2 and
operates the Express Tag business.
Under its contract with Hills Motorway
Group, Tollaust stood to earn
performance payments with a nominal
total value of $200 million up to the end
of the Hills M2 concession in 2042.
These payments will now stay within
the Transurban Group.
The acquisition meant Transurban
acquired 75,000 Express Tag accounts.
Transurban quickly moved to re-brand
Express Tag to Roam Express.
With more than 200,000 Roam and
Roam Express tags, Transurban now
has a 20 per cent share of Sydney’s
electronic tag and pass market.
The number of Roam Express
customers is expected to further
increase when Lane Cove Tunnel opens
(expected to be late 2006–early 2007).
Transurban has been appointed by Lane
Cove Tunnel as its preferred tag and
pass provider.
The Group will deliver tolling services
to Lane Cove Tunnel customers through
the Roam Express brand.
15
annual report 2006
Transurban Customer Ombudsman
Transurban Customer Ombudsman
Michael Arnold is familiar with tolling
customer issues, having been the
Ombudsman on matters raised by
Transurban’s CityLink customers since
September 2004. Now his role extends to
the Sydney market.
Michael has extensive experience in
handling complaints in the national
fi nance services and insurance sectors,
and has a reputation for successful
resolution of consumer concerns.
Michael Arnold is a lawyer and former
Member of the Victorian Parliament.
Customer Ombudsman extends to
Sydney market
Initially established for CityLink
customers, Transurban’s independent
dispute resolution service has been
extended to cover New South Wales
(NSW). The Group’s Customer
Ombudsman can now consider
complaints from customers of Hills M2,
and Transurban’s NSW tolling
businesses Roam and Roam Express.
The Customer Ombudsman provides an
opportunity for customers who cannot
resolve their disputes directly with
Transurban’s tolling businesses to seek
a review and determination by an
independent and impartial umpire.
The Ombudsman is a free service that is
fully funded by Transurban and is
located outside of the Group’s corporate
and operational structure and premises.
Most customer complaints are resolved
during a customer’s fi rst contact with
Transurban. Unresolved issues are
transferred to the internal customer
resolutions team. If a customer is still
dissatisfi ed, they can seek independent
determination by the Ombudsman.
Transurban is bound by this decision.
During FY06, CityLink’s Independent
Customer Resolutions group received
6131 enquiries. Of these, only 75 or just
over 1 per cent resulted in an enquiry to
the Ombudsman’s offi ce.
annual report 2006
16
DELIVERING
BENEFITS TO THE COMMUNITY
Run for the kids
More than 20,000 runners and walkers participated in the inaugural Herald Sun CityLink Run
for the Kids fun run on Sunday 9 April 2006—raising more than $400,000 for Melbourne’s Royal
Children’s Hospital Good Friday Appeal. Transurban teamed up with Melbourne’s most popular
newspaper—the Herald Sun—to make the run possible, agreeing to close parts of the road for the
event. This gave participants the unique experience of traversing the landmark Bolte Bridge and
the 1.6 kilometre Domain Tunnel on CityLink. Transurban’s support for Run for the Kids is part of
the Group’s ongoing commitment to giving back to the communities in which it operates. Run for
the Kids is one of the many community initiatives Transurban supported in 2005-06.
17
annual report 2006
Corporate social responsibility programs help
Transurban align its business with the long term
interests of our stakeholders. Without their support,
we won’t have a sustainable business.
Kim Edwards, Managing Director
providing detailed information and data
for sustainability reporting. The system
will also help the Group prioritise
environmental initiatives.
The EMS will be linked to data collection
systems for ongoing management and
reporting on Transurban’s social
impacts and community engagement
programs.
During the year, Transurban’s CSR
Committee was reconstituted as a
formal Board committee. It is chaired
by a Board member, Susan Oliver.
A second director, Christopher Renwick,
also sits on the committee. Three
independent specialist advisers and
a number of senior managers are also
members.
Sustainability Report
The Transurban Sustainability Report
will provide detailed information on the
Group’s performance in four key areas:
– environment
– community
– customers, and
– employees.
The report is based on the Global
Reporting Initiative (GRI) draft G3
reporting framework. Developed by
a global non-government organisation,
GRI is an internationally recognised
framework adopted by some 2,000
businesses and organisations around
the world.
More information
Copies of the Sustainability Report
will be available in late 2006 by emailing
corporate@transuban.com.au to order a
printed report or visiting
www.transurban.com.au to download
a copy.
Transurban will soon publish its
fi rst annual Sustainability Report
as the Group implements new
corporate social responsibility
(CSR) programs across the
business.
The Group’s focus on CSR refl ects its
importance to Transurban’s ongoing
competitive position. Governments
award new toll road concessions and
are likely to consider a bidder’s record
in environmental management and
community engagement.
As FY06 ended, Transurban was putting
the fi nal touches to a new Group-wide
Community Relations Framework.
This provides a blueprint for enhancement
of existing stakeholder relations
programs in our toll road assets and
tolling and customer service
businesses.
The Group adopted an Environment
Strategy in December 2005. A priority
initiative identifi ed in the strategy,
the development of an Environmental
Management System (EMS), initially for
the Australian businesses, is now under
way. The EMS will allow Transurban
to closely track the environmental
performance of all its toll roads,
Brunswick North West Primary School
in Victoria, Australia, is one of the many
schools Transurban works closely with
as part of its CSR program.
annual report 2006
18
DELIVERING
IN NEW MARKETS
Hot lane solutions for US cities
Like many American cities, Washington suffers from heavy road congestion. Transurban is looking
at congestion solutions for the I-95/395 and I-495 (Capital Beltway) roadways in the Northern
Virginia/Washington DC region.
Transurban is looking to alleviate the congestion problems by introducing HOT lanes—an innovative
demand management solution that delivers free-flow travel through the use of dynamic tolling.
Under this type of tolling, toll levels change to maintain the volume of traffic at ‘free-flow’
conditions.
HOT lanes are built next to existing lanes—much like Transit Lanes in Australia. Drivers can
choose to pay a toll to use the HOT lane and avoid the congestion on ‘free’ lanes, while cars with
three or more passengers travel free.
HOT lane projects are an attractive investment for Transurban as demand for the route is already
proven. They also provide an opportunity for the Group to apply its unique skills in electronic
tolling, operations and traffic management.
19
annual report 2006
Transurban’s partnership approach and our growing
reputation for active management of our assets,
means we are well placed to take advantage of
international opportunities.
Michael Kulper, Vice President, Transurban North America
Transurban made signifi cant
progress in FY06 in pursuing new
projects in its priority international
market, the United States (US).
International progress
The acquisition of the Pocahontas
Parkway delivered the Group its fi rst
operating business in the US. During
the year, a modest expansion of the
New York offi ce ensured Transurban
has the development and operational
resources to assess further
opportunities in the US.
A development team has been based in
Washington to work with the Virginia
Department of Transportation (VDoT)
to bring the I-95/395 and I-495 (Capital
Beltway) projects to fi nancial close.
Transurban has exclusive negotiating
positions on both projects.
The I-95/395 is a Bus Rapid Transit/High
Occupancy Toll (HOT) lane system to the
south of Washington in Northern Virginia
(see opposite for an explanation of HOT
lanes). In January 2006, Transurban and
its construction partner Fluor were
selected as VDoT’s preferred partner to
advance this project.
In April 2005 Transurban and Fluor
signed another agreement with VDoT to
negotiate development of HOT lanes
along the I-495, part of the Capital
Beltway ring road around Washington.
In the past year governments and road
authorities in the US have announced or
foreshadowed a large number of toll
road projects, both new roads and the
sale of existing ones. Transurban has
been very selective in pursuing new
opportunities, declining to be involved in
many projects because they would not
add value to our investors.
The Group’s initial decision to prioritise
one market, the State of Virginia, rather
than projects across many States, has
paid off. We are now investigating
projects in a few other States,
particularly ones that allow us to apply
our key capabilities in traffi c modelling,
tolling and customer service. These
capabilities give Transurban the ability
to deliver network-wide solutions based
on multiple concessions within
contiguous metropolitan areas.
BALTIMORE
MARYLAND
270
370
TO BALTIMORE
95
LEESBURG
DULLES
GREENWAY
267
DULLES
TOLL ROAD
495
495
495
267
Washington-Dulles
International Airport
D.C.
WASHINGTON
WASHINGTON
D.C.
D.C.
295
95
66
495
395
295
495
95
CAPITAL
BELTWAY
(I-495)
HOT LANES
95
495
95
MARYLAND
I-95/395
HOT LANES
95
FREDERICKSBURG
Legend
HOT lanes project
Freeways
Toll roads
VIRGINIA
annual report 2006
20
RICHMOND
NORFOLK
DELIVERING
FOR SUCCESS
Laurence Cox AO
Kimberley Edwards
Jeremy Davis
Peter Byers
Transurban’s
Board of
Directors
Chairman
Managing Director
Susan Oliver
Geoff Cosgriff
David Ryan
Christopher Renwick
21
annual report 2006
Corporate Governance
Transurban Group’s corporate
governance framework
substantially complies with the
Principles and Best Practice
Recommendations of the Corporate
Governance Council of the
Australian Stock Exchange.
See page 28 for a list of the
10 core principles.
The framework is updated from time
to time to ensure best practice
standards are maintained.
This corporate governance statement
applies to all entities comprising the
Transurban Group as described in the
Directors’ Report. The term ‘Board‘
refers to the Board of each relevant
entity unless otherwise stated.
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.
Day-to-day management of the Group’s
affairs and the implementation of
strategic and policy decisions made
by the Board have been formally
delegated to the Managing Director and
senior executives. These delegations are
reviewed regularly.
Board of Directors
– approval of operating and capital
The Board has adopted a charter
which sets the broad principles by which
it operates.
Board Responsibilities
(Principal 1, Recommendation 1.1)
The Board has delegated some of
its responsibilities to executive
management, particularly day-to-day
operations of the Group.
The following responsibilities have been
retained by the Board:
– reviewing and ratifying the entity’s
business strategies and monitoring
their implementation
– appointment and removal of the
Managing Director, the regular
evaluation of his/her performance
and the determination of his/her
remuneration
– appointment and removal of the
Company Secretary and the regular
evaluation of his/her performance
– ratifi cation of the appointment of
executives reporting to the Managing
Director, the review of the Managing
Director’s assessment of the
performance of such executives,
and the determination of 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/her
– reviewing the entity’s fi nancial reports
and certifying that they comply with
Australian Accounting Standards and
present a true and fair view of the
affairs of the entity
budgets.
– approval of distribution payments
– approval of capital management
activities, including the issue and
redemption of equity and the increase
or reduction of borrowings
– approval of signifi cant changes to
the Group’s organisational 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
– assessing the performance of
each individual director and of
the Board collectively
– selection of nominees for election
as directors
– provision of strong leadership of the
entity on a continuing basis, and
– fostering a culture of compliance
with the highest legal, ethical and
environmental standards and
business practices.
Board composition
The entity’s constitution allows a
maximum of 12 directors. Currently,
the Board has set a minimum number
of three directors and a maximum
of eight.
The Board seeks to ensure that
its membership provides the mix of
qualifi cations, skills and experience
to enable it to effectively fulfi ll its
responsibilities, and that its size
facilitates effective discussion and
effi cient decision making.
– ensuring the fi nancial integrity of
Board members
the entity through:
– overseeing the entity’s systems
of internal control and fi nancial
reporting
– the establishment and review of
fi nancial performance objectives,
and
Board member details—their experience,
expertise, qualifi cations, term of offi ce
and independence—are set out in the
Directors’ Report under the Information
on Directors section (see page 31).
annual report 2006
22
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/her relationship with
security holders, suppliers and
competitors and tenure as a director,
would materially affect their ability
to exercise unfettered and independent
judgement in the interests of the entity’s
security holders.
In considering potential confl icts of
interest, the Board looks at a director’s
business or other relationships.
The Board believes it is inappropriate
to decide if a confl ict exists solely on
the basis of arbitrary dollar, profi t or
turnover percentage tests. 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.
The Board considers that all
non-executive directors are currently
independent directors.
Mr Cox is an executive director of
Macquarie Bank Limited (MBL).
It is considered Mr Cox’s relationship
with MBL does not affect his ability to
exercise unfettered and independent
judgement in the interests of the
Group’s security holders.
In FY04 and FY06, Transurban Group
paid no fees to MBL. In FY05, advisory
fees totalling $12.7 million relating to
the takeover of Hills Motorway Group
were paid to MBL. In addition,
Transurban 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 MBL. This fee was
recognised during the year ended
30 June 2004 and is received in quarterly
instalments from 30 June 2004 until 30
June 2007. During this year $2.8 million
was received with the outstanding
balance of $2.3 million to be received
quarterly over the next year. The Group
also contributes to the cost of Mr Cox’s
personal assistant.
Conflicts of Interest
(Principle 2, Recommendation 2.1)
Entities within the Group follow
protocols designed to ensure every
director knows of any individual
director’s confl icts of interest or
potential confl icts of interest in a
particular matter to be considered by
the Board. These protocols are
consistent with obligations imposed by
the Corporations Act and the Australian
Stock Exchange (ASX) listing rules.
They require each director to disclose
any contracts, offi ces held, interests in
transactions and other directorships
held, to signal any potential confl ict.
If any director considers a potential
confl ict of interest could exist or may
arise involving any member of the
Boards of Transurban Group entities,
a sub-committee is established to
assess the matter.
The sub-committee excludes the
potentially confl icted director(s).
It considers the matter and makes
a determination on whether or not
the director(s) has/have a confl ict
of interest.
The determination is then conveyed
to the affected director(s).
If it decides there is no confl ict, the
sub-committee is required to report its
actions and recommendations to the
Board after each sub-committee
meeting. If a confl ict is deemed to exist
the sub-committee will report its
actions and recommendations to the
Board excluding the confl icted director.
Further information is set out in the
Board Charter.
23
annual report 2006
Roles of the Chairman and
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 Offi cer 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)
Board meetings of the three entities
comprising the Group are held
concurrently. The number of meetings
held by the Boards of each individual
entity and by Board committees is
disclosed in the Directors’ Report (see
pages 39 and 40).
The number of meetings of the Boards
and of Board committees attended by
each director is also disclosed in the
Directors’ Report (see pages 39 and 40).
The Nomination and Remuneration
Committee reviews the commitments
of non-executive directors before their
appointment to the Board and annually
thereafter. The aim is 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
before accepting appointment as a
director of any entity outside the Group.
Independent External Advice
(Principle 2, Recommendation 2.5)
Induction and Training
(Principle 1, Recommendation 1.1)
Independent external professional
advice relating to their roles and
responsibilities is available to directors
at the relevant entity’s expense.
Before seeking such advice, directors
are required to consult with, and obtain
the approval of, the Chairman.
The director must consult a suitably
qualifi ed adviser in the relevant fi eld
and inform the Chairman of the fee
payable for the advice.
A copy of the advice obtained must
be provided to the relevant Board.
Performance Assessment
(Principle 8, Recommendation 8.1)
Each year, the following reviews of
performance are undertaken:
– 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
– a review by the Chairman with each
director of the individual performance
of the director, and
– a review of the performance of the
Chairman by a non-executive director
nominated by the Board.
During 2005, an external evaluation of
the performance and effectiveness of
the Chairman, directors and the Board
as a whole was undertaken.
New directors are provided with an
induction program to familiarise them
with all aspects of the business and
each Group entity’s operations. 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.
Certification of Financial Reports
and Risk Management Systems
(Principle 4, Recommendation 4.1)
(Principle 7, Recommendation 7.2)
The Managing Director and the Chief
Finance Offi cer have provided
certifi cations to the Board in connection
with the fi nancial statements for the
Group and the individual entities
comprising the Group for the year ended
30 June 2006. A summary of the
certifi cation follows:
– the fi nancial statements present
a true and fair view, in all material
respects, of the fi nancial position
and generating results of the entities
and the Group, and are in accordance
with relevant accounting standards
and the Corporations Act 2001
– the above statement is founded on
sound systems of risk management
and internal compliance and control
which implement the policies of the
Board, and
– the systems of risk management and
internal compliance and control are
operating effi ciently and effectively
in all material respects.
annual report 2006
24
Board Committees
(Principle 4, Recommendation 4.4)
The Board has 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 Committee
– Corporate Social Responsibility
(CSR) Committee, and
– Nomination and Remuneration
Committee.
Each of these committees has
a Charter which can be seen on the
Group’s website.
Special purpose committees are
established where deemed necessary
to deal with specifi c projects or potential
confl icts of interest.
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.
At least once each year the Board
reviews the appropriateness of the
existing committee structure.
If necessary, it also reviews the
membership and the charter of
individual committees.
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)
and removal of the external auditor
and agrees the terms of the auditor’s
engagement
The Audit Committee consists of
the following non-executive directors:
– pre-approves all non-audit services
provided by the external auditor
– David J Ryan (Chairman)
– Peter C Byers
– Laurence G Cox
– Jeremy G A Davis
The qualifi cations of these directors
and their attendance records at meetings
of the Committee are set out in the
Directors’ Report (see pages 39 and 40).
All members of the Audit Committee
have appropriate fi nancial expertise and
an appropriate understanding of the
industry in which the Group operates.
The Managing Director, Chairman of
the Risk Committee, 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. The Committee’s primary
responsibility is to oversee the entity’s
fi nancial reporting process on behalf
of the Board, and to recommend to
the Board appropriate actions to ensure
high quality fi nancial reporting, sound
practices to control risks and ethical
behaviour.
In discharging this responsibility,
the committee:
– assesses the accounting, fi nancial
and internal control systems used
by the entity and if necessary
recommends changes to them
– reviews the statutory fi nancial reports
of the entity and management’s
representations in relation to them
and advises the Board whether to
adopt the reports
– makes recommendations to the Board
for the appointment, remuneration
– reviews the objectives, competence
and resourcing of the internal audit
function, including determining
whether the internal audit function
should be an internal or external
function, and
– reviews the internal audit program
conducted each fi nancial year.
Risk Committee
The Risk Committee consists of the
following directors:
– Susan M Oliver (Chairman)
– Geoff O Cosgriff
– Christopher J S Renwick
– David J Ryan
The qualifi cations of these directors
and their attendance records at
meetings of the Committee are set out
in the Directors’ Report (see pages 39
and 40). The primary responsibility of
the Committee is to assist the Board in
assuring the Group manages risk in
accordance with its Risk Management
Policy and Standards, by providing:
– governance
– oversight, and
– strategic direction.
After notifying the Board or the
Chairman of the Board and the
Managing Director, the Committee can:
– direct any special investigations
– seek advice from the entity’s auditors
and solicitors
– engage and consult independent
experts where necessary to carry
out its duties, and
– consult external reports and other
documents.
25
annual report 2006
CSR Committee
The CSR Committee consists of the
following directors:
– Susan M Oliver (Chairman)
– Christopher J S Renwick
The qualifi cations of these directors and
their attendance records at meetings
of the Committee are set out in the
Directors’ Report (see pages 39 and 40).
Independent stakeholder members are
appointed to the CSR Committee to
provide specialist external advice and
input into the Group’s CSR program.
Senior employees in roles of
responsibility in relation to the Group’s
CSR program have also been appointed
to the Committee.
The CSR Committee’s responsibility is
to assist the Board to develop initiatives
and a forward program for continuous
improvement in the Group’s CSR
commitments.
Nomination and Remuneration
Committee
(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:
– Laurence G Cox (Chairman)
– Geoff O Cosgriff
– Jeremy G A Davis
The qualifi cations of these directors and
their attendance records at meetings
of the Committee are set out in the
Directors’ Report (see pages 39 and 40).
The primary responsibilities of the
Committee are to provide advice to the
Board on 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
– implements these identifi cation 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 meet
them, having regard to their other
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,
and
– makes recommendations in relation
to the Group’s remuneration polices
and practices for directors and
employees. To assist in making these
recommendations, the Committee
consults external remuneration
consultants as necessary.
The remuneration of non-executive
directors consists entirely of directors’
fees and committee fees. Retirement
benefi ts for non-executive directors
were discontinued on 30 September
2005.
A summary of the Group’s remuneration
policy is available on the Group’s website.
Further information on directors’ and
executives’ remuneration is provided in
the Remuneration Report, part of the
Directors’ Report (see page 41).
External Auditors
(Principle 4, Recommendation 4.5)
The policy of the Group is to appoint
external auditors who are suitably
qualifi ed and whose independence is
unequivocal.
The performance of the external
auditors is reviewed annually by the
Audit Committee. It is responsible for
making recommendations to the Board
in relation to the appointment,
remuneration and removal of the
external auditors.
PricewaterhouseCoopers were initially
appointed as the Group’s external
auditor in 1996 and subsequently
re-appointed in December 2001.
The appointment of the external
auditors has been approved by security
holders as required by the Corporations
Act. PricewaterhouseCoopers are
required to rotate audit engagement
partners on listed entities at least every
fi ve years. The last rotation was for
the fi nancial year beginning 1 July 2002.
A new audit engagement partner will
be introduced for the fi nancial year
beginning 1 July 2007.
Details of the fees paid to the external
auditors, including a breakdown of fees
paid for non-audit services, are set out
in the Directors’ Report (see pages 57
and 58).
All non-audit services provided by the
external auditors are reported to the
annual report 2006
26
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
satisfi ed they are compatible with the
general standard of independence of
auditors.
The external auditors attend the Annual
General Meeting (AGM) 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
Committee, is responsible for assuring
the Group has an effective risk
management framework in accordance
with the Risk Management Policy.
A copy of the Risk Management Policy is
available on the Group’s website.
The Risk Committee is supported by the
Risk Management Group, which consists
of senior executives and is chaired by
the Group General Manager, Legal and
Risk Management. Key responsibilities
of the Risk Management Group are:
– ensuring a consistent and robust
approach to risk management
activities
– providing support to, and implementing
directions of, the Risk Committee
– promoting a culture of risk awareness
across the Group, and
– seeking confi rmation, where necessary,
from risk owners that they have a
current plan to manage their
identifi ed risks.
All major proposals submitted to the
Board for decision include a
comprehensive risk assessment and
a description of the strategies proposed
to be implemented to mitigate the
identifi ed risks.
Information on the Group’s compliance
with the environmental regulation to
which it is subject is set out in the
Directors’ Report (see page 35).
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 Group’s
corporate culture. This has played an
important role in Transurban’s success
to date, and in the establishment of its
reputation.
The Code is discussed with each new
employee as part of his/her induction
training. Each new employee receives
a copy of the Code with their contract
of employment.
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 specifi es 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 20 business
day periods following the release of the
annual and half year results to the ASX
and following the AGM.
Employees and directors are required
to notify the Company Secretary in
advance of any proposed transactions
in Transurban stapled securities, CARS
and in the securities of other entities
specifi ed from time to time under the
policy. A summary of the Dealing in
Securities Policy is available on the
Group’s website.
The Code encourages employees who
become aware of unethical behaviour
or breaches of the securities trading
policy to report these to senior
management.
The directors are satisfi ed that during
the year ended 30 June 2006, the Group
has complied with the requirements of
the Code, including the securities
dealing policy.
27
annual report 2006
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, and
– arrangements to promote
communication with security holders.
The Continuous Disclosure Policy
and Security Holder Communication
Strategy are 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
related 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 briefi ng
analysts on the Group’s operations is
released to the ASX and placed on the
Group’s website.
The Group strives to keep its security
holders and other stakeholders
informed of important news and events.
It uses a wide range of communication
tools, including the website, meetings,
briefi ngs and written materials.
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.
ASX Corporate Governance Council 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 fi nancial 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
Australian equivalents to International
Financial Reporting Standards (AIFRS)
The fi nancial statements for the year
ending 30 June 2006 are the fi rst Group
fi nancial statements to be prepared in
accordance with AIFRS. AASB 1 First-
time Adoption of Australian Equivalents
to International Financial Reporting
Standards has been applied in preparing
these fi nancial statements.
Financial statements of the Group until
30 June 2005 were prepared in
accordance with previous Australian
Generally Accepted Accounting
Principles (AGAAP). AGAAP differs in
certain respects from AIFRS. When
preparing the Group 2006 fi nancial
statements, management has amended
certain accounting, valuation and
consolidation methods applied in the
AGAAP fi nancial statements to comply
with AIFRS.
Reconciliations and descriptions of the
effect of transition from previous AGAAP
to AIFRS on the Group’s equity and its net
income are given in Note 1 to the Group
fi nancial statements (see page 66).
More information
More information can be found in the
Corporate Governance section of the
Group’s website (www.transurban.com.
au). The following material is available:
– Board Charter
– Nomination and Remuneration
Committee Charter
– Audit Committee Charter
– Remuneration Policy
– Code of Conduct
– Dealing in Securities Policy
– Continuous Disclosure Policy
– Security Holder Communication
Strategy
– Risk Management Policy
– Risk Committee Charter, and
– Corporate Social Responsibility (CSR)
Committee Charter.
annual report 2006
28
DELIVERING
FINANCIALS
29
annual report 2006
The Transurban Group
The Concise Financial Report of
Transurban Holdings Limited and Controlled Entities (ABN 86 098 143 429) including
Transurban Holding Trust (ABN 30 169 362 255) and
Transurban Limited (ABN 96 098 143 410)
For the year ended 30 June 2006
Contents
Directors’ report
Concise financial report:
Consolidated income
statement
Consolidated balance sheet
Consolidated statement of
changes in equity
Consolidated cash flow
statement
Notes to the consolidated
financial statements
Directors’ declaration
Independent audit report
to the members
Security holder information
31
61
62
63
64
65
72
73
75
FINANCIALS
Directors’ report
Relationship of the concise
fi nancial report to the full
fi nancial report
The concise fi nancial report is an
extract from the full fi nancial report
for the year ended 30 June 2006.
The fi nancial statements and specifi c
disclosures included in the concise
fi nancial report have been derived from
the full fi nancial report.
The concise fi nancial report cannot be
expected to provide as full an
understanding of the fi nancial
performance, fi nancial position and
fi nancing and investing activities of
Transurban Holdings Limited and its
subsidiaries as the full fi nancial report.
Further fi nancial information can be
obtained from the full fi nancial report.
The full fi nancial report and auditor’s
report will be sent to members on
request, free of charge. You can access
both the full fi nancial report and the
concise report under the Investors
section of Transurban’s website:
www.transurban.com.au. Alternatively,
call 1300 360 146 (free call) for a copy.
The directors of Transurban Holdings
Limited (THL), Transurban Limited (TL)
and Transurban Infrastructure
Management Limited (TIML) as
Responsible Entity for Transurban
Holding Trust present their report on
the Transurban Group for the year
ended 30 June 2006.
Group accounts
These Group Accounts have been
prepared as an aggregation of the
fi nancial statements of Transurban
Holdings Limited and controlled 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 fi nancial 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.
Directors
With the exception of the changes
noted, the persons listed below were
directors of Transurban Limited,
Transurban Holdings Limited and
Transurban Infrastructure Management
Limited during the whole of the fi nancial
year and up to the date of this report.
Transurban
Limited
Transurban Holdings
Limited
Transurban Infrastructure
Management Limited
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)
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
(1)
(2)
(3)
31
C J S Renwick was appointed a non-executive director of TL, THL and TIML on 26 July 2005 and continues in offi ce at the date of this report.
K Edwards was appointed an executive director of TIML on 26 July 2005 and continues in offi ce at the date of this report.
G R Phillips was an executive director of TL, THL and TIML from the beginning of the fi nancial year until his resignation on 26 July 2005.
annual report 2006
The Transurban Group
Directors’ report
Principal activities
(d) Tendering for participation in
and/or acquisition of other toll roads
Results
During the year the principal continuing
activities of the Group consisted of:
(a) Operation of CityLink and Hills M2
(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 domestic and international
markets, and
The result of operations for the
fi nancial year ended 30 June 2006
was an operating loss of $60.9 million
(2005: $90.4 million).
Distributions
(f)
Identifi cation and development of
infrastructure projects in accordance
with the investment strategies of
Transurban Group entities.
Distributions paid by a Group entity to
members during the fi nancial year are
outlined below.
Distributions proposed
Final distribution payable and recognised as a liability:
25.5 cents (2005 - 18.0 cents) per fully paid Stapled Security payable 25 August 2006
207,422
142,455
2006
$’000
2005
$’000
Distributions paid during the year
Final distribution for 2005 fi nancial year of 18.0 cents
(2004: 13.5 cents) per fully paid Stapled Security paid 2 September 2005
Interim distribution for 2006 fi nancial year of 24.5 cents
(2005: 17.0 cents) per fully paid Stapled Security paid 28 February 2006
Total Distributions Paid
Distributions paid in cash or satisfi ed by the issue of
Stapled Securities under the distribution reinvestment
plan during the years ended 30 June 2006 and 30 June 2005
Paid in cash
Executive loans—repayments
Satisfi ed by issue of Stapled Securities
Funds available for future distribution reinvestment plans
Total Distributions Paid
142,443
71,983
194,188
91,745
336,631
163,728
243,240
131,686
352
-
93,007
32,042
32
-
336,631
163,728
The proposed fi nal distribution includes $0.4 million to be settled against the benefi ts received by executives via the Executive
Loan Plan.
annual report 2006
32
FINANCIALS
Directors’ report
Review of operations
(a) CityLink Melbourne
Transaction volume for the year
ended 30 June 2006 was 234.5 million
transactions, representing a 3.1 per
cent increase on the prior year. Traffi c
growth was stronger in the fi rst half of
the year at 3.4 per cent moderating
to 2.7 per cent in the second half.
Continuing the trend of previous years,
the light commercial vehicle class
experienced the strongest transaction
growth achieving 5.0 per cent over the
prior year.
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 $304.5 million, an increase of
10.9 per cent over the previous year.
As in previous years, Citylink has
maintained the focus on effective cost
control delivering a 7.3 per cent
effi ciency gain. During the year the
following initiatives were delivered:
- The Late Toll Invoice (LTI) initiative
implemented in August 2005 delivered
a signifi cant change in the
enforcement process for CityLink.
Prior to the introduction of the LTI
initiative, motorists without valid
travel arrangements for CityLink were
issued with an infringement notice
from Victoria Police. Under the new
regime motorists are issued with an
invoice comprising the applicable tolls
plus an administration fee. Costs to
administer the LTI system are fully
recovered by CityLink through the
administration fee revenue.
- Rear Camera gantries were
constructed on all toll points
generating increased toll revenue
through improved image quality.
- Extended incident response covering
the West Gate Freeway between the
tunnels and the Bolte Bridge as well
as the Tullamarine Freeway and
Calder Freeway interchange has
provided quick restoration of traffi c
fl ow following road incidents.
- Customer account numbers continue
to grow. At 30 June 2006, there were
763,391 accounts (including 81,533
Access Accounts), and 1,083,880
e-TAG® devices linked to e-TAG
accounts. This represents increases
of 6.1 per cent and 6.9 per cent,
respectively.
- In addition, CityLink achieved all of
its customer service performance
requirements with respect to the
CityLink customer charter.
(b) Hills Motorway Group
During the year Transurban upgraded
Hills M2 with new Electronic Toll
Collection (ETC) gantries at both the
Main Toll Plaza and Pennant Hills
ramps. A marketing and community
relations campaign was conducted
to customers about the benefi ts of
having a tag. The upgrade was
completed in January and has delivered
increased traffi c fl ows by eliminating
the need to stop or slow while travelling
through the toll point.
Transaction volume for Hills M2 for
the year ended 30 June 2006 was
29 million transactions representing
a growth of 7.8 per cent over the prior
year. Both the ETC project and the
opening of the Westlink M7 in which
Transurban has a 45 per cent share,
have contributed positively to an
increase in electronic tolling
transactions on weekdays to 80 per
cent, an increase of 20 per cent over
the previous year.
During the year the Hills Motorway
activities were successfully integrated
into Transurban’s operations with all of
the acquisition benefi ts and synergies
being achieved.
(c) Westlink M7
The Westlink M7 motorway opened on
16 December 2005 eight months ahead of
schedule. Westlink M7 is a 40-kilometre
motorway in Western Sydney which links
Hills M2 at Baulkham Hills, the M4 at
Eastern Creek and the M5 at Preston, and
bypasses 48 sets of traffi c lights.
Transurban developed and implemented
the electronic toll collection system
along with the tolling and customer
management (TCM) system for the
Westlink project. Transurban received
an early completion bonus of
$8.3 million for delivery of the tolling
system 10 months ahead of schedule.
In line with the opening, Transurban
increased its equity interest from
40 per cent to 45 per cent. Transurban
and Macquarie Infrastructure Group
have pre-emptive rights over the
remaining 10 per cent held by Abigroup
Limited and Leighton Holdings Limited.
(d) Roam tolling
The tolling and customer management
system for Westlink M7 was successfully
delivered with road opening on 16
December 2005 (refer above). Tolling
operations commenced on 16 January 2006
following a one month toll free period.
As a direct result of Transurban’s marketing
campaign to educate the market about the
Group’s Roam® brand, 106,000 customer
accounts were opened during the period
(including 19,600 e-PASS or video accounts),
with 125,000 e-TAG devices issued and
208,000 vehicles registered.
(e) Business development
During the year Transurban Limited
has continued to pursue new business
development opportunities in both the
domestic and international markets.
Achievements during the period include:
(i) Transurban acquisition of
Pocahontas Parkway
On 29 June 2006, Transurban and the
Commonwealth of Virginia reached
fi nancial close on a Comprehensive
Agreement granting Transurban a
99 year concession for the Pocahontas
Parkway in Virginia, US.
33
annual report 2006
The Transurban Group
Directors’ report
The Pocahontas Parkway (route 895)
is a 14 kilometre, four lane toll road
located south-east of the city of
Richmond in Virginia. The Parkway
provides a crossing of the James River
and facilitates access to the Richmond
International Airport.
The cost of acquiring the 99 year
concession was A$813 million/
US$604 million.
(ii) Transurban acquisition of
Tollaust Pty Ltd
On 1 May 2006, Transurban acquired
Tollaust Pty Ltd for $38.9 million from
Abigroup Limited and Egis Projects SA.
Tollaust are the operators of the Hills
Motorway in Sydney and perform cash
collections and operations and
maintenance activities on the M2.
The acquisition will enable the
Transurban Group to retain traffi c
incentive payments payable over the life
of the concession estimated to be in
excess of $200 million in nominal terms.
The acquisition also included an existing
customer base of approximately 75,000
tags branded as ‘Express Tag’ in the
Sydney market. Express Tags are being
transitioned to the Transurban brand
Roam Express®. This process will
deliver account management cost
effi ciencies through utilisation of
Transurban’s existing tolling business.
(iii) Lane Cove Tunnel Letter of Intent
The Lane Cove Tunnel Company (LCTC)
and Transurban have signed a Letter of
Intent for Transurban to utilise its Roam
Express brand as the preferred tag and
electronic pass provider for the Lane
Cove Tunnel. Transurban will earn a
fee per transaction for its service.
(iv) Participation in I-495/Capital
Beltway project—Virginia, US
Transurban, through its wholly owned
subsidiary Transurban USA Inc, is
partnering with Fluor Enterprises to
investigate the feasibility of developing
High Occupancy Toll (HOT) lanes along a
22.4 kilometre segment of the Capital
Beltway (I-495) in Northern Virginia, US.
The Transurban-Fluor team has signed
a development agreement with the
Virginia Department of Transportation
(VDoT) and is currently undertaking
detailed evaluation of project feasibility.
In the event that fi nancial close is
achieved in early 2007, Transurban will
act as both an investor and tolling
operator of the HOT lanes.
(v)
I-95/395 Virginia US Proposal
—Virginia, US
In January 2006, Transurban and its
development partner, Fluor Enterprises,
were confi rmed by the Commonwealth
of Virginia’s Public Private
Transportation Act (PPTA) Advisory
Panel as the preferred proponent to
develop Bus Rapid Transit/HOT lane
systems for the I-95/395 motorway.
Work is progressing on the feasibility
of the project with fi nancial close
anticipated to occur in the second half
of 2007.
Signifi cant changes in the
state of affairs
(a) Refi nancing
During the year Transurban refi nanced
medium and short term debt facilities
through the following debt issues:
- US private placement of A$511
million/US$380 million on 11 August
2005. Proceeds of the placement have
been applied to maturing wrapped
and unwrapped bonds. The placement
consisted of three tranches with
tenors of 10, 12 and 15 years,
respectively.
- $600 million wrapped bond issue to
refi nance existing wrapped bonds,
maturing in 2007 and 2009, that were
redeemed early to extend the overall
term of the debt and to take
advantage of favourable market
conditions. The issue consists of two
tranches of $300 million each with
maturities in 2015 and 2017.
- In addition, Westlink Motorway
renegotiated its bank debt facilities of
$1.25 billion in December 2005. The
renegotiated, interest-only facilities,
have extended the average debt
maturity profi le to 6.8 years. Fixed
interest rate hedging has been put in
place in relation to 85 per cent of the
face value of the debt.
(b) Transurban acquisition of
Pocahontas Parkway
The debt funding of Pocahontas was
through non recourse senior bank debt
of A$549 million/US$408 million. The
majority of the debt (76 per cent), is
hedged against adverse movements in
interest rates through a series of
interest rate swaps. For further
information on the acquisition of
Pocahontas Parkway see Item (e)(i) of
Review of Operations.
(c) Transurban acquisition
of Tollaust Pty Ltd
See item (e)(ii) of Review of Operations.
(d) Lane Cove Tunnel Letter
of Intent
See item (e)(iii) of Review of Operations.
(e) Participation in I-495/Capital
Beltway project—Virginia, US
See item (e)(iv) of Review of Operations.
(f)
I-95/395 Proposal
—Virginia, US
See item (e)(v) of Review of Operations.
annual report 2006
34
FINANCIALS
Directors’ report
(g) West Gate–CityLink
–Monash freeway corridor
improvement project
See item (a) of Matters Subsequent to
the End of the Financial Year.
(h) Distribution reinvestment
plan
During the year Transurban re-
introduced its Distribution Reinvestment
Plan (DRP) entitling security holders to
receive additional Stapled Securities in
substitution for some or all cash
distributions in respect of their Stapled
Securities. Stapled Securities issued
pursuant to the DRP were subject to a
discount to market price of 2.5 per cent
and were free of all brokerage,
commission or other transaction costs,
stamp duty or other duties. DRP
acceptance was 47.9 per cent for the
interim distribution and 50.2 per cent
for the fi nal distribution.
Matters subsequent to the
end of the fi nancial year
(a) West Gate-CityLink
–Monash freeway corridor
improvement project
Transurban has reached agreement
with the State of Victoria and VicRoads
to jointly fund upgrades and
improvements to 75 kilometres of the
West Gate-CityLink (Southern Link)–
Monash freeway corridor.
The CityLink component of the upgrade,
which is estimated to cost $166 million
over the three year construction period,
will be funded via the DRP. The State
will fund the non-CityLink works,
estimated to cost $737 million. Full
project completion is expected by
December 2010.
Under the agreement, the State of
Victoria will also assign to Transurban
all remaining and future Concession
Note liabilities incurred under the
provisions of the Melbourne CityLink
Concession Deed. These liabilities have
a face value of $2.9 billion and will be
replaced by payments over the next four
years totalling $614 million.
Likely developments
and expected results of
operations
Transurban and the State will share in
the revenue uplift generated by the
project after Transurban has fully
recovered the capital cost and any lost
revenue from the construction phase of
the Southern Link upgrades.
(b) Westlink M7 increase in
equity interest
Transurban has exercised its pre-
emptive right to purchase an additional
2.5 per cent equity interest in the
Westlink M7 for $34.3 million. This will
increase Transurban’s holding from
45 per cent to 47.5 per cent. Transurban
and Macquarie Infrastructure Group
have pre-emptive rights over the
remaining 5 per cent held by Leighton
Holdings Limited.
(c) High Court of Australia
decision—deductibility of
concession fees
On 20 July 2006, the High Court ruled in
favour of Transurban in relation to the
tax deductibility of the Concession Fees
paid to the State of Victoria under the
Melbourne CityLink Concession Deed.
The case was heard by the High Court of
Australia after the Australian Taxation
Offi ce (ATO) appealed the unanimous
judgement of the Full Court of the
Federal Court in October 2004.
The High Court awarded the costs of the
legal action to Transurban which are yet
to be quantifi ed.
With the exception of these events, at the
date of this report, the directors are not
aware of any circumstances that have
arisen since 30 June 2006 that have
signifi cantly affected or may signifi cantly
affect the operations, and results of
those operations or the state of affairs,
of the Group in fi nancial years
subsequent to 30 June 2006.
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.
Environmental regulation
CityLink Melbourne Limited is subject
to regulation by the Environment
Protection Authority (EPA) Victoria 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
certifi ed by the National Association
of Testing Authorities.
Monitoring verifi es that emission levels
are well below the maximum levels
specifi ed 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,
35
annual report 2006
The Transurban Group
Information on Directors
Laurence G Cox AO, B. Com, FCPA, FSIA
Chairman—non-executive
Experience and expertise
Over 40 years experience in Australian
and international fi nancial markets,
including Chairman of the Australian
Stock Exchange Limited from 1989–1994
and Executive Chairman of the Potter
Warburg Group from 1989–1995.
Other current directorships
Non-executive Chairman of SMS
Management and Technology Limited,
executive director of Macquarie Bank
Limited and non-executive director of
Smorgon Steel Group.
Former directorships in last
three years
Non-executive director of Hills
Motorway Limited (April 2005–
August 2005).
Date of initial appointment
13 February 1996
Special responsibilities
Chairman of Board, Chairman of
Nomination and Remuneration
Committee and member of
Audit Committee.
Kimberley Edwards BE, MAdmin (Bus),
FIE (Aust), MAICD
Managing Director
Experience and expertise
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
three years
Executive director of Hills Motorway
Limited (April 2005–August 2005).
Date of initial appointment
29 October 1996
Special responsibilities
Managing Director
Directors’ report
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 vicinity of the
tunnel ventilation stacks.
Monitoring of emissions within the
tunnels and from the ventilation stacks
will continue unchanged.
Monitoring of groundwater quality
verifi es that the requirements of the
EPA are being met.
Monitoring of tunnel drainage water
quality verifi es that the requirements of
the EPA are being met.
CityLink Melbourne Limited is obliged to
take remedial action if traffi c noise at
abutting developments exceeds 63dB(A)
L10.
Hills Motorway Limited is subject to
environmental regulation in respect to:
- discharge of stormwater runoff from
the M2 Motorway into the Lane Cove
River, and
- carbon-monoxide levels within the
M2 tunnels.
Monitoring of these parameters
indicates that environmental
requirements have been satisfi ed.
Westlink M7 operations are not subject
to any special environmental regulation
apart from that which would apply to
any other road or development of a
similar nature, except where protection
for sensitive areas and specifi ed trees
that are endangered sites used by bats
for roosting.
annual report 2006
36
FINANCIALS
Directors’ report
Peter C Byers B Com (Hons)
Independent non-executive
director
Experience and expertise
A former business manager and deputy
principal of the University of Tasmania.
Other current directorships
None
Former directorships in last
three years
Non-executive director of Hills
Motorway Limited (1995–2005).
Date of initial appointment
2 January 1996
Special responsibilities
Member of Audit Committee
Jeremy G A Davis BEc, MBA, MA, FAICD
Independent non-executive
director
Experience and expertise
Professor Davis is a Professor Emeritus
of the University of New South Wales
after retiring from the Australian
Graduate School of Management in
January 2006. He spent ten years as a
management consultant with the
Boston Consulting Group and is a
former director of the Australian Stock
Exchange Limited. He is currently a
director of Singapore Power Limited.
Other current directorships
Non-executive director of SP AusNet
Former directorships in last
three years
Non-executive director of Gradipore
Limited (2002–2003).
Date of initial appointment
16 December 1997
Special responsibilities
Member of Audit Committee, and
member of Nomination and
Remuneration Committee.
Geoffrey O Cosgriff BAppSc,
Company Director Diploma. FIE(Aust), FAICD
Independent non-executive
director
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 Ltd. He is
currently a director of LogicaCMG Pty
Ltd and UXC Limited which have
signifi cant international and local
activities in information technology
solutions and services, and is a Council
Member for Leadership Victoria.
Other current directorships
Non-executive director of UXC Limited.
Former directorships in last
three years
None
Date of initial appointment
19 December 2000
Special responsibilities
Member of Risk Committee, and
member of Nomination and
Remuneration Committee.
37
annual report 2006
The Transurban Group
David J Ryan AO, BBus, FCPA, FAICD
Independent non-executive
director
Experience and expertise
Experience covers commercial
banking, investment banking and
operational business management
in a range of sectors.
Directors’ report
Susan M Oliver
B. Prop. & Const, FAICD
Independent non-executive
director
Christopher J S Renwick
AM, BA, LLB, FAIM, FAIE, FTSE
Independent non-executive
director
Experience and expertise
Experience and expertise
Over 35 years experience covering
mining, operational business
management and law.
Former Senior Manager of Andersen
Consulting and former Managing
Director of the Australian Commission
for the Future Limited. Experience
covers private and public sector senior
management roles, strategic and
technology consulting and business
development. She is currently a non-
executive director and chairperson of
the Remuneration Committee of MBF
Australia Limited, and executive director
and owner of wwITe Pty Limited.
Other current directorships
Non-executive director of Programmed
Maintenance Services Limited.
Former directorships in last
three years
None
Date of initial appointment
25 June 1996
Special responsibilities
Chairperson of Risk Committee, and
Chairperson of Corporate Social
Responsibility Committee.
Other current directorships
Other current directorships
Non-executive Chairman of Coal and
Allied Industries Limited and the Rio
Tinto Aboriginal Foundation, Governor of
the ATSE Ian Clunes Ross Foundation
and non-executive director of Downer -
EDI Limited.
Former directorships in last
three years
Multiple executive directorships with
Rio Tinto Group (1986–2004).
Date of initial appointment
26 July 2005
Special responsibilities
Member of the Risk Committee and
member of Corporate Social
Responsibility Committee.
Non-executive director of Lend Lease
Corporation Limited, ABC Learning
Centres Limited and Non-executive
Chairman of Tooth & Co Limited.
Former directorships in last
three years
Non-executive director of Virgin Blue
Holdings Limited. (2003–2005)
Date of initial appointment
29 April 2003.
Special responsibilities
Chairman of Audit Committee
and member of Risk Committee.
annual report 2006
38
FINANCIALS
Directors’ report
Company Secretary
Mark Licciardo B.Bus (Acc),
GradDip CSP, ASA, FCIS
Mr Licciardo was appointed to the
position of Company Secretary in
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. Prior to that he held
various fi nance roles with investment
companies and major banks.
Paul O’Shea B.Ec, LLB, FCIS
Mr O’Shea is a Company Secretary and
Group General Manager, Legal and Risk
Management (previously General
Counsel, Transurban Legal). He was
originally appointed General Counsel in
March 1996 and appointed Company
Secretary in March 1998. Before joining
Transurban he held a senior legal role
at Transfi eld for 18 months and prior to
that worked as a solicitor with two
major legal fi rms.
Meetings of directors
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 2006, and the numbers of
meetings attended by each director are
outlined below.
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
C J S Renwick
D J Ryan
K Edwards
G R Phillips(4)
A
14
10
14
14
14
11
14
14
2
B
14
14
14
14
14
13
14
14
2
A
14
10
14
14
14
11
14
14
2
B
14
14
14
14
14
13
14
14
2
A
14
10
14
14
14
11
14
14
2
B
14
14
14
14
14
13
14
14
2
A = Number of meetings attended
B = Number of meetings held during the time the director held offi ce
39
annual report 2006
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 2006, and the numbers of meetings attended by each
director are set out in the following table. All meetings were held jointly.
Name
Audit Committee
Nomination &
Remuneration
Committee
Risk
Committee
Corporate Social
Responsibility
Committee
A
B
A
B
A
B
A
B
L G Cox
P C Byers (1)
G O Cosgriff
J G A Davis
S M Oliver (2)
C J S Renwick
D J Ryan
K Edwards (3)
G R Phillips (4)
4
3
x
4
x
x
4
x
x
4
4
x
4
x
x
4
x
x
7
x
7
7
x
x
x
x
x
7
x
7
7
x
x
x
x
x
x
x
4
x
4
3
4
x
0
x
x
4
x
4
4
4
x
0
x
x
x
x
4
4
x
x
x
x
x
x
x
4
4
x
x
x
A = Number of meetings attended
B = Number of meetings held during the time the director held offi ce or was a member of the committee during the year
X = Not a member of the relevant committee
(1)
(2)
(3)
(4)
P C Byers did not participate in four board meetings and one audit committee meeting due to illness. The Board granted leave for an indefi nite period
on 20 April 2006.
S M Oliver is not a member of the Audit Committee but attended three of these meetings in her capacity as Chair of the Risk Committee.
K Edwards is not a member of the Audit Committee and Nomination and Remuneration Committee but attends these meetings. Mr K Edwards was
excluded from discussions on his own remuneration.
G R Phillips was an executive director from the beginning of the fi nancial year until his resignation on 26 July 2005.
annual report 2006
40
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:
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
Stapled Securities
Options over
Stapled Securities
Number
of CARS
1,142,500
70,580
31,110
51,817
68,009
-
22,394
1,873,500
-
-
-
-
-
-
-
-
-
-
121
-
-
-
-
-
Remuneration report
The remuneration report is set out
under the following main headings.
(a) Principles used to determine
the nature and amount of
remuneration (audited)
(a) Principles used to determine the
Non-executive directors
nature and amount of
remuneration
(b) Details of remuneration
(c) Service agreements
(d) Share-based compensation
(e) Additional information
The information provided under the
headings (a)-(d) includes remuneration
disclosures that are required under
Accounting Standards AASB 124 Related
Party Disclosures. These disclosures
have been transferred from the fi nancial
report and have been audited.
The disclosures under heading (e) are
additional disclosures required by
the Corporations Act 2001 and the
Corporations Regulations 2001 which
have not been audited.
The remuneration of non-executive
directors consists of director’s fees and
committee fees. Non-executive
directors are not currently provided with
any form of equity-based compensation.
The constitutions of the entities
comprising the Transurban Group
(‘the Group’) provide 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 and
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 October 2005.
In 1997, the Board implemented a policy
to provide retirement allowances to
non-executive directors. The policy
provided for an entitlement to a lump
sum payment (not exceeding the
maximum allowable under the
Corporations Act 2001) if the
non-executive director completed a
minimum of three years service.
The lump sum was equivalent to the
total emoluments received during the
relevant period. The relevant period was
one-third of the director’s total period of
service or three years (both calculated
to the day of retirement), whichever was
the lesser. This policy was reviewed in
September 2005 when it was resolved to
discontinue retirement benefi ts for all
participating non-executive directors
with effect from 30 September 2005
such that future directors are not
entitled to this benefi t. The value of
benefi ts accrued up to this date will
attract interest from 1 October 2005 at
the statutory FBT rate (currently
7.05 per cent). The accrued `frozen’
retirement benefi ts plus interest will be
paid to directors upon their retirement.
41
annual report 2006
The Transurban Group
- the extent to which a profi t-related
fi nancial performance target is
achieved, and
- the extent to which the executive has
achieved his/her individual KPIs.
Such adjustments can result in the
actual STI payment received by the
executive being above or below the
targeted STI amounts. STI payments are
made annually in September following
annual performance reviews.
The intent of the adjustment is to ensure
that STI payments are only made when
value has been created for security
holders and profi t and business growth is
consistent with the business plan.
Each year, KRAs, including a fi nancial
performance target, are established by
the Board 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 and Remuneration
Committee. KPIs for executives
reporting to the Managing Director are
established by the Managing Director.
The Nomination and Remuneration
Committee is also responsible for
assessing the extent to which KRAs and
KPIs set for senior executives have been
achieved. To assist in making these
assessments, the Committee receives
reports from the Chief Finance Offi cer
and the Managing Director.
Directors’ report
Executive directors and executives
- total shareholder return relative to
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, and
- 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, and
- 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 benefi ts,
short-term incentives (STI) in the form
of cash bonuses and long-term
incentives (LTI).
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 determined by:
- fi nancial performance relative to
short-term profi tability targets
- business achievements through
the achievement of Group key result
areas (KRAs)
- project successes
other companies in the ASX
Industrials index, and
- individual performance as
measured by the achievement of
key performance indicators (KPIs)
and the upholding of Group values.
The remuneration of the Managing
Director is established by the Board,
based on the recommendation of the
Nomination and 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 fi xed
component of executive remuneration
and is structured as a Total Employment
Cost (TEC). TEC consists of a mix of
cash, superannuation and prescribed
benefi ts. An executive’s TEC is reviewed
annually against market rates for
comparable roles. There are no
guaranteed base pay increases fi xed in
any executive’s contract of employment.
Benefi ts
Executives receive benefi ts including
death and disability insurance, salary
continuance insurance and car parking.
Short-term incentives (STI)
On an annual basis, the Group makes
available STI payments to executives for
the achievement of Group and individual
performance via KPIs. A target STI
amount, expressed as a percentage of
the executive’s TEC, is specifi ed for each
executive and is subject to further
adjustment for:
- the extent to which the Group has met
its (KRAs)
annual report 2006
42
FINANCIALS
Directors’ report
Long-term incentives (LTI)
Three forms of LTIs are currently in
operation. The Executive Option Plan
(EOP) provides equity rewards, the
Executive Long Term Incentive Plan
(ELTIP) provides cash rewards linked to
equity performance, and the Executive
Loan Plan (ELP) performance based
plan which is linked to improvements is
the price of Stapled Securities over a
three year period. All plans utilise Total
Shareholder Return as the basis for
determining payment. The EOP was
introduced with a fi ve 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 has
vested. No options were granted under
the EOP during this fi nancial year.
A further review of LTIs was undertaken
in 2005 and as a result a revised
Executive Loan Plan was introduced.
The objective of this plan is to
implement a more cost effective plan to
the Group for a given amount of
incentive. In addition, the revised plan
takes into consideration those plans
which had 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.
Business Generation Incentive Plan
(BGIP)
The Group also operates a 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
Nomination and Remuneration
Committee and Managing Director.
Key characteristics of Transurban’s
Business Generation Incentive Plan
(BGIP) are:
- based on success, not effort
- based on the added value of new
business
- determined by a risk adjusted market
value analysis, and
- distributed based on contribution.
(b) Details of remuneration
(audited)
Transurban Holdings Limited does not
employ any executive key management
personnel or executive directors. All
related remuneration disclosures refer
to other Group entities and have not
been apportioned between the Group
entities as a relevant basis of
apportionment is not available.
Non-executive remuneration reported
as ‘Transurban Holdings Limited’
represents the parent’s share of
remuneration with the remainder
divided between Transurban Holding
Trust and Transurban Limited.
Share-based disclosures relate to the
Transurban Stapled Group. The full
amounts have been disclosed within the
parent disclosures as a reasonable
basis of apportionment is not available.
Details of the remuneration of the
directors, key management personnel
and each of the fi ve highest paid
executives of Transurban Holdings
Limited and the Transurban Holdings
Group are set out in the following tables.
The fi ve highest paid executives of the
Group are:
- M Kulper—Vice President North
America
- K Daley—Vice President International
Development
- C Brant—Chief Finance Offi cer
- B Bourke—Group General Manager
Operations
- P O’Shea—Group General Manager
Legal and Risk Management
The key management personnel of the
Group are the directors of the
Transurban Group (see page 31) and
those executives that report directly to
the Managing Director. The executives
are:
- C Brant—Chief Finance Offi cer
- B Bourke—Group General Manager
Operations
- P O’Shea—Group General Manager
Legal and Risk Management
- G Mann—Group General Manager
Development (from 3 October 2005 to
30 June 2006)
The above persons were also key
management persons during the year
ended 30 June 2005, except for G Mann
who commenced employment with the
Group on 3 October 2005. C Brant was a
key management person for only part of
the year ended 30 June 2005 as he
commenced employment on
22 November 2004.
43
annual report 2006
The Transurban Group
Directors’ report
Key management personnel of Transurban Holdings Limited
2006
Name
Short-term benefi ts
Post-employment
benefi ts
Share-based payments
Cash
salary
and fees
bonus monetary annuation benefi ts(4)
Cash
Non-
benefi ts
Super- Retirement Options(1) Executive Long Term
Incentive
Plan(3)
Loan
Plan(2)
Total
$
$
$
$
$
$
$
$
$
Non-executive directors
L G Cox
Chairman
112,410
P C Byers
44,768
G O Cosgriff
37,699
J G A Davis
S M Oliver
26,348
42,394
CJS Renwick(1)
12,893
D J Ryan
44,985
Executive directors
K Edwards
Managing Director
G R Phillips(2)
Deputy Managing
Director
-
-
Other key management personnel
C Brant
B Bourke
P O’Shea
G Mann
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Five executives receiving the highest remuneration
—not already mentioned above
M Kulper
K Daley
Total
-
-
321,497
-
-
-
-
-
-
3,763
4,029
5,564
18,445
3,815
31,182
4,049
-
-
-
-
-
-
-
-
20,623
7,924
6,003
8,079
7,972
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
136,796
56,721
49,266
52,872
54,181
44,075
49,034
57,972
93,151
512,111
663,234
19,324
-
-
19,324
-
-
-
-
-
-
35,174
30,405
22,356
33,534
36,030
98,389
77,822
-
71,204
128,794
100,178
33,534
-
-
27,821
27,821
116,816
116,816
70,847
50,601
77,296
214,620
868,989
1,603,850
annual report 2006
44
FINANCIALS
Directors’ report
Key management personnel of the Group
2006
Name
Short-term benefi ts
Post-employment
benefi ts
Share-based payments
Cash
salary
and fees
bonus monetary annuation benefi ts(4)
Cash
Non-
benefi ts
Super- Retirement Options(1) Executive Long Term
Incentive
Plan(3)
Loan
Plan(2)
Total
$
$
$
$
$
$
$
$
$
Non-executive directors
L G Cox
Chairman
362,614
P C Byers
144,412
G O Cosgriff
121,611
J G A Davis
84,994
S M Oliver
136,755
CJ S Renwick(1)
41,591
D J Ryan
145,114
Executive directors
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,139
66,526
12,997
25,562
17,948
19,364
59,500
26,061
12,308
25,717
100,587
13,060
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
441,279
182,971
158,923
170,555
174,780
142,178
158,174
1,400,006 1,100,000
7,900
100,587
-
57,972
93,151
512,111
3,271,727
K Edwards
Managing
Director
G R Phillips(2)
Deputy
Managing
Director
174,592
-
658
861,261
Other key management personnel
C Brant
515,872
465,000
B Bourke
445,682
442,500
P O’Shea
351,333
464,000
7,900
7,900
7,900
45,460
41,303
31,399
G Mann
386,148
120,000
13,400
12,139
Five executives receiving the highest remuneration
—not already mentioned above
M Kulper
222,095 1,599,134
340,992
904,100
-
-
31,964
28,748
K Daley
Total
-
-
-
-
-
-
-
19,324
-
-
1,055,835
-
-
-
-
-
-
35,174
30,405
22,356
33,534
36,030
1,105,436
98,389
1,066,179
77,822
-
954,810
565,221
-
-
27,821
1,881,014
116,816
1,390,656
4,873,811 5,094,734
45,658 1,381,400
163,230
77,296
214,620
868,989
12,719,738
(1)
(2)
45
C J S Renwick was appointed a non-executive director on 26 July 2005.
G R Phillips was an executive director from the beginning of the fi nancial year until his resignation on 26 July 2005. His remuneration includes a
termination benefi t of $990,000 in recognition of his long term service to the Group.
annual report 2006
The Transurban Group
Directors’ report
Key management personnel of the Group
2005
Name
Short-term benefi ts
Post-employment
benefi ts
Share-based payments
Cash
salary
and fees
bonus monetary annuation benefi ts(4)
Cash
Non-
benefi ts
Super- Retirement Options(1) Executive Long Term
Incentive
Plan(3)
Loan
Plan(2)
Total
$
$
$
$
$
$
$
$
$
Non-executive directors
L G Cox
Chairman
265,718
P C Byers
100,935
G O Cosgriff
97,918
J G A Davis
77,013
S M Oliver
101,852
D J Ryan
117,566
Executive directors
-
-
-
-
-
-
-
-
-
-
-
-
20,331
168,992
9,085
8,812
78,822
47,078
80,000
79,311
9,167
82,340
10,581
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
455,041
188,842
153,808
236,324
193,359
128,147
1,154,259 1,000,000
7,300
95,940
-
183,999
-
2,545,620
4,987,118
538,509
262,500
7,300
11,585
Other key management personnel
C Brant
265,936
220,000
B Bourke
385,342
230,000
P O’Shea
304,319
225,000
4,867
7,300
7,300
23,934
46,660
27,312
Five executives receiving the highest remuneration
—not already mentioned above
K Daley
321,352
230,000
V Howard
254,315
432,500
6,083
7,300
27,337
15,000
305,473
137,000
13,400
26,511
L Hunt
Total
-
-
-
-
-
-
-
61,333
-
35,791
26,181
30,544
21,817
11,742
-
-
-
-
-
-
-
-
881,227
114,060
628,797
485,490
1,190,583
387,751
977,863
482,286
1,097,602
350,699
1,081,631
375,935
870,061
4,290,507 2,737,000
60,850
412,255
456,543
371,407
- 4,741,841
13,070,403
(1)
(2)
(3)
(4)
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 fi nancial years. The amounts disclosed as remuneration is that part of the value of the options which is attributable
to the current year portion of the vesting period.
The amounts disclosed as remuneration is that part of the value of the Executive Loan Plan benefi t which is attributable to the current year portion of
the vesting period.
The amount shown as Long Term Incentive is that part of the units issued under the cash based Executive Long Term Investment Plan which is
attributable to the current year portion of the vesting period for each current allocation.
Retirement benefi ts were frozen for all participating non-executive directors at their current levels up to 30 September 2005. Interest accrues on
directors entitlement balances at 7.05 per cent per annum.
annual report 2006
46
K Edwards
Managing
Director
G R Phillips
Deputy
Managing
Director
FINANCIALS
parking. Although not specifi ed in
agreements, executives are eligible to
participate in the Executive Loan Plan
(or equivalent Cash Plan) and the
Business Generation Incentive Plan.
Other major provisions of the
agreements, relating to remuneration,
are set out below.
Directors’ report
(c) Service agreements (audited)
Remuneration for the Managing
Director and the key management
personnel are formalised in service
agreements. Each of these agreements
provides for access to performance-
related cash bonuses and other benefi ts
including death and disability insurance,
salary continuance insurance and car
Current target remuneration mix
Executive Director
Managing Director
Key Management Personnel
Average
% of total remuneration
LTI
STI
TEC
56%
22%
22%
59%
18%
24%
Executive directors
K Edwards, Managing Director
- Term of Agreement—permanent, subject
to six months notice of termination.
- The payment of one year’s fi xed
remuneration upon termination as
disclosed in the 2005 Annual Report.
- Fixed remuneration including base
salary and superannuation, for the
year ended 30 June 2006 of $1,500,000
to be reviewed annually by the
Nomination and Remuneration
Committee and the Board.
- Long Term Incentive allocation for
FY07 based on 35 per cent of current
TEC allocation.
- Ineligible to participate in the
Employee Share Ownership Plan.
Key management personnel and
other executives
The major provisions contained in the
service agreements of key management
personnel and other executives are the
same for all persons (except for the
base salary component) and include the
following provisions.
- Term of agreement—permanent,
subject to termination on six
months notice.
- Total Employment Cost reviewed
annually by the Nomination and
Remuneration Committee and
approved by the Board.
(d) Share-based compensation
(audited)
Options
Options were issued at no cost to the
Option holder and vested in three equal
tranches on the second, third and fourth
anniversaries of their issue. The Exercise
of the options was subject to an Exercise
Condition. The Exercise Condition
involved a comparison between Total
Shareholder Return (TSR) of 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 had
been in the S&P/ASX 200 Industrials for
the full term of the Exercise Condition
47
annual report 2006
The Transurban Group
expected price volatility of Transurban
Group Stapled Securities, expected
future distributions and the risk free rate
of interest over the term of the options.
The terms and conditions of each
grant of options affecting remuneration
in this or future reporting periods are
outlined below.
Directors’ report
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. Transurban Group
and each of the Test Companies were
ranked according to their respective
TSRs over the Exercise Condition Test
Period. The ranking determines the
extent to which vested options could be
exercised. If the Group’s TSR exceeded
the 65th percentile of the ranking,
100 per cent of the vested options were
exercisable. If Transurban Group’s TSR
was below the 25th percentile of the
ranking, none of the vested options were
exercisable. If the TSR fell between
these percentiles, the percentage of
vested options that were exercisable
were calculated according to a formula.
The exercise price of options was the
volume weighted average price at which
the Group’s Stapled Securities were
traded on the ASX during the fi ve
business days immediately prior to
granting the options. When exercised,
each option was 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 were
exercisable at any time after vesting.
Fair values at grant date were
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
Grant date
Expiry date
Exercise price
Value per option at
grant date
Date exercisable
26 April 2001
30 April 2006
$3.817
$0.425
23 October 2001
31 October 2006
$4.404
$0.491
1 February 2002
30 April 2007
$4.280
$0.477
9 April 2002
30 April 2007
$4.030
$0.449
20 May 2002
30 April 2007
$4.220
$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
Details of options over Stapled Securities provided as remuneration to each director of Transurban Group and each of the key
management personnel of the Group are set out on page 49.
annual report 2006
48
FINANCIALS
Directors’ report
Directors of the Group
K Edwards
G R Phillips
Other key management personnel
of the Group
C Brant
B Bourke
P O’Shea
G Mann
Number of options
granted during the year
Number of options
vested during the year
2006
2005
2006
2005
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
166,667
-
116,667
100,000
-
Details of Stapled Securities provided as a result of the exercise of remuneration options to each director of Transurban Group and
other key management personnel of the Group are set out below.
Directors of the Group
K Edwards
G R Phillips
Other key management personnel
of the Group
C Brant
B Bourke
P O’Shea
G Mann
Number of Stapled Securities issued
on exercise of options during the year
2006
1,500,000
-
-
-
-
-
2005
-
500,000
-
350,000
204,300
-
The amounts paid per Stapled Security by each director and other key management personnel on the exercise of options at the
date of exercise were as follows:
Exercise date
21 September 2005
13 December 2005
20 June 2005
Amount paid per Stapled Security
$4.404
$4.404
$4.404
No amounts are unpaid on any securities issued on the exercise of options.
49
annual report 2006
The Transurban Group
Directors’ report
Executive Long-Term Incentive Plan
The executive long term incentive plan
(ELTIP) was introduced in 2003 to
provide long term incentives to executive
directors and executives in the period
after issued options had fully vested.
Under the ELTIP, participants were
allocated ELTI units. Each ELTI unit
entitled the holder to a cash payment on
the maturity date, approximately two
years after the date of allocation.
The cash payment per unit is 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 Transurban Group’s
ranking in the Total Shareholder
Returns (TSRs) of the companies within
the S&P/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 outlined
below.
Grant date
Expiry date
Grant price
Value per unit at
grant date
Value per unit at
reporting date
Date payable
30 September 2003
30 September 2005
30 September 2004
30 September 2006
$4.23
$5.45
$0.46
$0.54
fully paid
30 November 2005
$1.79
30 November 2006
Details of ELTIs provided and paid to each director of Transurban Group and other key management personnel of the Group are
set out as follows:
Name
Number of ELTIs
granted during the year
Number of ELTIs
paid during the year
$ Value of ELTIs
paid during the year
2006
2005
2006
2005
2006
2005
Directors of Transurban Holdings Limited
K Edwards
G Phillips
Other key management personnel
of the Group
C Brant
B Bourke
P O’Shea
G Mann
-
-
-
-
-
-
800,000
850,000
-
170,000
-
-
160,000
160,000
120,000
130,000
-
-
-
-
-
-
-
-
2,558,500
-
-
481,600
391,300
-
-
-
-
-
-
-
annual report 2006
50
FINANCIALS
Directors’ report
Executive Loan Plan (ELP)
The ELP was introduced in 2005 as it
offered payoff characteristics similar to
those of an option-based plan, and thus
rewarded TSR out performance. The
ELP, similar to those which had been
introduced by a number of other
companies whose equity securities were
stapled, was also more cost effective
than an option-based plan in terms of
cost to the Group for a given amount of
incentive. (The cost referred to above
was in the form of fringe benefi ts tax
that was payable by the Group on the
allocation of options.)
The ELP is structured as a performance
loan plan which is linked to
improvements in the price of Stapled
Securities over a three year period.
The Plan has been structured so that
rewards are only obtained if there are
materially improved security
holder returns.
Executives participating in the ELP are
provided with an interest free loan to
assist them to acquire Stapled
Securities at market price. The term of
the loan is three years and there is only
one testing date. The Stapled Securities
are held by the executive but will only
vest in the executive in accordance with
the terms of the Plan. Expiry occurs
three years plus 60 days from the date
of commencement of the Plan, unless
the rules of the Plan provide otherwise.
Holding locks are applied to the Stapled
Securities to ensure that the Stapled
Securities can only be dealt with in
accordance with the terms of the Plan.
The acquired shares cannot be
transferred or sold while the loan
is outstanding.
Stapled Securities will vest in the
executive if:
(a)
the executive is employed by
Transurban Group for at least
three years from the date of
commencement of the Plan,
unless the rules of the Plan
provide otherwise, and
(b)
the performance hurdle relevant to
the offer is met.
51
If the Stapled Securities vest in
the executive:
repayment of the repayable portion of
the loan.
(a)
(b)
then the executive can either pay
the amount of the loan which
needs to be repaid and which is
attributable to those vested Stapled
Securities, in which case they will
be free to deal with those Stapled
Securities as they see fi t, or
the Group will otherwise sell the
vested securities and apply for
the proceeds of sale in discharge
of the amount of the loan which is
repayable attributable to those
Stapled Securities, with any
surplus to be provided to the
executive.
Any unvested Stapled Securities will
also be sold by the Group and the
proceeds will be applied in reduction
of the repayable amount of the loan
attributable to those unvested
securities, with the executive having
no entitlement to the surplus.
The Plan has been designed so that the
executive does not need to provide any
money to purchase securities in
Transurban Group and is not himself
or herself directly responsible for
repayment of any loan provided.
The proceeds of sale of Stapled
Securities are, unless the rules of the
Plan provide otherwise, applied to
discharge the repayable portion of any
loan.
If the executive does not meet the
hurdle identifi ed, and remains employed
by Transurban Group for a period of
three years from the date of
commencement of the Plan, unless the
rules of the Plan provide otherwise, no
Stapled Securities will vest in the
executive and all Stapled Securities will
be sold with the proceeds being applied
in repayment of the repayable portion of
the loan, with no surplus being provided
to the executive.
If an executive leaves the employ of
Transurban Group those unvested
securities will lapse and will be sold
with the proceeds being applied in
All dividends and distributions payable
in respect of the Stapled Securities
subject of the Plan, net of deductions for
tax, are to be applied in reduction of the
outstanding loan balance. If a takeover
offer or scheme of arrangement occurs,
all outstanding Stapled Securities will
vest, and upon payment of the
outstanding loan amount, the executive
will be free to deal with those Stapled
Securities as he or she sees fi t.
The performance hurdle attached to
Stapled Securities has been set to
ensure that both executives and Stapled
Security holders generally benefi t from
the allocation of Stapled Securities to
executives under the Plan.
The performance hurdle involves a
comparison of Total Shareholder
Returns (TSR). The TSR of Transurban’s
listed Stapled Securities is compared
with the TSR of each other company
(Test Company) in the S&P/ASX 100
Industrials (or similar or replacement
index) for the whole period of
comparison. The period of comparison
(Performance Hurdle Test Period) is the
three years post the date of
commencement of the Plan.
TSR measures total return on
investment of a security. It takes into
account both capital appreciation and
distributed income. It assumes a
notional reinvestment of distributions
paid on the security (on a pre-tax basis)
in additional securities, at the market
price on the day before the securities
begin trading ex the relevant
distribution.
Transurban and each of the Test
Companies will be ranked according to
their respective TSRs over the
Performance Hurdle Test Period.
This ranking determines the extent to
which Stapled Securities will vest.
- If Transurban’s TSR is ranked at or
above the 75th percentile, 100 per
cent of the Stapled Securities will
vest.
annual report 2006
The Transurban Group
Directors’ report
- If Transurban’s TSR is ranked above
the 50th percentile but below the 75th
percentile, the percentage of Stapled
Securities (P) that will vest will be that
calculated according to the following
formula:
- P = 50 + 2 x (RTransurban – 50)
- Where: RTransurban = The
percentile rank of Transurban’s TSR.
- If Transurban’s TSR is ranked at or
below the 50th percentile, none of
the Stapled Securities will vest.
The allocation of ELP units is
determined by the following:
(i) A remuneration value is
determined for each participant
relative to their total employment
cost. These values are referenced
to external market benchmarks.
The number of Stapled Securities
an executive is entitled to is derived
by using an option valuation
methodology such as the Black
Scholes with Monte Carlo
simulations or other similar
method of calculation. These
valuation methods take into
account the fact that the loan will
need to be repaid along with
performance and other conditions.
By dividing the remuneration value
or number by this adjusted
valuation, the number of Stapled
Securities is derived
price of Stapled Securities
weighted by reference to volume
over the week leading up to and
including the date of
commencement of the Plan, and
(iv) the amount of the loan provided
to a participant is equal to the
purchase price per Stapled Security
multiplied by the participant’s
Stapled Securities entitlement.
Details of securities provided to each
director of Transurban Limited and
other key management personnel of
the Group are set out below.
(ii)
the Stapled Securities are acquired
and transferred to each participant
(iii) the purchase price per Stapled
Security is the average market
Number of
securities granted
Number of
securities vested
Number of
securities exercised
2006
2005
2006
2005
2006
2005
Directors of Transurban Holdings Limited
K Edwards
312,500
Other key management personnel
of the Group
C Brant
B Bourke
P O’Shea
G Mann
118,000
102,000
75,000
112,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Executive Loan Plan for executives located overseas
An Executive Long Term Incentive Cash Plan mirroring that of the Executive Loan Plan is used for participants outside Australia.
The terms and conditions of each grant of units under this cash plan affecting remuneration in this or future reporting periods are
as follows:
Grant date
Expiry date
Grant price
Value per unit at
grant date
Value per unit at
reporting date
Date payable
1 November 2005
1 November 2008
$6.47
$1.35
$1.40
1 November 2008
annual report 2006
52
FINANCIALS
Directors’ report
Announced taxation changes impacting
Stapled Securities
In the May 2006 Budget, the Federal
Government announced its intention to
extend the employee share scheme and
related capital gains tax provisions to
Stapled Securities that include an
ordinary share and are listed on the
ASX, with effect from 1 July 2006. Draft
legislation is expected to be introduced
around September–October 2006.
The Government’s announcement is
welcome and will offer some relief to
companies with other than ordinary
shares offered to their employees.
Given this announcement, a review of
Transurban’s Equity Plans will be
carried out once legislation is passed to
ensure that the long term incentive
programs and Employee Share Plans
remain relevant and aligned to the
interests of Stapled Security holders.
However, Transurban’s ability to offer a
full range of alternative incentive plans
is impacted by the constitution of
Transurban Holding Trust.
(e) Additional information
Principles used to determine the
nature and amount of remuneration:
relationship between remuneration
and company performance.
The overall level of executive reward
takes into account the performance of
the Group. In particular, the following
items are considered in determining
executive remuneration:
- fi nancial performance relative to
short-term profi tability targets
- the extent to which the Group has met
its KRAs
Cash bonuses and options
- total shareholder return relative to
other companies in the ASX
Industrials index, and
- individual performance as measured
by the achievement of KPIs and the
upholding of Group values.
Short term profi tability targets for the
Group were achieved for the year
evidenced by the decreased loss
reported for the period of $60.9 million
compared to $90.4 million for the prior
corresponding period. In addition, key
result areas were achieved with the
business delivering synergies of
$9 million following the acquisition of
the Hills Motorway Group which was
further enhanced by the acquisition of
Tollaust Pty Ltd, tolling and operations
manager of Hills M2.
Transurban’s ability to grow
distributions represents a combination
of strong cash generation and its
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
$172.2 million for the current period.
Transurban is currently ranked in
the top 50 public companies listed
on the ASX.
Cash bonuses
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 $6.34 million
were incurred under the Business
Generation Incentive Plan in relation to
the purchase of the Pocahontas
Parkway (Virginia, US) and the
agreement with the Victorian
Government to upgrade the West Gate–
CityLink–Monash corridor.
For each cash bonus paid to the
directors and the fi ve executives
receiving the highest remuneration, the
percentage of the available bonus that
was paid in the fi nancial year and the
percentage that was forfeited because
the person did not meet his or her
performance criteria is set out opposite.
No part of the cash bonuses are payable
in future years.
53
annual report 2006
Directors’ report
Name
K Edwards
M Kulper
K Daley
C Brant
B Bourke
P O’Shea
The Transurban Group
Cash bonus
Paid
%
Forfeited
%
100
100
100
100
100
100
-
-
-
-
-
-
Mr G R Phillips resigned on 26 July 2005 and was ineligible for a bonus in the current fi nancial year.
Options
No options on issue to the directors and the fi ve executives receiving the highest remuneration listed in the above table vested in
the current year and there are no remaining options on issue.
Long term incentive units
Long term incentive units which were issued in September 2003 vested in September 2005 and were paid in November 2005.
No amounts were forfeited.
annual report 2006
54
FINANCIALS
Directors’ report
Further details relating to options and long term incentives are set out below.
Name
K Edwards
—options
—ELTI
—share plan
G R Phillips
—options
—ELTI
—share plan
M Kulper
—options
—ELTI
—share plan
K Daley
—options
—ELTI
—share plan
C Brant
—options
—ELTI
—share plan
B Bourke
—options
—ELTI
—share plan
P O’Shea
—options
—ELTI
—share plan
A
Remuneration
%
B
Value at
grant date
$
C
Value at
exercise date
$
D
Value at
lapse date
$
E
Total of
columns B-D
$
-
-
30
-
-
-
-
30
-
-
30
-
-
-
30
-
-
30
-
-
30
-
-
3,963,002
2,558,500
437,500
-
-
-
-
126,000
-
-
103,950
-
-
-
165,000
-
-
142,500
-
-
105,000
-
-
-
-
-
-
-
723,247
511,700
-
-
-
-
-
481,600
-
-
391,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,963,002
2,558,500
437,500
-
-
-
-
126,000
-
723,247
615,650
-
-
-
165,000
-
481,600
142,500
-
391,300
105,000
A = The percentage of the value of remuneration, based on the value at grant date set out in column B
B = The value at grant date calculated in accordance with AASB 2 Share-Based Payment.
C = The value at exercise date that were granted as part of remuneration and were exercised/matured during the year.
D = The value at lapse date that were granted as part of remuneration and that lapsed during the year.
55
annual report 2006
The Transurban Group
Directors’ report
Shares under option
Unissued Stapled Securities of Transurban Group under option at the date of this report are as follows. No options were issued
during the year.
Grant date
20 May 2002
Expiry date
Issue price of Stapled
Securities
Number under option
30 April 2007
$4.220
76,283
Shares issued on the exercise of options
The following Transurban Stapled Securities were issued during the year ended 30 June 2006 on the exercise of options granted
under Transurban Group’s Employee Option Plan. No further securities have been issued since that date. No amounts are unpaid
on any of the securities.
of securities
Issue price Number of
securities
issued
$3.817
390,000
$4.404
1,500,000
$4.280
-
$4.030
223,200
$4.220
586,102
Pursuant to this indemnifi cation, the
individual entities of the Group have paid
premiums for an insurance policy for the
benefi t of directors, secretaries and
executive offi cers and related bodies
corporate of the Group, in the case of the
Trusts within the Group the offi cers are
indemnifi ed 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.
Rounding off
The Group is of a kind referred to in
Class Order 98/0100, issued by the
Australian Securities and 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, or in certain cases,
to the nearest dollar.
Date options granted
26 April 2001
23 October 2001
1 February 2002
9 April 2002
20 May 2002
Indemnifi cation and
insurance
The offi cers of the Group are indemnifi ed
against liability incurred by the person in
their capacity as an offi cer unless the
liability arises out of conduct on the part
of the offi cer which involves a lack of
good faith. The Group also indemnifi es
each person who is or has been an
offi cer against liability for costs or
expenses incurred by the person in his or
her capacity as an offi cer in defending
civil or criminal proceedings in which
judgement 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.
annual report 2006
56
FINANCIALS
Directors’ report
Non-audit services
The Group may decide to employ the
auditor on assignments additional to
their statutory audit duties where the
auditor’s expertise and experience with
the Group are important.
The Board of Directors has considered
the position and, in accordance with the
advice received from the Audit
Committee, is satisfi ed 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 satisfi ed 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.
During the year the fees outlined below
were paid or payable for services
1. Assurance services
Audit services
PricewaterhouseCoopers Australian fi rm:
Audit and review of fi nancial reports and
other audit work under the Corporations Act 2001
Fees paid to non-PricewaterhouseCoopers audit fi rms
for the audit or review of fi nancial reports
Total Remuneration for Audit Services
Other assurance services
PricewaterhouseCoopers Australian fi rm:
Due diligence
Compliance plan audit
Other assurance services including IFRS
Controls assistance
Fees paid to non-PricewaterhouseCoopers audit fi rms
Total Remuneration for Other Assurance Services
provided by the auditor of the parent
entity, its related practices and non-
related audit fi rms.
Consolidated
2006
$
2005
$
689,850
335,750
-
40,000
689,850
375,750
158,621
432,500
24,700
24,700
329,335
115,000
163,000
-
-
12,360
675,656
584,560
57
annual report 2006
Directors’ report
2. Taxation services
PricewaterhouseCoopers Australian fi rm:
Tax compliance services, including
review of income tax returns
International tax consulting
Indirect taxation services
Fees paid to non-PricewaterhouseCoopers audit fi rms
Total Remuneration for Taxation Services
The Transurban Group
Consolidated
2006
$
2005
$
104,735
191,865
1,128,028
-
434,714
619,530
-
26,436
1,667,477
837,831
Auditors’ independence
declaration
A copy of the auditors’ independence
declaration as required under section
307C of the Corporation Act 2001 is set
out on page 60.
Auditor
PricewaterhouseCoopers continues in
offi ce in accordance with section 327 of
the Corporations Act 2001.
annual report 2006
58
FINANCIALS
Directors’ report
This report is made in accordance with a resolution of the directors.
Laurence G Cox
Chairman
Kimberley Edwards
Managing Director
Melbourne
22 August 2006
59
annual report 2006
The Transurban Group
Directors’ report
Auditors’ Independence Declaration
As lead auditor for the audit of the Transurban Group for the year ended 30 June 2006,
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, other than a contravention covered by ASIC Class Order
05/910; 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
22 August 2006
Liability limited by a scheme approved under Professional Standards Legislation.
annual report 2006
60
FINANCIALS
Consolidated income statement for the year ended 30 June 2006
Revenue from continuing operations
Other income
Expenses from ordinary activities:
Operational costs
Corporate costs
Corporate and community relations
Business development
Concession fees
Promissory notes
Depreciation and amortisation expense
Finance costs
Share of net profi ts of associates and joint venture
partnership accounted for using the equity method
Loss before income tax
Income tax benefi t/(expense)
Loss for the Year Attributable to Members of Transurban Group
Earnings per security for loss attributable to the ordinary equity holders:
Basic earnings per Stapled Security
Diluted earnings per Stapled Security
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated
2006
$’000
2005
$’000
690,408
510,938
4,410
714
(105,291)
(74,222)
(28,979)
(26,730)
(6,278)
(3,523)
(9,033)
(18,158)
(22,053)
(16,268)
(2,025)
(541)
(258,065)
(178,896)
(372,092)
(280,207)
(8,634)
-
(117,632)
(86,893)
56,732
(3,544)
(60,900)
(90,437)
Cents
(7.6)
(7.6)
Cents
(15.3)
(15.3)
61
annual report 2006
Consolidated balance sheet as at 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative fi nancial instruments
Other
Total Current Assets
Non-current assets
Receivables
Investments accounted for using the equity method
Held-to-maturity investments
Derivative fi nancial instruments
Property, plant and equipment
Deferred tax assets
Intangible assets
Other
Total Non-Current Assets
Total Assets
Current liabilities
Trade and other payables
Borrowings
Non-interest bearing liabilities
Provisions
Current tax liabilities
Derivative fi nancial instruments
Total Current Liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Non-Interest bearing liabilities
Provisions
Derivative fi nancial instruments
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
The Transurban Group
Consolidated
2006
$’000
2005
$’000
323,110
46,901
1,709
-
371,720
186
15,732
469,767
20,217
5,760,346
260,570
805,511
-
7,332,329
7,704,049
78,625
265,142
39,205
229,115
-
13,423
625,510
395,561
25,394
-
9,178
430,133
-
6,236
392,000
-
5,946,814
255,394
115,030
26,898
6,742,372
7,172,505
104,301
598,000
129,578
157,601
5,429
-
994,909
3,550,294
784,601
213,477
364
67,652
4,616,388
5,241,898
2,462,151
2,275,976
843,937
243,296
3,999
-
3,367,208
4,362,117
2,810,388
4,277,736
(53,087)
(1,762,498)
2,462,151
4,127,228
-
(1,316,840)
2,810,388
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
annual report 2006
62
FINANCIALS
Consolidated statement of changes in equity
for the year ended 30 June 2006
Total Equity at the Beginning of the Financial Year
Adjustment on adoption of AASB 132 and
AASB 139, net of tax:
Retained profi ts
Reserves
Restated total equity at the beginning of the fi nancial year
Changes in fair value of
share-based payments
Transfer to net profi t - gross
Deferred tax - derivatives
Changes in fair value of
cash fl ow hedges, net of tax
Net income recognised directly in equity
Loss for the year
Total Recognised Income and Expense for the Year
Transactions with equity holders in their capacity as equity holders:
Exercise of employee security options
Treasury securities
CARS conversion
Issue on acquisition of Hills Motorway, inclusive of transaction costs
Distribution reinvestment plan
Distributions provided for or paid
Total Equity at the End of the Financial Year
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated
2006
$’000
2005
$’000
2,810,388
1,321,810
16,840
(40,074)
-
-
2,787,154
1,321,810
1,188
1,127
18,626
(33,954)
(13,013)
-
-
-
-
-
(60,900)
(90,437)
(73,913)
(90,437)
11,464
11,559
(10,227)
56,265
-
-
-
1,841,597
93,006
32,042
(401,598)
(306,183)
(251,090)
1,579,015
2,462,151
2,810,388
63
annual report 2006
The Transurban Group
Consolidated cash flow statement for the year ended 30 June 2006
Cash fl ows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Other revenue
Income taxes paid
Interest paid
Net Cash Infl ow from Operating Activities
Cash fl ows from investing activities
Payment for purchase of subsidiaries, net of cash acquired
Payments for property, plant and equipment
Payments for intangibles
Payments for Tullamarine-Calder freeway upgrade
Payment to secure release from single purpose restrictions
Distributions received
Loans to related parties
Repayment of loans by related parties
Consolidated
2006
$’000
2005
$’000
485,874
379,532
(207,766)
(171,174)
186,189
223,554
6,256
(9,688)
15,258
(2,720)
(288,643)
(297,478)
172,222
146,972
(98,412)
(67,953)
(673,217)
(161,985)
-
-
-
691
332,580
(29,361)
(4,400)
-
(3,150)
4,650
(2,576)
3,778
Net Cash (Outfl ow) \ Infl ow from Investing Activities
(1,000,876)
301,521
Cash fl ows from fi nancing activities
Proceeds from issue of Stapled Securities
Share issue transaction costs
Interest capitalised against cash collateral
Proceeds from borrowings
Payments for establishing borrowing facilities
Payments for treasury securities
Repayment of borrowings
Distributions paid
Net Cash Infl ow from Financing Activities
Net (decrease) \ increase in cash at bank and cash collateral
Cash at bank and cash collateral at the beginning of the fi nancial year
Effects of exchange rate changes on cash and cash equivalents
Cash at bank and cash collateral at the end of the fi nancial year
Less cash collateral
Cash at Bank at the End of the Financial Year
The above consolidated cash fl ow statement should be read in conjunction with the accompanying notes.
11,468
-
38,507
2,810,451
(22,708)
(10,228)
11,559
(146)
35,007
810,321
(10,394)
-
(1,788,000)
(590,000)
(243,240)
(131,686)
796,250
124,661
(32,404)
573,154
2,029,636
1,456,452
(1,540)
30
1,995,692
2,029,636
(1,672,582)
(1,634,075)
323,110
395,561
annual report 2006
64
FINANCIALS
Notes to the consolidated financial statements
for the year ended 30 June 2006
Principles of consolidation
Security comprises one share in
Transurban Holdings Limited, one share
in Transurban Limited and one unit in
Transurban Holding Trust. None of the
components of the Stapled Security are
able to be traded separately.
The Group 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 fi nancial reports.
Amounts in the concise fi nancial report
have been rounded off in accordance
with that Class Order to the nearest
thousand dollars, or in certain cases, to
the nearest dollar.
Upon the adoption of AIFRS, Transurban
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
identifi ed as the parent for the purposes
of preparing consolidated fi nancial
reports. Further, it requires that the
consolidated fi nancial report of
the ‘parent’ under the stapling
arrangement shall be the combined
fi nancial report of the entities whose
securities are stapled, prepared on the
same basis as the combined fi nancial
report for those entities immediately
before adopting AIFRS.
Transurban Holdings Limited has been
identifi ed as the parent in the Stapled
Group based on the size of its net assets
and its operations. Accordingly, it
presents the consolidated fi nancial
report of the Stapled Group.
As such, this Concise Financial Report
consists of the aggregated fi nancial
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 fi nancial statements on a
combined basis. The accounting policies
adopted in preparing the fi nancial
statements have been consistently
applied by the individual entities
comprising the accounts except as
otherwise indicated in Note 1 below.
The fi nancial statements have been
aggregated in recognition of the fact
that the securities issued by the parent
entities are stapled into parcels during
the year ended 30 June 2006. A Stapled
65
annual report 2006
The Transurban Group
to AIFRS on the Group’s equity and its
net income are given in note 46 of the
full fi nancial report. A summary of this
information is provided below.
Notes to the consolidated financial statements
for the year ended 30 June 2006
1. Adoption of Australian
Equivalents to
International Financial
Reporting Standards
The full fi nancial report on which this
concise fi nancial report is based is the
fi rst annual Transurban Holdings
Limited fi nancial report to be prepared
in accordance with Australian
Equivalents to International Financial
Reporting Standards (AIFRS). AASB 1
First-Time Adoption of Australian
Equivalents to International Financial
Reporting Standards has been applied
in preparing the full fi nancial report.
Financial statements of Transurban
Holdings Limited until 30 June 2006
had been prepared in accordance with
previous Australian Generally Accepted
Accounting Principles (AGAAP). AGAAP
differs in certain respects from AIFRS.
When preparing Transurban Holdings
Limited 2006 fi nancial statements,
management has amended certain
accounting, valuation and consolidation
methods applied in the AGAAP fi nancial
statements to comply with AIFRS. With
the exception of fi nancial instruments,
the comparative fi gures in respect of
2005 were restated to refl ect these
adjustments.
The Group has taken the exception
available under AASB 1 to only apply
AASB 132 Financial Instruments:
Disclosure and Presentation and AASB
139 Financial Instruments: Recognition
and Measurement from 1 July 2005.
Reconciliations and descriptions of the
effect of transition from previous AGAAP
(a) Impact on total equity reported under previous AGAAP
Total Equity Under Previous AGAAP
Adjustment to retained earnings (net of related tax impact)
Derecognition of goodwill
Creation of goodwill on acquisition
Recognition of deferred tax assets
Recognition of deferred tax liabilities
Total Equity Under AIFRS
(b) Impact on profi t for the year ended 30 June 2005
Loss for the year ended 30 June 2005 as reported under AGAAP
Adjustment to depreciation expense
Adjustment to income tax expense
Loss for the Year Ended 30 June 2005—Restated Under AIFRS
(c) Impact on cash fl ow statement for the year ended 30 June 2005
The adoption of AIFRS has not resulted in any material adjustments to the cash fl ow statement.
30 June
2005
$’000
1 July
2004
$’000
3,328,367
1,837,189
(8,252)
84,742
(8,752)
-
244,444
250,621
(838,913)
(757,248)
2,810,388
1,321,810
$’000
(87,837)
500
(3,100)
(90,437)
annual report 2006
66
FINANCIALS
Notes to the consolidated financial statements
for the year ended 30 June 2006
2. Presentation currency
The presentation currency used in this concise fi nancial report is Australian dollars.
3. Change in accounting policy
The Group has taken the exemption available under AASB 1 First-Time Adoption of Australian Equivalents to International
Financial Reporting Standards to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial
Instruments: Recognition and Measurement from 1 July 2005. At the date of transition to these standards at 1 July 2005, the
following adjustments were recognised.
Other fi nancial assets at fair value
through profi t or loss
Deferred tax assets
Non-current derivative fi nancial assets
Other non-current assets
Current derivative liabilities
Non-current interest bearing liabilities
Non-current non-interest bearing liabilities
Deferred tax liabilities
Non-current derivative fi nancial liabilities
Adjustment to Net Assets
Cash fl ow reserve
Accumulated losses
Adjustment to Total Equity
30 June
2005
$’000
-
244,444
-
22,811
-
2,865,976
206,796
843,937
-
-
(1,316,840)
Adjustment
$’000
16,840
17,948
5,910
(22,811)
20,817
(16,320)
(11,741)
1,773
46,592
(23,234)
(40,074)
16,840
(23,234)
1 July
2005
$’000
16,840
262,392
5,910
-
20,817
2,849,656
195,055
845,710
46,592
(40,074)
(1,300,000)
Financial assets at fair value
through profi t or loss
Options held to acquire an additional
5.0 per cent interest in Westlink M7
Project at a cost of $49 million were
recognised and recorded at fair value.
A fi nancial asset and an increase in
accumulated losses of $16,840,000
were recognised.
67
Derivative fi nancial instruments
From 1 July 2004 to 30 June 2005.
The Group has taken the exemption
available under AASB 1 to apply AASB
132 and AASB 139 from 1 July 2005. The
Group has applied previous AGAAP in
the comparative information on fi nancial
instruments within the scope of AASB
132 and AASB 139.
The following sets out how derivatives
were accounted for under previous
AGAAP.
annual report 2006
Notes to the consolidated financial statements
for the year ended 30 June 2006
Interest rate swaps
(i)
Adjustments on transition date:
1 July 2005
The net amount receivable or payable
under interest rate swap agreements
was progressively brought to account
over the period to settlement.
The amount recognised was accounted
for as an adjustment to interest and
fi nance charges during the period and
included in other debtors or other
creditors at each reporting date.
Where an interest rate swap was
terminated early and the underlying
hedged transaction was:
(a) still expected to occur as
designated—the gains and losses
arising on the swap upon its early
termination continued to be
deferred and were progressively
brought to account over the period
during which the hedged
transactions were recognised, and
(b) no longer expected to occur as
designated—the gains or losses
arising on the swap upon its early
termination were recognised in the
income statement at termination.
Forward foreign exchange contracts
Gains or costs arising from entering
into a contract intended to hedge the
purchase or sale of goods or services,
together with the subsequent exchange
gains or losses resulting from
measurement of those contracts by
reference to movements in spot
exchange rates, were deferred in the
balance sheet from the inception of the
hedging transaction up to the date of
the purchase or sale and included in the
measurement of the purchase or sale.
Early termination of forward foreign
exchange contracts was accounted for
on a basis consistent with interest rate
swaps (see above). For both interest rate
swaps and foreign exchange contracts, if
the hedged transaction was not expected
to occur as originally designated, or if the
hedge was no longer expected to be
effective, any previously deferred gains or
losses were recognised as revenue or
expense immediately.
annual report 2006
The nature of the main adjustments to
make this information comply with
AASB 132 and AASB 139 are that
derivatives are measured on a fair value
basis. Changes in fair value are either
taken to the income statement or an
equity reserve. At the date of transition
(1 July 2005) changes in the carrying
amounts of derivatives were taken to
retained earnings or reserves,
depending on whether the criteria for
hedge accounting are satisfi ed at the
transition date.
From 1 July 2005
Derivatives are initially recognised at
fair value on the date a derivative
contract is entered into and are
subsequently remeasured to their fair
value at each reporting date. The
accounting for subsequent changes in
fair value depends on whether the
derivatives are designated as hedging
instruments, and if so, the nature of the
item being hedged. The Group
designates certain derivatives as either:
(1) hedges of the fair value of
recognised assets or liabilities or a
fi rm commitment (fair value
hedge), or
(2) hedges of the cash fl ow of
recognised assets and liabilities and
highly probable forecast
transactions (cash fl ow hedges).
At the inception of the hedging
transaction the Group documents
the relationship between hedging
instruments and hedged items, as well
as its risk management objective and
strategy for undertaking various hedge
transactions. The Group also documents
its assessment, both at hedge inception
and on an ongoing basis, of whether the
derivatives that are used in hedging
transactions have been, and will
continue to be, highly effective in
offsetting changes in fair values or
cash fl ows of hedged items.
The Transurban Group
fair value hedge
Changes in the fair value of derivatives
that are designated and qualify as fair
value hedges are reported in the income
statement, together with any changes
in the fair value of the hedged asset or
liability that are attributable to the
hedged risk. The gain or loss relating
to the effective portion of interest rate
swaps hedging fi xed rate borrowings is
recognised in the income statement
within other income or other expense.
Together with the gain or loss relating
to the ineffective portion and changes
in the fair value of the hedge fi xed rate
borrowings attributable to interest
rate risk.
If the hedge no longer meets the criteria
for hedge accounting, the adjustment to
the carrying amount of a hedge item for
which the effective interest method is
used is amortised to profi t or loss over
the period to maturity.
(ii) cash fl ow hedge
The effective portion of changes in the
fair value of derivatives that are
designated and qualify as cash fl ow
hedges is recognised in equity in the
hedging reserve. The gain or loss relating
to ineffective portion is recognised
immediately in the income statement
within ‘other income’ or ‘other expense’.
Amounts accumulated in equity are
recycled in the income statement in the
periods when the hedged item will
affect profi t or loss. The gain or loss
relating to the effective portion of
interest rate swaps hedging variable
rate borrowings is recognised in the
income statement within ‘fi nance costs’.
When a hedging instrument expires or
is sold or terminated, or when a hedge
no longer meets the criteria for hedge
accounting, any cumulative gain or loss
existing in equity remains in equity and
is recognised when the forecast
transaction is ultimately recognised in
the income statement. When a forecast
transaction is no longer expected to
occur, the cumulative gain or loss that
was reported in equity is immediately
transferred to the income statement.
68
FINANCIALS
Notes to the consolidated financial statements
for the year ended 30 June 2006
(iii) Derivatives that do not qualify for
Re-classifi cation of capitalised
borrowing costs
hedge accounting
Certain derivative instruments do not
qualify for hedge accounting. Changes
in the fair value of any derivative
instrument that does not qualify for the
hedge accounting are recognised
immediately in the income statement
and are included in ‘other income’ or
‘other expenses’.
Impact on adoption
The recognition of a non-current asset
of $5,910,000 and an increase in cash
fl ow reserves of the same amount.
The recognition of a current liability of
$20,817,000 and a reduction in cash fl ow
reserves of the same amount.
The recognition of a non-current
liability of $46,592,000 and a reduction
in reserves of the same amount.
The recognition of tax deferred assets of
$17,948,000 and deferred tax liabilities
of $1,773,000 with the net effect
recognised in cash fl ow reserves.
4. Segment information
The Group’s primary business segment
for the year ending 30 June 2006 was
the operation of the toll roads being
CityLink in Melbourne, Hills M2 in
Sydney, a 45 per cent interest in the
Westlink M7 in Sydney and the
investigation of possible investment
opportunities in the segment.
Geographical segment information is
provided in the table below and refl ects
Transurban Group’s activities in relation
to geographically unique locations.
The carrying value of deferred
borrowing costs of $16,320,000 has
been re-classifi ed as a reduction in
interest bearing liabilities, rather than
a non-current asset.
Financial swap contract break
costs
In May 2005, the Group incurred fi nance
costs of $6,491,000 associated with the
early termination of swap contracts.
These costs have been recognised in a
cash fl ow reserve within equity, rather
than a non-current asset.
Non-interest bearing liabilities
Cross-currency interest rate swap
contracts under which the Group is
obliged to receive foreign currency
interest at fi xed rates and to pay
Australian dollar interest at fl oating
rates is revalued at each reporting date
to refl ect any changes in foreign
exchange rates. The contracts are
settled on a net basis. These net
payables or receivables of $11,741,000
have been recognised in a cash fl ow
reserve within equity
Segment revenues
Segment assets
Segment liabilities
2006
$’000
2005
$’000
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Victoria, Australia
466,146
436,035
3,874,293
4,200,495
3,874,458
3,358,093
New South Wales, Australia
224,262
74,903
3,109,967
2,970,082
920,742
1,004,024
United States
Other
Total
-
-
-
-
717,226
1,928
536,698
2,563
-
-
-
-
690,408
510,938
7,704,049
7,172,505
5,241,898
4,362,117
69
annual report 2006
Notes to the consolidated financial statements
for the year ended 30 June 2006
5. Revenue
Services revenue from continuing operations
6. Distributions
The distributions set out below represent distributions to Stapled Securities holders.
The Transurban Group
Consolidated
2006
$’000
2005
$’000
435,795
314,553
Consolidated
2006
$’000
2005
$’000
Distributions proposed
Final distribution payable and recognised as a liability:
25.5 cents (2005: 18.0 cents) per fully paid Stapled Security payable 25 August 2006
207,422
142,455
Distributions paid during the year
Final distribution for 2005 fi nancial year of 18.0 cents
(2004: 13.5 cents) per fully paid Stapled Security paid 2 September 2005
Interim distribution for 2006 fi nancial year of 24.5 cents
(2005: 17.0 cents) per fully paid Stapled Security paid 28 February 2006
Total Distributions Paid
Distributions paid in cash or satisfi ed by the issue of
Stapled Securities under the distribution reinvestment
plan during the years ended 30 June 2006 and 30 June 2005
Paid in cash
Executive loans—repayments
Satisfi ed by issue of Stapled Securities
Funds available for future distribution reinvestment plans
Total Distributions Paid
142,443
71,983
194,188
91,745
336,631
163,728
Consolidated
2006
$’000
2005
$’000
243,240
131,686
352
-
93,007
32,042
32
-
336,631
163,728
annual report 2006
70
FINANCIALS
Notes to the consolidated financial statements
for the year ended 30 June 2006
7. Events occurring after
(b) Westlink M7 increase in
equity interest
Transurban has exercised its pre-
emptive right to purchase an additional
2.5 per cent equity interest in the
Westlink M7 for $34.3 million. This will
increase Transurban’s holding from
45 per cent to 47.5 per cent. Transurban
and Macquarie Infrastructure Group
have pre-emptive rights over the
remaining 5 per cent held by Leighton
Holdings Limited.
(c) High Court of Australia decision
—deductibility of concession fees
On 20 July 2006, the High Court ruled in
favour of Transurban in relation to the
tax deductibility of the Concession Fees
paid to the State of Victoria under the
Melbourne CityLink Concession Deed.
The case was heard by the High Court
of Australia after the Australian Taxation
Offi ce (ATO) appealed the unanimous
judgement of the Full Court of the
Federal Court in October 2004.
The High Court awarded the costs of the
legal action to Transurban which are yet
to be quantifi ed.
the balance date
(a) West Gate-CityLink-Monash
freeway corridor improvement
project
Transurban has reached agreement
with the State of Victoria and VicRoads
to jointly fund upgrades and
improvements to 75 kilometres of the
West Gate-CityLink (Southern Link)-
Monash freeway corridor.
The CityLink upgrade, which is estimated
to cost $166 million over the three year
construction period, will be funded via
the Distribution Reinvestment Plan.
The State will fund the non-CityLink
works, estimated to cost $737 million.
Full project completion is expected by
December 2010.
Under the agreement, the State of
Victoria will also assign to Transurban
all remaining and future Concession
Note liabilities incurred under the
provisions of the Melbourne CityLink
Concession Deed. These liabilities have
a face value of $2.9 billion and will be
replaced by payments over the next four
years totalling $614 million.
Transurban and the State will share in
the revenue uplift generated by the
project after Transurban has fully
recovered the capital cost and any lost
revenue from the construction phase of
the Southern Link upgrades.
71
annual report 2006
The Transurban Group
Directors’ declaration
The directors declare that in their opinion, the concise fi nancial report of the consolidated entity for the year ended 30 June 2006,
as set out on pages 61 to 71, complies with Accounting Standard AASB 1039: Concise Financial Reports.
The concise fi nancial report is an extract from the full fi nancial report for the year ended 30 June 2006. The fi nancial statements
and specifi c disclosures included in the concise fi nancial report have been derived from the full fi nancial report.
The concise fi nancial report cannot be expected to provide as full an understanding of the fi nancial performance, fi nancial position
and fi nancing and investing activities of the consolidated entity as the full fi nancial report, which is available on request.
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
22 August 2006
annual report 2006
72
FINANCIALS
Independent audit report to the members
73
annual report 2006
The Transurban Group
Independent audit report to the members
annual report 2006
74
FINANCIALS
Security holder information as at 31 August 2006
Shareholder Information
The security holder information set out below was applicable as at 31 August 2006.
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 61,060.
2. The voting rights are one vote per Stapled Security.
3.
At 31 August 2006 the percentage of the total holdings held by or on behalf of the twenty largest holders of these
securities was 60.86 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
12,954
36,758
7,532
3,579
237
61,060
8,101,713
92,172,780
54,472,850
77,503,197
601,670,645
833,921,185
%
0.97
11.06
6.53
9.29
72.15
100
There were 72 holders of less than a marketable parcel of ordinary shares.
5. Substantial Shareholder’s as at 31 August 2006 are as follows:
Name
Commonwealth Bank of Australia
Ontario Teacher’s Pension Plan Board
Number of % of Total
Stapled Securities
107,188,884
48,153,103
13.54
6.08
75
annual report 2006
The Transurban Group
Security holder information as at 31 August 2006
B. Twenty Largest Holders Of Stapled Securities
Number of
Stapled Securities Held
% of Issued
Stapled Securities
Westpac Custodian Nominees Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
ANZ Nominees Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
Queensland Investment Corporation
RBC Dexia Investor Services Australia Nominees
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
Westpac Financial Services Limited
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
AMP Life Limited
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
Djerriwarrh Investments
Total
108,957,945
98,002,340
56,025,274
35,330,662
25,907,530
25,879,938
24,271,145
21,664,987
21,613,879
14,653,050
14,328,011
11,473,729
10,030,788
8,792,402
7,646,406
5,456,248
5,342,861
4,586,097
4,236,822
3,250,000
13.07
11.75
6.72
4.24
3.11
3.10
2.91
2.60
2.59
1.76
1.72
1.38
1.20
1.05
0.92
0.65
0.64
0.55
0.51
0.39
507,450,114
60.86
annual report 2006
76
FINANCIALS
Transurban CARS Trust and Controlled Entities
The Concise Financial Report of
Transurban CARS Trust and Controlled Entities (ABN 81 656 633 158)
For the year ended 30 June 2006
Contents
Directors’ report
Concise fi nancial report:
Consolidated income
statement
Consolidated balance sheet
Consolidated statement of
changes in equity
Consolidated cash fl ow
statement
Notes to the consolidated
fi nancial statements
Directors’ declaration
Independent audit report
to the members
Security holder information
79
86
87
88
89
90
92
93
95
FINANCIALS
Directors’ report
Relationship of the concise
fi nancial report to the full
fi nancial report
The concise fi nancial report is an
extract from the full fi nancial report
for the year ended 30 June 2006.
The fi nancial statements and specifi c
disclosures included in the concise
fi nancial report have been derived
from the full fi nancial report.
The concise fi nancial report cannot
be expected to provide as full an
understanding of the fi nancial
performance, fi nancial position and
fi nancing and investing activities
of Transurban CARS Trust and its
subsidiaries as the full fi nancial report.
Further fi nancial information can be
obtained from the full fi nancial report.
The full fi nancial report and auditor’s
report will be sent to members on
request, free of charge. You can access
both the full fi nancial report and the
concise report via the internet at our
Investor Information on our website:
www.transurban.com.au. Alternatively,
you can call 1300 360 146 (free call) and
a copy will be forwarded to you.
The directors of Transurban
Infrastructure Management Limited,
the Responsible Entity of Transurban
CARS Trust, present their report on the
consolidated entity consisting of the
Transurban CARS Trust (the Trust),
and the entities it controlled at the
end of, and during, the year ended
30 June 2006.
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 the Transurban
CARS Trust and is responsible for
performing all functions that are
required under the Corporations
Act 2001.
Directors
With the exception of the changes noted
below, the following persons were
directors of TIML during the whole of
the fi nancial year and up to the date of
this report.
Non-executive directors
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)
(1) C J S Renwick was appointed a
non-executive director on 26 July
2005 and continues in offi ce at the
date of this report.
(2) K Edwards was appointed an
executive director on 26 July 2005
and continues in offi ce at the date
of this report.
(3) G R Phillips was an executive
director from the beginning of the
fi nancial year until his resignation
on 26 July 2005.
Principal activities and
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.
a) Westlink M7
The Trust increased its equity interest
from 40 per cent to 45 per cent in the
Westlink M7 project on 16 December
2005, in line with the opening of the
Westlink M7 Motorway, eight months
ahead of schedule.
Transurban and Macquarie
Infrastructure Group have pre-emptive
rights over the remaining 10 per cent
held by Abigroup Limited and Leighton
Holdings Limited.
Transurban’s role in the Westlink
project involves:
- a 45 per cent equity stake in the road’s
owner, Westlink Motorway
- supply of the tolling system, and
- provision of tolling and customer
management services.
Westlink M7 is a 40-kilometre motorway
in Western Sydney which links Hills M2
at Baulkham Hills, the M4 at Eastern
Creek and the M5 at Prestons, and
bypasses 48 sets of traffi c lights.
b) 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
which it acquired to fund Transurban’s
contribution to the Westlink Motorway
Partnership. The CPLN are
subordinated loan notes which pay
interest at the rate of 6.27 per cent
per annum.
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.
CPLN held by the Trust converted to Term
Loan Notes (TLN) on the Equity
Contribution Date defi ned as the earlier of:
- the date of completion of construction
of the Westlink M7 motorway
- the date which is 42 months after
fi nancial close, and
- the date on which a demand is
made after the occurrence of an
event of default under the
subscription agreement.
79
annual report 2006
Transurban CARS Trust and Controlled Entities
Directors’ report
Construction of Westlink M7 was
completed on 16 December 2005,
accordingly CPLN converted to Term
Loan Notes accruing interest at 11.93
per cent.
Any unpaid interest capitalises into
additional Term Loan Notes.
c) Convertible Adjusting Rate
Securities (CARS)
During the period, TCT paid distributions to
CARS holders at the fi xed rate of 7 per cent
per annum. The distributions which are
paid twice annually with payment dates of
31 July and 31 December, respectively,
were 100 per cent tax deferred for the year
ended 30 June 2006.
Under the terms of the CARS
prospectus, unit holders are eligible to
convert their CARS units into
Transurban triple stapled securities
(Transurban securities) at any time after
the second anniversary of the issue date
(14 April 2005). During the year
exchange notices were received electing
to convert units into Transurban Group
Stapled Securities.
The table below sets out the conversions for the year ended 30 June 2006.
Units on
issue
Conversion
factor
1 July 2005
31 December 2005—Stapled Securities
were issued on 3 January 2006
30 June 2006—Stapled Securities
were issued on 3 July 2006
30 June 2006
4,300,000
(288,711)
(273,953)
3,737,336
17.0679
17.4966
Distributions
Distributions paid to holders of CARS during the fi nancial year were as follows:
CARS
Distribution payment for the period 1 January 2005 to 30 June 2005 of
7.0 per cent per annum paid on 29 July 2005
Distribution payment for the period 1 July 2005 to 31 December 2005
of 7.0 per cent per annum paid on 31 January 2006
Stapled
Securities
issued
‘000
4,928
4,793
9,721
2006
$’000
14,926
15,174
30,100
A further distribution for the period 1 January 2006 to 30 June 2006 of $13.9 million was paid on 31 July 2006.
annual report 2006
80
FINANCIALS
Directors’ report
Results
A summary of the consolidated revenue and overall result is set out below:
Revenue from continuing operations
Net Profi t/(Loss)
Signifi cant changes in the
state of affairs
With the exception of the events
mentioned in the Review of Operations
(See page 79), in the opinion of the
directors there were no signifi cant
changes in the state of affairs of the
consolidated entity that occurred during
the fi nancial year.
Matters subsequent to the
end of the fi nancial period
Transurban has exercised its
pre-emptive right to purchase an
additional 2.5 per cent equity interest
in Westlink M7 for $34.3 million. This
will increase Transurban’s holding from
45 per cent to 47.5 per cent. Transurban
and Macquarie Infrastructure Group
have pre-emptive rights over the
remaining 5 per cent held by Leighton
Holdings Limited.
With the exception of this event at the
date of this report, the directors are not
aware of any circumstances that have
arisen since 30 June 2006 that have
signifi cantly affected, or may
signifi cantly affect:
(a)
the Trust’s operations in future
fi nancial years
(b)
the results of those operations in
future fi nancial years, or
(c)
the Trust’s state of affairs in future
fi nancial years.
Likely developments
and expected results
of operations
Information on likely developments in
the operations of the consolidated entity
and the expected results of operations
have not been included in this report
because the directors believe it would
be likely to result in unreasonable
prejudice to the consolidated entity.
Environmental regulation
Westlink M7 operations are not subject to
any special environmental regulation apart
from that which would apply to any other
road or development of a similar nature
except where protection for sensitive areas
and specifi ed trees that are endangered
sites used by bats for roosting.
Insurance and
indemnifi cation of offi cers
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 offi cers of the
responsible entity act in accordance
with the Trust Constitution and the Act,
they remain fully indemnifi ed 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 indemnifi ed out of the assets of
the Trust.
Consolidated
2006
$’000
41,237
3,450
2005
$’000
26,030
(8,939)
Fees paid to and interest
held in the trust by the
responsible entity or its
associates
Fees paid to the responsible entity and
its associates out of Trust property
during the year are disclosed in Note 25
of the full fi nancial statements.
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 fi nancial year are
disclosed in Note 28 of the full fi nancial
statements.
81
annual report 2006
Transurban CARS Trust and Controlled Entities
Directors’ report
Interests in the Trust issued during the fi nancial year
CARS on issue at 1 July
CARS issued during the year
CARS converted to Transurban Stapled Securities
CARS on issue at 30 June
Ordinary units on issue at 1 July
Ordinary units issued during the year
Ordinary units on issue at 30 June
Value of assets
Value of Trust assets at 30 June
Consolidated
2006
2005
4,300,000
4,300,000
-
(562,664)
-
-
3,737,336
4,300,000
Consolidated
2006
Units
2005
Units
12
-
12
12
-
12
Consolidated
2006
$’000
2005
$’000
491,916
437,236
annual report 2006
82
FINANCIALS
Directors’ report
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
Number of CARS
Number of
Transurban Stapled
Securities
Options issued over
Transurban Stapled
Securities
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
-
-
121
-
-
-
-
-
1,142,500
70,580
31,110
51,817
68,009
-
22,394
1,873,500
-
-
-
-
-
-
-
-
Rounding of amounts
The Trust is of a kind referred to in Class
Order 98/0100, issued by the Australian
Securities and Investments Commission,
relating to the ‘rounding off’ of amounts
in the Directors’ Report. Amounts in the
Directors’ Report have been rounded off
in accordance with that Class Order to
the nearest thousand dollars, or in
certain cases, to the nearest dollar.
Auditors’ independence
declaration
A copy of the auditors’ independence
declaration as required under section
307C of the Corporations Act 2001 is set
out on page 85.
Auditor
PricewaterhouseCoopers continues
in offi ce in accordance with the
Corporations Act 2001.
83
annual report 2006
Transurban CARS Trust and Controlled Entities
Directors’ report
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
22 August 2006
annual report 2006
84
FINANCIALS
Directors’ report
Auditors’ Independence Declaration
As lead auditor for the audit of the Transurban Group for the year ended 30 June 2006,
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, other than a contravention covered by ASIC Class Order
05/910; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This statement is in respect of the Transurban Group and the entities it controlled during
the year.
Tim Goldsmith
Partner
Melbourne
22 August 2006
Liability limited by a scheme approved under Professional Standards Legislation.
85
annual report 2006
Transurban CARS Trust and Controlled Entities
Consolidated income statement for the year ended 30 June 2006
Revenue from continuing operations
Other income
Administration expenses
Finance costs
Share of net losses of associates and joint venture partnership
accounted for using the equity method
Net Profi t/(Loss ) for the Year Attributable
to the Unit-holders of the Trust
Earnings per unit for profi t/(loss) from continuing
operations attributable to the ordinary unit holders:
Basic earnings per ordinary unit
Diluted earnings per ordinary unit
Notes
5
Consolidated
2006
$’000
41,237
2,940
2005
$’000
26,030
-
(2,599)
(3,843)
(29,494)
(31,126)
(8,634)
-
3,450
(8,939)
$
$
287,500
(744,917)
287,500
(744,917)
The above consolidated income statement should be read in conjunction with the accompanying notes.
annual report 2006
86
FINANCIALS
Consolidated balance sheet as at 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-current assets
Investments accounted for using
the equity method
Held-to-maturity investments
Other fi nancial asset
Total Non-Current Assets
Total Assets
Current liabilities
Trade and other payables
Total Current Liabilities
Non-current liabilities
Borrowings
Total Non-Current Liabilities
Total Liabilities
Net liabilities
Unitholders’ funds
Accumulated losses
Total Unitholders’ Funds
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Consolidated
2006
$’000
2005
$’000
12,452
32,531
201
354
12,653
32,885
9,496
-
469,767
392,000
-
12,351
479,263
404,351
491,916
437,236
18,757
18,757
17,119
17,119
482,537
449,785
482,537
449,785
501,294
466,904
(9,378)
(29,668)
(9,378)
(29,668)
(9,378)
(29,668)
87
annual report 2006
Transurban CARS Trust and Controlled Entities
Consolidated statement of changes in equity
for the year ended 30 June 2006
Total equity at the beginning of the fi nancial year
Adjustment on adoption of AASB 132 and AASB 139:
Retained profi ts
Profi t/(loss) for the year
Total Equity at the End of the Financial Year
Attributable to Unit Holders of the Trust
Notes
3
Consolidated
2006
$’000
2005
$’000
(29,668)
(20,729)
16,840
-
3,450
(8,939)
(9,378)
(29,668)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
annual report 2006
88
FINANCIALS
Consolidated cash flow statement for the year ended 30 June 2006
Cash fl ows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Interest paid
Net Cash (Outfl ows) from Operating Activities
Cash fl ows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Loans to related parties
Net Cash (Outfl ows) from Investing Activities
Cash fl ows from fi nancing activities
Loans from related parties
Repayment of loans to related parties
Net cash infl ows from fi nancing activities
Net (decrease) in cash held
Cash at the beginning of the fi nancial year
Cash at the End of the Financial Year
Notes
6
Consolidated
2006
$’000
2005
$’000
270
(2,860)
12,528
355
(4,503)
26,051
(30,100)
(30,135)
(20,162)
(8,232)
(47,350)
-
(47,350)
47,433
-
47,433
(20,079)
32,531
12,452
-
(92)
(92)
171
(23)
148
(8,176)
40,707
32,531
The above consolidated cash fl ow statement should be read in conjunction with the accompanying notes.
89
annual report 2006
Transurban CARS Trust and Controlled Entities
Notes to the consolidated financial statements
for the year ended 30 June 2006
This concise fi nancial report relates to
the consolidated Trust consisting of
Transurban CARS Trust and the entities
it controlled at the end of, or during,
the year ended 30 June 2006.
The accounting policies adopted have
been consistently applied to all years
presented, unless otherwise stated in
Note 1 below.
to International Financial Reporting
Standards (AIFRS). AASB 1 First-Time
Adoption of Australian Equivalents to
International Financial Reporting
Standards has been applied in
preparing the full fi nancial report.
2. Presentation currency
The presentation currency used in
this concise fi nancial report is
Australian dollars.
3. Change in accounting
policy
The Trust has taken the exemption
available under AASB 1 First-Time
Adoption of Australian Equivalents
to International Financial Reporting
Standards to apply AASB 132
Financial Instruments: Disclosure
and Presentation and AASB 139
Financial Instruments: Recognition
and Measurement from 1 July 2005.
At the date of transition to these
standards at 1 July 2005, the below
adjustments were recognised:
Financial statements of Transurban
CARS Trust until 30 June 2006 had been
prepared in accordance with previous
Australian Generally Accepted
Accounting Principles (AGAAP). AGAAP
differs in certain respects from AIFRS.
When preparing Transurban CARS Trust
2006 fi nancial statements, management
has amended certain accounting,
valuation and consolidation methods
applied in the AGAAP fi nancial
statements to comply with AIFRS. With
the exception of fi nancial instruments,
the comparative fi gures in respect of
2005 were restated to refl ect these
adjustments. The Trust has taken the
exception available under AASB 1 to only
apply AASB 132 Financial Instruments:
Disclosure and Presentation and AASB
139 Financial Instruments: Recognition
and Measurement from 1 July 2005.
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 fi nancial reports.
Amounts in the concise fi nancial report
have been rounded off in accordance
with that Class Order to the nearest
thousand dollars, or in certain cases,
to the nearest dollar.
1. Adoption of Australian
Equivalents to
International Financial
Reporting Standards
The full fi nancial report on which this
concise fi nancial report is based is the
fi rst annual Transurban CARS Trust
fi nancial report to be prepared in
accordance with Australian equivalents
Financial assets at fair value through
profi t or loss
Other non-current assets
Non-current interest bearing liabilities
Adjustment to Net Assets
Accumulated losses
Adjustment to Total Equity
30 June
2005
$’000
-
12,351
449,785
(29,668)
Adjustment
$’000
16,840
(12,351)
(12,351)
16,840
16,840
16,840
1 July
2005
$’000
16,840
-
437,434
(12,828)
annual report 2006
90
FINANCIALS
Notes to the consolidated financial statements
for the year ended 30 June 2006
Financial assets at fair value
through profi t or loss
Re-classifi cation of capitalised
borrowing costs
4. Segment information
The carrying value of deferred
borrowing costs of $12,351,000 has
been re-classifi ed as a reduction in
interest bearing liabilities, rather than
a non-current assets.
The Trust’s sole business segment for
the year ending 30 June 2006 was
investing in the Westlink Motorway
Partnership. All revenues and expenses
are directly attributable to this sole
purpose. Internal fi nancial reporting is
based on this sole business segment.
Options held to acquire an additional
5 per cent interest in the Westlink M7
Project at a cost of $49 million were
recognised and recorded at fair value.
A fi nancial asset and an increase in
accumulated losses of $16,840,000
were recognised.
5. Revenue
Interest from continuing operations
6. Distributions
Consolidated
2006
$’000
2005
$’000
41,237
26,030
2006
$’000
14,926
15,174
30,100
CARS
Distribution payment for the period 1 January 2005 to 30 June 2005
of 7.0 per cent per annum paid on 29 July 2005
Distribution payment for the period 1 July 2005 to 31 December 2005
of 7.0 per cent per annum paid on 31 January 2006
The coupon payment for the half year ended 30 June 2006 of $13.9 million was paid on 31 July 2006.
7. Economic dependency
8. Events occurring after
Transurban CARS Trust is reliant on the
receipt of distributions from Transurban
WSO Trust for its ongoing viability.
Transurban CARS Trust has
$12.4 million (2005: $20.1 million) in
reserve to fund future CARS coupon
payments which is not available for
general use. The CARS coupon
payments are guaranteed by
Transurban Holding Trust (parent entity)
until the fi rst reset date 14 April 2007.
the balance date
Transurban has exercised its pre-
emptive right to purchase an additional
2.5 per cent equity interest in Westlink
M7 for $34.3 million. This will increase
Transurban’s holding from 45 per cent
to 47.5 per cent. Transurban and
Macquarie Infrastructure Group
have pre-emptive rights over the
remaining 5 per cent held by Leighton
Holdings Limited.
91
annual report 2006
Transurban CARS Trust and Controlled Entities
Directors’ declaration
The directors declare that in their opinion, the concise fi nancial report of the Trust for the year ended 30 June 2006, as set out on
pages 86 to 91, complies with Accounting Standard AASB 1039: Concise Financial Reports.
The concise fi nancial report is an extract from the full fi nancial report for the year ended 30 June 2006. The fi nancial statements
and specifi c disclosures included in the concise fi nancial report have been derived from the full fi nancial report.
The concise fi nancial report cannot be expected to provide as full an understanding of the fi nancial performance, fi nancial position
and fi nancing and investing activities of the Trust as the full fi nancial report, which is available on request.
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
22 August 2006
annual report 2006
92
FINANCIALS
Independent audit report to the members
93
annual report 2006
Transurban CARS Trust and Controlled Entities
Independent audit report to the members
annual report 2006
94
FINANCIALS
Security holder information as at 31 August 2006
Shareholder information
The security holder information set out below was applicable as at 31 August 2006.
A. Distribution of Convertible Adjusting Rate Securities (CARS)
1. The number of holders of CARS, which are preference units in Transurban CARS Trust was 5,277.
2. The voting rights are one vote per security.
3.
At 31 August 2006 the percentage of the total holdings held by or on behalf of the twenty largest holders of these
securities was 71.12 per cent.
4. The distribution of holders was as follows:
Security grouping
Number of holders
Number of CARS held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Total
5,166
85
4
16
6
5,277
876,640
151,618
26,811
531,823
2,150,444
3,737,336
There were 43 holders of less than a marketable parcel of preference units.
5. Substantial Holders as at 31 August 2006 are as follows:
%
23.45
4.06
0.72
14.23
57.54
100
Name
DKR Oasis Management Company and associate
JP Morgan Chase and Co and its affi liates
Number of CARS % of total
274,000
374,365
6.37
10.02
95
annual report 2006
Transurban CARS Trust and Controlled Entities
Security holder information as at 31 August 2006
B. Twenty largest holders of CARS
Citicorp Nominees Pty Limited
ANZ Nominees Limited
Westpac Custodian Nominees Limited
Brispot Nominees Pty Limited
J P Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees
HSBC Custody Nominees Australia Limited
Goldman Sachs Jbwere Capital Markets Ltd
National Nominees Limited
Irrewarra Investments Pty Ltd
UBS Wealth Management Australia Nominees
Brencorp No 8 Pty Limited
RBC Dexia Investor Services Australia Nominees
Brencorp No 11 Pty Limited
Cambooya Pty Limited
Fortis Clearing Nominees
Cogent Nominees Pty Limited
Elise Nominees Pty Limited
Australian Executor Trustees Limited
RBC Dexia Investor Services Australia Nominees
Total
Number of CARS held
% of issued CARS
779,753
399,972
329,857
255,562
170,029
155,227
97,500
59,252
58,571
42,500
36,583
33,278
64,997
25,927
25,335
21,791
21,153
24,282
17,047
14,222
19.56
12.01
9.57
7.79
4.46
4.15
2.61
1.59
1.57
1.24
0.97
0.87
0.82
0.69
0.68
0.59
0.57
0.54
0.44
0.40
2,632,838
71.12
annual report 2006
96
FINANCIALS
This page is intentionally left blank.
97
annual report 2006
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Enquiries and information
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:
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.
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
GPO Box 2975
Melbourne Victoria 3001
Telephone 1300 360 146 (within Australia)
Telephone +613 9415 4000 (outside Australia)
Facsimile +613 9473 2500
web.queries@computershare.com.au
www.computershare.com
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
Or write to:
Manager, Investor Relations
Transurban Group
Level 43, Rialto South Tower
525 Collins Street
Melbourne Victoria 3000
Stock Exchange listing
Stapled Securities are listed on the Australian
Stock Exchange under the name Transurban
Group and under the code ‘TCL’.
Transurban CARS Trust: 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).
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.
Change of address or name
A security holder should notify the Register
immediately, in writing, if there is any change
in his/her registered address or name.
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 Offi ce
Level 43, Rialto South Tower
525 Collins Street
Melbourne Victoria 3000
Telephone +613 9612 6999
Facsimile +613 9649 7380
www.transurban.com.au
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 Secretaries
Mark Licciardo
Paul O’Shea
Auditors
PricewaterhouseCoopers
Freshwater Place
2 Southbank Boulevard
Melbourne Victoria 3006
Telephone +613 8603 1000
Facsimile +613 8603 1999
www.transurban.com.au