annual report
2010
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www.transurban.com
Annual Report
1 Corporate Governance
Financial Statements
10 Transurban Holdings Limited and Controlled Entities
129 Transurban Holding Trust and Controlled Entities
208 Transurban International Limited and Controlled Entities
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Corporate governance statement
This statement outlines the key aspects of Transurban’s corporate governance framework and main governance practices.
Copies or summaries of certain governance documents referred to in this statement can be found in the “Corporate
Governance” section of the Transurban website. These charters, policies and procedures are regularly reviewed and
updated to ensure they continue to reflect best practice.
Throughout the year ended 30 June 2010 (the reporting period), Transurban’s governance arrangements complied with the
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.
cross-referencing the Principles and Recommendations to the relevant sections of this statement and elsewhere in the
Annual Report can be found in the “Corporate Governance” section of the Transurban website.
A checklist
1
The Board of Transurban Holdings Limited (THL), the Board of Transurban Infrastructure Management Limited (TIML), as
responsible entity of Transurban Holding Trust (THT), and the Board of Transurban International Limited (TIL) are
collectively referred to as the “Board” in this statement, unless otherwise indicated.
Corporate governance framework
1. ROLE OF THE BOARD
Relevant governance documents:
(cid:57)
Board Charter
The Board is accountable to security holders for the performance of Transurban.
The Board has a Charter that sets out its authority, responsibilities and membership, and the arrangements by which it
operates. The Charter also clearly establishes the relationship between the Board and management. The Board
reviewed and amended the Charter during the reporting period.
The primary role of the Board is to provide overall strategic guidance for Transurban and effective oversight of
management. To this end, the Board has reserved to itself the specific responsibilities listed in the Board Charter. To
assist it in discharging these responsibilities, the Board has established committees to give detailed consideration to key
issues.
The Board has delegated to the CEO, and through the CEO to other senior executives, responsibility for the day-to-day
management of Transurban. The scope of, and limitations to, these delegations are clearly documented and cover areas
such as operating expenditure, capital expenditure and investments. These delegations balance effective oversight with
appropriate empowerment and accountability of senior executives.
1
On 30 June 2010, the ASX Corporate Governance Council (CGC) released final amendments to the Principles and Recommendations
in relation to diversity, remuneration, trading policies and briefings. The changes take effect for the first financial year of listed entities
commencing on or after 1 January 2011, but an early transition to the changes is encouraged by the CGC. Transurban has already
made the transition to a number of the changes.
-38-
1 Transurban annual reporT 2010
2. STRUCTURE AND MEMBERSHIP OF THE BOARD
Relevant governance documents:
(cid:57)
Board Charter
(cid:57)
Policy and Procedure for the Nomination, Selection and Appointment of New Non-Executive Directors and the
Re-Election of Incumbent Non-Executive Directors
Board structure
The Board is structured so that its membership provides the mix of qualifications, skills and experience to enable it to
discharge its responsibilities, and so that its size facilitates effective discussion and efficient decision making.
The Board determines its size and composition, subject to the constitutions of THL and TIML and the Bye-laws of TIL.
The Board of THL and the Board of TIML have common directors and meetings are held concurrently. As at the date of
the Annual Report, this Board comprises 8 directors, with 7 non-executive directors, including the Chairman, and 1
executive director, the CEO. Subsequent to the reporting period, David Ryan resigned, and Lindsay Maxsted was
appointed, as Chairman, continuing the Board renewal process that started in 2008. Bob Officer was also appointed as a
non-executive director.
The Board of TIL meets separately. As at the date of the Annual Report, this Board currently comprises 4 directors, with 3
non-executive directors, including the Chairman, and 1 executive director, the CEO.
The skills, qualifications, experience, relevant expertise and period in office of each director during the reporting period are
set out in the Directors’ Report.
Director independence
Each director is expected to bring unfettered and independent judgment to the Board’s deliberations.
Under the Board Charter, the Board must comprise a majority of independent non-executive directors and have an
independent non-executive Chairman. The roles of the Chairman and the CEO must be exercised by separate individuals.
The Board defines an independent director as a non-executive director who is free of any business or other relationship
that could interfere with, or could reasonably be perceived to interfere with, the exercise of their unfettered and independent
judgment and ability to act in the best interests of security holders.
In assessing the independent status of a non-executive director, the Board considers the ‘relationships affecting
independent status’ set out in the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations and other facts, information and circumstances that the Board considers relevant. The test of whether
a business or other relationship is material
is assessed from the perspective of both Transurban and the director.
2
The Board assesses the independence of new directors upon appointment, and reviews the independence of all directors
annually and as appropriate. Each director is required to provide the Board with all re levant information to enable it to make
this assessment.
The Board has reviewed the positions and associations of the non-executive directors, including the Chairman, and
considers each of them to be independent except for Bob Officer. Professor Officer is not considered to be independent
as he is a nominee of a major security holder, CP2 Limited.
Lindsay Maxsted, Rodney Slater, Neil Chatfield and Jennifer Eve each hold, or previously held, positions in companies or
with firms with which Transurban has commercial relationships, as described in note 36 in the Notes to the Financial
Statements in the Annual Report. The Board has considered each case separately and has concluded that these
relationships are not material and do not interfere with the relevant director’s exercise of unfettered and independent
judgment or their ability to act in the best interests of security holders. None of Mr Maxsted, Mr Slater, Mr Chatfield nor Ms
Eve were, or are, involved in any procurement or other Board decision making regarding the companies or firms with which
they have (or have previously had) an association.
2 Transurban annual reporT 2010
-39-
2. STRUCTURE AND MEMBERSHIP OF THE BOARD (continued)
Tenure, retirement and re-election
Each non-executive director’s term of appointment is subject to the provisions of the Corporations Act, the ASX Listing
Rules, the constitutions of THL and TIML and the Bye-laws of TIL.
New directors (appointed by the Board during the year to fill a casual vacancy or as an addition to the Board) are required
to seek election as a director at the annual general meeting (AGM) following their appointment, and then re-election on a
rotational basis with the other directors.
No director of THL or TIML (other than the CEO) may hold office without re-election past the third AGM following their
appointment or 3 years, whichever is longer. Each director of TIL (other than the CEO and the directors appointed by the
Class A and B Shareholders) must retire from office or seek re-election at each AGM.
Board support for directors retiring and seeking re-election is not automatic. Prior to each AGM, the Board determines
whether it will recommend to security holders that they vote in favour of the re-election of each non-executive director
seeking re-election, having regard to any matters the Board considers relevant, including the director’s performan ce
evaluation and his or her tenure.
Nomination and appointment of new directors and Board gender diversity
The Board has established a policy and procedure for the nomination, selection and appointment of new non-executive
directors. A regular assessment of the range of qualifications, skills, experience, and diversity of gender, age, experience,
relationships and background on the Board is undertaken to enable the identification of particular competencies and
perspectives that will best increase the Board’s effectiveness. Where a need is identified or arises, the Nomination
Committee commences a search process for potential appointees, with the assistance of external consultants as
necessary.
The Nomination Committee undertakes an assessment of short listed potential appointees against a range of criteria. The
Chairman and other directors also meet in person with potential appointees. The Nomination Committee will then
recommend the most appropriate candidate(s) for consideration by the Board as a whole.
The Board recognises that diversity is a competitive advantage bringing real value, adding to the collective skills and
experience of the Board and allowing Board renewal with changing needs. The Nomination Co mmittee is responsible for
making recommendations to the Board on strategies for addressing Board gender diversity.
Induction of new directors
New non-executive directors are issued with a formal letter of appointment that sets out the key terms and conditions of
appointment, including the director’s duties, rights and responsibilities, the time commitment envisaged, and the Board’s
expectations regarding involvement with committee work.
An induction program is in place to allow new non-executive directors to participate fully and actively in Board decision
making at the earliest opportunity. The program is designed to enable new directors to gain an understanding of
Transurban’s financial, strategic, operational and risk management position, its culture and values, the role and
responsibilities of senior executives, and director interaction with each other, senior executives and other stakeholders.
Knowledge, skills and experience
Directors are expected to maintain the knowledge and skills required to discharge their obligations to Transurban. The
Board is provided with papers, presentations and briefings on Transurban’s operations, and is briefed on relevant changes
in the legislative, regulatory or industry framework. Directors are expected to undertake any necessary continuing
professional education and training to update and enhance their knowledge and skills.
Board access to information and independent professional advice
Directors have unrestricted access to management. Management is expected to provide regular detailed financial and
operational reports in a form and timeframe, and of a quality, that enable the Board to discharge its duties effectively.
Directors may request additional information where necessary to make informed decisions.
The Board Charter sets out the circumstances and procedures pursuant to which a director may seek independent
professional advice at Transurban’s expense. These procedures require prior consultation with, and the consent of, the
Chairman and, under normal circumstances, the provision of a copy of the advice to the Board.
2
While the Board believes it is inappropriate to determine materiality solely on the basis of arbitrary dollar, profit or turnover percentage
tests, when assessing materiality, thresholds suggested in accounting standards are used and interests equal to more than 5% of revenue,
equity or profit are potentially material. In certain circumstances, the Board considers that interests of a lesser value might also be
relevant.
3 Transurban annual reporT 2010
-40-
2. STRUCTURE AND MEMBERSHIP OF THE BOARD (continued)
Conflicts of interest
Directors are required to take all reasonable steps to avoid actual, potential or perceived conflicts of interests.
Under the Corporations Act, the constitutions of THL and TIML and the Board Charter, directors are required to disclose
any conflicts and abstain from participating in any discussion or voting on matters in which they have a material personal
interest. A director who discloses that they may have a conflict must follow the procedures developed by the Board to deal
with such circumstances.
3. OPERATION OF THE BOARD
Relevant governance documents:
(cid:57)
Board Charter
(cid:57)
Audit and Risk Committee Charter
(cid:57)
Nomination Committee Charter
(cid:57)
Remuneration Committee Charter
Board committees
As at the date of the Annual Report, the Board has three standing committees of directors: the Audit and Risk Committee,
the Nomination Committee and the Remuneration Committee.
Each committee operates under a charter, approved by the Board, which sets out the authority, membership and
responsibilities of the committee, together with any relevant administrative arrangements and any other matters considered
appropriate by the Board.
The role of committees is to advise and make recommendations to the Board. The committees do not have decision
making authority except as expressly stated in the relevant charter or as authorised by the Board.
The Board periodically reviews the appropriateness of the existing committee structure, as well as the membership and the
charter of each committee. A review was undertaken during the reporting period, which resulted in amendments to both
the Nomination Committee Charter and the Remuneration Committee Charter. Subsequent to the reporting period, the
Board determined to disband the Sustainability Committee on the basis that sustainability is now embedded in
Transurban’s business and business practices and is to be overseen by the Board.
Audit and Risk Committee
Nomination Committee
Remuneration Committee*
Sustainability Committee1
•
Lindsay Maxsted (Chair);
•
Geoff Cosgriff (Chair);
•
David Ryan (Chair);
•
Neil Chatfield;
•
Jeremy Davis;
•
Bob Edgar;
•
Rodney Slater; and
•
Geoff Cosgriff.
•
Lindsay Maxsted; and
•
Lindsay Maxsted;
•
Jeremy Davis.
•
Bob Edgar; and
•
Rodney Slater.
✓
✓
✓
Only non-executive
directors, all of whom are
independent.
At least 3 members.
An independent Chair.
✓
✓
✓
Only non-executive
directors, all of whom are
independent.
At least 3 members.
An independent Chair.
✓
✓
✓
Only non-executive
directors, all of whom
are independent.
At least 3 members.
An independent Chair.
✓
✓
✓
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•
* Neil Chatfield (Chair);
*
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Lindsay Maxsted; and
Jeremy Davis;
•
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o
•
Bob Edgar.
Each member is financially
literate and has relevant
qualifications/experience.
Only non-executive
directors, all of whom
are independent.
At least 3 members.
An independent Chair
who is not also Chair
of the Board.
•
Integrity of financial
reporting;
•
Size and composition of
the Board and new Board
appointments;
y
t
i
l
i
/
s
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o
f
•
Effectiveness of systems
of financial risk management
and internal control;
i
•
•
f
o
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r
A
b
s
n
o
p
s
e
r
Internal and external audit
functions;
Board gender diversity and
diversity in general;
Setting target measures
1 The Sustainability Committee is no longer a separate committee of the Board.
against which progress
* The composition of the Remuneration Committee complies with the CGC’s recent amendments to the Principles and Recommendations
towards strategic objectives
and the ASX’s new Listing Rule relating to remuneration committees.
is assessed;
** David Ryan resigned as Chairman on 12 August 2010. Mr Ryan was Chair of the Nomination and Sustainability Committees and a
member of the Audit and Risk and Remuneration Committees until his resignation.
Monitoring progress
and identifying critical
sustainability issues
The number of meetings held by each committee during the reporting period and each member’s attendance at those
for decision.
meetings are set out in the Directors’ Report.
Effectiveness of the risk
management framework
and supporting risk
management systems.
Remuneration strategies,
practices and disclosures
generally.
Board and senior executive
succession planning.
Board, committee and
director performance;
•
•
•
•
•
•
•
Remuneration of directors;
•
Performance and
remuneration of, and
incentives for, the CEO and
other senior executives;
•
Development of
Transurban’s strategic
vision for sustainability;
1 The Sustainability Committee is no longer a separate committee of the Board.
* The composition of the Remuneration Committee complies with the CGC’s recent amendments to the Principles and Recommendations
and the ASX’s new Listing Rule relating to remuneration committees.
** David Ryan resigned as Chairman on 12 August 2010. Mr Ryan was Chair of the Nomination and Sustainability Committees and a
member of the Audit and Risk and Remuneration Committees until his resignation.
The number of meetings held by each committee during the reporting period and each member’s attendance at those
meetings are set out in the Directors’ Report.
-41-
4 Transurban annual reporT 2010
3. OPERATION OF THE BOARD (continued)
Performance of the Board
The Board acknowledges the importance of the regular review of its own performance, as well as the performance of its
committees and individual directors. The Board conducts a formal performance evaluation each year and has an external
consultant facilitate the process every second year. This arrangement is supplemented by self-assessments undertaken
by committees, the results of which are reported to the Board.
A Board performance review was conducted during the reporting period. The review involved a detailed self-assessment
by each director of Board and committee performance. Directors were specifically asked to comment on the composition
and diversity of the current Board. The results of the self-assessment were considered by the Board as a whole. The
process was then supplemented by one-on-one discussions between each director and the Chairman, which provided an
opportunity for the consideration of individual contributions and issues particular to a director. The actions agreed by the
Board in response to the performance review have been documented and the completion of these items is monitored by
the Board.
As noted in section 4 below, a diversity policy is in development that will include measurable objectives in relation to gender
diversity. Diversity objectives at all levels will be a measure against which performance of the Board is reviewed going
forward. The Board recognises that increasing Board accountability for diversity objectives is an important element in
delivering improvements in diversity on the Board and at all levels of the organisation.
During the reporting period, the Audit and Risk Committee also undertook a self-assessment by reference to the objectives
and responsibilities set out in its charter. The results of the self-assessment were considered by the Audit and Risk
Committee and actions were agreed in response to specific matters raised by committee members.
Performance of senior executives
Each year the Board sets key performance indicators (KPIs) for the CEO, and approves KPIs set for other senior
executives, against which their performance is measured. KPIs relate to both the performance of Transurban and the
performance of the executive individually. A ‘shared’ executive team KPI is may also be set. The performance of the
CEO is reviewed by the Board. The CEO reviews the performance of each senior executive and reports to the Board
through the Remuneration Committee on the outcome of these reviews. The outcomes directly impact each senior
executive’s short term incentive.
Performance reviews for the CEO and other senior executives for the year ended 30 June 2009 were conducted during the
reporting period. Detailed information regarding these reviews, and the reward structure and remuneration outcomes for
senior executives during the reporting period, can be found in the Remuneration Report within the Directors' Report.
Performance reviews for the year ended 30 June 2010 were conducted in July 2010.
Remuneration of directors and senior executives
The remuneration of non-executive directors consists entirely of directors’ fees and committee fees. Non-executive
directors do not receive any variable remuneration or other performance related incentives. In September 2005, the Board
resolved to discontinue previously provided retirement benefits for non-executive directors. Accrued “frozen” retirement
benefits plus interest (at the statutory fringe benefits rate) will be paid to Geoff Cosgriff and Jeremy Davis upon their
retirement. No other current directors are entitled to any accrued retirement benefits.
Further details of the remuneration paid to each non-executive director during the reporting period are set out in the
Remuneration Report within the Directors' Report.
The remuneration of the CEO and other senior executives comprises fixed remuneration, short term cash incentives and
long term equity based incentives. Transurban’s remuneration strategy and framework, and the remuneration package
and outcomes for the CEO and other senior executives, is described in detail in the Remuneration Report within the
Directors' Report.
5 Transurban annual reporT 2010
-42-
4. ETHICAL CONDUCT AND RESPONSIBLE DECISION-MAKING
Relevant governance documents:
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
How We Work @ TU
Whistleblower Policy
Fraud Policy
Dealing in Securities Policy
Sustainability Report
Conduct and ethics
Transurban revised its code of conduct during the reporting period. The new code of conduct, called “How We Work @
TU”, sets the standards for how all of Transurban’s employees, consultants and contractors should act to ensure that
Transurban’s organisational values (honesty, integrity, humility and accountability) are upheld.
All employees are expected to align their actions with the code whenever they are representing Transurban or undertaking
work on Transurban’s behalf. The code refers employees to relevant Transurban policies for further information and
guidance. It also encourages employees who become aware of unethical behaviours to report these to senior
management.
A copy of How We Work @ TU is provided to new employees and is discussed as part of their induction training. New
employees are also required to complete online training in relation to the code.
Whistleblower protection
In keeping with the spirit of How We Work @ TU, Transurban has a Whistleblower Policy to encourage directors, senior
executives, employees, contractors and suppliers who have witnessed, or know about, any misconduct to report it without
fear of reprisal. The policy sets out how Transurban will respond to, and investigate, reports of misconduct, and outlines
the protections available to those who make a whistleblower report in good faith.
Transurban also has a separate Fraud Policy that sets out the procedures for the investigation of reports of fraudulent or
corrupt conduct that are made other than under the Whistleblower Policy.
Dealing in securities
Transurban has a Dealing in Securities Policy that establishes a procedure for dealings by directors, senior executives,
employees, contractors and their related parties in Transurban securities, and in securities of other entities with whom
Transurban may have business dealings.
The policy prohibits directors and employees from dealing in securities at any time if they are in possession of
price-sensitive information. Dealing is also not permitted during designated “Closed Periods” except with prior approval in
circumstances of financial hardship. Directors and employees may generally deal in securities during “Open Periods” if
prior approval is obtained in accordance with procedure set out in the policy. For the purposes of the policy, dealing
includes hedging.
The policy also prohibits dealing in securities on a short-term basis, except in circumstances of financial hardship.
Employees who have rights to securities under a long term incentive plan may not hedge against those rights until they
have vested. Directors and employees are also prohibited from entering into margin lending arrangements using
Transurban securities as security.
Diversity
Transurban is currently developing a diversity policy appropriate for Transurban’s circumstances. For the purposes of this
policy, diversity will include gender, age, ethnicity and cultural background. The policy will require the Board to establish
measurable objectives in relation to gender diversity, and the Board will report on progress towards the achievement of
those objectives in the 2011 Annual Report.
Sustainability
The Board is committed to ensuring that all Transurban operations work to sustainable business practices. Further
information on Transurban’s approach to sustainability will be set out in Transurban’s Sustainability Report which will be
published in October 2010.
6 Transurban annual reporT 2010
-43-
5. INTEGRITY IN FINANCIAL REPORTING
Relevant governance documents:
(cid:57)
(cid:57)
Audit and Risk Committee Charter
External Auditor Independence Policy
Role of the Audit and Risk Committee
The Audit and Risk Committee assists the Board in overseeing the integrity of financial reporting, the effectiveness of
systems of financial risk management and internal control, and the internal and external audit functions.
The CEO, the CFO, the internal auditor and the external auditor must attend committee meetings if requested. Other
members of management and advisers may also be invited to attend meetings.
The Audit and Risk Committee has unrestricted access to management and the auditors, and rights to seek explanations
and additional information. The committee meets on a regular basis with the internal auditor, and separately with the
external auditor, without management present. The chair also meets with the internal and external auditor regularly to
receive updates on their work.
Independence of the external auditor
Transurban’s external auditor is PricewaterhouseCoopers. The effectiveness, performance and independence of the
external auditor is reviewed by the Audit and Risk Committee. If it becomes necessary to replace the external auditor for
performance or independence reasons, the committee will formalise a procedure and policy for the selection and
appointment of a new external auditor.
The Corporations Act requires the external auditor to make an annual independence declaration, addressed to the Board,
declaring that the auditor has maintained its independence in accordance with the Corporations Act and the rules of
professional accounting bodies. PricewaterhouseCoopers has provided an independence declaration to the Board for the
reporting period. The declaration forms part of the Directors’ Report.
John Yeoman is the lead audit engagement partner of PricewaterhouseCoopers in relation to the audit of Transurban. He
was appointed on 1 July 2007 and is due to be rotated off as lead audit partner in 2012.
Restrictions on the provision of non-audit services by the external auditor
Transurban has implemented policies and procedures to monitor the independence of the external auditor. The External
Auditor Independence Policy regulates the provision of non-audit services by the external auditor. Under the policy, the
auditor is prohibited from providing certain non-audit services, and may only provide a permissible non-audit service where
there is a compelling reason for the auditor to do so. The provision of permissible non-audit services must be
pre-approved by either the Audit and Risk Committee, the Chair of that committee, or the CFO (where the proposed fee for
the service does not exceed $5,000). The CFO provides a verbal report at each Audit and Risk Committee meeting
describing any non-audit services pre-approved by the CFO or the Chair since the last meeting.
Details of the fees paid to PricewaterhouseCoopers during the reporting period, including a breakdown of fees paid for
non-audit services, are set out in the Directors’ Report. The Board has considered the nature of the non -audit services
provided by PricewaterhouseCoopers during the reporting period and has determined that the services provided, and the
amount paid for those services, are compatible with the general standard of independence for auditors imposed by the
Corporations Act and that the auditor’s independence has not been compromised.
Attendance of the external auditor at annual general meeting
The lead audit engagement partner of PricewaterhouseCoopers attends, and is available to answer security holder
questions about the conduct of the audit and the preparation and content of the auditor’s report at Transurban’s AGM.
7 Transurban annual reporT 2010
-44-
6. CONTINUOUS DISCLOSURE
Relevant governance documents:
(cid:57)
Continuous Disclosure Policy and Procedure
Transurban has a Continuous Disclosure Policy and Procedure that establishes a best practice procedure for compliance
with its continuous disclosure obligations, provides guidance for the identification of material information and requires the
reporting of such information to the Company Secretary for review. The policy also ensures that Transurban and its
personnel are aware of the penalties for a contravention of Transurban’s continuous disclosure obligations.
The Company Secretary has primary responsibility for the effective operation of the policy and for all communications with
the ASX in relation to continuous disclosure issues. Under the policy, personnel must immediately notify the Company
Secretary as soon as they become aware of information that should be considered for release to the ASX. The Company
Secretary reviews that information, determines (after appropriate consultation) whether disclosure is required and, if so,
co-ordinates the actual form of the disclosure, its approval and prompt release. All ASX releases are required to be
cleared by either the Board (or a Board sub-committee) or the CEO (or in the CEO’s absence, the CFO or a designated
director).
All information disclosed to the ASX is promptly posted on the Transurban website. All material used in presentations to
investors and analysts is released to the ASX immediately prior to the making of those presentations.
The Board considers potential disclosure issues at each of its meetings.
7. COMMUNICATIONS WITH SECURITY HOLDERS
Relevant governance documents:
(cid:57)
Security Holder Communications Policy
Transurban places considerable importance on effective communication with its security holders to ensure they are kept up
to date with Transurban’s latest news and information. The Security Holder Communication Policy outlines the range of
ways Transurban provides information to its security holders and other stakeholders. These include the Transurban
website, meetings and briefings, written materials and email update bulletins. Security holders are encouraged to elect to
receive information in electronic format in line with Transurban’s commitment to sustainability.
Transurban uses its website to complement the official release of information to the ASX. All ASX announcements and
related information, such as information provided to analysts or the media during briefings or presentations, are promptly
posted on the website. The annual and half year results presentations, media releases and other communications
material are also published on the website.
Annual general meeting
Transurban regards its AGM as an important opportunity to communicate with security holders. It is also a major forum for
security holders to ask questions about the performance of Transurban, and to provide feedback to Transurban about
information they have received.
Transurban welcomes and encourages security holder attendance and participation at AGMs. The full text of notices of
meeting and explanatory material is published on the Transurban website. AGMs are also webcast to accommodate
security holders who are unable to attend in person.
8. RISK MANAGEMENT
Relevant governance documents:
(cid:57)
(cid:57)
Audit and Risk Committee Charter
Risk Management Policy
Risk oversight and management
Transurban views effective risk management as central to achieving its objectives.
The Board is responsible for reviewing Transurban’s policies on risk oversight and management and satisfying itself that
management has developed and implemented a sound system of risk management and internal control.
Transurban has a Risk Management Policy that sets out its commitment to risk management and identifies the associated
roles and responsibilities of the Board, management and employees in the oversight and management of risk. The policy
is supplemented by an enterprise wide risk management framework (compliant with the Australian / New Zealand standard
(AS/NZ 4360:2004) and the international standard (ISO 31000:2009)) that seeks to embed risk management processes
into Transurban’s business activities and functions.
8 Transurban annual reporT 2010
-45-
8. RISK MANAGEMENT (continued)
Within the framework, each business unit is required to formally consider its risk environment and create a register of
identified risks, a risk treatment plan and a risk management plan which are stored in a risk management information
system. Progress in the management of risks is regularly reported to executive management. Executive management
has also established a strategic risk register which it reviews on a quarterly basis.
The Audit and Risk Committee assists the Board in overseeing Transurban’s risk policy and the effectiveness of its risk
management framework and supporting systems. At each meeting, the committee considers the ‘Key Risks Register’.
This register includes material risks (those that are “A” rated by the business), strategic risks and certain other risks
identified by the committee as being of sufficient concern to merit regular consideration. Management reports to the
committee in relation to the effectiveness of the management of risks set out in the Key Risks Register. Detailed reports
are provided to the committee if any of these risks are re-rated or if there are any other significant developments in relation
to those risks.
Financial reporting - CEO and CFO certifications
The Board has received certifications from the CEO and the CFO in connection with the financial statements for the
Transurban Group and the individual entities comprising the Transurban Group for the year ended 30 June 2010. The
certifications state that the declaration provided in accordance with section 295A of the Corporations Act as to the integrity
of the financial statements is founded on a sound system of risk management and internal control and that system is
operating effectively in all material respects in relation to financial reporting risks.
9 Transurban annual reporT 2010
-46-
Transurban Holdings Limited and
Controlled Entities ABN 86 098 143 429
(including Transurban International Limited and
Transurban Holding Trust)
Annual financial report
for the year ended 30 June 2010
10 Transurban annual reporT 2010
Transurban Holdings Limited ABN 86 098 143 429
Annual financial report - 30 June 2010
Directors' report
Auditor's Independence Declaration
Financial report
Directors' declaration
Independent auditor's report to the members
Security holder information
Page
12
48
49
124
125
127
11 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
Directors' report
The directors of Transurban Holdings Limited, Transurban International Limited and Transurban Infrastructure
Management Limited, as Responsible Entity for Transurban Holding Trust, present their report on the Transurban Group
for the year ended 30 June 2010.
Group accounts
The Transurban Group financial statements have been prepared as an aggregation of the financial statements of
Transurban Holdings Limited and controlled entities (THL), Transurban International Limited and controlled entities (TIL)
and Transurban Holding Trust and controlled entities (THT) as if all entities operate together. They are therefore treated
as a combined entity (and referred to as "the Group"), notwithstanding that none of the entities controls any of the others.
The financial statements have been aggregated in recognition of the fact that the securities issued by THL, TIL and THT
are stapled together and comprise one share in THL, one share in TIL and one unit in THT (Stapled Security). None of the
components of the Stapled Security can be traded separately.
Directors
With the exception of the changes noted below, the following persons were directors of THL, TIML and TIL during the
whole of the financial year and up to the date of this report.
THL
TIML
TIL
Non-executive Directors
David J Ryan AO
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis AM
Robert J Edgar (Appointed 21 July 2009)
Lindsay P Maxsted
Rodney E Slater
Jennifer S Eve
James M Keyes
Executive Director
Christopher J Lynch
Results
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
The consolidated net profit for the year for the Transurban Group was $59,605,000 (2009: loss of $16,134,000). The net
profit attributable to ordinary equity holders of the Transurban Group for the year was $59,418,000 (2009: loss of
$24,575,000).
Principal activities
The principal activities of the Group during the financial year were the development, operation and maintenance of toll
roads.
-12-
12 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Distributions
Distributions paid to the ordinary equity holders of the Group during the financial year were as follows:
Distributions proposed
Final distribution payable and recognised as a liability: 12 cents (2009: 11.0 cents)
per fully paid Stapled Security payable 27 August 2010
Distributions paid during the year
Final distribution for 2009 financial year of 11.0 cents (2008: 29.0 cents) per fully
paid Stapled Security paid 28 August 2009
Interim distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully
paid Stapled Security paid 26 February 2010
Total distributions paid
Distributions paid in cash or satisfied by the issue of Stapled Securities under the
distribution reinvestment plan during the years ended 30 June 2010 and 30 June
2009
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities
Funds available (from)/for future distribution reinvestment plans
30 June
2010
$'000
30 June
2009
$'000
169,760
169,760
141,095
141,095
141,095
319,076
154,806
295,901
140,041
459,117
230,451
65
65,381
4
295,901
172,161
551
286,418
(13)
459,117
Review of operations
Transurban's net profit for the year ended 30 June 2010 was $59.6 million. Despite the cessation of the M4 concession,
toll revenue increased by 0.9 per cent to $684.4 million, reflecting traffic growth across all Australian assets. Excluding the
M4 in both the current and prior corresponding period, toll revenue increased 7.3 per cent to $613.6 million. Management
has continued to focus on cost control which has also contributed to the strong result.
Operating performance of Transurban’s portfolio of assets
CityLink (Melbourne)
CityLink toll revenue for the year ended 30 June 2010 increased 9.1 per cent to $389.9 million, with average
daily transactions increasing by 4.0 per cent.
CityLink traffic volumes began to return to pre-construction levels in the second half of the year ended 30 June
2010, as construction works were completed on Southern Link and the additional outbound lane from the
Burnley Tunnel to Toorak Road was opened in December 2009.
Upgrade works continued throughout the year on the government owned West Gate Freeway and West Gate
Bridge, and adjacent roads. These are expected to be completed in the second half of the year ended 30 June
2011.
CityLink’s new Traffic Management System has commenced operation, enhancing emergency response
capabilities and allowing for greater management of traffic flows on Southern Link, the Monash Freeway and the
West Gate Freeway.
Hills M2 (Sydney)
Hills M2 toll revenue for the year ended 30 June 2010 increased 13.3 per cent to $141.5 million. Average daily
trips increased 1.8 per cent.
The increase in toll revenue was largely driven by a 12.5 per cent increase in car tolls in July 2009 and the
continued implementation of a two year program to increase truck tolls from 2.5 times car tolls to 3.0 times car
tolls.
-13-
13 Transurban annual reporT 2010
Review of operations (continued)
During the year, Transurban reached an in-principle agreement with the NSW State Government for a major
upgrade of the Hills M2 Motorway. Refer to commentary below on other business development activities for an
update on this project.
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
M1 Eastern Distributor (Sydney) – Airport Motorway Group
Toll revenue for the year ended 30 June 2010 for the M1 Eastern Distributor increased 4.4 per cent to $82.2
million.
M4 (Sydney) – Statewide Roads Group
The concession to toll the M4 ended on 15 February 2010.
Toll revenue for the period 1 July 2009 to 15 February 2010 was $70.8 million.
Following the cessation of the tolling concession, Transurban retains a right to operate and maintain the service
centre located on the M4 Motorway.
M5 (Sydney) - Interlink Roads Pty Limited
M5 toll revenue for the year ended 30 June 2010 increased 3.6 per cent to $162.5 million. Average Daily Trips
(ADT) increased 3.4 per cent compared to the prior corresponding period.
During the year, Transurban and Interlink Roads have worked together to reach an Initial Agreement with the
NSW Roads and Traffic Authority to develop a concept design and funding plan to widen the M5. Refer to
commentary below on other business development activities for detail on the M5 widening project.
Westlink M7 (Sydney)
Westlink M7 toll revenue for the year ended 30 June 2010 increased 9.5 per cent to $175.5 million. Strong
growth in Average Daily Trips of 6.7 per cent contributed to the increase, as well as the quarterly toll escalation.
Growth in truck volumes was strong on Westlink M7 during the year, increasing by 6.9 per cent on the prior
corresponding period. Westlink M7 has the higher truck to car ratio of all Transurban assets of 14.9 per cent.
Pocahontas 895 (Virginia USA)
Toll revenue for the year ended 30 June 2010 for Pocahontas 895 decreased 0.7 per cent to US$13.8m. The
conditions in the Richmond economy drove under performance in traffic and revenue in the current year.
Construction on the Richmond Airport Connector continued during the year ended 30 June 2010 and is
expected to be completed in 2011. Pocahontas 895 also commenced the installation process for a new
Electronic Toll System to improve revenue capture and recovery.
Cost control
In the year ended 30 June 2008, Transurban announced a cost reduction program targeting the removal of
corporate and operating costs from the ongoing cost structure of the business.
In the year ended 30 June 2010, further savings were achieved across all areas of the business. Transurban
continues to monitor costs with a view to increasing the cash available for distribution to security holders.
Other corporate activities
Capital raising
On 10 May 2010, the Transurban Group announced that it would undertake a capital raising comprising a fully
underwritten accelerated renounceable 1 for 11 entitlement offer to raise $542.3million at an offer price of $4.60
per security.
The capital raising was undertaken to fund the equity component of Transurban’s acquisition of the Lane Cove
Tunnel (see Business Development activities below for further details of the acquisition) and took into account
Transurban’s broader capital funding requirements for growth projects.
The capital raising was successfully completed on 10 June 2010.
-14-
14 Transurban annual reporT 2010
Review of operations (continued)
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Refinancing activities
Transurban has continued to have success in refinancing activities in the year ended 30 June 2010.
July 2009
Refinanced $515 million of non-recourse project debt on the M1 Eastern Distributor
December 2009
In conjunction with Interlink Roads Pty Limited, refinanced $500 million of non-recourse
project debt on the M5 Motorway, as well as an additional $23 million of new debt.
March 2010
Refinanced $150 million of domestic medium term notes, with an additional $100 million of
bonds also issued.
April 2010
Refinanced $130 million of bank debt, plus an additional $35 million
May 2010
Refinanced $65 million of bank debt
Business development activities
Acquisition of Lane Cove Tunnel (Sydney)
On 10 May 2010 Transurban announced that it had reached agreement to acquire the assets and motorway
concession deed connected with the Lane Cove Tunnel in Sydney for $630.5million.
The 3.6 kilometre Lane Cove Tunnel is a key link on the Sydney orbital network that sits adjacent to the Hills
M2. The Lane Cove Tunnel acquisition expands Transurban’s footprint on the Sydney orbital network and
increases exposure to the North West Sydney corridor.
Transurban took control of theTunnel on 10 August 2010. From 10 May 2010 to the date of acquisition,
Transurban has worked to maximise the ‘Day 1’ EBITDA margin on the Lane Cove Tunnel, primarily by
eliminating costs.
DRIVe - Capital Beltway (Virginia USA)
Construction on the Capital Beltway (I-495) High Occupancy Toll (HOT) lane project is now over 40 per cent
complete. The project remains on target for completion in late 2012, with first tolls expected in 2013.
The business case behind the Capital Beltway project remains strong with the corridor being one of the three
most heavily congested roads in the US and economic conditions in Fairfax County remaining strong through
the US recession.
Other elements of the Capital Beltway project have also progressed well during the year with construction on
the HOT Operations Centre commencing as well as development of the Tolling and Traffic Management
System.
M1 CityLink Upgrade
The Monash Freeway upgrade was completed in December 2009 enabling the opening of the new fourth
outbound lane on the Southern Link section of CityLink at that time. Consistent strong traffic growth through the
corridor has been observed since the opening.
Works have continued through the year on strengthening elevated areas of Southern Link inbound in order to
allow the opening of the fourth inbound lane. Through the strengthening, the lane has progressively opened and
strengthening works to allow the remainder of the lane to open is expected to be completed in September 2010.
Additional works will continue on strengthening Southern Link throughout 2011.
Government works are also continuing on the West Gate Freeway and West Gate Bridge. Following completion
of the West Gate Freeway works, a total of three lanes will enter Burnley Tunnel from the West Gate Freeway
where there is currently only two.
A seven per cent uplift in CityLink traffic is expected within five years of completion of the broader corridor
upgrade project. This uplift is relative to the estimated traffic levels if no upgrade works on the road had been
undertaken. The projected uplift has started to be observed in the six months ended 30 June 2010.
Hills M2 upgrade
In October 2009 Transurban achieved in-principle agreement with the NSW Government on a major project to
upgrade the Hills M2. As part of the in-principle agreement, all tolls will increase by approximately 8% at
construction completion and the concession, which currently expires in 2042, will be extended 4 years. Financial
close is expected in the six months ended 31 December 2010 with construction to commence thereafter.
At 30 June 2010, the Environmental Assessment had been completed and public comment received.
-15-
15 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Review of operations (continued)
M5 Motorway widening
In December 2009 the NSW RTA signed an initial agreement with Interlink Roads to develop a concept design
and funding plan to widen the M5 Motorway. The project involves widening the M5 Motorway by one lane in
each direction.
Under the terms of the Agreement, Interlink’s project development costs are fully underwritten by the RTA,
subject to certain conditions, in the event the project does not proceed.
Transurban and Interlink have been working with the RTA since the initial agreement to finalise project scope
and timing. Achievement of financial close on the M5 widening is expected following agreement of the M2
Upgrade.
Significant changes in the state of affairs
On 10 May 2010, Transurban announced that it had reached agreement to acquire the assets and motorway concession
deed connected with the Lane Cove Tunnel in Sydney for $630.5 million.
On 15 February 2010, the concession to toll the M4 Motorway in Sydney ended. Transurban retains the right to operate
and maintain the service centre located on the M4 Motorway.
Matters subsequent to the end of the financial year
Subsequent to the end of the financial year, the Group has completed the acquisition of the assets and motorway
concession deed connected with the Lane Cove Tunnel in Sydney. The Group took control of the assets and concession
deed on 10 August 2010. The acquisition was funded through cash on hand from a capital raising in May 2010 and
external bank debt.
Likely developments and expected results of operations
Likely developments in the operations of the Group and the expected results of operations have not been included in
these financial statements because the directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain applicable
laws in the USA. The Group maintains a comprehensive environmental management plan to monitor the performance of
its motorways, and any external parties responsible for operating any of the Group’s motorways, and takes remedial steps
where necessary.
There were no significant breaches reported during the financial year on the Group’s controlled assets.
Information on directors
David J Ryan AO, BBus, FCPA, FAICD.
Chairman & Independent non-executive director
Term of office
Director since 29 April 2003. Chairman since 28 February 2007.
David has a background in commercial banking, investment banking and operational business management.
He has held senior executive management positions in investment banking and industry, as well as being the
Chairman or a non-executive director of a number of listed public companies.
David is a non-executive director of Lend Lease Corporation Limited and non-executive Chairman of Tooth &
Co Limited and ABC Learning Centres Limited (administrators appointed) (receivers and managers appointed).
David holds interests in 66,486 Stapled Securities.
Transurban Board Committee membership
Chairman of each of the Nomination and Sustainability Committees and a member of each of the Audit and
Risk and Remuneration Committees.
-16-
16 Transurban annual reporT 2010
Information on directors (continued)
Christopher J Lynch B Comm, MBA, FCPA.
Chief Executive Officer
Term of office
Director since 18 February 2008. CEO since April 2008.
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Chris came to Transurban from one of the world’s largest resources and mining companies, BHP Billiton. He
held a series of senior appointments there, including 5 years as CFO. His last position at BHP Billiton was
Executive Director and Group President - Carbon Steel Materials. Prior to his time at BHP Billiton the bulk of
Chris’ career was with Alcoa Inc where his roles included Vice President and CIO (1999-2000), CFO Europe
(1997-1999), and Managing Director of KAAL Australia Limited (1996-1997).
Chris has experience in senior leadership roles in global corporations operating across multiple markets and the
development and operation of major projects with large up-front capital requirements.
Chris is also a Commissioner of the Australian Football League, and a former director of BHP Billiton Limited
(January 2006 – June 2007), BHP Billiton Plc (January 2006 – June 2007), Samancor Limited (January 2006 –
June 2007), and Samarco Limited (January 2006 – June 2007).
Chris holds interests in 254,966 stapled securities and 1,100,932 Performance Awards.
Neil G Chatfield M.Bus, FCPA, FAICD.
Independent non-executive director.
Term of office
Director since 18 February 2009.
Neil is an established executive and non-executive director with experience across a range of industries. He is
currently the independent Chairman of Virgin Blue Holdings Limited and a non-executive director of Seek
Limited, Whitehaven Coal Limited, and Grange Resources Limited.
Neil was most recently an Executive Director and the CFO of Toll Holdings Limited, Australia’s largest transport
and logistics company, a position he held for over 10 years.
Neil holds interests in 20,910 stapled securities.
Transurban Board Committee membership
Member of each of the Audit and Risk and Nomination Committees.
Geoffrey O Cosgriff BAppSc, Company Director Diploma, FIE(Aust), FAICD.
Independent non-executive director.
Term of office
Director since 19 December 2000.
Geoff has extensive experience in the information technology industry and was the Managing Director of MITS
Limited for 10 years. He has also held executive management roles with Melbourne and Metropolitan Board of
Works, Melbourne Water Corporation and Logica Australia Pty Ltd. He is a Council Member for Leadership
Victoria and is actively engaged in a number of executive coaching and mentoring assignments.
He is a non-executive director of UXC Limited and a director of Infocos Pty Limited. He was formerly a director
of Logica Australia Pty Ltd (until June 2008).
Geoff holds interests in 144,423 stapled securities.
Transurban Board Committee membership
Chairman of the Remuneration Committee and a member of the Nomination Committee.
-17-
17 Transurban annual reporT 2010
Information on directors (continued)
Jeremy G A Davis AM BEc, MBA, MA, FAICD
Independent non-executive director
Term of office
Director since 16 December 1997.
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Jeremy is a Professor Emeritus of the University of New South Wales, after retiring from the Australian
Graduate School of Management. He was a management consultant with the Boston Consulting Group for 10
years and is a former Director of the Australian Stock Exchange Limited. He is currently a non-executive
director of Singapore Power Limited, SP AusNet, and Asian Renewable Energy Management Limited. He is
also a non-executive director of CHAMP Ventures Pty Ltd and AMWIN Management Pty Ltd.
Jeremy holds interests in 158,188 stapled securities.
Transurban Board Committee membership
Member of each of the Audit and Risk, Nomination and Remuneration Committees.
Robert J Edgar BEc (Hons), PhD, FAICD
Independent non-executive director.
Term of office
Director since 21 July 2009.
Bob retired from his position as Deputy CEO of the ANZ Banking Group in April 2009. In a 25 year career at
ANZ, he also held the positions of Chief Operating Officer, Managing Director, Institutional Financial Services
and Chief Economist. He remains on the Boards of three of ANZ’s Asian banks, AMMB Holdings Berhad,
Shanghai Rural Commercial Bank and Bank of Tianjin.
Bob is currently a non-executive director of Nufarm Ltd, Asciano Group and Linfox Armaguard Pty Ltd. He is
also Chairman of the Prince Henry’s Institute of Medical Research.
Bob holds interests in 11,836 stapled securities.
Transurban Board Committee membership
Member of each of the Nomination and Sustainability Committees.
Lindsay P Maxsted Dip Bus, FCA.
Independent non-executive director
Term of office
Director since 1 March 2008.
Lindsay was the CEO of KPMG Australia between 2001 and 2007. His principal area of practice prior to
becoming CEO was in the corporate recovery field managing a number of Australia's largest
insolvency/workout/turnaround engagements. He is currently the Managing Director of Align Capital Pty Ltd, a
non-executive director of Westpac Banking Corporation, and Honorary Treasurer of Baker IDI Heart and
Diabetes Institute. He was previously the non-executive Chairman of VicRacing Pty Ltd and a non-executive
director of St George Bank Limited.
Lindsay holds interest in 12,000 stapled securities.
Transurban Board Committee membership
Chairman of the Audit and Risk Committee and a member of each of the Nomination and Sustainability
Committees.
-18-
18 Transurban annual reporT 2010
Information on directors (continued)
Rodney E Slater J.D., BS
Independent non-executive director
Term of office
Director since 22 June 2009.
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Rodney is a partner in the public policy practice group of Washington DC firm Patton Boggs, where he has led
its transportation practice since 2001. He served as US Secretary of Transportation from 1997 until the end of
the Clinton Administration in January 2001, and was also the head of the Federal Highway Administration
between 1993 and 1996.
In the US, Rodney's current directorships include Kansas City Southern (railroads), Southern Development
Bancorporation, Delta Airlines Inc, ICx Technologies Inc, and Verizon Communications Inc. He was formerly a
director of Parsons Brinckerhoff. He also served on Transurban's US Advisory Board until November 2008.
Rodney holds no stapled securities.
Transurban Board Committee membership
Member of each of the Nomination and Sustainability Committees.
Jennifer S Eve BA, LLB (Hons), LLM in Corporate Law
Independent non-executive director
Term of office
Director of TIL since 18 September 2006.
Jennifer is an associate and member of the Funds and Investment Services Team within the Corporate and
Commercial Practice Group at offshore law firm Appleby. She practices in the area of company and
commercial law, specialising in the formation and administration of investment vehicles. Jennifer also has
experience involving debt restructuring and intergroup restructuring. She is a local team member of the
Segregated Accounts Portfolio Team and the Global Islamic Finance Team.
Jennifer was educated in Bermuda, Canada and the United Kingdom. She is a member of the Bar of England
and Wales (non-practicing) and Bermuda.
Jennifer holds no stapled securities.
James M Keyes MA. (Hons)
Independent non-executive director.
Term of office
Director of TIL since 18 September 2006.
James is Managing Director of Renaissance Capital. He is responsible for the Bermuda office, which he
established for Renaissance in 2008. He was previously a partner at offshore law firm Appleby. He practised
as a lawyer for over 15 years, specialising in mutual funds, corporate finance and securities.
James attended Oxford University in England and graduated as a Rhodes Scholar.
James holds no stapled securities.
-19-
19 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Company secretary
Elizabeth Mildwater BEc, LLB (Hons), MA, GAICD
Elizabeth joined Transurban in May 2008. She is responsible for company secretarial, compliance, risk, legal
and human resource functions within the business. Before joining Transurban, Elizabeth was General Counsel
and Company Secretary of SP AusNet for three years. She has over 17 years of legal, company secretarial and
other relevant experience, mostly within the infrastructure sector. Her experience includes several years of
international project development in the power generation and water industries, as well as more recent
experience within the Australian regulated electricity sector. Prior to her in-house work, Elizabeth was a solicitor
with Australian law firms Blake Dawson Waldron and Freehills. Elizabeth recently completed the Advanced
Management Programme at Harvard Business School in the US.
Stephen Byrne LLB, BEc, Dip Leg. Practice
Stephen joined Transurban in February 2010 as General Counsel, Australia. He is responsible for all Australian
legal matters. He has over 16 years of legal, company secretarial and other relevant experience, mostly within
the infrastructure and chemicals sector. Stephen is an experienced manager of legal teams, having previously
held General Counsel roles with Veolia Water (Australia, New Zealand) and BOC Gases (Asia Pacific, the
Americas), where his work included large engineering projects, joint ventures and M&A.
J (Brett) Burns BCom, LLB
Brett was General Counsel, Australia until 18 September 2009. Brett was with Transurban for seven years,
initially as an external legal adviser and, from 2003, was responsible for Australian legal matters and providing
support to Company Secretariat and the North American business.
Juliet Evans
Juliet Evans is a Corporate Administrator on the Funds and Investment Services team at Appleby Corporate
Services. She holds the ICSA Certificate in Offshore Business Administration and has eight years of
experience in the corporate administration field. Juliet is Company Secretary of TIL.
-20-
20 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Meetings of directors
The number of meetings of the board of directors of THL, TIL and TIML held during the year ended 30 June 2010, and the
number of meetings attended by each director are listed below.
Meetings of the board of directors of THL and TIML were held jointly.
David J Ryan
Christopher J Lynch
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis
Robert J Edgar (Appointed 21 July 2009)
Lindsay P Maxsted
Rodney E Slater
Jennifer S Eve
James M Keyes
* = Not a member of the relevant Board
Board of Directors
THL
Board of Directors
TIML
Board of Directors
TIL
Attended Held Attended Held
Attended
Held
28
28
26
28
28
25
27
18
*
*
28
28
28
28
28
28
28
28
*
*
28
28
26
28
28
25
27
18
*
*
28
28
28
28
28
28
28
28
*
*
4
4
*
*
*
*
*
*
4
4
4
4
*
*
*
*
*
*
4
4
The number of meetings of each board committee of THL, TIML and TIL held during the year ended 30 June 2010, and
the number of meetings attended by each director are set out in the following table.
Audit and
Risk
Committee(1)
Remuneration
Committee(2)
Nomination
Committee(3)
Sustainability
Committee(4)
Special purpose
Sub-committees
Attended Held# Attended Held# Attended Held# Attended Held# Attended Held#
David J Ryan
Christopher J Lynch
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis
Robert J Edgar
(Appointed 21 July 2009)
Lindsay P Maxsted
Rodney E Slater
Jennifer S Eve
James M Keyes
7
7
7
4
7
*
7
1
*
*
7
*
7
*
7
*
7
*
*
*
8
7
1
8
7
*
1
1
*
*
8
*
*
8
8
*
*
*
*
*
1
1
1
1
1
1
1
1
*
*
1
*
1
1
1
1
1
1
*
*
3
3
*
*
*
2
3
3
*
*
3
*
*
*
*
3
3
3
*
*
5
11
7
*
12
*
13
*
*
*
5
13
10
*
13
*
13
*
*
*
# = Number of meetings held during the time the director held office and was a member of the committee during the year
* = Not a member of the relevant committee
(1) - Geoffrey Cosgriff, Chris Lynch and Rodney Slater were not members of the Audit and Risk Committee but attended
meetings during the year.
(2) - Lindsay Maxsted, Chris Lynch and Neil Chatfield were not members of the Remuneration Committee but attended
meetings during the year. Chris Lynch was excluded from discussions involving his remuneration during meetings of the
Remuneration Committee which he attended.
(3) - Chris Lynch was not a member of the Nomination Committee but attended the meeting during the year.
(4) - Chris Lynch was not a member of the Sustainability Committee but attended meetings during the year.
-21-
21 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
2010 REMUNERATION REPORT
INTRODUCTION
The Directors present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001
for Transurban Holdings Limited and its controlled entities (the Group) for the year ended 30 June 2010. The information
provided in the Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001.
The Remuneration Report contains detailed information regarding the remuneration arrangements for the directors and
senior executives who are the 'key management personnel' (KMP) of the Group. The KMP include the five highest
remunerated executives of the Group for the year ended 30 June 2010, and are listed in the tables below:
Senior executives
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
1
Position
Executive Director, Chief Executive Officer (CEO)
Chief Operating Officer
Chief Financial Officer
Chief Legal Counsel and Company Secretary
Group General Manager, Strategy and Development
Group General Manager, Public Affairs
Acting Group General Manager, People, Legal and
Governance
Group General Manager, Human Resources
President, International Development
President, Transurban North America
Non-executive directors
Name
David Ryan
Neil Chatfield
Geoff Cosgriff
Jeremy Davis
Bob Edgar
Lindsay Maxsted
Rodney Slater
Jennifer Eve
James Keyes
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. Upon her return she fulfilled the role of Group
General Manager People, Legal and Governance for Elizabeth Mildwater who was on study leave.
David Cardiff resigned with effect from 30 November 2009.
2
During the year ended 30 June 2010, the Board reviewed key aspects of the remuneration of the CEO and other senior
executives, taking into account feedback received from security holders on the 2009 Remuneration Report. As a result of
the review, certain changes were implemented. The Group also revised the format of the Remuneration Report in an effort
to improve security holder understanding of its remuneration arrangements.
The remuneration information contained in the Remuneration Report is presented as follows:
Content
Remuneration governance
Remuneration in context
CEO and senior executive remuneration:
!
!
!
!
!
!
!
!
Remuneration strategy and policy
Relative weightings of remuneration
Key changes for the year ended 30 June 2010
Fixed remuneration, Short term incentives, Long term incentives
Other equity plans
Legacy LTI plans
Dealings in securities
Remuneration paid to the CEO and other senior executives
Page
Page 23
Page 23
Page 24
Page 24
Page 25
Page 25
Page 26
Page 34
Page 34
Page 37
Page 38
Link between Group performance, security holder wealth and remuneration
Page 39
Non-executive director remuneration
Glossary of terms
Page 42
Page 45
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22 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
REMUNERATION GOVERNANCE
Board and Remuneration Committee responsibility
The Remuneration Committee assists the Board in fulfilling its responsibilities relating to the remuneration of directors, the
remuneration of, and incentives for, the CEO and other senior executives, and remuneration practices, strategies and
disclosures generally.
It is critical that the Remuneration Committee is independent of management when making decisions affecting employee
remuneration. Accordingly, the Remuneration Committee comprises non-executive directors, all of whom are
independent. Where appropriate, members of management attend Remuneration Committee meetings by invitation,
however they do not participate in formal decision making.
Engagement of remuneration consultants
To ensure it has all relevant information at its disposal when making remuneration decisions, the Remuneration
Committee seeks and considers advice from independent remuneration consultants where appropriate. Any advice and
recommendations from external consultants are used to guide the Remuneration Committee and the Board, but do not
serve as a substitute for thorough consideration of the issues by directors.
Potential conflicts of interest are taken into account when remuneration consultants are selected, and their terms of
engagement regulate their level of access to, and require their independence from, management.
During the year ended 30 June 2010, market remuneration data was used to assist the Remuneration Committee in
making decisions regarding non-executive director and senior executive remuneration. It was provided by the Hay Group,
an independent external consultant who were engaged by the Remuneration Committee.
REMUNERATION IN CONTEXT
Toll road concessions are an asset class characterised by defensive, predictable cash flows, which grow over the life of
long dated concession agreements. There is high upfront capital expenditure during the construction phase of a project,
which shifts to a low cost, high margin cash generative business for the remainder of the concession life. The investment
proposition for high quality toll road assets lies in providing investors with access to long dated, predictable, growing cash
flows generated by the assets over the life of the concessions.
The Group is an international toll road developer and manager with interests in Australia and the US. The Group is
focused on the long-term management of toll road assets at various stages of maturity to achieve the best outcomes for
investors, government partners and the community.
In Australia, the Group's interests include whole ownership of CityLink in Melbourne, and the Hills M2 and Lane Cove
Tunnel (control taken on 10 August 2010) in Sydney. The Group has partial interests in a further three roads on the
Sydney orbital network, being the M1 Eastern Distributor (75.1%), M5 (50.0%), and M7 (50%). In North America, the
Group has interests in two assets, Pocahontas 895 (75%) and the Capital Beltway Express (67.5%), which is under
construction in Northern Virginia.
The Board and management are focused on ensuring security holder value is enhanced through the strong performance
of the current portfolio of assets. In addition, development activities provide opportunities to further expand the portfolio in
value accretive ways. The maximisation of free cash available to security holders over the near, medium and longer term
is central to achieving this aim and the remuneration framework has been determined having regard to this.
The Group's remuneration strategy uses three critical measures of performance to align management and investors; total
shareholder return (TSR), proportional net costs and proportional Earnings Before Interest, Tax, Depreciation, and
Amortisation (EBITDA). TSR is a commonly utilised measure of company performance and this coupled with the other
measures align with the particular character of the Transurban Group. Further explanation of these measures and the
rationale for their utilisation is outlined in Sections 5 and 6. These measures, along with KPIs related to individual areas of
accountability form the core elements of the Group's remuneration framework.
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23 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
CEO AND SENIOR EXECUTIVE REMUNERATION
1
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate an appropriately qualified and
experienced management team with the necessary skills and attributes to lead the Group in achieving its business
objective of creating security holder value. The remuneration strategy also aims to encourage management to strive for
superior performance by rewarding the achievement of targets that are challenging, clearly understood and within the
control of individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
(cid:4)
Remuneration Strategy
Attract, retain, motivate and reward executives who are critical to the Group's growth and success by:
!!
!!
Offering competitive remuneration that is benchmarked against the external market.
Providing a balance of fixed and variable or 'at risk' remuneration.
Align executive rewards with individual and Group performance by:
!!
!!
!!
Making short term and long term components of remuneration 'at risk' based on performance.
Assessing rewards against appropriate financial and non-financial performance measures.
Encouraging executive security holdings.
Fixed
Fixed remuneration:
(cid:4)
Remuneration Structure
!
!
!
Comprises cash salary, superannuation and other prescribed benefits.
Provides a base level of reward for effective completion of Group and specific accountabilities.
Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable or 'at risk'
Short term incentive:
!
!
!
Cash rewards tied to pre-determined individual and Group annual performance measures.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
Group performance targets linked to earnings and cost management.
Long term incentive:
!
!
!
Equity rewards to align executive and security holder interests.
Vest after 3 years, subject to relative total security holder return and Group earnings growth.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
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24 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
2
RELATIVE WEIGHTINGS OF REMUNERATION
The remuneration of the CEO and other senior executives is structured as a mix of fixed remuneration and variable or 'at
risk' remuneration (through short term and long term incentive components).
The relative weightings of the three remuneration components for the CEO and other senior executives are determined by
the Board (on the advice of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components1
CEO
Other senior executives
% of total remuneration (annualised)
Fixed
remuneration
Variable remuneration (performance-
based)
34
50-56
STI
33
25-22
LTI
33
25-22
1
These figures do not reflect the relative value derived from each of the components, which is dependent on actual performance
against targets for the variable components. This is discussed in sections 5 and 6 below. The above STI percentages are based
on achieving 100% of the relevant performance targets. The above LTI percentages are based on the maximum LTI available to
each executive if 100% of the awards granted vest.
3
KEY CHANGES FOR THE YEAR ENDED 30 JUNE 2010
Following careful consideration by the Board, the following changes to the various components of remuneration were
implemented during the year ended 30 June 2010. In making these changes, the Board has sought to address the
feedback received from security holders and other stakeholders. The Board has also taken into account the shift in
corporate governance expectations regarding remuneration issues, whilst recognising the need to appropriately
remunerate strong performance.
Change
Fixed remuneration
Salary freeze: A salary 'freeze' was instituted for the CEO and other senior executives, and the majority of employees on
salaries of $200,000 or more, for the year ended 30 June 2010. Fixed remuneration increases for all employees averaged
2.2% during the same period.
The Board approved the salary freeze in light of both an anticipated slowdown in the broader Australian economy and
business objectives regarding cost reductions.
Variable remuneration - short term incentives (STIs)
CEO's STI: In the year ended 30 June 2009, as a one-off arrangement, the CEO had a guaranteed minimum annual STI
payment of 50% of his annual TEC. This guarantee has ceased. For the year ended 30 June 2010 and future years, the
CEO's STI is performance based and 100% at risk. There is no minimum guaranteed STI payment.
STI performance measures: For the year ended 30 June 2010, STI performance measures for the CEO and other senior
executives consisted of:
!
!
!
individual key performance indicators (KPIs);
a shared senior executive KPI; and
Group performance measures based on proportional EBITDA (from the Group's audited financial statements) and
cost management.
The inclusion of a cost management target for STIs is a new initiative for the year ended 30 June 2010.
Variable remuneration - long term incentives (LTIs)
Cessation of Executive Equity Plan (EEP): Grants under the EEP, which were made during the year ended 30 June
2009, have ceased. The EEP was used to achieve retention of key personnel during a period of transition for the business
and is no longer required.
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25 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
All LTIs granted to the CEO and other senior executives during the year ended 30 June 2010 are subject to performance
hurdles.
No retesting: LTIs in the form of Performance Awards granted in the year ended 30 June 2010 are tested once at the end
of the 3 year performance period. No retesting of Performance Awards granted under the LTI plan is available.
Proportional EBITDA target: The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA
results included in the Group's audited financial statements and is adjusted for acquisitions and divestments that may
occur during the performance period and is subject to Board approval. For further proportional EBITDA information see
Note 2 Segment information in the Transurban Holdings Limited financial statements.
Following a review of the Group's LTI arrangements, the Board concluded that proportional EBITDA continues to best
reflect the underlying performance of the Group and be an appropriate LTI performance measure.
Performance hurdles for the proportional EBITDA measure have been increased to 6 - 9% compound growth (on actual
proportional EBITDA results for the year ended 30 June 2009), for the 2010 LTI plan. This is a change from the 5 - 9%
applied in the prior period. The 6-9% range was determined based on the Group's understanding of a range of business
parameters including forecast on traffic growth, toll increases and operating costs.
Security holder approval of CEO LTIs: The Group intends to seek security holder approval of the CEO's LTI grant for
the year ended 30 June 2011 at the 2010 Annual General Meeting. The Group considers seeking such approval to be
good corporate governance practice. The LTI grants will be made under the CEO's employment agreement. Due to
contractual arrangements, in the event that security holders do not approve the proposed grant, a cash payment
equivalent to the remuneration value of the LTI awards will be made to Mr Lynch subject to the terms and conditions of the
LTI plan offered for the year ended 30 June 2011.
4
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
The remuneration for all senior executives is represented by total employment cost (TEC) comprising base salary,
company superannuation contributions and benefits such as salary continuance, death and disability insurance.
This amount of remuneration is not 'at risk' but is set by reference to appropriate benchmark information for an individual’s
responsibilities, performance, qualifications and experience.
There are no guaranteed base salary increases in any senior executive's employment agreement. In light of both an
anticipated slowdown in the broader Australian economy and business objectives regarding cost reductions, the CEO
recommended, and the Board approved, a salary 'freeze' for the CEO and other senior executives for the year ended 30
June 2010.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year by reference to
relevant comparative compensation in the market, as well as each senior executive’s performance. Independent
remuneration consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also
reviewed upon promotion.
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26 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
5
SHORT TERM INCENTIVE (STI)
What is the STI plan?
The STI plan is an annual cash incentive plan linked to specific pre-determined individual and Group performance
measures set as a fixed percentage of TEC.
Who participates in the STI plan?
All permanent Group employees including the CEO and other senior executives participate in the STI plan. Fixed term
employees with tenure greater than two years are also eligible participants.
Why does the Board consider the STI an appropriate incentive for senior executives?
The STI plan puts a significant proportion of senior executive remuneration 'at risk' against meeting specific targets linked
to the Group's business objectives. The STI plan focuses participants on achieving performance targets and provides
incentive for high performance. This aligns executive interests with the Group's financial performance, as well as
management principles and the cultural values of the Group.
What proportion of fixed remuneration does the STI plan represent?
For the year ended 30 June 2010, the CEO had a target STI opportunity of 100% of his annualised TEC. Other senior
executives had a target STI opportunity of 40% - 50% of their annualised TEC.
What are the performance measures?
STI performance measures are set at the beginning of the financial year.
There were three categories of performance measures for the CEO and other senior executives for the year ended 30
June 2010. They are described below and were chosen to provide a balance between individual, Group, operational,
strategic, financial and non-financial aspects of performance.
2010 STI performance measures for the CEO and other senior executives
Performance
measure
Individual key
performance
indicators (KPIs)
% of target STI
amount performance
measure applies to
40%
Target(s) for performance measure
Individual KPIs are unique to the individual's area of accountability, but
relate to critical business sustainability measures including: operational
performance; cost reduction; customer satisfaction; project outcomes;
succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group, and are capable
of measurement. Individuals have a clear line of sight to KPIs and are able
to directly affect results through their actions.
Shared senior
executive KPI
10%
To achieve the business objective of creating and maintaining a safety
culture, the senior executive team shared a safety KPI that required
outcomes relating to:
!!
!!
!!
a reduction in lost time injury frequency rates;
implementation of an OHS Management Framework in Australia and
US; and
the completion of risk and ergonomics assessments.
Group
performance
targets
50%
To ensure that STI payments are aligned with business performance and the
creation of value for security holders, there are two Group performance
targets:
!!
!!
a proportional EBITDA target; and
a cost management target based on proportional net costs.
Each accounts for half of the group performance targets.
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27 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
The CEO's individual KPIs are set by the Board. All other senior executives individual KPIs and the shared senior
executive KPI are set by the CEO and approved by the Board. The Board sets the Group performance targets.
What is proportional EBITDA and why does Transurban use it as a performance measure?
EBITDA is a common operational performance measure used by many companies.
Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's percentage ownership, as
well as any contribution from Group functions.
Proportional EBITDA is one of the primary measures that the Board uses to assess the operating performance of the
Group. It reflects the contribution from individual assets to the Group's operating performance and focuses on elements of
the result that management can influence to drive improvements in short term earnings.
Unlike companies in other industries toll roads do not require any discretionary capital expenditure except in the
occasional upgrade project such as the M1 upgrade. These are rigorously analysed as projects and incorporated in
EBITDA targets once completed. Therefore, proportional EBITDA for Transurban captures the critical measure of
performance that management can control.
Since 2009, proportional EBITDA has been used as a performance hurdle for both STIs and LTIs to ensure that the long
term growth and activities of the Group are not sacrificed in the short term to achieve a desired operating result in a given
year.
Proportional EBITDA figures used to assess performance are extracted from the financial statements which have been
audited by PricewaterhouseCoopers.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result. These items
reflect one-off, non-recurring items, both revenue and expenses, that will not contribute to the Group’s performance in
future periods. Where they are not reflective of the Group’s ongoing operating performance, these one-offs are also
excluded when determining performance incentives. For the year ended 30 June 2010 the Board has excluded corporate
advisory costs incurred in advising the Board with respect of the joint change of control proposals made by CPPIB, OTPP
and CP2.
Why is proportional EBITDA a better performance measure than statutory EBITDA?
Proportional EBITDA provides a better reflection of the operating performance of the Group and the EBITDA generated
from its portfolio. The presentation of proportional EBITDA permits a meaningful and appropriate analysis of the
underlying performance of the Group's assets.
The EBITDA calculation from the statutory accounts would not include the operating performance of the M5, M7 or DRIVe
(which are equity accounted in the statutory results). These assets are meaningful contributors to the Group's
performance and it is therefore appropriate that they be included in the measure of executive performance.
What is the cost management measure and why does Transurban use it as a performance measure?
The cost management measure is based on proportional net costs. Proportional net costs are the operating, corporate
and business development costs of the Group less non-toll revenues (fees and other). The deduction of these non-toll
revenues from costs encourages and allows management to incur additional costs where these are justified by increased
revenue results (e.g. toll collection activities such as video tolling and/or enforcement). The inclusion of a cost measure in
Transurban's performance rewards reflects the fact that management has the ability to influence the expenditure of the
business. Strong cost management throughout the business drives an increase in proportional EBITDA and cash flow and
ultimately security holder value. The year ended 30 June 2010 was the first year that proportional net costs have been
used by the Group as a performance measure.
As with proportional EBITDA, in specific cases items are excluded from proportional net costs to provide underlying net
costs. Underlying net costs are used when determining performance incentives. For the year ended 30 June 2010 the
Board has excluded corporate advisory costs incurred in advising the Board with respect of the joint change of control
proposals made by CPPIB, OTPP and CP2.
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28 Transurban annual reporT 2010
What are the proportional EBITDA and proportional net costs targets for the year ended 30 June 2010?
The proportional EBITDA and proportional net costs targets for the year ended 30 June 2010 are set out in the table
below:
Proportional EBITDA target
Percentage of STI that vest*
Proportional net costs target
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Actual proportional EBITDA result
is below that for the year ended
30 June 2009
0%
Actual proportional EBITDA result
achieved is the same as the year
ended 30 June 2009
50%
Budgeted proportional EBITDA
achieved for the year ended 30
June 2010
5% above the budgeted
proportional EBITDA for the year
ended 30 June 2010
100%
150%
* straight line vesting applies between 50-150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2010
Actual underlying proportional net costs on budget
for the year ended 30 June 2010
Actual underlying proportional net costs are 5%
below the budgeted underlying proportional net
costs for the year ended 30 June 2010
15% below the budgeted underlying proportional
net costs for the year ended 30 June 2010
The targets were set against the year ended 30 June 2009 results (which include a full year of M4 contributions) and the
30 June 2010 budget.
How are the varying levels of performance achievement rewarded?
The STI targets are designed to differentiate and reward high performance.
50% of the available STI vests for on target performance, 100% vests for achievement of high performance and an
additional 50% can be earned for outperformance. These targets are consistent for all of the Group's permanent
employees.
Given that STI payments are contingent on performance across a range of measures; maximum STI payments can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Individual KPIs
The CEO's performance is assessed by the Remuneration Committee which then makes recommendations to the Board.
The performance of other senior executives against their individual KPIs is assessed by the CEO, who confers with the
Remuneration Committee and then the Board regarding his assignment.
Group performance targets
The performance of senior executives against the Group performance targets is assessed by the Board and independently
audited.
Shared senior executive KPIs
The CEO's performance, and the performance against the senior executive team's shared KPI, is assessed by the
Remuneration Committee which then makes recommendations to the Board. These results are also independently
reviewed.
Board approval
Once KPIs have been assessed, the Board approves STI amounts for payment, typically in August each year.
The Board believes the above methods of assessment are rigorous and transparent, and provide a balanced evaluation of
the CEO and each senior executive's performance.
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29 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
What if a senior executive ceases employment?
If the CEO's employment is terminated before STI targets are achieved, the CEO will receive the higher of pro rata target
STI or actual performance.
If a senior executive ceases employment with the Group before STI targets are achieved, the senior executive will
generally not be entitled to receive any STI payment, unless otherwise determined by the Board.
What STIs did senior executives earn in 2010?
STI payments for the year ended 30 June 2010 are set out in the table below.
STIs awarded in respect of the year ended 30 June 2010
Actual STI awarded 3
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
$
2,740,000
432,400
648,250
273,750
271,300
185,050
49,500
-
471,200
725,390
%
132
118
130
122
136
116
124
-
126
124
%
-
-
-
-
-
-
-
100
-
-
1
2
3
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. The actual STI awarded reflects a pro-rated
payment.
David Cardiff resigned with effect from 30 November 2009.
The target level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI
which would have been awarded in respect of the year ended 30 June 2010 was nil. The STI payments in respect of the year
ended 30 June 2010 are paid in September 2010.
6
LONG TERM INCENTIVE (LTI)
What is the purpose of the LTI program?
The LTI program aligns reward with security holder wealth by tying this component of executive remuneration to the
achievement of performance conditions which underpin sustainable long term growth.
Who participates in the LTI program?
Participation in the LTI program is only offered to senior executives, and certain other senior managers approved by the
Board.
What proportion of TEC was granted under LTI program in the year ended 30 June 2010?
For the year ended 30 June 2010, the CEO was offered an LTI grant equivalent to 100% of his annualised TEC. Other
senior executives were offered grants representing approximately 40% - 50% of their annualised TEC.
All grants made to senior executives in the year ended 30 June 2010 are subject to performance conditions.
-30-
30 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
How is reward delivered under the LTI program?
LTI grants are delivered in the form of performance awards under the Group’s Performance Awards Plan (PAP).
Performance awards are offered at no cost to the participants. Each performance award is an entitlement to receive a fully-
paid Transurban security on terms and conditions determined by the Board, including the achievement of certain vesting
conditions linked to performance over a three year period.
If the vesting conditions are satisfied, the performance awards vest and Transurban securities will be delivered to the
senior executive.
Whilst the Board has discretion to grant cash payments of equivalent value at the end of the performance period, it is the
Board's current intention to settle any vested performance awards in Transurban securities.
What rights are attached to the performance awards?
Performance awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of performance awards will carry the same rights as other Transurban securities.
What are the performance measures?
None of the participants derive actual value from their LTI grants unless performance hurdles are achieved.
Performance awards are subject to dual performance measures over a three year performance period:
!
!
relative total security holder return (TSR); and
growth in proportional EBITDA.
Each condition applies to 50% of the available LTI award.
What are the performance hurdles?
Relative TSR
The relative TSR component of the performance awards will vest if the Group's relative TSR performance is at least above
the median of the S&P/ASX100 group of companies at the end of the three year performance period, in accordance with
the following table:
TSR vesting schedule
The Group's relative TSR
ranking in the S&P/ASX100
Index
% of performance awards that vest
At or below the 50th percentile
Nil
Above the 50th percentile but
below the 75th percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Proportional EBITDA
The percentage of performance awards that will vest will depend on the Group's percentage compound proportional
EBITDA growth over a three financial year performance period including on a part-year basis. The measure will be
adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may occur during the
performance period. The proportional EBITDA vesting schedule is set out below:
Since 2009, proportional EBITDA has been used as a performance measure in both the LTI and STI plans. This measure
is effective for the STI plan as it maintains a focus on the Group’s operating results and associated cash generation.
Proportional EBITDA also acts to ensure that the long term growth and activities of the Group are not sacrificed in the
short term to achieve a desired operating result in a given year and therefore it is also the measure utilised for the LTI
plan.
The movement in proportional EBITDA best reflects Transurban's underlying business performance and its goal of long
term sustainable growth in earnings from existing operations. In addition, there are many aspects of proportional EBITDA
that management can influence to drive improvements in short term earnings.
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31 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Proportional EBITDA vesting schedule
% compound proportional
EBITDA annual growth
% of performance awards that vest
6%
50%
Between 6% and 9%
Straight line vesting between 50-100%
9% or more
100%
Why have these performance measures been chosen?
The TSR hurdle is a relative, external, market-based performance measure against those companies with which the Group
competes for capital, customers and talent. It provides a direct link between executive reward and security holder return.
The proportional EBITDA hurdle provides evidence of the Group's growth in earnings and is linked to the Company's
overall strategic objectives.
Why does the Board think that the S&P/ASX 100 index is an appropriate comparator group?
The S&P/ASX100 comparator group was chosen due to a lack of publicly listed companies in the toll road sector in
Australia.
Additionally, this Group reflects Transurban's competitors for security holder capital and talent. As each of the ASX100
companies are subject to similar challenges, opportunities and market sentiment, the Group’s performance in comparison
to that of these companies should more fairly reflect the strength of the Group's performance.
How are the performance hurdles measured?
Relative TSR
The Group receives an independent report that sets out the Group's TSR growth and that of each company in the peer
group. A volume weighted average price of securities for the one week up to and including the test date is used in the
calculation of TSRs for Transurban and the comparator group.
The level of TSR growth achieved by the Group is given a percentile ranking having regard to its performance compared to
the performance of other companies in the group (the highest ranking company being ranked at the 100th percentile).
This ranking determines the extent to which performance awards subject to this hurdle will vest.
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA results included in the Group's
audited financial statements and is adjusted for acquisitions and divestments that may occur during the performance
period and is subject to Board approval. For further proportional EBITDA information see Note 2 Segment information in
the Transurban Holdings Limited financial statements.
What if a senior executive ceases employment?
If the CEO ceases employment with the Group before the performance condition is tested, then he is entitled to retain any
unvested performance awards, which will vest in accordance with the performance conditions under the LTI plan as at the
time of grant.
If senior executives cease employment with the Group before the performance condition is tested, then their unvested
performance awards will lapse, unless the Board determines otherwise.
What happens in the event of a change in control?
LTIs form part of the CEO and senior executives’ remuneration. In the event of a takeover or change of control of the
Group, any unvested performance awards will automatically vest.
Performance awards that vest following a change of control will not generally be subject to restrictions on dealing.
-32-
32 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
What was the grant, movement in the number and value of performance awards by senior executives during the
year ended 30 June 2010?
These are summarised in tables below.
Performance Awards granted in the year ended 30 June 2010
Performance criteria Grant date
Vesting date
TSR
EBITDA
11-Dec-09
11-Dec-09
11-Dec-12
11-Dec-12
Fair value of awards
at grant date1
VWAP at grant date
$
3.33
4.97
$
5.55
5.55
1
The fair value was calculated as at the grant date of 11 December 2009. An explanation of the pricing model used to calculate
these values is set out in Note 35 to the financial statements.
Performance awards granted in the year ended 30 June 2010
Number of performance
awards granted 3
Value at grant date
Maximum total value of
grant yet to vest 4
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
617,211
109,050
148,368
66,766
59,347
47,478
47,478
-
111,276
161,956
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
Performance awards vest subject to performance over the period from 11 December 2009 through to 11 December
2012.
Performance awards lapse where the performance conditions are not satisfied on testing. As the performance awards
only vest on satisfaction of performance and service conditions which are to be tested in future financial periods, none
of the senior executives forfeited performance awards during the year.
1
2
3
4
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010.
David Cardiff resigned with effect from 30 November 2009.
The grants made to senior executives constituted their full LTI entitlement for the year ended 30 June 2010
and were made on 11 December 2009 on the terms summarised above.
The maximum value of the grant has been estimated based on the fair value per instrument at date of grant.
The minimum total value of the grant, if the applicable performance conditions are not met, is nil.
-33-
33 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
7
OTHER EQUITY PLANS
The Group operates three broad employee-based security plans as described below.
ShareLink Incentive Plan
Under this plan, subject to Board approval, an allocation of securities or cash payments may be made to eligible
employees (excluding the CEO but including other senior executives) in recognition of the Group’s prior year performance.
Eligible employees received a grant of 100 securities at no cost to them on 5 February 2010. Eligible employees in the US
received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's past performance and is not intended to serve as a
future incentive, there are no performance conditions attached to grants of securities or cash payments under the plan.
ShareLink Investment Tax Exempt Plan
This plan provides eligible employees the opportunity to invest in Transurban securities, on a tax-exempt basis, up to
$1,000 per annum, of which half is contributed by the Group and half is contributed by the employee through salary
sacrifice. All permanent employees are eligible to participate in this plan. For the year ended 30 June 2010, securities
were acquired by plan participants on 26 March 2010 and 18 June 2010.
Grants of securities under this plan are designed to encourage employee security holdings and to align the interests of
employees with the Group and therefore are not subject to performance conditions.
ShareLink Investment Tax Deferred Plan
This plan was suspended in May 2009 due to proposed changes in tax legislation governing employee share plans in
Australia. This plan was reviewed and a new offer was made to eligible employees during the year ended 30 June 2010
and will take effect in the year ended 30 June 2011.
The plan now provides eligible employees with the opportunity to invest in Transurban securities, on a salary sacrifice
basis, up to $5,000 per annum. Participants also receive up to $3,000 of a matching component from the Group. The
plan has a maximum disposal restriction period of three years including a twelve month forfeiture period.
Equity grants under this plan are designed to encourage employee security holding and to align the interests of employees
with the Group and therefore are not subject to performance conditions.
8
LEGACY LTI PLANS
There are a number of legacy LTI plans that are no longer offered to new entrants but which have existing participants.
Details of these plans are in the following tables.
2007 Executive Loan Plan (ELP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Expiry date:
Grant price:
Value per unit at grant date:
Details of plan
1 Nov 2006
1 Nov 2009
31 Dec 2009
$7.28
$1.37
Australian participants were granted Transurban securities purchased using interest free loans provided by the Group.
These securities vest in the participants subject to meeting the stipulated performance condition. Outstanding loans are
repaid upon vesting.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance condition.
-34-
34 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Performance hurdles
The Plan had a single performance measure of relative TSR against the S&P/ASX 100 Industrials.
TSR vesting schedule
Relative TSR ranking in the comparator
group
% of awards that vest
At or below the 50th percentile
Nil
Above the 50th percentage but below the 75th
percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Result (movements in plan for the year ended 30 June 2010)
The 2007 award matured on 1 November 2009. No awards vested as the prescribed performance condition was not met.
The following Transurban securities and performance rights lapsed during the year ended 30 June 2010 for the following
key management personnel:
B Bourke (160,000)
D Cardiff (35,000)
A Head (22,500)
K Daley (100,000)
M Fletcher (15,000)
M Kulper (100,000)
The value of the securities which lapsed during the year, based on the original loan was:
B Bourke $987,854
D Cardiff $216,090
A Head $138,913
The value of performance rights for overseas participants which lapsed during the year was:
K Daley $137,000
M Fletcher $20,550
M Kulper $137,000
2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
1 Nov 2007
1 Nov 2010
Fair value per right at grant date:
TSR: $3.50, Statutory EBITDA $5.96
Spot price at grant date:
$7.29
Details of plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance condition.
-35-
35 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Performance hurdles
For Australian participants, the Plan has two performance measures, statutory EBITDA and relative TSR against the
S&P/ASX 100 Index, each applied to 50% of the awards.
For overseas participants, the Plan has two performance measures, DRIVe management fee growth and relative TSR
against the S&P/ASX 100 Index, each applied to 50% of the awards.
The TSR vesting schedule is as per the above table.
Statutory EBITDA and DRIVe management fee vesting schedule
% compound statutory EBITDA annual growth
% of awards that vest
10%
50%
Between 10% and 15%
Straight line vesting between 50-100%
15% or more
100%
% compound growth of the DRIVe
management fee
% of awards that vest
20%
50 %
Between 20% and 25%
Straight line vesting between 50-100%
25%
100%
Result (movements in plan for the year ended 30 June 2010)
8,401 performance rights were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed rights
was $39,737. The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 19,027 performance rights to
be vested post employment subject to terms and conditions of the plan.
2009 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
1 Nov 2008
1 Nov 2011
Fair value per right at grant date:
TSR $3.30, Proportional EBITDA $4.27
Spot price at grant date:
$5.22
Details of plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions. The Board has discretion to award
cash payments of equivalent value upon vesting.
Performance hurdles
The plan has two performance measures, proportional EBITDA and relative TSR against the S&P/ASX 100 Index, each
applies to 50% of the awards.
The awards are tested at the end of each of the three year performance period. If the performance measures are satisfied
for the year, one third of the awards are preserved until the vesting date. At the end of the three years a cumulative test of
the performance measures is applied to any unvested awards.
The TSR vesting schedule is as per the above table.
-36-
36 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual
growth
% of awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Result (movements in plan for the year ended 30 June 2010)
The table below sets out the performance hurdles achieved over the testing period, the vesting scale, banked awards and
awards to be carried forward for Tranche 2 for testing.
Performance
Measure
Number of awards
subject to testing
Testing period
Vesting
scale
Number of awards
banked in tranche 1
Number of awards to
be carried forward to
tranche 2
219,048
-
181,810
37,238
TSR
Proportional
EBITDA
219,048
219,048
31 Oct 2008 to
30 Oct 2009
Year ended 30
June 2009
0%
83%
29,749 performance awards were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
Awards was $112,600.
The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 16,763 Performance Awards to be vested
post employment, subject to the terms and conditions of the plan.
2009 Executive Equity Plan (EEP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Grant price:
Value per unit at grant date:
Details of plan
1 Nov 2008
1 Nov 2011
$5.22
$4.27
Australian participants received a grant of Transurban securities at no cost subject to disposal restrictions for three years
from the grant date.
Executives based outside Australia receive a grant of performance rights at no cost which entitles participants to receive
Transurban securities which vest at the end of the vesting period of three years.
Performance Hurdles
Vesting is based on service during the three year performance period.
Result (movements in plan for the year ended 30 June 2010)
19,146 Transurban securities were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
securities was $104,729.
9
DEALINGS IN SECURITIES
In accordance with Transurban's Dealing in Securities Policy, employees who have performance awards under an LTI plan
may not hedge against those rights until they have vested. Employees may hedge after vesting if the hedge is both
initiated in and arranged so that the specified exercise date falls within an open period.
Employees are not permitted to obtain margin loans using Transurban securities (either solely or as part of a portfolio) as
security for loans.
-37-
37 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
10 REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration of key management personnel, who included the five highest paid executives of the Group. All values are
in Australian dollars unless otherwise stated.
Remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Post-
employ-
ment
benefits
Long
term
benefits
Termin-
ation
benefits
Share based benefits2
Total
Value of
equities
acquired
in lieu of
cash
salary/fees
Cash
salary and
fees
Cash
Bonus1
Non-
monetary
benefits
Super-
annuation
Long
service
leave
2008
PRP/2009
& 2010
PAP
2007
ELP
2009 EEP
Executive director
C Lynch
2010
2009
Other key management personnel
2,030,860
1,980,839
-
-
-
-
-
-
-
-
-
-
-
-
-
-
687,093
635,976
157,544
344,033
706,407
658,635
296,196
274,381
376,772
368,033
134,569
355,355
B Bourke
2010
2009
D Cardiff3
2010
2009
K Daley4
2010
2009
M Fletcher
2010
2009
A Head
2010
2009
S Hogg
2010
2009
T Honan5
2010
2009
M Kulper
2010
2009
E Mildwater
2010
2009
Total
2010
2009
Notes:
1
38 Transurban annual reporT 2010
2,740,000
2,800,000
6,049
36,881
50,000
100,000
-
-
432,400
329,800
6,049
7,845
49,107
100,241
13,148
15,913
-
-
-
-
-
-
1,079,488
404,265
113,261
75,093
6,019,658
5,397,078
24,800
88,498
346,315
217,564
132,046
18,051
1,690,958
1,413,888
-
314,500
-
-
10,420
57,042
4,443
16,198
268,637
-
5,425
20,303
(65,233)
82,038
(29,389)
18,051
351,847
852,165
1,271,200
383,400
53,677
97,354
49,004
94,694
14,168
46,917
185,050
163,600
-
6,301
24,481
28,319
11,697
15,327
271,300
204,500
49,500
170,000
976,396
690,950
-
250,000
648,250
1,750,000
1,126,355
1,235,047
410,093
322,142
-
-
-
-
725,390
630,022
273,750
217,000
-
-
-
-
-
-
-
-
-
-
24,330
33,042
15,080
16,419
11,292
31,900
25,000
36,226
-
-
-
-
8,729
110,949
52,446
72,102
24,330
28,911
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
280,674
181,986
27,226
18,051
2,402,356
1,481,037
-
1,679
95,895
47,003
27,226
18,051
640,545
554,661
3,488
12,850
127,201
62,254
27,226
18,051
845,397
715,149
-
-
-
-
-
-
-
-
65,449
19,436
21,780
14,440
282,590
591,131
406,064
194,358
121,547
36,103
2,177,257
2,957,637
415,367
244,528
34,049
22,575
2,362,336
2,315,223
87,458
24,295
27,226
18,051
822,857
610,399
6,902,285
6,865,391
-
250,000
6,596,840
6,962,822
65,775
148,381
276,693
621,324
110,982
182,876
268,637
33,713
- 123,330
2,838,678
1,477,727
502,198
256,517
17,595,801
16,888,368
The amount represents cash STI payments to the senior executive for the year ended 30 June 2010, which are paid in September
2010.
-38-
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
2
3
4
5
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards awarded under the LTI plan). The fair value of
equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included
as remuneration may be different to the benefit (if any) that senior executives may ultimately realise should the equity instruments
vest. The fair value of performance awards at the date of their grant has been determined in accordance with AASB 2 applying a
Black-Scholes valuation method. The assumptions underpinning these valuations are set out in Note 35 to the financial
statements.
An ex-gratia payment of $268,637 was made to David Cardiff upon resignation in recognition of his contribution in the period of
business transition.
Ken Daley's cash bonus includes his STI payment as per note 1 above of $471,200 as well as a payment of $800,000 as part of
his service agreement as noted in section 11 below.
Tom Honan elected to receive part of his sign-on award in Transurban securities which were purchased on market.
11 SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other senior executives are formalised in service
agreements which have no specified term. Each of these agreements provides for access to performance-related STIs
and other prescribed benefits. Although not specified in agreements, the CEO and other senior executives are eligible to
participate in the LTI plan (or equivalent cash plans for those executives located outside Australia).
Some key aspects of the agreements are outlined below:
Period of notice to terminate
(executive)
Period of notice to terminate
(the Group)*
CEO
Other senior executives
6 months
3 months
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
Pursuant to his service contract, a cash payment of $800,000 was made to Ken Daley. This reflects 80% achievement of
the stipulated performance criteria under a performance incentive arrangement.
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other senior executives is linked to the performance of the Group through the use of
incentive hurdles based on the operating performance of the business for both short and long term incentives, as noted
below.
1
GROUP PERFORMANCE AND STI
25% of executive short term incentives are determined with reference to proportional EBITDA and 25% with reference to
proportional net costs as discussed on page 27. This aligns the executive’s interests with the Group's financial performance
Proportional EBITDA
The underlying proportional EBITDA result for the year ended 30 June 2010 was $635.4 million, an 8.9% increase from the
prior year result. The year ended 30 June 2010 result exceeded the budget by 5.4%, allowing the payment of 150.0% of
STIs attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued focus on
cost control and the performance of the asset portfolio, characterised by strong traffic volumes on all Australian assets,
particularly Melbourne’s CityLink following the completion of the Southern Link Upgrade.
Proportional net costs
The underlying proportional net costs result for the year ended 30 June 2010 was $174.3 million. This represents a
decrease from the year ended 30 June 2009 by 10.8%, resulting in the payment of 139.2% of STIs attributable to
proportional net costs. As with proportional EBITDA, the Group's continued focus on cost management resulted in a
decrease in the cost base across operational, corporate and business development costs. A number of value initiatives
implemented have also contributed to the cost reductions with developments in revenue collection also contributing to
overall proportional net costs through improved fee revenue.
-39-
39 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Safety
In 2010, the safety performance measure applied to senior executives resulted in the payment of 114% of the eligible short
term incentive. The hurdle included three components as discussed on page 25 of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2010 lost time injury frequency rates decreased from 6.94 to
3.64.
2
GROUP PERFORMANCE AND LTI
Long term incentives are linked to proportional EBITDA and relative TSR.
The performance hurdles for the current plans are outlined on page 30 - 34.
Proportional EBITDA
The performance hurdle for proportional EBITDA of between 6% and 9% compound growth is considered an appropriate
target in the current economic climate and for the anticipated level of organic growth in a mature toll road portfolio. Ring
fencing arrangements mean that only the existing portfolio of assets contribute to the calculation.
In general, long term incentive hurdles are based on cumulative performance in relation to proportional EBITDA over
preceding years. The following graph shows the growth in proportional EBITDA since 2007. This growth is driven by
increased traffic volumes and revenue collection processes and more specifically cost control that has been a focus of the
Group since 2008.
1. The result for the year ended 30 June 2010 includes the M4 until 15 February 2010 when the concession deed ended.
The table below illustrates the Group's annual compound growth for the relevant non-market measure of each plan:
Long term incentive plan
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
Group Compound growth as at 30 June 2010
7%
-
9%
12%
-40-
40 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
TSR performance
The table below summarises the relative TSR performance over the performance period to date in respect of unvested
long term incentives.
Long term incentive plan
Group TSR as at 30 June 2010
Indicative percentile rank
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
(26.3)%
(26.3)%
(8.7)%
(18.1)%
60.7%
60.7%
22.4%
14.6%
-41-
41 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
NON-EXECUTIVE DIRECTOR REMUNERATION
1
REMUNERATION POLICY
The Group's non-executive director remuneration policy as set by the Board is summarised below:
Aggregate remuneration is approved by security holders
The amount of aggregate remuneration that may be paid to non-executive directors in any year is capped at a level
approved by security holders. The current aggregate fee pool for non-executive directors of $2,100,000 per year
(including the superannuation guarantee levy) was approved by security holders at the 2007 Annual General Meeting.
The Board intends to seek security holder approval at the 2010 AGM to increase the aggregate fee pool for non-executive
directors. The key reasons for the proposed increase are to provide the Board with the strategic flexibility to make
additional non-executive director appointments and to facilitate orderly Board succession planning.
Fees are set by reference to key considerations
The aggregate fee pool for non-executive directors and the manner in which it is apportioned amongst the non-executive
directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board after taking into
consideration a number of relevant factors including:
!
!
!
!
the responsibilities and risks attached to the role of non-executive director;
the time commitment expected of non-executive directors;
the fees paid by peer companies to non-executive directors; and
benchmark data provided by independent external advisors.
Remuneration is structured to preserve independence whilst creating alignment
The remuneration of non-executive directors consists of base (director) fees and Committee fees. To preserve
independence and impartiality, no element of non-executive director remuneration is 'at risk'. In other words, it is not based
on the performance of the Group.
Retirement benefits
In September 2005, the Board resolved to discontinue previously provided retirement benefits for non-executive directors
with effect from 30 September 2005. The value of benefits accrued up to this date attracts interest at the statutory fringe
benefits rate. Accrued 'frozen' retirement benefits plus interest will be paid to Geoff Cosgriff and Jeremy Davis on their
retirement from the Board. No other current directors are entitled to any retirement benefits.
Cumulatively an amount of $605,725 (2009: $565,178) has been provided as at 30 June 2010 and $40,547 (2009:
$64,388) expensed in the current year. Retirement benefits of $nil (2009: $405,134) were paid out in the current year.
-42-
42 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
2
COMPONENTS OF NON-EXECUTIVE DIRECTORS REMUNERATION
Director / Committee fees*
Current base (director) fees per year are:
!
$455,000 for the Chairman and $170,000 for other non-executive directors.
Current Committee fees* per year are set out below:
!
!
!
!
$40,000 for chair of the Audit and Risk Committee and $20,000 for members of that committee;
$25,000 for chair of the Remuneration Committee and $20,000 for members of that committee;
$25,000 for chair of the Sustainability Committee and $15,000 for members of that committee1; and
$10,000 for chair of the Nomination Committee and $10,000 for members of that committee.
* The Chairman does not receive any additional fees for his Committee responsibilities.
The fees as outlined above took effect on 1 January 2010 following an independent review of non-executive director and
Committee fees by an external remuneration consultant. The decision to increase fees was based on the following factors:
!
!
!
the length of time since the last increase (October 2006 for the Chair and October 2005 for other non-executive
directors);
benchmarking data from relevant comparator groups; and
alignment of fees with a revised Committee structure.
Other fees / benefits
Certain non-executive directors were entitled to retirement benefits, however, the retirement benefits plan was frozen on
30 September 2005 and no further benefits have been provided under that plan since that date.
Non-executive directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year.
Non-executive directors are also entitled to be reimbursed for all business related expenses, including travel, as may be
incurred in the discharge of their duties.
Post-employment benefits*
Superannuation contributions are made on behalf of the non-executive directors at a rate of 9%, which satisfies the
Group’s statutory superannuation obligations.
* Director and committee fees and post-employment benefits are included in the security holder approved cap.
1. As of 11 August 2010, the Sustainability Committee is no longer a separate committee of the Board. Sustainability is
considered by the Board to be embedded in Transurban's business and business practices, and the Board has
responsibility for sustainability oversight.
Under the ShareLink Investment Tax Deferred Plan, non-executive directors are able to sacrifice up to 50% of their pre-tax
fees to acquire Transurban securities through a tax deferred arrangement. The plan was suspended in May 2009 due to
proposed changes to tax legislation governing share plans. No offers or purchases were made under the plan during the
year ended 30 June 2010. Following a review of the plan, eligible participants (including non-executive directors) have the
opportunity to invest in Transurban securities up to $5,000 per annum. The offer for the year ending 30 June 2011 was
made to eligible employees and non-executive directors on 1 June 2010. No non-executive directors currently participate
in the plan.
The Group conducted a review of the Tax Deferred Plan following the passing of the tax legislation on 14 December 2009.
The offer for the 2010/11 financial year was made to eligible employees and the non-executive directors on 1 June 2010.
-43-
43 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
3
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of non-executive directors' remuneration for the years ended 30 June 2010 and 30 June 2009 are set out in the
table below.
Non-executive director remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Current non-executive directors
Fees
Superannuation
contributions1
Post-employment
benefits
Retirement benefits2
Total
David Ryan
2010
2009
Neil Chatfield
2010
2009
Geoff Cosgriff
2010
2009
Jeremy Davis
2010
2009
Bob Edgar
2010
2009
Lindsay Maxsted
2010
2009
Rodney Slater
2010
2009
Jennifer Eve
2010
2009
James Keyes
401,546
385,306
167,818
51,035
171,880
165,131
175,084
158,760
155,739
-
194,826
174,399
125,975
4,098
77,315
47,030
2010
2009
Former non-executive directors
39,597
47,030
Susan Oliver3
2010
2009
Chris Renwick
2010
2009
Total
2010
2009
-
166,367
-
119,293
1,509,780
1,318,449
44 Transurban annual reporT 2010
36,139
34,694
15,104
4,593
15,469
14,869
22,500
24,000
14,016
-
17,534
15,696
10,932
-
-
-
-
-
-
14,973
-
56,778
131,694
165,603
-44-
-
-
-
-
15,210
14,192
25,338
23,642
-
-
-
-
-
-
-
-
-
-
-
26,554
-
-
40,548
64,388
437,685
420,000
182,922
55,628
202,559
194,192
222,922
206,402
169,755
-
212,360
190,095
136,907
4,098
77,315
47,030
39,597
47,030
-
207,894
-
176,071
1,682,022
1,548,440
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
1
2
3
Superannuation contributions made on behalf of non-executive directors to satisfy the Group’s obligations
under applicable Superannuation Guarantee legislation.
Amounts provided for by the Group during the financial year in relation to the contractual retirement benefits
which the non-executive director will be entitled to upon retirement from office.
Susan Oliver retired on 22 June 2009 and received payment of $405,134 in retirement benefits.
GLOSSARY OF TERMS
Term
EBITDA
Proportional EBITDA
Statutory EBITDA
Proportional net costs
Total employment cost (TEC)
Short term incentive (STI)
Long term incentive (LTI)
Relative total shareholder return (TSR)
Definition
Earnings before interest, tax, depreciation and amortisation.
EBITDA calculated based on percentage of Transurban
asset ownership as follows: CityLink (100%), Hills M2
(100%), Roam (100%), Tollaust (100%), M1 Eastern
Distributor (75.1%), M4 (50.61%), M5 (50%), M7 (50%) and
DRIVe (75% including 67.5 % of Capital Beltway Express
and 75% of Pocahontas 895).
The proportional EBITDA result is included in the audited
financial statements.
100% of the EBITDA from controlled entities (CityLink, Hills
M2, M1 Eastern Distributor, M4, Roam, Tollaust) regardless
of Transurban’s ownership. It excludes the EBITDA
contribution from non-controlled interests (M5 Motorway,
Westlink M7 and DRIVe).
Net costs include the operating, corporate and business
development costs of the Group less non-toll revenues (fees
and other).
Base salary and other benefits including superannuation
paid to an executive.
An 'at risk' component of executive remuneration under
which a cash reward may be payable based on achievement
of individual and Group performance measures.
An 'at risk' component of executive remuneration under
which an equity reward may be provided to participants
based on achievement of specific performance conditions.
TSR measures total return on investment of a security,
taking into account both capital appreciation and distributed
income which was reinvested on a pre-tax basis.
Relative TSR measures the return on investment of a
company relative to a peer group of companies.
Relative TSR is one of the performance measures in
determining the vesting of Transurban LTI program.
-45-
45 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Non-audit services
The Group has an "External Auditor Independence" policy which is intended to support the independence of the external
auditor by regulating the provision of services by the external auditor. The external auditor will not be engaged to perform
any service that may impair or be perceived to impair the external auditor's judgement or independence. The external
auditor will only provide a permissible non-audit service where there is a compelling reason for it to do so, and the aim is
for the external auditor not to provide non-audit services at all. All non-audit services must be pre-approved by the Chief
Financial Officer (services less than $5000) or the Chair of the Audit and Risk Committee (in all other cases).
The board of directors has considered the position and, in accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-
audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
!
the Audit and Risk Committee reviews the non-audit services to ensure they do not impact the impartiality and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a
management or a decision making capacity for the Group, acting as advocate for the Group or jointly sharing
economic risk and rewards.
!
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of the
parent entity, its related practices and non-related audit firms:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and Other Assurance Services
- Audit and review of financial reports
PricewaterhouseCoopers Australia
- Other assurance services
PricewaterhouseCoopers Australia
Total audit and other assurance services
Other services
Taxation services
- Indirect taxation services
PricewaterhouseCoopers Australia
Total taxation services
30 June
2010
$
30 June
2009
$
1,022,000
1,200,000
474,802
1,496,802
25,792
1,225,792
-
-
617,063
617,063
Total remuneration for PricewaterhouseCoopers
1,496,802
1,842,855
Amounts received or due and receivable by non-PwC audit firms for:
Audit services
Audit and review of financial report
Other services
- Other assurance services
- Taxation services
Total remuneration for other audit firms
Total auditors remuneration
88,400
94,380
296,550
95,847
480,797
867,888
178,950
1,141,218
1,977,599
2,984,073
The audit fee relates to the amount due to Ernst & Young who are the auditors of Statewide Roads Limited. Other
assurance and tax fees are for other services Ernst and Young were engaged for throughout the Group.
-46-
46 Transurban annual reporT 2010
Transurban Holdings Limited
Directors' report
30 June 2010
(continued)
Indemnification and insurance
Each officer (including each director) of the Group is indemnified, to the maximum extent permitted by law, against any
liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is also indemnified
against reasonable costs (whether legal or otherwise) incurred in relation to relevant proceedings in which the officer is
involved because the officer is or was an officer.
The Group has arranged to pay a premium for a Directors and Officers Liability insurance policy to indemnify directors and
officers in accordance with the terms and conditions of the policy.
This policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered, the name of
the Insurer, the Limit of Liability and the Premium paid for this policy.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 48.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, 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.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
David J Ryan
Director
Christopher J Lynch
Director
Melbourne
12 August 2010
-47-
47 Transurban annual reporT 2010
Auditor's Independence Declaration
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
As lead auditor for the audit of Transurban Holdings Limited and the Transurban Holdings Limited Group for the year
ended 30 June 2010, I declare that to the best of my knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Transurban Holdings Limited and the Transurban Holdings Limited Group (the Group).
The Group comprises the aggregation of Transurban Holdings Limited, Transurban Holding Trust and Transurban
International Limited and the entities they controlled during the period.
John Yeoman
Partner
PricewaterhouseCoopers
Melbourne
12 August 2010
Liability limited by a scheme approved under Professional Standards Legislation
-48-
48 Transurban annual reporT 2010
Transurban Holdings Limited ABN 86 098 143 429
Annual financial report - 30 June 2010
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
Page
50
50
51
51
52
52
53
53
54
54
55
55
124
124
125
125
This financial report covers the Transurban Group which consists of Transurban Holdings Limited, Transurban Holding
Trust and Transurban International Limited and their controlled entities as described in Note 1 to the Financial Statements.
The financial report is presented in the Australian currency.
The equity securities of the parent entities are stapled and cannot be traded separately. Entities within the group are
domiciled and incorporated in Australia, the United States of America or Bermuda. Transurban Holdings Limited's
registered office and principal place of business is:
Level 3
505 Little Collins Street
Melbourne Victoria 3000
The financial report was authorised for issue by the directors on 12 August 2010. The Group has the power to amend and
reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally.
All releases to the ASX and the media, financial reports and other information are available on our website:
www.transurban.com
49 Transurban annual reporT 2010
-49-
Transurban Holdings Limited
Consolidated income statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
Revenue
Toll, fee and other road revenue
Construction revenue
Business development and other revenue
Road operating costs
Corporate costs
Business development costs
Construction costs
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and tax
Depreciation and amortisation expense
Finance income
Finance costs
Net finance costs
Share of net (losses) of equity accounted investments
Profit (loss) before income tax
Income tax benefit
Profit (loss) for the year
Profit (loss) is attributable to:
Ordinary equity holders of the stapled group
Non-controlling interests
3
3
3
4
5
9
6
Earnings per security attributable to ordinary equity holders of the stapled
group:
Basic earnings per stapled security
Diluted earnings per stapled security
33
33
751,107
46,822
19,240
817,169
(179,312)
(44,742)
(18,830)
(46,822)
(289,706)
738,981
62,193
32,829
834,003
(182,407)
(69,005)
(40,970)
(62,193)
(354,575)
527,463
479,428
(305,051)
(340,939)
280,644
(456,964)
(176,320)
298,255
(456,920)
(158,665)
(20,549)
(32,193)
25,543
(52,369)
34,062
36,235
59,605
(16,134)
59,418
187
59,605
(24,575)
8,441
(16,134)
Cents
Cents
4.6
4.6
(1.9)
(1.9)
The above consolidated income statement should be read in conjunction with the accompanying notes.
-50-
50 Transurban annual reporT 2010
Profit/(loss) for the year
Other comprehensive income
Changes in the fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Transurban Holdings Limited
Non-controlling interest
Transurban Holdings Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
59,605
(16,134)
22,026
(1,780)
20,246
(128,907)
29,012
(99,895)
79,851
(116,029)
133,269
(53,418)
79,851
(109,947)
(6,082)
(116,029)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
-51-
51 Transurban annual reporT 2010
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total current assets
Non-current assets
Equity accounted investments
Term loan notes
Derivative financial instruments
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Derivative financial instruments
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
(Accumulated losses)
Non-controlling interest - Transurban International Limited
Non-controlling interests
Total equity
Transurban Holdings Limited
Consolidated balance sheet
As at 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
7
8
11
9
10
11
12
13
14
15
16
11
17
18
16
13
17
11
18
19
20
20
681,259
205,607
271
887,137
599,459
678,044
79,959
146,053
12,051
7,678,619
9,194,185
199,805
210,441
-
410,246
664,159
633,272
63,535
116,456
7,726
7,862,265
9,347,413
10,081,322
9,757,659
202,354
35,604
2,822
17,779
293,569
78,035
630,163
4,005,010
901,462
181,612
141,030
45,536
5,274,650
185,023
746,000
3,336
61,596
262,411
149,452
1,407,818
3,296,372
938,069
139,617
105,221
29,426
4,508,705
5,904,813
5,916,523
4,176,509
3,841,136
7,656,383
52,594
(3,836,959)
118,197
186,294
7,106,243
12,230
(3,605,921)
116,479
212,105
4,176,509
3,841,136
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
-52-
52 Transurban annual reporT 2010
Transurban Holdings Limited
Consolidated statements of changes in equity
For the year ended 30 June 2010
Consolidated
Attributable to members of Transurban Holdings
Limited
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
$'000
Notes
Non-
controlling
interests
$'000
Total
equity
$'000
Balance at 1 July 2008
6,846,992
99,109
(3,300,393) 3,645,708
323,753
3,969,461
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs
Treasury securities
Distribution reinvestment plan
Distributions provided for or paid
Distributions provided for or paid to
non-controlling interests in
subsidiaries
Change in value of share-based
payment reserve
19
19
21
20
20
-
(85,372)
(24,575)
(109,947)
(6,082)
(116,029)
8,468
5,895
244,888
-
-
-
-
-
-
-
-
-
-
(280,953)
8,468
5,895
244,888
(280,953)
1,411
488
41,530
-
9,879
6,383
286,418
(280,953)
-
-
(32,516)
(32,516)
-
259,251
(1,507)
(1,507)
-
(280,953)
(1,507)
(23,209)
-
10,913
(1,507)
(12,296)
Balance at 30 June 2009
7,106,243
12,230
(3,605,921) 3,512,552
328,584
3,841,136
Balance at 1 July 2009
7,106,243
12,230
(3,605,921) 3,512,552
328,584
3,841,136
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs
Treasury securities
Distribution reinvestment plan
Distributions provided for or paid
Distributions provided for or paid to
non-controlling interests in
subsidiaries
Change in value of share-based
payment reserve
19
19
19
20
20
-
39,741
93,528
133,269
(53,418)
79,851
482,665
7,978
59,497
-
-
-
550,140
-
-
-
-
-
-
-
-
(324,566)
482,665
7,978
59,497
(324,566)
47,648
459
5,884
-
530,313
8,437
65,381
(324,566)
-
-
(25,329)
(25,329)
623
623
-
(324,566)
623
226,197
663
29,325
1,286
255,522
Balance at 30 June 2010
7,656,383
52,594
(3,836,959) 3,872,018
304,491
4,176,509
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
-53-
53 Transurban annual reporT 2010
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Other revenue
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payments for maintenance of intangible assets
Payments for equity accounted investments
Payments for acquisition of term loan notes
Payments for available-for-sale financial assets
Payments for derivative financial instruments
Payment for settlement of CityLink concession notes
Dividends received from equity accounted investment
Proceeds from share buyback from equity accounted investment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of stapled securities, net of costs
Proceeds from sale of treasury securities, net of costs
Proceeds from borrowings, net of costs
Repayment of borrowings
Loans to associates
Distributions paid to Group's security holders
Distributions paid to non-controlling interests
Net cash inflow (outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
Transurban Holdings Limited
Consolidated cash flow statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
31
21
857,082
(308,736)
19,892
196,486
(347,945)
(60,997)
355,782
(46,829)
(56,059)
(22,396)
(24,804)
-
-
-
(61,795)
36,500
-
(175,383)
530,929
4,540
1,177,477
(1,154,033)
-
(230,451)
(28,158)
300,304
480,703
199,805
751
822,172
(346,973)
23,456
212,240
(354,056)
(36,812)
320,027
(50,477)
(73,027)
(14,024)
(32,510)
(30,444)
(6,063)
(29,176)
(148,307)
28,020
17,500
(338,508)
9,877
3,523
614,862
(540,600)
(1,300)
(172,161)
(32,871)
(118,670)
(137,151)
336,545
411
Cash and cash equivalents at end of year
7
681,259
199,805
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
-54-
54 Transurban annual reporT 2010
Contents of the notes to the financial statements
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Summary of significant accounting policies
Segment information
Revenue
Expenses
Net finance costs
Income tax benefit
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Equity accounted investments
Non-current assets - Term loan notes
Derivative financial instruments
Non-current assets - Property, plant and equipment
Deferred tax assets and liabilities
Non-current assets - Intangible assets
Current liabilities - Trade and other payables
Borrowings
Provisions
Other liabilities
Contributed equity
Reserves and accumulated losses
Distributions
Remuneration of auditors
Contingencies
Intra-group Guarantees
Commitments
Related party transactions
Subsidiaries
Parent entity financial information
Deed of cross guarantee
Events occurring after the balance sheet date
Reconciliation of profit after income tax to net cash inflow from operating activities
Non-cash investing and financing activities
Earnings per stapled security
Net tangible asset backing
Share-based payments
Key management personnel disclosures
Critical accounting estimates and judgements
Financial risk management
Page
56
68
74
74
75
76
77
77
79
81
82
83
84
85
86
87
90
91
92
94
95
96
97
97
98
99
100
102
103
104
105
105
105
106
107
112
117
119
-55-
55 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial report are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the
Corporations Act 2001.
The Transurban Group financial statements have been prepared as an aggregation of the financial statements of
Transurban Holdings Limited and controlled entities (THL), Transurban Holding Trust and controlled entities (THT), and
Transurban International Limited and controlled entities (TIL) as if all entities operate together. They are therefore treated
as a combined entity (hereon referred to as "the Group"), notwithstanding that none of the entities controls any of the
others. The principles of consolidation have been applied in order to present the aggregated financial statements on a
combined basis. THL has been deemed the parent of the Group.
The financial statements have been aggregated in recognition of the fact that the securities issued by THL, THT and TIL
are stapled together and comprise one share in THL, one unit in THT and one share in TIL (Stapled Security). None of the
components of the Stapled Security can be traded separately.
Where necessary, comparatives have been reclassified for consistency with current year disclosures.
Compliance with IFRS
The consolidated financial statements of Transurban Holdings Limited also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standard early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
other financial assets and liabilities (including derivative financial instruments).
Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January
2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement
of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income.
As a consequence, the Group had to change the presentation of its financial statements. Comparative information has
been re-presented so that it is also in conformity with the revised standard.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The aggregated financial statements incorporate an elimination of inter-entity transactions and balances and other
adjustments necessary to present the financial statements on a combined basis. The accounting policies adopted in
preparing the financial statements have been consistently applied by the individual entities comprising the Group except
as otherwise indicated.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(h)).
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, balance sheet and statement of changes in equity respectively.
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56 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Associates and joint ventures
Associates are all entities over which the Group has significant influence but not control. Interests in joint ventures are
where the Group jointly controls an entity with another party (refer to note 9).
Investments in associates are accounted for using the equity method of accounting, after being initially recognised at cost.
The Group’s share of its associates’ and joint ventures' post-acquisition profits or losses is recognised in the income
statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-
acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in
an associate or joint venture equals or exceeds its interest in the associate or joint venture, the Group does not recognise
further losses. Dividends received from associates and joint ventures reduce the carrying amount of the investment.
Application of UIG 1013 Pre-date of Transition Stapling Arrangements and AASB Interpretation 1002 Post-date of
Transition Stapling Arrangements
For the purpose of UIG 1013 and AASB Interpretation 1002, THL was identified as the parent entity in relation to the pre-
date of transition stapling with THT and the post-date of transition stapling with TIL. In accordance with UIG 1013 the
results and equity of THL and THT have been combined in the financial statements. AASB Interpretation 1002 however
requires the results and equity of TIL to be treated and disclosed as non-controlling interest.
Changes in ownership interest
The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
reserve within equity.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer
(the chief operating decision maker) and the Executive Committee, who report to the Chief Executive Officer (CEO).
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting.
The new standard requires a 'management approach', under which segment information is presented on the same basis
as that used for internal reporting purposes. In addition, the segments are reported in a manner that is consistent with the
internal reporting provided to the CEO. There has been no impact on the measurement of the Group's assets and
liabilities. Comparatives for 2009 have been restated.
(d) Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Transurban Holdings Limited’s
functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the consolidated income statement, except when they are deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as
equities held at fair value through profit and loss are recognised in profit and loss as part of the fair value gain or loss and
translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are
included in the fair value reserve in equity.
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57 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
Foreign operations
The results and financial position of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
!
!
!
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet
income and expenses for each income statement are translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions), and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are taken to shareholders' equity.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised for the major business activities as follows:
!
!
!
!
Toll and fee revenue - Toll charges and related fees are recognised when the charge is incurred by the user.
Business development fees - Business development fees are recognised when receivable, and to the extent of
costs incurred and that these costs will be recovered.
Interest income - Interest income is recognised using the effective interest rate method.
Construction revenue - During the construction phase of service concession infrastructure assets, the Group
records an intangible asset representing the right to charge users of the infrastructure and recognises revenue from
the construction of the infrastructure. Revenue and expenses associated with construction contracts are
recognised in accordance with the percentage of completion method.
(f)
Income tax
The income tax expense or benefit for the period is the tax payable or benefit on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Group operates and generates taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the Group is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
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58 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset, and intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the income statement, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income,
or directly in equity, respectively.
Investment allowances
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets
(investment allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces
income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried
forward as tax losses.
Tax consolidation legislation
The Transurban Group has adopted the tax consolidation legislation for Transurban Holdings Limited and its wholly-owned
Australian entities as of 1 July 2005.
All entities within the tax consolidated group continue to account for their own current and deferred tax amounts. These
tax amounts are measured as if each entity in the tax consolidation group is a separate tax payer within the tax
consolidated group.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases (note 25). Payments made under operating leases (net of any incentives received from the
lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.
Lease incentives are recognised as a reduction of the rental expense over the lease term on a straight line basis.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in
the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values
at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the
income statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in the income statement.
Change in accounting policy
A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to
apply the acquisition method to business combinations, there have been some significant changes.
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59 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(h) Business combinations (continued)
All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt
are subsequently remeasured through the income statement. Under the Group's previous policy, contingent payments
were only recognised when the payments were probable and could be measured reliably and were accounted for as an
adjustment to the cost of acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and
therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest's
proportionate share of the acquiree's net identifiable assets. This decision is made on an acquisition-by-acquisition basis.
Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree's net identifiable
assets.
If the Group recognises previously acquired deferred tax assets after the initial acquisition accounting is completed there
will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the
Group's net profit after tax.
The changes were implemented prospectively from 1 July 2009. There has been no impact on the Group as a result of
applying the new standard.
(i)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount
through the income statement. The decrement in the carrying amount is recognised as an expense in the income
statement in the reporting period in which the impairment occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
(j) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
(k)
Investments and other financial assets
Classification
The Group classifies its investments and other financial assets in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The
classification depends on the purpose for which the investments and other financial assets were acquired. The
classification of the Group's investments and other financial assets are determined at initial recognition and, in the case of
assets classified as held-to-maturity, is re-evaluated at the end of each reporting period.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified
in this category if acquired principally for the purpose of selling in the short-term. Derivatives are classified as held-
for-trading unless they are designated as hedges. Assets in this category are classified as current assets.
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60 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables (note 8) in the consolidated balance sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. Trade receivables are due for settlement no more than 30
days from revenue recognition.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An impairment allowance account (provision for impairment of
trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. The amount of the impairment allowance is the difference between
the asset’s carrying amount and the present value of estimated future cash flows. The amount of the impairment
allowance is recognised in the income statement.
Held-to-maturity investments (term loan notes)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group's management has the positive intention and ability to hold to maturity. If the Group were
to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted
and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for
those with maturities less than 12 months from the reporting date, which are classified as current assets.
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are
either designated in this category or not classified in any of the other categories. They are included in non-current
assets unless the investment matures or management intends to dispose of the investment within 12 months of the
end of the reporting period.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statements. Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all
the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit and loss as gains and losses from investment securities.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss'
category are presented in the income statements within other income or other expenses in the period in which they arise.
Dividend income from financial assets at fair value through profit and loss is recognised in the income statements as part
of revenue from continuing operations when the Group's right to receive payments is established.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group
of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged
decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the
income statement - is reclassified from equity and recognised in the income statement as a reclassification adjustment.
Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not
reversed through the income statement.
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61 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(l) Derivatives and hedging activities
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 the end of each reporting period. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as either:
!
!
!
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges)
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges), or
hedges of a net investment in a foreign operation (net investment 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 flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 11. Movements
in the hedging reserve in shareholders' equity are shown in note 20. The full fair value of a hedging derivative is classified
as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified
as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives
are classified as a current asset or liability. The treatment of derivatives is as follows:
!
!
!
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statements, 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 and cross currency
swaps hedging fixed rate borrowings is recognised in the income statements within finance costs, together with
changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss
relating to the ineffective portion is recognised in the income statement.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to profit or loss over the period to maturity using a
recalculated effective interest rate.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to
the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects
profit 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.
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 at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income statements. 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.
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other
comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Gains and losses accumulated in equity are included in the income statement when the foreign operation is
partially disposed of or sold.
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62 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(l) Derivatives and hedging activities (continued)
!
Derivatives that do not qualify for 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 hedge accounting are recognised immediately in the income statement.
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Costs incurred on development projects (including
computer software and hardware) are recognised as an asset when it is probable that the project will, after considering its
commercial and technical feasibility, be completed and generate future economic benefits and its costs can be reliably
measured. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services,
direct labour and an appropriate proportion of overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to the income statements during the reporting period in
which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
income statement.
Depreciation
Depreciation is calculated on a straight line basis so as to write off the net cost of items of plant and equipment over their
expected useful lives. Estimates of remaining useful lives will be made annually for all assets. The expected useful lives
are 3 – 15 years.
Impairment
Fixed assets are assessed for impairment in line with the policy stated in note 1(i).
(n)
Intangible assets
Concession Assets
Concession Assets represent the Group's rights to operate roads under Service Concession Arrangements. Concession
Assets constructed by the Group are recorded at the fair value of consideration received or receivable for the construction
services delivered. Concession Assets acquired by the Group are recorded at the fair value of the assets at the date of
acquisition. All Concession Assets are classified as intangible assets and are amortised over the term of the right to
operate the asset on a straight line basis. For details of concession agreement dates refer to note14.
Where work is in progress, it is classified as assets under construction.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable
assets of the acquired business/associate at the date of acquisition. Goodwill on acquisitions of businesses is included in
intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not
amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to the relevant cash-generating units for the purpose of impairment testing.
(o) Financial liabilities
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Concession and promissory notes
The Group has non-interest bearing long term debt, represented by Concession and Promissory Notes, payable to the
government, measured at the net present value of expected future payments.
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63 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(p) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in the consolidated income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To
the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheets when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
the income statement as finance income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting date.
(q) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except to the extent to which they
relate to the construction of qualifying assets in which case specifically identifiable borrowing costs are capitalised into the
cost of the asset. Borrowing costs include interest on short-term and long-term borrowings.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective period of
the funding.
(r) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Provisions are discounted to the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value reflects
current market assessments of the time value of money and the risks specific to the liability. The increase in the provision
due to the discount unwinding over the passage of time is recognised as a finance cost.
Provision for maintenance
As part of its obligations under the service concession arrangements, the Group assumes responsibility for the
maintenance and repair of installations of the publicly-owned roads it operates. A provision for maintenance has been
raised where the Group has a present legal or constructive obligation to maintain and replace components of the
underlying physical assets operated by the Group as a result of past events. The Group's obligations under the respective
concession deeds arise as a consequence of use of the road during the operating phase. The provision is measured at
the present value of management's best estimate of the expenditure required to settle the present obligation at the
reporting date. Provisions giving rise to a cash outflow after more than one year are discounted to present value if the
impact is material. The increase in the provision due to the discount unwinding over the passage of time is recognised as
a finance cost.
Provision for distribution
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
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64 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(s) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and short-term incentives, and long
service leave expected to be settled within 12 months after the end of the period, are recognised in respect of employees'
services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave and short-term incentives, and long service leave expected to be settled within 12 months of
the reporting date is recognised in the provision for employee benefits. All other short-term employee benefit obligations
are presented in payables. An expense for non-accumulating sick leave is recognised when the leave is taken and
measured at the rates paid or payable.
Long-term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period is
recognised in the provision for employee benefits. It is measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date. Consideration is given to expected future
wages and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash outflows.
Equity-based compensation benefits
Equity-based compensation benefits have been provided to some employees.
The fair value of units granted under the plans are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the period during which the employees
become unconditionally entitled to the units.
The fair value of units granted under cash settled share-based compensation plans is recognised as an expense over the
vesting period with a corresponding increase in liabilities. The fair value of the liability is remeasured at each reporting
date with any changes in fair value recognised in the income statement for the period.
The fair value is independently determined using a Black-Scholes option pricing model that takes into account the exercise
price, the term, the impact of dilution, the security price at grant date and expected price volatility of the underlying
security, the expected dividend yield and the risk free interest rate for the term of the plan.
The fair value granted is adjusted to reflect the market vesting conditions, but excludes the impact of any non-market
vesting conditions (for example, profitability and growth targets). Non-market vesting conditions are included in
assumptions about the number of units that are expected to become exercisable. At each reporting date, the Group
revises its estimate of the number of units that are expected to become exercisable. The employee benefit expense
recognised each reporting period takes into account the most recent estimate. The impact of the revision to original
estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.
Superannuation
Superannuation is contributed to plans as nominated by the employee. The contribution is not less than the statutory
minimum. The superannuation plans are all accumulation funds.
The cost of current and deferred employee compensation and contributions to employee superannuation plans were
charged to the income statement.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary
redundancy.
-65-
65 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(t) Contributed equity
Stapled securities are classified as equity.
Incremental costs directly attributable to the issue of new stapled securities are shown in equity as a reduction, net of tax,
from the proceeds.
If the Group reacquires its own securities, those securities are deducted from equity. No gain or loss is recognised in the
profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is
recognised directly in equity.
(u) Parent entity financial information
The financial information for the parent entity, Transurban Holdings Limited, disclosed in note 28 has been prepared on
the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Transurban Holdings Limited. Dividends received from associates are recognised in the parent entity's profit or loss,
rather than being deducted from the carrying amount of these investments.
Tax consolidation legislation
Transurban Holdings Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation effective 1 July 2005.
The head entity, Transurban Holdings Limited, and the controlled entities in the tax consolidated group account for their
own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group is
a separate taxpayer within the tax consolidated group.
In addition to its own current and deferred tax amounts, Transurban Holdings Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.
(v) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
-66-
66 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(w) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2010
reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
(effective for annual periods beginning on or after 1 January 2010)
In May 2009, the AASB issued a number of improvements to existing Australian Accounting Standards. The Group does
not expect any adjustments will be necessary as a result of applying the revised rules.
AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions
[AASB2] (effective from 1 January 2010)
The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share-based
payment arrangement must recognise an expense for those goods or services regardless of which entity in the group
settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based
payment arrangement should be measured, that is, whether it is measured as an equity or a cash-settled transaction.
There will be no impact on the financial report of the Group as this is consistent with the Group's current accounting policy.
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective for annual reporting periods beginning on or after 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods
beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for
government-related entities to disclose details of all transactions with the government and other goverment-related entities
and clarifies and simplifies the definition of a related party. There will be no impact on the financial report of the Group as
this is consistent with the Group's current accounting policy.
AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
(effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the
Group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early
adoption. Management continue to assess the impact of AASB 9.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB
2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective
from 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's
annual improvements project. The Group will apply the amendments from 1 July 2010. Management continue to assess
the impact of AASB 2010-3 and AASB 2010-4 and does not expect that any adjustments will be necessary as the result of
applying the revised rules.
Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting
Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements.
Transurban Holdings Limited is listed on the ASX and is therefore not eligible to adopt the new Australian Accounting
Standards - Reduced Disclosure Requirements. The two standards will have no impact on the financial statements of the
Group.
-67-
67 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
2 Segment information
Description of segments
It has been determined that the operating segments based on information provided to the CEO and Executive Committee
is by geographical region, being Victoria and New South Wales in Australia and the USA.
The Group operates in one business sector only, being the development, operation and maintenance of toll roads. The
CEO and Executive Committee therefore consider the business from the perspective of locations.
The following assets are included in the operating segments:
Segment
Victoria, Australia
Assets
CityLink
New South Wales, Australia
Hills M2 Motorway
USA
75.1 per cent interest in the M1 Eastern
Distributor
50.61 per cent interest in the M4 Motorway
Equity investments in the M5 Motorway (50.0 per
cent) and Westlink M7 (50.0 per cent)
75.0 per cent interest in Transurban DRIVe.
Transurban DRIVe holds 100.0 per cent of
Pocahontas 895 and 90.0 per cent of Capital
Beltway Express
The tolling businesses of Roam and Tollaust have also been included in the NSW operating segment as they are
managed together with each of the assets and contribute tolling services to all NSW assets.
The USA segment does not meet the quantitative thresholds to be reported as an operating segment in accordance with
AASB 8. However management have concluded that this segment should be reported as it is closely monitored as an
emerging market with development opportunities.
The Group's corporate function is not an operating segment under the requirements of AASB 8 as its revenue generating
activities are only incidental to the business. Management have aggregated and disclosed the corporate business units as
the contribution to the business is closely monitored.
The operating segments have been further broken down by asset to assist with external analysis of the financial
statements.
-68-
68 Transurban annual reporT 2010
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Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
2 Segment information (continued)
Other segment information - Proportional income statement
Proportional basis of presenting results
The CEO and Executive Committee receive information for assessing the business on an underlying proportional basis
reflecting the contribution of individual assets in the proportion of Transurban's equity ownership.
The Group's proportional EBITDA result reflects business performance and permits a more appropriate and meaningful
analysis of the Group's underlying performance on a comparative basis. This method of presentation differs from the
statutory accounting format and has been reconciled below.
EBITDA is earnings before interest, taxation, depreciation and amortisation.
Segment revenue
Revenue from external customers is through toll and fee revenues earned on toll roads. There are no inter-segment
revenues.
Segment revenue reconciles to total statutory revenue as follows:
Total segment revenue (proportional)
Add: Revenue of M1 attributable to non-controlling interest
Add: Revenue of M4 attributable to non-controlling interest
Less: Revenue of non-controlled assets
Construction revenue
Business development revenue
ConnectEast distribution
Other
Total statutory revenue (note 3)
30 June
2010
$'000
30 June
2009
$'000
880,306
20,530
36,969
(188,052)
46,822
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817,169
843,666
19,666
54,626
(179,869)
62,193
28,700
3,050
1,971
834,003
Interest revenue
Interest revenue is earned through Infrastructure Bonds, bank interest revenue and term loan note interest received.
Interest revenue reconciles to statutory finance income as follows:
Total segment interest revenue (proportional)
Add: Interest revenue of M1 attributable to non-controlling interest
Add: Interest revenue of M4 attributable to non-controlling interest
Add: Foreign exchange gains
Less: Interest revenue of non-controlled assets
Total statutory finance income
30 June
2010
$'000
30 June
2009
$'000
245,139
38,610
359
137
(3,601)
280,644
259,996
35,363
331
2,705
(140)
298,255
-71-
71 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
2 Segment information (continued)
Reconciliation of proportional EBITDA to statutory profit (loss) for the year
Proportional EBITDA reconciles to statutory net profit (loss) for the year as follows:
Proportional EBITDA
Add: Proportional EBITDA of M1 attributable to non-controlling interest
Add: Proportional EBITDA of M4 attributable to non-controlling interest
Less: Proportional EBITDA of M5
Less: Proportional EBITDA of M7
Less: Proportional EBITDA of Pocahontas
Less: Proportional EBITDA of DRIVe
Statutory profit before depreciation and amortisation,
net finance costs, equity accounted investments and tax
Statutory net finance costs
Statutory depreciation and amortisation
Share of associates profit/(loss)
Income tax benefit/(expense)
Profit (loss) for the year
30 June
2010
$'000
30 June
2009
$'000
629,942
14,504
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(74,743)
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One off items
The exclusion of certain items in the Group's results permits a more appropriate and meaningful analysis of the Group's
underlying performance on a comparative basis.
One off items are:
Loss on CEU Investment
Onerous lease provision
Corporate advisory costs (relating to the change of control proposal)
30 June
2010
$'000
30 June
2009
$'000
-
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-72-
72 Transurban annual reporT 2010
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7
-
73 Transurban annual reporT 2010
3 Revenue
Toll revenue
Fee revenue
Other road revenue
Total toll, fee and other road revenue
Construction revenue
Business development revenue
Other revenue
Total business development and other revenue
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(a)
(b)
(c)
(d)
684,390
49,967
16,750
751,107
678,263
44,100
16,618
738,981
46,822
62,193
18,447
793
19,240
28,700
4,129
32,829
817,169
834,003
Description of revenue
(a) Toll and fee revenue
Toll revenue and associated fees are recognised when the charge is incurred by the user.
(b) Other road revenue
Other road revenue includes advertising, rental and other associated revenue.
(c) Construction revenue
Construction revenue is recognised during the construction phase of an intangible asset, and the development of assets
for sale to third parties.
It should be noted that construction revenue is offset by an equal expense. This presentation is a requirement of AASB-I
12 Service Concession Arrangements, and does not have a net effect on the income statement for the Transurban Group.
(d) Business development revenue
Business development revenue relates to the provision of development services.
4 Expenses
30 June
2010
$'000
30 June
2009
$'000
1,216
6,119
83,397
4,887
5,159
-
17,758
1,610
7,977
83,880
6,008
1,994
25,433
18,637
Profit before income tax includes the following specific expenses:
Provision for impairment of trade receivables recognised during the year
Rental expenses relating to operating leases
Employee benefit expense
Defined contribution superannuation expense
Share based payment expense
Losses on Connect East investment
Provision for maintenance recognised during the year
-74-
74 Transurban annual reporT 2010
4 Expenses (continued)
Concession fees (road operating cost) are attributable to:
Hills M2 Motorway
M1 Eastern Distributor
M4 Motorway
Depreciation and amortisation expense
Road operating cost
Corporate cost
5 Net finance costs
Finance income
Interest income on infrastructure bonds
Interest income on term loan notes (held to maturity investment)
Interest income on bank deposits
Foreign exchange gains
Total finance income
Finance costs
Interest and finance charges paid/payable
Interest charges paid/payable on infrastructure bonds
Interest rate hedging charges paid/payable
Unwind of discount on liabilities
Total finance costs
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
919
1,457
1,668
4,044
1,193
1,003
2,633
4,829
299,532
5,519
327,167
13,772
305,051
340,939
30 June
2010
$'000
30 June
2009
$'000
190,605
78,879
11,023
137
280,644
(247,580)
(129,378)
(67,003)
(13,003)
(456,964)
208,763
72,862
13,925
2,705
298,255
(262,316)
(142,515)
(24,161)
(27,928)
(456,920)
Net finance costs
(176,320)
(158,665)
-75-
75 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
6 Income tax benefit
Income tax benefit
Current tax
Deferred tax
Over provided in prior years
Deferred income tax (benefit) expense included in income tax benefit comprises:
Increase in deferred tax assets (note 13)
Decrease in deferred tax liabilities (note 13)
Numerical reconciliation of income tax benefit to prima facie tax payable
Profit (loss) before income tax benefit
Tax at the Australian tax rate of 30% (2009 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Trust income not subject to tax
Accounting depreciation on non tax depreciable assets
Infrastructure bond non-deductible interest
Equity accounted results
Sundry items
Under (over) provision in prior years
Income tax benefit
30 June
2010
$'000
30 June
2009
$'000
24,934
(54,398)
(4,598)
(34,062)
(28,672)
(25,726)
(54,398)
25,543
7,663
(85,922)
653
38,814
6,132
3,196
(29,464)
(4,598)
(34,062)
63,737
(95,646)
(4,326)
(36,235)
(46,338)
(49,308)
(95,646)
(52,369)
(15,711)
(75,551)
1,798
42,755
10,363
4,437
(31,909)
(4,326)
(36,235)
Tax expense (income) relating to items of other comprehensive income
Cash flow hedges (note 20)
13,635
13,635
(29,952)
(29,952)
Tax consolidation legislation
The Transurban Group elected to implement tax consolidation legislation for Transurban Holdings Limited and its wholly
owned Australian entities with effect from 1 July 2005. The accounting policy in relation to this legislation is set out in note
1(f).
The entities in the Transurban Holdings Limited tax consolidated group entered into a tax sharing agreement (TSA)
effective from 29 April 2009. The TSA, in the opinion of the directors, limits the joint and several liability of the wholly-
owned entities in the case of a default by the head entity, Transurban Holdings Limited (THL).
The entities in the Transurban Holdings Limited tax consolidated group have also entered into a tax funding agreement
(TFA) effective from 1 July 2008. Under the TFA the wholly-owned entities fully compensate THL for any current tax
payable assumed and are compensated by THL for any current tax receivable and deferred tax assets relating to tax
losses. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities
financial statements.
The amount receivable/payable under the TFA are calculated as soon as practicable after the end of the financial year for
each wholly-owned entity. THL communicates the funding amount to each wholly-owned entity along with the method of
calculation and any other information deemed necessary.
-76-
76 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
681,259
681,259
199,805
199,805
7 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
Funds not for general use
The amount shown in Cash at Bank includes $84.8 million not available for general use at 30 June 2010 (2009: $128.2
million). This comprises amounts required to be held under maintenance and funding reserves, and prepaid tolls.
8 Current assets - Trade and other receivables
Trade receivables
Provision for impairment of receivables
Amounts due from equity accounted investments
Infrastructure bond interest receivable
Prepayments
Other receivables
30 June
2010
$'000
30 June
2009
$'000
32,353
(4,408)
27,945
-
139,483
6,235
31,944
205,607
29,739
(3,972)
25,767
8,822
129,969
7,429
38,454
210,441
Provision for impaired trade and other receivables
As at 30 June 2010 current trade receivables of the Group with a nominal value of $4,408,000 (2009: $3,972,000) were
considered impaired and accordingly the Group held a provision for impairment of $4,408,000 (2009: $3,972,000). As at
30 June 2010, trade receivables of $3,271,000 (2009: $3,421,000) were past due but not impaired.
The ageing of these receivables is as follows:
For the year ended 30 June 2010
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 30 but less than 60 days overdue
more than 60 but less than 90 days overdue
more than 90 days overdue
Not impaired
$'000
Amount
considered
impaired
$'000
Provision for
impairment
$'000
24,674
2,601
403
77
190
27,945
1,311
1,099
1,400
215
383
4,408
1,311
1,099
1,400
215
383
4,408
-77-
77 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
8 Current assets - Trade and other receivables (continued)
For the year ended 30 June 2009
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 30 but less than 60 days overdue
more than 60 but less than 90 days overdue
more than 90 days overdue
Not impaired
$'000
Amount
considered
impaired
$'000
Provision for
impairment
$'000
22,346
2,507
596
93
225
25,767
887
1,067
1,221
202
595
3,972
887
1,067
1,221
202
595
3,972
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the
credit history of these other classes, it is expected that these amounts will be received when due. The Group does not hold
any collateral in relation to these receivables.
Movements in the provision for impairment of receivables was as follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectible
At 30 June
30 June
2010
$'000
30 June
2009
$'000
3,972
1,216
(780)
4,408
3,018
1,610
(656)
3,972
Amounts charged to the provision are generally written off when there is no expectation of recovering additional cash.
When customers travel on a road without a prior arrangement in place, they are issued with an invoice. If this invoice is
outstanding for a period of time they are sent to a government enforcement authority and the customers are issued an
external fine. These authorities use the full extent of the law to recover the amounts and then pass on an amount collected
back to the Group. This is recognised in ‘other revenue’.
-78-
78 Transurban annual reporT 2010
9 Equity accounted investments
Name of company
Westlink M7:
WSO Company Pty Limited
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
M5 Motorway:
Interlink Roads Pty Ltd
Transurban DRIVe Holdings LLC
Summarised financial information
2010
Westlink M7
Interlink Roads Pty Ltd
Transurban DRIVe Holdings LLC
2009
Westlink M7
Interlink Roads Pty Ltd
Transurban DRIVe Holdings LLC
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
Ownership
interest
30 June 30 June
2010
%
2009
%
Carrying amount
30 June
2010
$'000
30 June
2009
$'000
50
50
50
50
50
75
50
50
50
50
50
75
-
-
-
-
-
-
-
-
428,747
170,712
599,459
467,956
196,203
664,159
Ownership
Interest
%
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit (loss)
$'000
Group's share of:
50
50
75
50
50
75
973,418
722,789
2,110,104
3,806,311
(1,359,152)
(294,041)
(1,939,392)
(3,592,585)
949,641
778,687
2,017,520
3,745,848
(1,297,264)
(310,731)
(1,821,317)
(3,429,312)
88,838
87,407
11,807
188,052
81,193
84,774
13,902
179,869
(48,621)
(2,709)
(17,840)
(69,170)
(138,576)
(3,496)
(21,141)
(163,213)
-79-
79 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
9 Equity accounted investments (continued)
Westlink M7
M5 Motorway
DRIVe
Total
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
-
-
-
-
-
-
-
-
-
-
-
-
7,556
(7,556)
-
-
-
-
-
467,956
-
(2,709)
(36,500)
-
-
-
428,747
516,972
-
(3,496)
(28,020)
(17,500)
-
-
467,956
196,203
24,452
(17,840)
-
-
(11,940)
(20,163)
170,712
174,197
24,809
(21,141)
-
-
60,776
(42,438)
196,203
664,159
24,452
(20,549)
(36,500)
-
(11,940)
(20,163)
599,459
691,169
32,365
(32,193)
(28,020)
(17,500)
60,776
(42,438)
664,159
(7,556)
13,229
11,986
(24,890)
(34,692)
(11,661)
(30,262)
-
(7,556)
(15,938)
(2,709)
(15,482)
(3,496)
7,050
(17,840)
13,551
(21,141)
(8,888)
(20,549)
(1,931)
(32,193)
286,822
148,246
48,621
335,443
138,576
286,822
-
392,644
-
392,644
-
402,865
-
402,865
-
-
-
-
-
-
-
-
152
-
152
-
-
-
-
-
-
-
21
21
28
28
-
-
-
-
-
-
286,822
148,246
48,621
335,443
138,576
286,822
780,440
134,782
-
915,222
860,591
154,827
-
1,015,418
780,440
527,578
-
1,308,018
860,591
557,692
21
1,418,304
-
-
-
-
-
-
28
28
Movements in carrying
amounts
Carrying amount 1 July
Investments in associate
Share of losses after tax
Dividends received
Share buy-back
Movement in exchange rate
Movement in reserves
Carrying amount at 30 June
Share of profits or losses
recognised
Profit/(loss) before tax
Income tax
(expense)/benefit
Share of losses not
recognised
Balance at 1 July
Unrecognised losses for the
year
Balance at 30 June
Share of expenditure
commitments
Capital commitments
Operating commitments
Lease commitments
Contingent liabilities
Share of contingent
liabilities incurred jointly
with other investors
Westlink M7
Transurban owns a 50% interest in the Westlink Group which holds the concession to design, construct, finance and
operate the Westlink M7 Toll Road in Sydney for a period of 34 years. All were incorporated in Australia.
WSO Company Pty Limited is the operator of the M7.
Westlink Motorway Limited is the nominee manager of the Westlink Motorway Partnership.
WSO Finance Pty Limited is the financier of the M7.
Westlink Motorway Partnership was responsible for the construction of the M7. The M7 opened for operation on 16
December 2005.
The M7 is a fully electronically tolled motorway with distance-based tolling charges. Tolls are escalated or deescalated
quarterly by quarterly CPI.
Transurban also holds the right to provide tolling and customer management services to the M7.
-80-
80 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
9 Equity accounted investments (continued)
M5 Motorway
Transurban holds a 50% ownership interest in the M5 Motorway in Sydney. Tolls are collected on the M5 in both
directions, with four toll collection points. The concession for the M5 Motorway extends to August 2023 when all
concession assets will be returned to the NSW State Government.
The M5 has two tolling categories, cars and similar vehicles and all other vehicles (for example, trucks and buses). Toll
increases for the M5 are based on CPI in $0.50 increments. The M5 is a participant in the NSW State Government
Cashback Scheme. Motorists with ETC accounts and driving privately registered vehicles on the M5 are able to claim the
full amount of tolls paid (excluding GST) from the NSW State Government.
Transurban DRIVe Holdings LLC
Transurban owns 75% of Transurban DRIVe Holdings LLC (DRIVe). DRIVe owns 100% of Pocahontas 895 and 90% of
Capital Beltway Express, both in Virginia, USA. Pocahontas 895 is a 99 year concession ending in June 2105. Tolls are
escalated according to a prescribed schedule until 2016, and the greater of CPI, real GDP or 2.8 per cent thereafter.
Capital Beltway Express is currently in construction phase and is scheduled to open in late 2012, and will have a 75 year
concession period.
10 Non-current assets - Term loan notes
Term loan notes
30 June
2010
$'000
30 June
2009
$'000
678,044
678,044
633,272
633,272
Term Loan Notes (TLN's) represent Transurban's debt funding contribution to the Westlink Motorway. The fixed maturity
date of the TLN's is the earlier of 34 years and the termination of the "Agreement to Lease" between the Roads and Traffic
Authority of New South Wales and Westlink Motorway Limited.
The interest rate charged on these notes is 11.93 per cent and any unpaid interest capitalises into additional notes. During
the year ended 30 June 2010 the Group capitalised interest of $44.8 million (2009: $44.6 million). The TLN's are
accounted for as held-to-maturity investments.
Impairment and risk exposure
None of the TLN's are either past due or impaired. All held-to-maturity investments are denominated in Australian
currency. As a result, there is no exposure to foreign currency risk. There is also no exposure to price risk as the
investments will be held to maturity.
-81-
81 Transurban annual reporT 2010
11 Derivative financial instruments
Current assets
Interest rate swap contracts - cash flow hedges
Non-current assets
Interest rate swap contracts - cash flow hedges
Cross-currency interest rate swap contracts - cash flow hedges
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
271
271
17,484
62,475
79,959
-
-
36,253
27,282
63,535
Total derivative financial instrument assets
80,230
63,535
Current liabilities
Interest rate swap contracts - cash flow hedges
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Cross currency interest rate swap contracts - cash flow hedges
Forward exchange contracts - cash flow hedges
Total derivative financial instrument liabilities
Instruments used by the Group
2,822
2,822
3,336
3,336
96,223
4,416
40,391
141,030
71,545
10,937
22,739
105,221
143,852
108,557
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in interest and foreign exchange rates in accordance with the Group’s financial risk management policies
(refer to note 38).
The instruments used by the Group are as follows:
!
!
Interest rate swap contracts - cash flow hedges
The Group uses interest rate swap contracts for hedging purposes to convert variable rate borrowings to fixed.
Variable rate borrowings of the Group currently bear an average variable interest rate of 6.1 per cent (2009: 4.1 per
cent). It is policy to protect part or all of the loans from exposure to increasing interest rates. Accordingly, the
Group has entered into interest rate swap contracts under which it receives interest at variable rates and pays
interest at fixed rates.
Interest rate swap contracts currently in place cover 100 per cent (2009: 91 per cent) of long term variable debt
excluding working capital facilities. The average all-in rate after hedging on the hedged portion of the Group's
variable rate borrowings is 7.2 per cent (2009: 6.6 per cent).
Forward exchange contracts - cash flow hedges
The Transurban Group raised fixed U.S. Dollar debt through a U.S. Private Placement in November 2006. This
placement was structured to be capital accretive for five years. In order to protect against exchange rate
movements, the Group has entered into forward exchange contracts.
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
in other comprehensive income.
-82-
82 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
11 Derivative financial instruments (continued)
!
Cross-currency interest rate swap contracts - cash flow hedges
The Group has made several U.S. Private Placements raising fixed rate debt. It is the policy of the Group to protect
foreign currency facilities from exposure to unfavourable exchange rate movements. Accordingly, the Group has
entered into cross-currency interest rate swap contracts under which it is obliged to receive foreign currency
interest at fixed rates and pay AUD interest at floating rates.
12 Non-current assets - Property, plant and equipment
Opening balance
Cost
Accumulated depreciation
Net book amount
Movement for the year
Opening net book amount
Additions
Depreciation charge
Closing net book amount
Closing balance
Cost
Accumulated depreciation
Net book amount
30 June
2010
$'000
30 June
2009
$'000
254,675
(138,219)
116,456
217,095
(120,870)
96,225
116,456
44,961
(15,364)
146,053
96,225
47,947
(27,716)
116,456
284,285
(138,232)
146,053
254,675
(138,219)
116,456
During the year, fully written down property, plant and equipment with a cost of $15,351,000 (2009: $10,367,000) were
disposed of.
Included in property, plant and equipment is operating systems, equipment and fittings.
-83-
83 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
13 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
The balance comprises
temporary differences
attributable to:
Accrued expenses
Provisions
Current and prior year losses
Investments
Unearned income
Fixed Assets/Intangibles
Interest receivable
Unrealised gain
Prepayments
Concession fees and promissory
notes
Cash flow hedges
Other
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited/(charged) to the
income statement
Credited/(charged) to equity
Tax losses utilised
Foreign exchange movements
Transfer from deferred tax
assets/liabilities
Closing balance at 30 June
Deferred tax assets/(liabilities) to
be recovered after more than 12
months
2,200
75,819
400,440
-
15,236
3,464
-
14,299
-
-
39,278
2,895
553,631
(541,580)
12,051
1,579
74,738
363,381
15,698
10,721
5,655
-
6,805
-
-
29,111
6,983
514,671
(506,945)
7,726
-
-
-
-
-
(1,004,716)
(44,506)
(11,501)
-
(318,335)
(63,947)
(37)
(1,443,042)
541,580
(901,462)
-
-
-
-
-
(1,035,643)
(43,257)
(312)
(5,705)
(318,914)
(40,145)
(1,038)
(1,445,014)
506,945
(938,069)
2,200
75,819
400,440
-
15,236
(1,001,252)
(44,506)
2,798
-
(318,335)
(24,669)
2,858
(889,411)
-
(889,411)
1,579
74,738
363,381
15,698
10,721
(1,029,988)
(43,257)
6,493
(5,705)
(318,914)
(11,034)
5,945
(930,343)
-
(930,343)
514,671
505,738
(1,445,014)
(1,562,994)
(930,343)
(1,057,256)
28,672
11,064
(611)
(189)
46,338
(45,204)
(419)
2,608
25,726
(23,801)
-
71
49,308
75,156
-
(874)
54,398
(12,737)
(611)
(118)
95,646
29,952
(419)
1,734
24
553,631
5,610
514,671
(24)
(1,443,042)
(5,610)
(1,445,014)
-
(889,411)
-
(930,343)
553,631
553,631
514,671
514,671
(1,443,042)
(1,443,042)
(1,445,014)
(1,445,014)
(889,411)
(889,411)
(930,343)
(930,343)
The set off of deferred tax assets and liabilities relates to deferred tax balances for Australian domiciled entities that are
levied tax by the Australian Taxation Office.
-84-
84 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
14 Non-current assets - Intangible assets
Goodwill
$'000
CityLink
$'000
Hills M2
Motorway
$'000
M1 Eastern
Distributor M4 Motorway
$'000
$'000
Assets under
construction
$'000
Total
$'000
At 1 July 2008
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2009
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2009
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2010
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated amortisation
Net book amount
260,288
-
260,288
4,439,019
(1,031,771)
3,407,248
2,517,866
(323,398)
2,194,468
2,153,780
(68,211)
2,085,569
178,788
(76,465)
102,323
52,565
-
52,565
9,602,306
(1,499,845)
8,102,461
260,288
-
-
260,288
3,407,248
-
(135,744)
3,271,504
2,194,468
-
(64,737)
2,129,731
2,085,569
-
(51,341)
2,034,228
102,323
-
(61,401)
40,922
52,565
73,027
-
125,592
8,102,461
73,027
(313,223)
7,862,265
260,288
-
260,288
4,439,019
(1,167,515)
3,271,504
2,517,866
(388,135)
2,129,731
2,153,780
(119,552)
2,034,228
178,788
(137,866)
40,922
125,592
-
125,592
9,675,333
(1,813,068)
7,862,265
260,288
-
-
260,288
3,271,504
49,982
(134,488)
3,186,998
2,129,731
-
(64,701)
2,065,030
2,034,228
-
(52,050)
1,982,178
40,922
-
(38,448)
2,474
125,592
56,059
-
181,651
7,862,265
106,041
(289,687)
7,678,619
260,288
-
260,288
4,489,001
(1,302,003)
3,186,998
2,517,866
(452,836)
2,065,030
2,153,780
(171,602)
1,982,178
178,788
(176,314)
2,474
181,651
-
181,651
9,781,374
(2,102,755)
7,678,619
Description of intangible assets
Goodwill
Goodwill relates to the Group's Sydney Network and has arisen from the acquisition of Hills Motorway Group, Tollaust Pty
Limited and the Sydney Roads Group.
Concession assets
The CityLink, Hills M2, Eastern Distributor and M4 Motorway Service Concession Arrangements have been accounted for
in accordance with AASB-I 12 and therefore the concession assets have been classified as Intangible Assets.
CityLink concession asset
Transurban holds the Concession for Melbourne’s CityLink tollway which grants the Group the right to design, build,
operate and maintain CityLink for the concession period ending on 14 January 2034 (being 34 years following completion
of construction). Transurban has the right to collect tolls from CityLink for the duration of the Concession Arrangement and
maintains the tollway to ensure continuous availability for public use. Tolls are escalated in accordance with the maximum
allowable increases in the Concession Deed, being a quarterly escalation at the greater of quarterly CPI or 1.1065 per
cent (equivalent to an annual escalation rate of 4.5 per cent) for the first 15 years then quarterly by CPI, but no greater
than annual CPI plus 2.5 per cent. At the end of the concession period, all concession assets are to be returned to the
Victorian State Government.
-85-
85 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
14 Non-current assets - Intangible assets (continued)
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until 2042. The Concession Deed also requires Transurban to
maintain the Motorway.
Toll increases for the Motorway are based on a maximum toll increase as defined in the Concession Deed, being a
quarterly escalation at the greater of quarterly CPI or 1%, subject to integer rounding. At the end of the concession period,
all concession assets will be returned to the NSW State Government.
M1 Eastern Distributor concession asset
Transurban has the right to toll the M1 Eastern Distributor (ED) until 24 July 2048.
Toll increases for the ED are based on a maximum toll increase as defined in the Concession Deed, being a quarterly
escalation at the greater of a weighted sum of quarterly AWE and quarterly CPI or 1% subject to integer rounding. At the
end of the concession period, all concession assets will be returned to the NSW State Government.
M4 Concession asset
Transurban held an investment of 50.61 per cent in the M4 Motorway in Sydney via the concessionaire Statewide Roads
Limited. The M4 Motorway opened in 1992 and was handed back to the NSW State Government on 15 February 2010.
The Group continues to operate and maintain the service centres located on the M4 Motorway.
Assets under construction
The Group is currently undertaking an upgrade of CityLink, scheduled for completion in 2010; and development on the
Hills M2 Motorway. These will be transferred to the respective intangible assets upon completion.
Impairment testing of goodwill and other intangible assets
Impairment testing
The Group tests whether goodwill and other intangible assets have suffered any impairments, in accordance with the
accounting policy stated in note1(i). The recoverable amount of assets and cash-generating units have been determined
based on the greater of value-in-use and fair value less cost to sell calculations. These calculations require the use of
assumptions regarding traffic flows, discount rates, growth rates and other factors affecting operating activities of cash-
generating units.
Key assumptions used for calculating the recoverable amount
The Group makes assumptions in calculating the recoverable amount of its cash generating units. These include
assumptions around expected traffic flows and forecast operational costs. In performing the calculations the Group has
applied a discount rate of 8.8 per cent (2009: 8.8 per cent), representing the implied discount rate applicable to the risk
profile of the Group's assets, to discount the forecast future attributable cash flows. In determining future cash flows, the
Group has also applied rates of growth to underlying operating assumptions to reflect the expected performance of the
assets beyond the budget period in accordance with the respective concessions. The operating costs have been
escalated in line with a combination of Consumer Price Index (CPI) and Average Weekly Earnings (AWE) forecasts. A
long term CPI rate of 2.5 per cent (2009: 2.5 per cent) and AWE of 4.0 per cent (2009: 4.0 per cent) have been used.
15 Current liabilities - Trade and other payables
Trade payables and accruals
Infrastructure bond interest payable
30 June
2010
$'000
30 June
2009
$'000
99,834
102,520
202,354
90,795
94,228
185,023
-86-
86 Transurban annual reporT 2010
16 Borrowings
Current
Infrastructure facilities
Less: Infrastructure facility cash reserve
Working capital facilities
Secured loan - Statewide Roads
Term debt
Capital Markets Debt
Non-current
Infrastructure Facilities
Less: Infrastructure facility cash reserve
Working capital facilities
Term debt
Capital Markets Debt
U.S. Private Placement
Syndicated facility
Total borrowings
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(a)
(b)
(c)
(d)
(a)
(a)
(b)
(c)
(d)
(e)
(f)
-
-
35,604
-
-
-
35,604
537,551
(537,551)
80,000
500
515,500
150,000
746,000
1,187,777
(1,187,777)
-
964,507
1,136,627
1,306,161
597,715
4,005,010
1,091,707
(1,091,707)
14,821
457,739
887,080
1,338,102
598,630
3,296,372
4,040,614
4,042,372
Description of borrowings - Financing arrangements and credit facilities
Credit facilities are provided as part of the overall debt funding structure of the Transurban Group. Each facility is
described below.
(a)
Infrastructure facilities
M1 Airport Motorway
$1,187.8 million (2009: $1,091.7 million) facility certified by the Development Allowance Authority to qualify for
concessional tax treatment under the Income Tax Legislation. The bonds are secured by an infrastructure facility cash
reserve equal to the amount of the loan which is set off against the loan facility, the principal of the refinancing bonds will
be repaid from the infrastructure facility cash reserve on August 2011. The facility was fully drawn down at 30 June 2010.
Hills M2 Motorway
The Hills M2 infrastructure facility matured during the year.
(b) Working capital facilities
The Group has the following facilities in place:
!
!
!
$320.0 million facility which is for a term of 3 years, maturing February 2011. At 30 June 2010, $35.6 million of the
facility was drawn-down in cash. Additionally, $13.4 million had been utilised in letters of credit.
$130.0 million facility which is for a term of 3 years, maturing June 2013. At 30 June 2010, the facility was un-
drawn.
$100.0 million facility which is for a term of 3 years, maturing April 2013. At 30 June 2010, the facility was un-
drawn.
These facilities are secured by a first ranking charge over the cash flows of the Transurban Group.
-87-
87 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
16 Borrowings (continued)
(c) Term debt
The term debt facilities are comprised of a $515.0 million facility entered into by AMT Management Limited (as trustee for
Airport Motorway Trust) and a $465.0 million facility entered into by Hills Motorway Management Limited (as trustee for
Hills Motorway Trust). The facilities have deferred borrowing costs of $9.6 million and $5.9 million respectively.
The Airport Motorway facility was refinanced in July 2009 and is fully secured against the respective rights of Airport
Motorway Limited and Airport Motorway Trust and their assets. The facility is a non-recourse syndicated facility with terms
of three years ($195.0 million), five years ($260.0 million) and seven years ($60.0 million). The current floating interest
rate applicable to the facility is 7.6 per cent (2009: 4.0 per cent). These facilities are fully hedged to an all-in rate after
hedging of 8.4 per cent.
The Hills M2 facility is a non-recourse syndicated facility with terms of three years ($290.5 million) and five years ($174.5
million). The current floating interest rate applicable to the facility is 7.3 per cent (2009: 5.9 per cent). These facilities are
fully hedged to an all-in rate after hedging of 7.8 per cent.
(d) Capital markets debt
These facilities comprise the following:
!
!
!
!
$600.0 million credit wrapped floating rate bonds raised in November 2005 with terms of 10 years ($300 million)
and 12 years ($300 million) with floating interest payable at 5.2 per cent at 30 June 2010. These facilities are fully
hedged with all-in-rates of 6.0 and 5.8 per cent respectively.
$200.0 million non-credit wrapped fixed rate bonds raised in September 2006 with a term of 5 years. Interest is
payable at 6.5 per cent.
$100.0 million non-credit wrapped floating rate bonds raised in September 2006 with a term of 5 years. Floating
interest is payable at 5.4 per cent at 30 June 2010. This facility is fully hedged with an all-in-rate after hedging of
4.4 per cent.
$250.0 million non-credit wrapped fixed rate bonds raised in March 2010 with a term of 4 years. Interest is payable
at 7.3 per cent.
The facilitites have deferred borrowing costs of $13.4 million. These facilities are secured by first ranking charge over the
cash flows of the Group.
(e) U.S. private placement
The composition of the three US Private Placements is outlined below:
Fixed Interest Rate
Dec 04 - Tranche A
Dec 04 - Tranche B
Dec 04 - Tranche C
Aug 05 - Tranche A
Aug 05 - Tranche B
Aug 05 - Tranche C
Nov 06 - Tranche A
Nov 06 - Tranche B
Nov 06 - Tranche C
Nov 06 - Tranche D
Floating Interest Rate
Dec 04 - Tranche D
Total US Private Placement
Deferred borrowing costs
Total
88 Transurban annual reporT 2010
USD
$'000
100,000
38,900
108,600
98,000
125,500
156,500
52,366
166,469
148,562
61,619
1,056,516
Maturity
Dec 2014
Dec 2016
Dec 2019
Aug 2015
Aug 2017
Aug 2020
Nov 2016
Nov 2018
Nov 2021
Nov 2026
Dec 2019
AUD
$'000
117,330
45,641
127,420
114,983
147,249
183,621
61,440
195,317
174,307
72,297
1,239,605
72,000
72,000
1,311,605
(5,444)
1,306,161
Rate
5.02%
5.17%
5.47%
5.04%
5.19%
5.35%
5.71%
5.86%
5.95%
6.06%
5.71%
-88-
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
16 Borrowings (continued)
Note that the Dec 04 - Tranche D facility is fully hedged with an all in rate after heding of 6.7 per cent.
These facilities are secured by a first ranking charge over the cash flows of the Group.
Hedge of net investment in foreign entity
Transurban's investment in Transurban DRIVe Holdings LLC acts as a natural hedge against exposure to foreign currency
movements in a portion of the US Private Placement (Nov 06 - Tranche C). Exchange differences arising on the
revaluation of the USD debt are recognised in profit or loss in the separate financial report of Transurban Finance
Company Pty Limited. In the consolidated financial report, such exchange differences are recognised initially in a separate
component of equity and will be recognised in the profit or loss on disposal of the net foreign investment.
As at 30 June 2010, the Group has deferred $16.8 million in gains (2009: $8.0 million).
(f) Syndicated facility
This facility comprises syndicated bank debt issued by Transurban Finance Company Pty Limited, with terms of five years
($375.0 million), seven years ($100.0 million) and ten years ($125.0 million) with applicable interest rates ranging between
5.1 and 5.3 per cent. This facility is fully hedged with all-in rates after hedging ranging from 7.2 to 7.3 per cent.
The facility has deferred borrowing costs of $2.3 million. This facility is secured by a first ranking charge over the cash
flows of the Group.
Letters of credit
The Group has provided a $20 million letter of credit as a requirement of the CityLink Concession Deed. The letter of
credit is currently undrawn and therefore no liability has been recorded.
Set-off of assets and liabilities
A legal right of set-off exists in respect of the specific cash deposit of $1,187.7 million (2009: $1,621.3 million) representing
collateralisation of the M1 Airport Motorway Infrastructure Facility and the Hills M2 Infrastructure Facility (prior year).
Covenants
The Group's debt has the following Interest Coverage Ratio ("ICR") covenants:
!
!
CityLink - ICR greater than 1.1 times
Group - ICR greater than 1.25 times
In addition, the Group has a market capitalisation based clause where gearing must not exceed 60%. Based on the
balance sheet as at 30 June 2010, the Group's security price would need to close below $1.88 per Security for 20
consecutive business days to trigger this clause.
In addition, the non-recourse debt at M1 Eastern Distributor and Hills M2 Motorway has the following covenants:
!
!
M1 Eastern Distributor - ICR greater than 1.2 times
Hills M2 Motorway - ICR greater than 1.2 times
-89-
89 Transurban annual reporT 2010
17 Provisions
Current
Employee benefits
Restructuring and onerous lease provision
Distribution to security holders
Distributions to non-controlling interests in subsidiaries
Maintenance provision
Non-current
Employee benefits
Maintenance provision
Provision for contingent consideration
Total provisions
Movements in provisions
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(b)
(c)
(c)
(d)
(a)
(d)
(e)
25,185
2,876
169,818
27,662
68,028
293,569
1,645
129,980
49,987
181,612
20,542
4,584
141,153
30,493
65,639
262,411
1,764
137,853
-
139,617
475,181
402,028
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Current
Non-current
Restructuring
and onerous
lease provision
$'000
Distribution
to security
holders
$'000
Distributions to
non-controlling
interests in
subsidiaries
$'000
Current
maintenance
provision
$'000
Non-current
maintenance
provision
$'000
Provision for
contingent
consideration
$'000
4,584
-
141,153
324,566
30,493
11,613
65,639
17,758
137,853
-
-
49,987
(1,581)
(295,901)
(14,444)
(22,396)
-
(127)
-
-
2,876
-
-
-
-
-
-
7,027
(7,027)
-
-
-
(846)
-
-
-
-
169,818
-
27,662
-
68,028
-
129,980
-
49,987
Consolidated - 2010
Balance at 1 July
Provision recognised
Amount paid/utilised during
the year
Transfer (to)/from
current/non-current
Movements in foreign
exchange rates
Unwinding of discount
Long term incentive loan
repayment
Balance at 30 June
Description of provisions
(a) Employee benefits
Employee benefits relate to the provision for annual leave, bonuses and long service leave.
(b) Restructuring and onerous lease provision
A restructuring provision is recognised when the main features of the restructuring are planned and there is a
demonstrable commitment and valid expectation that the restructuring plan will be implemented.
(c) Distribution to security holders and non-controlling interests
These distributions are provided for once approved by the board and are announced to equity holders.
-90-
90 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
17 Provisions (continued)
(d) Maintenance provision
A maintenance provision is recognised for the present value of the Group's obligations to maintain the tolling assets as
required under the Service Concession Arrangements.
(e) Provision for contingent consideration
As part of the M1 CityLink Upgrade project agreement with the Victorian State Government, Transurban agreed to share
any increased revenue resulting from the upgrade once all investment and future operating costs for the new Southern
Link Upgrade section are recovered.
The payment will represent 50 per cent of the present value of the increased revenue (net of capital cost) expected to be
collected as a result of the upgrade. Actual toll revenue for the period to the end of the third full financial year post
construction completion is extrapolated to the end of the CityLink concession to determine the payment amount.
A provision and corresponding intangible asset have been recognised for the potential obligation to pay the State.
18 Other liabilities
Current
Prepaid tolls
Unearned income
Payable for settlement of CityLink concession notes
Amounts payable to associates
Other
Non-current
Concession and promissory notes
Lease incentive
Other
Total other liabilities
Description of other liabilities
(a) Prepaid tolls
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(b)
(c)
(d)
56,393
21,063
-
-
579
78,035
41,846
3,146
544
45,536
53,462
20,815
61,795
12,800
580
149,452
25,190
3,726
510
29,426
123,571
178,878
Prepaid tolls represent amounts received from customers and held on deposit until the charge is incurred by the user.
(b) Unearned income
Unearned income represents amounts received in advance and will be recognised when the income is earned.
(c) Payable for settlement of CityLink concession notes
Transurban reached an agreement with the State of Victoria and Vic Roads to jointly fund upgrades and improvements to
75 kilometres of the West Gate - CityLink (Southern Link) - Monash Freeway corridor. To fund the upgrade Transurban
agreed to pay the State $614.3 million over three years in satisfaction of its current and future obligations to repay
concession notes issued to the State.
The agreement effectively represents the termination of any future obligation to the State of Victoria by the Group by
assigning the right to receive future concession payments made by CityLink Melbourne to Transurban Holding Trust. On a
Group basis, the impact of concession notes on the balance sheet and income statement is nil, as the Group has a right of
offset.
-91-
91 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
18 Other liabilities (continued)
(d) Concession and promissory notes
M1 Eastern Distributor
The Eastern Distributor Project Deed between Airport Motorway Limited, Airport Motorway Trust and the Roads and Traffic
Authority (RTA) provides for annual concession fees of $15.0 million during the construction phase and for the first 24
years after construction completion of the Eastern Distributor (ED). Until a certain threshold return is achieved, payments
of concession fees due under the ED Project Deed will be satisfied by means of the issue of non-interest bearing
Concession Notes.
Concession Notes are recognised at the present value of expected future repayments. As the timing and profile of these
repayments is largely determined by the available equity cash flows of the M1 Motorway, the present value of the expected
future repayments is determined using a discount rate of 12 per cent which recognises their subordinate nature.
The face value of Concession Notes on issue at 30 June 2010 is $195.0 million (2009: $180.0 million). The net present
value at 30 June 2010 of the redemption payments relating to these Concession Notes is $25.2 million (2009: $14.6
million).
M2 Motorway
The Hills Motorway Trust has entered into leases with the Roads and Traffic Authority of New South Wales (RTA). Annual
lease liabilities under these leases total $7.0 million, indexed annually to the Consumer Price index over the estimated
period that the M2 Motorway will be used. Until such time as a threshold return is achieved, payments under these leases
can be made at any time at the discretion of the Responsible Entity of the Trust, by means of the issue of non-interest
bearing Promissory Notes to the RTA.
Promissory Notes are recognised at the present value of expected future repayments. As the timing and profile of these
repayments is largely determined by the available equity cash flows of the M2 Motorway, the present value of the expected
future repayments is determined using a discount rate of 12 per cent which recognises their subordinated nature.
The face value of Promissory Notes on issue at 30 June 2010 is $116.2 million (2009: $106.2 million). The net present
value at 30 June 2010 of the redemption payments relating to these Promissory Notes is $16.6 million (2009: $10.6
million).
19 Contributed equity
Share capital
Fully paid stapled securities
Fully paid stapled securities
Stapled securities
30 June
2010
$'000
30 June
2009
$'000
7,656,383
7,656,383
7,106,243
7,106,243
Number
'000
Number
'000
1,414,295
1,414,295
1,281,363
1,281,363
The number of stapled securities on issue is 1,414,667,986 (2009: 1,282,682,606). The difference of 373,804 (2009:
1,319,606) relates to treasury securities.
Stapled securities entitle the holder to participate in distributions and the winding up of the Transurban Group in proportion
to the number of and amounts paid on the securities held. On a show of hands every holder of stapled securities present
at a meeting in person or by proxy, is entitled to one vote.
-92-
92 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
19 Contributed equity (continued)
Capital risk management
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital on the
basis of the gearing ratio to ensure compliance with the covenant. There have been no breaches of the covenant. For
further information refer to note 16.
The Group’s objective when managing capital is to safeguard their ability to continue as a going concern, so that it can
continue to provide returns to security holders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of distributions paid to security
holders, return capital to security holders, issue new securities or sell assets to reduce debt.
Movements in ordinary share capital:
Opening balance at 1 July 2008
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Share purchase plan, net of transaction costs
Less: Amounts attributable to Transurban International Limited
Closing balance at 30 June 2009
Opening balance at 1 July 2009
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Equity placement, net of transaction costs
Less: Amounts attributable to Transurban International Limited
Closing balance at 30 June 2010
Number of
securities
'000
Consolidated
$'000
Notes
(a)
(b)
(c)
(d)
(a)
(b)
(e)
(d)
1,218,263
60,591
679
1,830
-
1,281,363
1,281,363
14,069
946
117,917
-
1,414,295
6,846,992
286,418
6,383
9,879
(43,429)
7,106,243
7,106,243
65,381
8,437
530,313
(53,991)
7,656,383
(a) Distribution Reinvestment Plan
The Transurban Group has established a distribution reinvestment plan under which holders of stapled securities may
elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather than by cash.
Securities are to be issued under the plan at 2.5 per cent discount to market price for the 30 June 2010 distribution.
(b) Treasury securities
Stapled securities were issued to executives under share based payment plans. The securities are held by the executive
but will only vest in the executive in accordance with the terms of the plans. The acquired securities cannot be transferred
or sold prior to vesting date. On forfeit, the securities are sold on market.
(c) Share purchase plan
In the prior year, Transurban raised $10.0 million via a share purchase plan, issuing 1.8 million stapled securities to
eligible security holders.
(d) Non-controlling interest - Transurban International Limited
THL has been identified as the parent entity of the post-date of transition stapling arrangement of THL, THT and TIL.
AASB Interpretation 1002 requires the equity of TIL to be classified as a non-controlling interest.
(e) Equity placement
Transurban raised $542.4 million, less costs, via an equity raising, issuing 117.9 million stapled securities.
-93-
93 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
20 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Foreign currency translation
Transactions with non-controlling interests
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross
Deferred tax (note 13)
Transfer to net profit
Amount attributable to non-controlling interest
Movement in associate's reserve
Movement in associate's reserve attributable to non-controlling interest
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Employee distribution
Transfer to equity (vested loan)
Balance 30 June
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Currency translation differences arising during the year attributable to non-controlling
interest
Balance 30 June
Transactions with non-controlling interests
Balance 1 July
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
30 June
2010
$'000
30 June
2009
$'000
63,602
6,128
(12,009)
(5,127)
52,594
20,744
38,704
(13,635)
17,120
669
(20,163)
20,163
63,602
5,505
3,949
-
(3,326)
6,128
(8,892)
(1,781)
(1,336)
(12,009)
20,744
5,505
(8,892)
(5,127)
12,230
105,726
(125,385)
29,952
8,964
1,487
(42,438)
42,438
20,744
7,012
1,854
(70)
(3,291)
5,505
(8,502)
29,012
(29,402)
(8,892)
(5,127)
(5,127)
(5,127)
(5,127)
Balance at 1 July
Profit (loss) attributable to ordinary equity holders of the stapled group
Distributions to ordinary equity holders
Transfer of loss attributable to non-controlling interest - Transurban International
Limited
Balance 30 June
(3,605,921)
59,418
(324,566)
(3,300,393)
(24,575)
(280,953)
34,110
(3,836,959)
-
(3,605,921)
-94-
94 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
20 Reserves and accumulated losses (continued)
Nature and purpose of reserves
Cash flow hedges
The cash flow hedges reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are
recognised in other comprehensive income, as described in note 1(l). Amounts are reclassified to profit or loss when the
associated hedged transaction affects profit and loss.
Share-based payments
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not exercised.
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income as
described in note 1(d) and accumulated in this reserve within equity.
Transactions with non-controlling interests
The transactions with non-controlling interests reserve was created as a result of the acquisition of an additional 3.75 per
cent of the Airport Motorway Group during a prior year as the Group uses the economic entity approach to transactions
with non-controlling interests.
21 Distributions
Distributions proposed
Final distribution payable and recognised as a liability:
12.0 cents (2009: 11.0 cents) per fully paid stapled security payable 27 August 2010
Distributions paid during the year
Final distribution for 2009 financial year of 11.0 cents (2008: 29.0 cents) per fully paid
Stapled Security paid 28 August 2009
Interim distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully paid
Stapled Security paid 26 February 2010
Distributions paid in cash or satisfied by the issue of Stapled Securities under the
distribution reinvestment plan during the years ended 30 June 2010 and 30 June 2009
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities
Funds available (from)/for future distribution reinvestment plans
30 June
2010
$'000
30 June
2009
$'000
169,760
169,760
141,095
141,095
141,095
319,076
154,806
295,901
140,041
459,117
230,451
65
65,381
4
295,901
172,161
551
286,418
(13)
459,117
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
(2009 - 30%)
216,076
143,892
-95-
95 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
22 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity and its
related practices:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and Other Assurance Services
- Audit and review of financial reports
PricewaterhouseCoopers Australia
- Other assurance services
PricewaterhouseCoopers Australia
Total audit and other assurance services
Taxation services
PricewaterhouseCoopers Australia
- Indirect taxation services
Total taxation services
30 June
2010
$
30 June
2009
$
1,022,000
1,200,000
474,802
1,496,802
25,792
1,225,792
-
-
617,063
617,063
Total remuneration for PricewaterhouseCoopers
1,496,802
1,842,855
Amounts received or due and receivable by non-PwC audit firms for:
Audit services
Audit and review of financial report
Other services
- Other assurance services
- Taxation services
Total remuneration for non-PwC audit firms
Total auditors remuneration
88,400
94,380
296,550
95,847
480,797
867,888
178,950
1,141,218
1,977,599
2,984,073
The audit fee relates to the amount due to Ernst & Young who are the auditors of Statewide Roads Limited. Other
assurance and tax fees are for other services Ernst and Young were engaged for throughout the Group.
-96-
96 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
23 Contingencies
Contingent liabilities
The Group and parent entity had contingent liabilities at 30 June 2010 in respect of:
Equity guarantee
Transurban DRIVe Holdings LLC (DRIVe), a related party of the Transurban Group, holds a concession agreement with
The Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on the Capital Beltway (Capital
Beltway project), a ring road that runs around Washington DC. The project is currently in the construction phase.
Construction is expected to take five years and the tolling concession will operate for 75 years.
On 20 December 2007 (and as amended on 12 June 2008) the Transurban Group, through the entities in the triple staple,
being Transurban Holdings Limited, Transurban International Limited and Transurban Infrastructure Management Limited
(as responsible entity of the Transurban Holding Trust), entered into an agreement with Capital Beltway Express LLC
(Capital Beltway Express), a subsidiary of DRIVe, the Virginia Department of Transportation, Goldman Sachs Capital
Markets L.P., Depfa Bank plc and Wells Fargo Bank N.A. to provide an Equity Funding Guarantee (the Guarantee) over all
of DRIVe’s equity obligations associated with funding the equity contributions to the Capital Beltway project.
The Transurban Group owns 75% of the equity of DRIVe and recognises this investment in the consolidated financial
statements using the equity method of accounting. DRIVe holds 90% of the equity in Capital Beltway Express and, from
time to time, is required to make equity contributions to Capital Beltway Express to fund the equity component of the
Capital Beltway project costs. The total equity contribution DRIVe is obliged to make to Capital Beltway Express is
US$313,825,757, of which US$133,064,838 had been paid at balance sheet date.
In accordance with the DRIVe Holdings LLC Agreement, should a DRIVe member default on any capital calls, the
Transurban Group has the right to acquire their share of DRIVe at a 50% discount to its fair value. As such in the instance
of the Guarantee being called, the Transurban Group may exercise its right to acquire the interest in DRIVe at a
discounted value.
Contingent assets
DRIVe capital sum
As a part of the establishment of Transurban DRIVe, DRIVe Holdings LLC agreed to make a "capital sum" compensation
payment to Transurban for contributing to DRIVe the right to negotiate the Capital Beltway and I-95.
The fee is payable to Transurban if the pre-financing/pre-tax net present value of Capital Beltway or I-95 is positive as at
financial close, when calculated three years after the completion of construction. Receipt of the capital sum is contingent
on the projects achieving positive net present value at the strike date, and as such this amount has not been recognised
on the balance sheet. Due to uncertainty associated with the amount and timing of the potential receipt, it is not practical
to quantify the potential amount.
24 Intra-group Guarantees
As at 30 June 2010, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and
Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities within
the group on a continual basis.
-97-
97 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
25 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment payable:"
Within one year
Later than one year but not later than five years
Later than five years
Operating commitments payable:
Within one year
Later than one year but not later than five years
Later than five years
Intangible assets
Within one year
Later than one year but not later than five years
Lease commitments
Commitments in relation to leases contracted for at the reporting date but not recognised
as liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
Sub-lease payments
Future minimum lease payments expected to be received in relation to non-cancellable
sub-leases of operating leases
30 June
2010
$'000
30 June
2009
$'000
5,490
-
-
5,490
41,977
70,093
307,011
419,081
35,000
13,600
48,600
7,801
52
4
7,857
34,657
74,025
317,156
425,838
29,350
-
29,350
4,506
15,869
5,232
25,607
3,862
16,449
8,910
29,221
1,592
1,592
1,947
1,947
Promissory Notes
The Responsible Entity, on behalf of the Hills Motorway Trust, has entered into an agreement with the Roads and Traffic
Authority of New South Wales (RTA). Annual liabilities under this agreement total $7.0 million indexed annually to the
Consumer Price Index over the estimated period that the M2 Motorway will be used. Until such time as a threshold return
is achieved, payments under this agreement can be made at the discretion of the Responsible Entity, by means of the
issue of non-interest bearing promissory notes to the RTA. For further information refer to note 18.
Concession Notes
The Eastern Distributor Project Deed between Airport Motorway Limited, Airport Motorway Trust and the RTA provides for
annual concession fees of $15.0 million during the construction phase and for the first 24 years after the construction
completion date of the Eastern Distributor.
Other operating leases
The Group leases various offices under non-cancellable operating leases expiring within one to eleven years. The leases
have varying terms, escalating clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
-98-
98 Transurban annual reporT 2010
26 Related party transactions
Transactions with associates
The following transactions occurred with related parties:
Revenue from services
Operating electronic tolling system for Westlink
Business development fees
Consulting fees on refinancing
Interest earned
Term Loan Notes
Loans to/from associates
Term loan notes
Beginning of the year
Net interest capitalised
Acquisition of additional interest in Westlink M7
Loans to Transurban DRIVe Holdings LLC
Beginning of the year
Loans advanced
Foreign exchange movements
Loans repaid
Loans from Transurban DRIVe Holdings LLC
Beginning of the year
Loans advanced
Foreign exchange movements
Loans repaid
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
30 June
2010
$
30 June
2009
$
6,477,365
18,446,959
750,000
25,674,324
7,815,312
28,699,549
-
36,514,861
78,879,621
72,862,036
30 June
2010
$
30 June
2009
$
633,272,067
44,772,100
-
678,044,167
558,223,463
44,604,379
30,444,225
633,272,067
10,968,696
-
(221,202)
(10,747,494)
-
28,946,510
5,583,207
6,156,549
(29,717,570)
10,968,696
(12,799,885)
-
221,202
12,578,683
-
(30,037,362)
(207,893)
(6,156,549)
23,601,919
(12,799,885)
No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts from related parties.
Transactions with director related parties
Refer to note 36 for director related party transactions.
Term loan notes
The Term Loan Notes (TLN) earn interest at a fixed rate of 11.93 per cent until the earlier of 34 years and the termination
of the Agreement to Lease between the RTA and Westlink Motorway Limited.
-99-
99 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
26 Related party transactions (continued)
Any unpaid interest is capitalised and deemed to subscribe for further loan notes with an aggregate principal amount equal
to that unpaid interest.
The TLN are classified as a held-to-maturity receivable. It is not classified as an investment for equity accounting
purposes, and therefore has not been affected by equity accounting losses from the associate.
27 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Name of entity
Country of
incorporation Class of shares
Equity holding
2009
2010
%
%
CityLink Trust
CityLink Melbourne Limited
City Link Extension Pty Limited
Transurban Infrastructure Management Limited
Transurban Limited
Transurban Collateral Security Pty Limited
Transurban Finance Trust
Transurban Finance Company Pty Limited
Transurban Nominees Pty Limited
Transurban Nominees 2 Pty Limited
Transurban WSO Pty Limited
Transurban AL Trust
Transurban CARS Trust
Transurban WSO Trust
Roam Tolling Pty Limited
Transurban Retail Pty Limited
Transurban (USA) Holdings No.1 Pty Limited
Transurban (USA) Holdings No.2 Pty Limited
Transurban (USA) Holdings No.3 Pty Limited
Transurban Asset Management Pty Limited
Transurban Operations Pty Limited
Transurban Investments Pty Limited
The Hills Motorway Limited
Hills Motorway Management Limited
Hills Motorway Construction Company Pty Limited
Hills Motorway Underwriting No.1 Pty Limited
Hills Motorway Trust
LMI WSO Holding No.2 Pty Limited
Abigroup WSO Holding No.2 Pty Limited
Abigroup Westlink Partner Holding No.4 Pty Limited
Abigroup Westlink Partner No.4 Pty Limited
Abigroup WSO Holding No.4 Pty Limited
Abigroup Westlink Partner Holding No.2 Pty Limited
Abigroup Westlink Partner No.2 Pty Limited
LMI Westlink Partner Holding No.4 Pty Limited
LMI Westlink Partner No.4 Pty Limited
LMI WSO Holding No.4 Pty Limited
LMI Westlink Partner Holding No. 2 Pty Limited
LMI Westlink Partner No.2 Pty Limited
Tollaust Pty Limited
Transurban (USA) Inc.
Transurban (USA) Holdings Inc.
Transurban (USA) Operations Inc.
Transurban (895) General Partnership
100 Transurban annual reporT 2010
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
USA
-100-
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
27 Subsidiaries (continued)
Name of entity
Country of
incorporation Class of shares
Equity holding
2009
2010
%
%
T (895) Finance Trust
Transurban International Holdings Limited
Transurban DRIVe Management LLC
Sydney Roads Limited
Sydney Roads Trust
Sydney Roads Management Limited
Eastern Distributor Funding Trust
Airport Motorway Trust
Airport Motorway Holdings Pty Limited
Airport Motorway Limited
Airport Motorway Construction Company Pty Limited
AMT Management Limited
M5 Holdings Funding Trust
M5 Holdings Pty Limited
M4 Holdings No. 1 Pty Limited
Devome Pty Limited
Statewide Roads Limited
SWR Services Pty Limited
SWR Engineers Pty Limited
Statewide Roads (M4) Pty Limited
SWR Operations Pty Limited
SWR Properties Pty Limited
Statewide Roads (M2) Pty Limited
SWR Constructors Pty Limited
LCT-MRE Pty Limited **
LCT-MRE Nominees Pty Limited **
LCT-MRE Trust **
**
Incorporated on 7 May 2010
Australia
Bermuda
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
-
75.10
75.10
75.10
75.10
100
100
100
100
75
50.61
50.61
50.61
50.61
50.61
50.61
50.61
50.61
100
100
100
100
100
100
100
100
100
100
75.10
75.10
75.10
75.10
100
100
100
100
75
50.61
50.61
50.61
50.61
50.61
50.61
50.61
50.61
-
-
-
-101-
101 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
28 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Retained earnings
Loss for the year
Total comprehensive income
Guarantees entered into by the parent entity
30 June
2010
$'000
30 June
2009
$'000
700,802
266,811
1,971,408
2,012,820
2,672,210
2,279,631
469,836
219,161
1,511,820
1,473,241
1,981,656
1,692,402
552,883
2,775
134,896
690,554
413,878
1,017
172,334
587,229
(37,438)
(63,968)
(37,438)
(63,968)
There are cross guarantees given by Transurban Holdings Limited, Transurban Limited, Tollaust Pty Limited, Roam Tolling
Pty Limited, Sydney Roads Limited, Sydney Roads Management Limited, and M5 Holdings Pty Limited as described in
note 29.
Contingent liabilities of the parent entity
For details of contingent liabilities of the parent entity, refer to note 23.
-102-
102 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
29 Deed of cross guarantee
Transurban Holdings Limited, Transurban Limited, Tollaust Pty Limited, Roam Tolling Pty Limited, Sydney Roads Limited,
Sydney Roads Management Limited and M5 Holdings Pty Limited are party to a deed of cross guarantee under which
each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been
relieved from the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended)
issued by the Australian Securities and Investments Commission.
Consolidated income statement, statement of comprehensive income and summary of movements in
consolidated retained earnings
The above companies represent a ‘closed group' for the purposes of the Class Order, and as there are no other parties to
the deed of cross guarantee that are controlled by Transurban Holdings Limited, they also represent the ‘extended closed
group'.
Set out below is a consolidated income statement and a summary of movements in consolidated retained profits for the
years ended 30 June 2010 and 30 June 2009 for the parties to the deed of cross guarantee.
Income statement
Revenue
Operating costs
Depreciation and amortisation expense
Net finance costs
Loss before income tax
Income tax benefit
Loss for the year
Statement of comprehensive income
Loss for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Summary of movements in consolidated retained earnings
(Accumulated losses) at the beginning of the financial year
(Loss) for the year
(Accumulated losses) at the end of the financial year
30 June
2010
$'000
30 June
2009
$'000
141,081
(102,462)
(7,482)
(68,845)
(37,708)
34,506
(3,202)
123,663
(115,436)
(14,330)
(79,066)
(85,169)
51,852
(33,317)
(3,202)
-
(3,202)
(33,317)
-
(33,317)
(202,280)
(3,202)
(205,482)
(168,963)
(33,317)
(202,280)
-103-
103 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
29 Deed of cross guarantee (continued)
Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2010 and 30 June 2009 for the parties to the deed of cross
guarantee.
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Payables
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
30 June
2010
$'000
30 June
2009
$'000
516,255
359,317
875,572
36,971
378,017
414,988
1,286,015
129,178
410,187
1,825,380
1,286,015
96,416
375,432
1,757,863
2,700,952
2,172,851
1,600,650
15,578
1,616,228
1,176,558
14,282
1,190,840
597,620
134,700
2,228
734,548
618,439
149,533
1,424
769,396
2,350,776
1,960,236
350,176
212,615
552,883
2,775
(205,482)
350,176
413,878
1,017
(202,280)
212,615
30 Events occurring after the balance sheet date
Subsequent to the end of the financial year, the Group has completed the acquisition of the assets and motorway
concession deed connected with the Lane Cove Tunnel in Sydney. The Group took control of the assets and concession
deed on 10 August 2010. The acquisition was funded through cash on hand from a capital raising in May 2010 and
external borrowings.
-104-
104 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
31 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit (loss) for the year
Depreciation and amortisation
Non-cash share-based payments expense
Non-cash finance costs
Share of net profits/(losses) of equity accounted investments
Maintenance provision
Fair value losses on derivatives/available for sale securities
Change in operating assets and liabilities
Increase (decrease) in concession and promissory note liability
Increase (decrease) in creditors
Decrease in debtors
(Increase) in term loan notes
Increase (decrease) in operating provisions
Movement in current tax liabilities and deferred taxes
Net cash inflow from operating activities
32 Non-cash investing and financing activities
Distributions satisfied by the issue of stapled securities under the distribution
reinvestment plan
33 Earnings per stapled security
Basic earnings per security
Earnings per security attributable to the ordinary equity holders of the stapled group
Diluted earnings per security
Earnings per security attributable to the ordinary equity holders of the stapled group
30 June
2010
$'000
30 June
2009
$'000
59,605
305,051
5,159
55,981
20,549
17,758
-
16,656
7,130
8,232
(44,772)
2,817
(98,384)
355,782
(16,134)
340,939
1,994
77,781
32,193
18,637
25,433
(4,402)
(43,061)
8,331
(44,648)
(6,598)
(70,438)
320,027
30 June
2010
$'000
30 June
2009
$'000
65,381
65,381
286,414
286,414
30 June
2010
Cents
30 June
2009
Cents
4.6
4.6
4.6
4.6
(1.9)
(1.9)
(1.9)
(1.9)
-105-
105 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
33 Earnings per stapled security (continued)
Reconciliations of earnings used in calculating earnings per security
30 June
2010
$'000
30 June
2009
$'000
Basic and diluted earnings per security
Profit (loss) for the year
Profit attributable to non-controlling interests
Profit (loss) attributable to ordinary equity holders of the stapled group in calculating
earnings per security
59,605
(187)
59,418
(16,134)
(8,441)
(24,575)
Weighted average number of securities used as the denominator
30 June
2010
Number
30 June
2009
Number
Weighted average number of securities used as the denominator in calculating basic
earnings per security
Adjustments for calculation of diluted earnings per security:
Performance rights
Weighted average number of ordinary securities and potential ordinary securities used
as the denominator in calculating diluted earnings per security
1,301,035,941
1,267,502,187
2,750,885
1,297,389
1,303,786,826
1,268,799,576
Basic earnings per stapled security
Basic earnings per stapled security is calculated by dividing the profit (loss) attributable to members of the stapled security
excluding any non-controlling interest and costs of servicing equity other than distributions, by the weighted average
number of securities outstanding during the financial year.
Diluted earnings per stapled security
Diluted earnings per stapled security adjusts the figures used in the determination of basic earnings per stapled security to
take into account the after income tax effect of interest and other financing costs associated with dilutive potential stapled
securities and the weighted average number of additional stapled securities that would have been outstanding assuming
the conversion of all dilutive potential stapled securities.
34 Net tangible asset backing
30 June
2010
$'000
30 June
2009
$'000
Net tangible asset backing per stapled security *
2.77
2.79
(*) - Net tangible assets used as the basis for this calculation include the relative concessions and permits relating to the
operational assets of the Group. Assets of this type are characterised as intangibles under AIFRS.
-106-
106 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments
2009 and 2010 Performance Awards Plan
The Performance Awards Plan (PAP) is a modified version of the 2008 Performance Rights Plan (PRP) discussed below.
Under the PAP, eligible executives receive a grant of Performance Awards which entitles participants to receive securities
at no cost subject to the achievement of performance conditions. The Board has discretion as to the form of the award at
the end of the performance period and may grant cash payments of equivalent value at vesting. No dividends or
distributions on securities are payable to participants prior to vesting.
Dual performance measures (earnings before interest, tax, depreciation and amortisation (EBITDA) measure and relative
total security holder return (TSR)) apply to Performance Awards, each representing 50 per cent of the award. The use of
dual measures balances the need to both improve the underlying performance of the business over the long term as well
as appropriate returns relative to the market.
Performance Awards were granted on 1 November 2008 and 11 December 2009 with a three year vesting period. For the
1 November 2008 grant, the awards are tested at the end of each year. If the performance measures are satisfied for the
year, one third of the awards are preserved until the end of the three year period. At the end of the three years a
cumulative test of the performance measures is applied to any unvested awards. For the 11 December 2009 grant, the
awards are tested at the end of the three year vesting period only.
Grant Date
2010
1 Nov 2008
11 Dec 2009
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2011
11 Dec 2012
3.30
3.33
4.27
4.97
1,314,288
-
1,314,288
-
1,990,913
1,990,913
-
-
-
(36,658)
-
(36,658)
1,277,630
1,990,913
3,268,543
Weighted average exercise price
$3.79
$4.15
$-
$3.79
$4.01
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2009
1 Nov 2008
Total
1 Nov 2011
3.30
4.27
-
-
1,345,370
1,345,370
-
-
(31,082)
(31,082)
1,314,288
1,314,288
Weighted average exercise price
$-
$3.79
$-
$3.79
$3.79
-107-
107 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments (continued)
2009 Executive Equity Plan
Equity awards were granted under the Executive Equity Plan (EEP) based on executives’ performance and were designed
to encourage retention of executives while focusing on business excellence.
Individuals who are high performers and in business critical roles were nominated for awards for their past contribution and
expected future performance. Board approval was required to grant EEP awards to nominated executives.
Under the EEP, eligible executives received a grant of stapled securities in the Transurban Group (”securities”) at no cost
that are subject to disposal restrictions for three years from the grant date. Participants are entitled to distributions paid on
their Securities during the restriction period. If the executive ceases employment with Transurban during the restriction
period, their Securities will be forfeited unless the Board decides otherwise.
Awards were last made under the EEP on 1 November 2008. The table below provides details of the awards granted.
Grant Date
Expiry date
Fair
value at
grant
date
Balance at
start of
the year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2010
1 Nov 2008
Total
1 Nov 2011
$4.27
611,692
611,692
-
-
(2,953)
(2,953)
(60,089)
(60,089)
548,650
548,650
Weighted average exercise price
$4.27
$-
$4.26
$4.13
$4.27
Grant Date
Expiry date
Fair
value at
grant
date
Balance at
start of
the year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2009
1 Nov 2008
Total
1 Nov 2011
$4.27
-
-
632,886
632,886
(722)
(722)
(20,472)
(20,472)
611,692
611,692
Weighted average exercise price
$-
$4.27
$4.27
$4.27
$4.27
-108-
108 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments (continued)
2008 Performance rights plan
The Performance Rights Plan (PRP) enabled eligible executives to receive a grant of Performance Rights that entitled
participants to receive stapled securities in the Transurban Group (Securities) at no cost at the end of a three year
performance period, subject to the achievement of performance conditions. No dividends or distributions on Securities
were payable to participants prior to vesting. The Plan has two performance measures, EBITDA and relative TSR against
the S&P/ASX 100 Industrials, each applied to 50 per cent of the PRP award. For US participants of the plan, they will be
awarded a cash amount instead of stapled securities at the end of the three year performance period, subject to
performance conditions.
There is only one testing date at the end of the performance hurdles at the vesting date.
Awards were last made under the PRP in November 2007.
Australian based plan
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2010
3.50
5.96
345,854
345,854
-
-
(14,260)
(14,260)
331,594
331,594
Weighted average exercise price
$4.73
$-
$4.73
$4.73
Grant Date
2009
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2010
3.50
5.96
654,610
654,610
-
-
(308,756)
(308,756)
345,854
345,854
Weighted average exercise price
$4.73
$-
$4.73
$4.73
Overseas based plan
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
DRIVe mgt
fee
Balance at
start of the
year
Granted
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
247,561
247,561
-
-
-
-
247,561
247,561
Weighted average exercise price
$4.26
$-
$-
$4.26
-109-
109 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments (continued)
Grant Date
2009
1 Nov 2007
Total
Vesting /
Expiry date Fair value at grant date
DRIVe mgt
fee
TSR
Balance at
start of the
year
Granted
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
253,456
253,456
21,534
21,534
(27,429)
(27,429)
247,561
247,561
Weighted average exercise price
$3.32
$3.32
$3.32
$3.32
The assessed fair value of the US participants at reporting date is: TSR $4.33 (2009: $2.78) and DRIVe management fee
$4.18 (2009: 3.86).
2006 and 2007 Executive Loan Plan
The Executive Loan Plan (ELP) was discontinued as of the 2007 financial year. The ELP rewarded the improvements in
the price of Transurban’s stapled securities over a three year period with relative Total Security holder Return (TSR)
against the S&P/ASX 100 Industrials as a performance measure. Executives based outside Australia were eligible to
participate in a cash based plan similarly structured to the ELP.
Executives that participated in the ELP were provided with an interest free loan to assist them to acquire securities at
market price. The term of the loan is three years and there is only one testing date. The 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 otherwise provide. Holding locks are
applied to the securities to ensure that they can only be dealt with in accordance with the terms of the Plan. The acquired
securities cannot be transferred or sold while the loan is outstanding.
Set out below are securities granted under the plan.
Australian Based Plan
Grant Date
2010
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of
the year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2009
$7.28
897,346
897,346
-
-
-
-
(897,346)
(897,346)
-
-
Weighted average grant price
$7.28
$-
$-
$7.28
$-
-110-
110 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments (continued)
Overseas Based Plan
Grant Date
2010
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of
the year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2009
$7.28
270,000
270,000
-
-
-
-
(270,000)
(270,000)
-
-
Weighted average grant price
$7.28
$-
$-
$7.28
$-
Australian Based Plan
Grant Date
2009
1 Nov 2005
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of
the year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2008
1 Nov 2009
$6.47
$7.28
814,200
1,175,000
1,989,200
-
-
-
(696,831)
-
(696,831)
(117,369)
(277,654)
(395,023)
-
897,346
897,346
Weighted average grant price
$6.95
$-
$6.47
$7.04
$7.28
Overseas Based Plan
Grant Date
2009
1 Nov 2005
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of
the year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2008
1 Nov 2009
$6.47
$7.28
189,700
300,000
489,700
-
-
-
(189,700)
-
(189,700)
-
(30,000)
(30,000)
-
270,000
270,000
Weighted average grant price
$6.97
$-
$6.47
$7.28
$7.28
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined using a Black-Scholes option
pricing model that takes into account the term of the right/award, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right/award.
-111-
111 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
35 Share-based payments (continued)
Employee security scheme
The Transurban Employee Security Ownership Plan (the Plan) provides employees with an opportunity to be a part owner
of Transurban and partner in its continued success.
All Australian based permanent employees are eligible to participate in either the Investment Tax Exempt Plan or the
Investment Tax Deferred Plan. Under the plans, Transurban provides participants with a matching component toward the
acquisition of the stapled securities. For the period 1 July 2009 to 30 June 2010, the cost of company matches was
$125,517 (2009: $33,292) for the Investment Tax Exempt Plan and $nil (2009: $207,417) for the Investment Tax Deferred
Plan. These plans were suspended in May 2009 following changes to taxation announced in the Federal budget. The
Group reactivated the Tax Exempt Plan in the year ended 30 June 2010 and has reactivated the Investment Tax Deferred
Plan for the 2011 financial year. These have been reactivated with the required modifications as a result of legislation
changes.
The third element under the Plan is the Incentive Plan. Subject to Board approval and the performance of the Group,
eligible employees may receive a certain number of Transurban securities at no cost to them.
In February 2010, each participant was allocated 100 stapled securities at a value of $5.27 per security. Stapled securities
provided under the Plan were acquired on the open market.
2010
Number
2009
Number
Shares purchased on the market under the plan and provided to participating employees
44,800
45,300
Expenses arising from share-based payments
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense was $5.2 million (2009: $2.0million).
36 Key management personnel disclosures
Directors
The following persons were directors of THL, TIML and/or TIL, as noted below, during the financial year and/or up until the
date of this report:
(i) Executive directors
Christopher J Lynch (THL, TIML and TIL)
(ii) Non-executive directors
David J Ryan (Chairman of THL, TIML and TIL)
Neil G Chatfield (THL and TIML)
Geoffrey O Cosgriff (THL and TIML)
Jeremy GA Davis (THL and TIML)
Robert J Edgar (appointed 21 July 2009) (THL and TIML)
Lindsay Maxsted (THL and TIML)
Rodney Slater (THL and TIML)
Jennifer S Eve (TIL)
James M Keyes (TIL)
-112-
112 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
36 Key management personnel disclosures (continued)
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, during the financial year:
B Bourke
D Cardiff (resigned 30 November 2009)
K Daley
M Fletcher
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Key management personnel compensation
Chief Operating Officer
Group General Manager, Human Resources
President, International Development
Group General Manager, Public Affairs
Group General Manager, Strategy and Development
Acting Group General Manager, People, Legal and Governance
Chief Financial Officer
President, Transurban North America
Chief Legal Counsel and Company Secretary
The remuneration amounts below represent the entire amounts paid by the Transurban Group.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
30 June
2010
$
30 June
2009
$
15,074,681
448,936
110,982
268,637
3,374,587
19,277,823
15,545,045
851,313
182,876
-
1,857,574
18,436,808
Detailed remuneration disclosures are made in the directors’ report. The relevant information can be found in the
remuneration report in the directors report.
Equity instrument disclosures relating to key management personnel
Share-based payments
Details of long-term incentives provided as remuneration and securities issued, together with terms and conditions of the
long term incentives, can be found in the remuneration report in the directors report.
Performance Awards Plan
2010
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
483,721
C J Lynch
Other key management personnel of the Group
85,465
B Bourke
46,512
D Cardiff
67,151
K Daley
34,884
M Fletcher
46,512
A Head
23,256
S Hogg
232,558
T Honan
145,422
M Kulper
29,070
E Mildwater
617,211
109,050
-
111,276
47,478
59,347
47,478
148,368
161,956
66,766
-113-
113 Transurban annual reporT 2010
-
-
-
-
-
-
-
-
-
-
-
1,100,932
-
(29,749)
-
-
-
-
-
-
-
194,515
16,763
178,427
82,362
105,859
70,734
380,926
307,378
95,836
-
-
-
-
-
-
-
-
-
-
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
36 Key management personnel disclosures (continued)
2009
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C J Lynch
-
Other key management personnel of the Group
-
B Bourke
-
D Cardiff
-
K Daley
-
M Fletcher
-
A Head
-
S Hogg
-
T Honan
-
M Kulper
-
E Mildwater
483,721
85,465
46,512
67,151
34,884
46,512
23,256
232,558
145,422
29,070
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
483,721
85,465
46,512
67,151
34,884
46,512
23,256
232,558
145,422
29,070
-
-
-
-
-
-
-
-
-
-
Executive Loan Plan
The number of securities held under the executive loan plan during the financial year by each director of Transurban
Holdings Limited and other key management personnel of the Group, including their personally related parties, are set out
below.
2010
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
160,000
B Bourke
35,000
D Cardiff
100,000
K Daley
15,000
M Fletcher
22,500
A Head
100,000
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
(160,000)
(35,000)
(100,000)
(15,000)
(22,500)
(100,000)
-
-
-
-
-
-
-
-
-
-
-
-
2009
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
262,000
B Bourke
63,500
D Cardiff
174,000
K Daley
15,000
M Fletcher
37,501
A Head
190,000
M Kulper
-
-
-
-
-
-
(90,005)
(25,148)
(74,000)
-
(15,001)
(90,000)
(11,995)
(3,352)
-
-
-
-
160,000
35,000
100,000
15,000
22,500
100,000
-
-
-
-
-
-
-114-
114 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
36 Key management personnel disclosures (continued)
Stapled security holdings
The number of Transurban Group Stapled Securities held during the financial year by each director of Transurban
Holdings Limited and other key management personnel of the Group, including their personally-related parties, are set out
below.
Stapled Securities
2010
Directors of the Group
D J Ryan
N G Chatfield
G O Cosgriff
J G A Davis
R J Edgar
L P Maxsted
C J Lynch
Other key management personnel of the Group
B Bourke
D Cardiff
K Daley
M Fletcher
A Head
S Hogg
T Honan
M Kulper
E Mildwater
2009
Directors of the Group
D J Ryan
G O Cosgriff
J G A Davis
R J Edgar
S M Oliver
C J S Renwick
C J Lynch
Other key management personnel of the Group
B Bourke
D Cardiff
K Daley
M Fletcher
A Head
S Hogg
T Honan
M Kulper
E Mildwater
115 Transurban annual reporT 2010
Balance at
start of the
year
Received during
the year via the
Executive
Equity Plan
Other changes
during the year
Balance at end
of the year
60,945
-
126,012
125,005
7,709
-
233,041
460,151
158,477
384,578
33,491
23,742
22,781
85,474
103,944
24,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,541
20,910
18,411
33,183
4,127
12,000
21,925
100
(158,477)
100
1,000
100
(7,265)
8,100
-
556
66,486
20,910
144,423
158,188
11,836
12,000
254,966
460,251
-
384,678
34,491
23,842
15,516
93,574
103,944
25,196
Balance at
start of the
year
Received during
the year via the
Executive
Equity Plan
Other changes
during the year
Balance at end
of the year
-
-
-
-
-
-
79,647
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
3,645
9,976
-
2,333
4,004
20,000
594
(98,656)
(28,302)
100
(776)
-
7,465
-
-
794
60,945
126,012
125,005
7,709
54,522
41,552
233,041
460,151
158,477
384,578
33,491
23,742
22,781
85,474
103,944
24,640
57,300
116,036
125,005
5,376
50,518
21,552
152,800
539,661
167,633
365,332
15,121
4,596
-
-
80,000
4,700
-115-
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
36 Key management personnel disclosures (continued)
(i) Executive Equity Plan (EEP)
2010
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C J Lynch
79,647
Other key management personnel of the Group
19,146
B Bourke
19,146
D Cardiff
19,146
K Daley
19,146
M Fletcher
19,146
A Head
15,316
S Hogg
85,474
T Honan
23,944
M Kulper
19,146
E Mildwater
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,647
-
(19,146)
-
-
-
-
-
-
-
19,146
-
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
2009
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C J Lynch
-
Other key management personnel of the Group
-
B Bourke
-
D Cardiff
-
K Daley
-
M Fletcher
-
A Head
-
S Hogg
-
T Honan
-
M Kulper
-
E Mildwater
79,647
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,647
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
Performance Rights Plan
2010
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Other key management personnel of the Group
92,857
B Bourke
27,428
D Cardiff
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,401)
-
-
-
-
92,857
19,027
78,571
11,142
14,857
76,778
-
-
-
-
-
-
-116-
116 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
36 Key management personnel disclosures (continued)
2009
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Other key management personnel of the Group
92,857
B Bourke
27,428
D Cardiff
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,857
27,428
78,571
11,142
14,857
76,778
-
-
-
-
-
-
Other transactions with directors and key management personnel
Mr Rodney Slater is a Partner in the public policy practice group of Patton Boggs. Transurban used Patton Boggs during
the year for various lobbying activities in the US. Mr Slater was also a Director of Parsons Brinckerhoff until September
2009. Parsons Brinkerhoff provides engineering consulting services to Transurban. Both of these relationships are based
on normal commercial terms.
Mr Lindsay Maxsted is a non-executive director of Westpac Banking Corporation. Westpac provides transactional banking
and loan facilities to Transurban. Mr Maxsted also acts as Special Advisor to Lazard Pty Limited who provides corporate
advisory services to Transurban. Both of these relationships are based on normal commercial terms.
Mr Neil Chatfield is a non-executive director of Seek who provides employment advising services to Transurban. Mr
Chatfield is also Chairman of Virgin Blue Holdings Limited. Transurban uses air travel services provided by Virgin Blue.
Both of these relationships are based on normal commercial terms.
Ms Jennifer Eve is an associate with Appleby. During the year Transurban utilised Appleby for various legal services.
These services are based on normal commercial terms.
37 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities within the next financial year are disclosed below.
Income taxes
The Group is subject to income taxes in Australia and USA. Significant judgement is required in determining the provision
for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for
which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based
on whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which
such determination is made.
The Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient
taxable temporary differences relating to the same taxation authority against which the unused tax losses can be utilised.
However, the utilisation of tax losses also depends on the ability of the Group to satisfy certain tests at the time the losses
are recouped. Management has internal models forecasting future taxable profits and has therefore recognised deferred
tax assets in relation to tax losses.
Useful lives of plant and equipment
The Group determines the estimated useful lives and related depreciation for its plant and equipment. This estimate is
based on expected useful lives of technology. It could change significantly as a result of technical innovations. The Group
will increase the depreciation charge where useful lives are less than previously estimated lives, or will write-off or write-
down technically obsolete or non-strategic assets.
-117-
117 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
37 Critical accounting estimates and judgements (continued)
The Group depreciates the assets associated with the various toll road infrastructure over the life of the respective
concession arrangements.
Estimated impairment of intangible assets and cash generating units
The Group tests whether goodwill, other intangible assets and cash generating units have suffered any impairment, in
accordance with the accounting policy stated in note1(i). The recoverable amount of each cash generating unit has been
determined based on the greater of value-in-use and fair value less costs to sell calculations. These calculations require
the use of assumptions regarding traffic flows, discount rates, growth rates and other factors affecting operating activities
of the cash generating units.
Valuation of Promissory Notes and Concession Notes
The Group holds non-interest bearing long term debt, represented by promissory notes and concession notes, that are
included in the financial statements at the present value of expected future payments. The calculations to discount these
notes to their present value are based on the estimated timing and profile of the repayments. Assumptions are made in
determining the timing and profile, based on expected available equity cash flows of the Group's cash generating units.
A discount rate is used to value the promissory notes and concession notes to their present value, which is determined
through reference to other facilities in the market with similar characteristics.
Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
The Group uses its judgement to select a variety of methods and makes assumptions that are mainly based on market
conditions existing at each balance sheet date.
Provision for future major maintenance expenditure
The Group records a provision for its present obligation to maintain the Motorways held under Concession Deeds. The
provision is included in the financial statements at the present value of expected future payments. The calculations to
discount these amounts to their present value are based on the estimated timing and profile of expenditure occurring on
the roads.
A discount rate is used to value the maintenance expenditure provision at its present value, which is determined through
reference to the nature of the provision and the risks associated with the expenditure.
-118-
118 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
38 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk), credit
risk and liquidity risk. The financial risk management function is carried out centrally by the Transurban Group Treasury
team (Treasury) under policies approved by the Board. Treasury work closely with the Group’s operating units to actively
identify and monitor all financial risks, and put hedging in place where appropriate. The Board are informed on a regular
basis of any material exposures to financial risks.
The Group’s hedging strategies are detailed below, and include the use of derivative financial instruments. The Group’s
policies allow derivative transactions to be undertaken only for the purpose of reducing risk, and do not permit speculative
trading. Treasury continuously monitor risk exposures over time through review of cashflows, price movements, market
analysis and ongoing communication within the Group. When measuring financial risk, Treasury consider positive and
negative exposures, existing hedges and the ability to offset exposures where possible.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk when future commercial transactions and
recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
Foreign currency exposures are viewed as either investment exposures or operating exposures. Exposures from
investment in foreign assets are generally managed using foreign currency debt. All known material operating exposures
out to 12 months are hedged, using hedging instruments, offsetting exposures or drawing on foreign currency funds.
The Group's exposure to foreign currency risk at the reporting date, denominated in the currency in which the risk arises,
was as follows:
Cash and cash equivalents
Net Investment in foreign operation
Borrowings
Cross-currency interest rate swaps
30 June
2010
USD
$'000
11,611
184,744
(1,090,163)
933,406
30 June 2009
USD
$'000
18
198,144
(1,047,417)
933,406
Exposure to other foreign exchange movements is not material.
Sensitivity
Based on the financial instruments held at end of the period, had the Australian dollar strengthened/weakened by 10 cents
against the U.S. dollar with all other variables held constant, the Group’s post-tax profit for the year would have been
$825,000 lower (2009: $2,000 lower) or $1,044,000 higher (2009: $2,000 higher), as a result of foreign exchange
gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.
The Group’s post-tax profit is more sensitive to movements in the Australian dollar/US dollar exchange rate in the current
year due to an increase in US dollar cash holdings.
Had the Australian dollar strengthened by 10 cents against the U.S. dollar with all other variables held constant, the
Group's equity would have been $40,924,000 lower (2009: $34,160,000 lower). Had the Australian dollar weakened by 10
cents against the U.S. dollar with all other variables held constant, the Group's equity would have been $60,922,000
higher (2009: $50,961,000 higher). The Group revalues its U.S. dollar borrowings each period using market spot rates
and, where a qualifying hedge is in place, defers these movements in equity. The volatility in equity is caused mainly by
fair value movements of the cross currency interest rate swaps, which are affected by changes in forward Australian
dollar/U.S. dollar foreign exchange rates.
Price risk
The Group is not exposed to price risk.
-119-
119 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
38 Financial risk management (continued)
Cash flow interest rate risk
The Group’s main exposure to interest rate risk arises from long-term borrowings. Treasury manages interest rate risk by
entering into fixed rate debt facilities or using interest rate swaps to convert floating rate debt. Generally, the Group raises
long term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group
borrowed at fixed rates directly. The Group’s policy is to hedge interest rate exposure at a minimum in compliance with
the covenant requirements of funding facilities and up to 100%. Covenant requirements vary by debt facility, and require a
minimum of between 50% and 80% of interest rate exposure to be hedged. At 30 June 2010 99% of the Group’s interest
rate exposure on variable rate borrowings was hedged.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts
outstanding:
30 June 2010
30 June 2009
Weighted
average
interest rate
%
Balance
$'000
Weighted
average
interest rate
%
Balance
$'000
Cash and cash equivalents
Floating Rate Borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
%4.6
%6.1
%4.4
(681,259)
2,387,604
(2,351,979)
(645,634)
%2.8
%4.1
%3.3
(199,805)
2,447,821
(2,223,604)
24,412
An analysis by maturities is provided in Liquidity risk below.
Sensitivity
At 30 June 2010, if interest rates had changed by +/-100 basis points from the year-end rates with all other variables held
constant, post-tax profit for the year would have been $6,456,000 higher/lower (2009: $244,000 lower/higher). Profit is
more sensitive to movements in interest rates in 2010 than 2009, due mainly to an increase in cash holdings.
Credit risk
The Group has no significant concentrations of credit risk from operating activities, and has policies in place to ensure that
transactions are made with commercial customers with an appropriate credit history. However as an operator of large
infrastructure assets, the Group is exposed to credit risk with its financial counterparties through undertaking financial
transactions intrinsic to its business. These include funds held on deposit, cash investments and the market value of
derivative transactions.
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by multiple
independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to higher rated
counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only dealing with credit
worthy counterparties, limiting the exposure to any one counterparty, minimising the size of the exposure where possible
through netting offsetting exposures, diversifying exposures across counterparties, closely monitoring changes in total
credit exposures and changes in credit status, and taking mitigating action when necessary.
The Group’s investment in the Westlink Motorway is through Term Loan Notes (see note 10 for details). The return on
these Notes is ultimately dependent on the performance of the Motorway. The Group continually monitors the performance
and expected cashflows of the Motorway.
Liquidity risk
The Group maintains sufficient cash and undrawn facilities to maintain short term flexibility and enable the Group to meet
financial commitments in a timely manner. Treasury assesses liquidity over the short term (up to 12 months) and medium
term (1 – 5 years) by maintaining accurate forecasts of operating expenses, committed capital expenditure and payments
to security holders. Long term liquidity requirements are reviewed as part of the annual strategic planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group’s forecast
annual operating costs and certain risk exposure scenarios as maintained by the Group’s strategic risk register, and is
maintained as cash and undrawn facilities. The reserve is maintained on a rolling 12 month basis. Medium term liquidity
forecasting is maintained on a rolling 5 year horizon.
-120-
120 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
38 Financial risk management (continued)
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
- Expiring within one year
- Expiring beyond one year
2010
$'000
2009
$'000
270,971
230,000
500,971
111,156
305,179
416,335
The facilities are committed for the term of the facility and cannot be withdrawn by the bank without notice.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities, net and gross settled derivative financial instruments into
relevant maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal
their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows have been
estimated using forward interest rates applicable at the end of the reporting period.
Contractual maturities
of financial liabilities
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 4 to
5 years
Over 5
years
Total
contractual
cash flows
At 30 June 2010
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total non-derivatives
Derivatives
Net settled (interest rate
swaps)
Net settled (cross-
currency interest rate
swaps)
355,102
183,132
71,790
610,024
-
537,122
291,227
828,349
-
692,867
98,676
791,543
-
264,654
351,097
615,751
-
440,126
217,260
657,386
313,676
916,389
1,687,793
2,917,858
668,778
3,034,290
2,717,843
6,420,911
397,492
2,387,604
1,653,010
4,438,106
36,041
30,222
24,612
7,422
5,586
(4,976)
98,907
81,290
5,426
41,467
17,916
48,138
9,857
34,469
13,234
20,656
7,568
13,154
(128,922)
(133,898)
(74,921)
23,986
(17,668)
63,622
-121-
121 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
38 Financial risk management (continued)
At 30 June 2009
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 4 to 5
years
Over 5
years
Total
contractual
cash flows
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
385,499
700,139
213,784
1,299,422
-
106,984
55,611
162,595
-
494,279
275,601
769,880
-
463,516
83,830
547,346
-
242,587
86,038
328,625
288,726
958,108
1,916,986
3,163,820
674,225
2,965,613
2,631,850
6,271,688
411,199
2,425,520
1,616,102
4,452,821
57,105
37,142
(2,228)
(9,899)
(9,664)
(24,751)
47,705
(38,628)
1,173
58,278
4,040
41,182
44,355
42,127
20,698
10,799
18,626
8,962
(104,995)
(129,746)
(16,103)
31,602
(6,395)
(45,023)
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total non-derivatives
Derivatives
Net settled (interest rate
swaps)
Net settled (cross-
currency interest rate
swaps)
Fair value measurements
The carrying value of financial assets and financial liabilities brought to account at balance sheet date approximates fair
value.
The fair value of these financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
As of 1 July 2009, the Group has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires
disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(a)
(b)
(c)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2),and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3)
-122-
122 Transurban annual reporT 2010
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2010
(continued)
38 Financial risk management (continued)
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2010.
Comparative information has not been provided as permitted by the transitional provisions of the new rules.
Group - as at 30 June 2010
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
80,230
80,230
143,852
143,852
-
-
-
-
80,230
80,230
143,852
143,852
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at the end of each reporting period. The fair value of both cross-currency interest rate swaps
and interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward
exchange contracts is determined using forward exchange market rates at the end of the reporting period. All these
instruments are included in level 2.
-123-
123 Transurban annual reporT 2010
In the directors' opinion:
Transurban Holdings Limited
Directors' declaration
30 June 2010
(a)
(b)
(c)
the financial statements and notes set out on pages 49 to 123 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Group's financial position as at 30 June 2010 and of its performance for
the financial year ended on that date; and
(ii)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable,and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group identified in note 29 will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in note 29.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with separate resolution of the directors of Transurban Holdings Limited,
Transurban Infrastructure Management Limited and Transurban International Limited.
David J Ryan
Director
Christopher J Lynch
Director
Melbourne
12 August 2010
-124-
124 Transurban annual reporT 2010
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
Independent auditor's report to the members of
Transurban Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Transurban Holdings Limited (the company), which comprises the
balance sheet as at 30 June 2010, and the income statement, the statement of comprehensive income, statement of
changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies,
other explanatory notes and the directors’ declaration for the Transurban Holdings Limited Group (the Group). The Group
comprises the aggregation of Transurban Holdings Limited (THL), Transurban Holding Trust (THT) and Transurban
International Limited (TIL) and the entities they controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation
of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the
financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation
-125-
125 Transurban annual reporT 2010
Independent auditor's report to the members of
Transurban Holdings Limited (continued)
Auditor's opinion
In our opinion:
(a)
the financial report of Transurban Holdings Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance for
the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 45 of the directors’ report for the year ended 30 June 2010.
The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based
on our audit conducted in accordance with Australian Auditing Standards.
Auditor's opinion
In our opinion, the Remuneration Report of Transurban Holdings Limited for the year ended 30 June 2010, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John Yeoman
Partner
Melbourne
12 August 2010
-126-
126 Transurban annual reporT 2010
Transurban Holdings Limited
Transurban Holdings Limited
Security holder information
Shareholder information
30 June 2010
30 June 2010
The security holder information set out below was applicable as at 1 September 2010.
Distribution of stapled securities
The number of holders of stapled securities, which comprises one share in Transurban Holdings Limited, one share in
Transurban International Limited and one unit in Transurban Holding Trust, was 67,003.
The voting rights are one vote per stapled security.
At 1 September 2010 the percentage of the total holdings held by or on behalf of the 20 largest holders of these securities
was 79.06 per cent.
The distribution of holders was as follows:
Security grouping
Security grouping
1 - 1,000
1 - 1,000
1,001 - 5,000
1,001 - 5,000
5,001 - 10,000
5,001 - 10,000
10,001 - 100,000
10,001 - 100,000
100,001 - 9,999,999,999
100,001 - and over
Rounding
Total
Number of holders
Total holders
26,408
24,717
33,725
31,107
7,091
7,109
3,845
3,518
225
196
70,938
67,003
Number of
securities held
Units
10,850,998
9,743,880
83,943,968
78,306,126
50,532,525
50,916,469
81,493,545
72,924,528
1,220,830,613
1,064,430,587
1,282,682,606
1,441,290,633
% of
%
Issued
Capital
0.85
0.68
6.54
5.43
3.94
3.53
5.65
5.69
84.70
82.98
0.01
100
100.00
There were 5,687 holders of less than a marketable parcel of stapled securities.
Total stapled securities: 1,441,290,633.
There were 5,687 holders of less than a marketable parcel of stapled securities.
Twenty largest holders of stapled securities
Total stapled securities: 1,441,290,633.
Name
Twenty largest holders of stapled securities
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC Custody Nominees (Australia) Limited
CITICORP NOMINEES PTY LIMITED
National Nominees Limited
RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
J P Morgan Nominees Australia Limited
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
Citicorp Nominees Pty Limited
QUEENSLAND INVESTMENT CORPORATION
Cogent Nominees Pty Limited
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LIMITED
Australian Foundation Investment Company Limited
ANZ NOMINEES LIMITED
UBS Nominees Pty Ltd
AMP LIFE LIMITED
CITICORP NOMINEES PTY LIMITED
AMP Life Limited
COGENT NOMINEES PTY LIMITED
UBS Wealth Management Australia Nominees Pty Ltd
CITICORP NOMINEES PTY LIMITED
ANZ Nominees Limited
RBC DEXIA INVESTOR SERVICES AUSTRALIAN NOMINEES PTY LIMITED
RBC Dexia Investor Services Australia Nominees Pty Limited
CREDIT SUISSE SECURITIES (EUROPE) LIMITED
Australian Reward Investment Alliance
ANZ NOMINEES LIMITED
Queensland Investment Corporation
CITICORP NOMINEES PTY LIMITED
ANZ Nominees Limited
RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CS Third Nominees Pty Ltd
CS THIRD NOMINEES PTY LIMITED
RBC Dexia Investor Services Australia Nominees Pty Limited
DJERRIWARRH INVESTMENTS LIMITED
Djerriwarrh Investments Limited
Argo Investments Limited
Bond Street Custodians Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
479,852,426
349,974,664
145,496,316
33,402,284
Number of
Number
stapled
of stapled
securities held
securities
520,957,946
held
267,493,413
81,201,635
25,142,681
12,996,425
9,556,216
9,203,147
9,064,468
8,324,301
7,246,053
6,709,247
6,326,607
4,720,494
4,301,530
4,160,000
3,445,578
3,256,214
3,244,595
2,984,976
2,842,450
993,177,976
17,403,961
14,825,726
12,389,880
11,785,190
10,422,999
10,029,735
9,404,426
8,776,444
7,156,613
5,175,821
5,055,376
4,880,206
3,895,156
3,405,099
3,266,846
2,867,732
Per cent of
Per cent
issued stapled
of issued
securities
stapled
40.61
securities
20.85
6.33
33.29
1.96
24.28
1.01
10.09
0.75
2.32
0.72
1.21
0.71
1.03
0.65
0.86
0.56
0.52
0.82
0.49
0.72
0.37
0.70
0.34
0.65
0.32
0.61
0.27
0.50
0.25
0.36
0.25
0.35
0.23
0.34
0.22
0.27
77.41
0.24
0.23
0.20
Total
1,139,466,900
79.06
-116-
127 Transurban annual reporT 2010
Substantial holders
Substantial security holders as at 1 September 2010 were as follows:
Name
Transurban Holdings Limited
Security holder information
30 June 2010
(continued)
Number of
stapled
securities
held
Per cent of
issued
stapled
securities
CP2 Limited
Canadian Pension Plan Investment Board
Transurban Holdings Limited and
Controlled Entities ABN 86 098 143 429
(including Transurban International Limited and
Transurban Holding Trust)
187,139,384
182,552,346
13.50
12.90
Annual financial report
for the year ended 30 June 2010
128 Transurban annual reporT 2010
Transurban Holding Trust and
Controlled Entities
ARSN 098 807 419
Annual financial report
for the year ended 30 June 2010
129 Transurban annual reporT 2010
Transurban Holding Trust ARSN 098 807 419
Annual financial report - 30 June 2010
Contents
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
131
135
136
205
206
130 Transurban annual reporT 2010
Transurban Holding Trust
Directors' report
30 June 2010
Directors' report
The directors of Transurban Infrastructure Management Limited ("the Company"), the responsible entity of Transurban
Holding Trust, present their report on the consolidated entity consisting of Transurban Holding Trust (“the Trust”) and the
entities it controlled (collectively “the Group”), for the year ended 30 June 2010.
Transurban Holding Trust forms part of the Transurban Group. The securities of the entities comprising the Transurban
Group are stapled. A Stapled Security comprises one share in Transurban Holdings Limited, one share in Transurban
International Limited and one unit in Transurban Holding Trust. None of the components of the Stapled Security can be
traded separately.
Responsible Entity
Transurban Holding 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 is the responsible entity of
Transurban Holding Trust and is responsible for performing all functions that are required under the Corporations Act 2001
of a responsible entity.
Directors
With the exception of the changes noted below, the following persons were directors of Transurban Infrastructure
Management Limited during the whole of the financial year and up to the date of this report:
Non-executive Directors
David J Ryan AO
Neil Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis AM
Robert J Edgar (21 July 2009)
Lindsay Maxsted
Rodney E Slater
Executive Director
Christopher J Lynch
Results
The consolidated net profit for the Group was $305,502,000 (2009: profit of $263,753,000). The net profit attributable to
ordinary unit holders of the Group for the year was $294,256,000 (2009: $250,830,000).
Principal Activities
During the year the principal activities of the consolidated entity consisted of holding 100 per cent of the units in the
CityLink Trust, the Transurban Finance Trust, the Hills Motorway Trust, the Sydney Roads Trust, the T (895) Finance Trust
and the Transurban CARS Trust. The Transurban CARS Trust holds the Transurban Group’s investment in Westlink M7
Motorway in Sydney.
-131-
131 Transurban annual reporT 2010
Distributions
Distributions paid to members during the financial year were as follows:
Distributions proposed
Final distribution payable and recognised as a liability: 12.0 cents (2009: 11.0 cents)
per fully paid Stapled Security payable 27 August 2010
Distributions paid during the year
Final distribution for 2009 financial year of 11.0 cents (2008: 29.0 cents) per fully paid
Stapled Security paid 28 August 2009
Interim distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully
paid Stapled Security paid 26 February 2010
Total distributions paid
Distributions paid in cash or satisfied by the issue of Stapled Securities under the
distribution reinvestment plan during the years ended 30 June 2010 and 30 June
2009
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities
Funds available for future distribution reinvestment plans
Transurban Holding Trust
Directors' report
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
169,760
169,760
141,095
141,095
141,095
319,076
154,806
295,901
140,041
459,117
230,451
65
65,381
4
295,901
172,161
551
286,418
(13)
459,117
Review of operations
Total revenue for the Group increased by 1.88% to $220.2 million. The profit for the year was $305.5 million.
Capital raising
On 10 May 2010, the Transurban Group announced that it would undertake a capital raising comprising a fully
underwritten accelerated renounceable 1 for 11 entitlement offer to raise $542.3 million at an offer price of $4.60 per
security.
The capital raising was undertaken to fund the equity component of Transurban’s acquisition of the Lane Cove Tunnel
(see below for further details of the acquisition) and took into account Transurban’s broader capital funding requirements
for growth projects.
The capital raising was successfully completed on 10 June 2010.
Acquisition of Lane Cove Tunnel (Sydney)
On 10 May 2010 Transurban announced that it had reached agreement to acquire the assets and motorway concession
deed connected with the Lane Cove Tunnel in Sydney for $630.5million.
The 3.6 kilometre Lane Cove Tunnel is a key link on the Sydney orbital network that sits adjacent to the Hills M2. The Lane
Cove Tunnel acquisition expands Transurban’s footprint on the Sydney orbital network and increases exposure to the
North West Sydney corridor.
Transurban took control of the tunnel on 10 August 2010. From 10 May 2010 to the date of acquisition, Transurban has
worked to maximise the ‘Day 1’ EBITDA margin on the Lane Cove Tunnel, primarily by eliminating costs.
Significant changes in the state of affairs
On 10 May 2010, Transurban announced that it had reached agreement to acquire the assets and motorway concession
deed connected with the Lane Cove Tunnel in Sydney for $630.5 million.
-132-
132 Transurban annual reporT 2010
Transurban Holding Trust
Directors' report
30 June 2010
(continued)
Matters subsequent to the end of the financial year
Subsequent to the end of the financial year, the Group has completed the acquisition of the assets and motorway
concession deed connected with the Lane Cove Tunnel in Sydney. The Group took control of the assets and concession
deed on 10 August 2010. The acquisition was funded through cash on hand from a capital raising in May 2010 and
external bank debt.
Likely developments and expected results of operations
Information on likely developments in the operations of the Trust and the expected results of operations have not been
included in this report because the directors of the responsible entity believe it would be likely to result in unreasonable
prejudice to the Trust.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain applicable
laws in the USA. The Group maintains a comprehensive environmental management plan to monitor the performance of
the Motorways, and any external parties responsible for operating any of the Group’s Motorways, and takes remedial steps
where necessary.
There were no significant breaches reported during the financial year on the Group’s controlled assets.
Indemnification and Insurance
Each officer (including each director) of the Group is indemnified, to the maximum extent permitted by law, against any
liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is also indemnified
against reasonable costs (whether legal or otherwise) incurred in relation to relevant proceedings in which the officer is
involved because the officer is or was an officer.
The Group has arranged to pay a premium for a Directors and Officers Liability insurance policy to indemnify directors and
officers in accordance with the terms and conditions of the policy.
This policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered, the name of
the Insurer, the Limit of Liability and the Premium paid for this policy.
Fees paid to and interest held in the Trust by the Responsible Entity or its Associates
Fees paid to the Responsible Entity out of Trust property during the year are disclosed in note 28.
No fees were paid to the directors of the Responsible Entity during the year out of Trust property.
Interests in the Trust issued during the financial year
Balance at 1 July
Units issued during the year
Balance at 30 June
Value of Assets
Value of Trust assets at 30 June
30 June
2010
Number
'000
30 June
2009
Number
'000
1,281,363
132,932
1,414,295
1,218,263
63,100
1,281,363
2010
$'000
2009
$'000
9,943,978
9,542,960
The value of the Trust's assets is derived using the basis of accounting set out in Note 1 to the financial statements.
Units under option
There are 4,396,348 units of Transurban Holding Trust under share based payment schemes. 1,990,913 units were
granted in the current year. 2,953 units were issued on the exercise of the relevant schemes.
-133-
133 Transurban annual reporT 2010
Directors' Interests
The directors of the Responsible Entity have disclosed relevant interests in Stapled Securities issued by the Transurban
Group as follows:
Transurban Holding Trust
Directors' report
30 June 2010
(continued)
Non-executive directors
D J Ryan
N G Chatfield
G O Cosgriff
J G A Davis
R J Edgar (appointed 21 July 2009)
L P Maxsted
R Slater
Executive directors
C J Lynch
Auditor's independence declaration
Number of
Stapled Securities
66,486
20,910
144,423
158,188
11,836
12,000
-
254,966
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 135.
Rounding of amounts
The trust is of a kind referred to in Class Order 98/100, 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.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
David J Ryan
Chairman
Christopher J Lynch
Director
Melbourne
12 August 2010
-134-
134 Transurban annual reporT 2010
Auditor's Independence Declaration
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
As lead auditor for the audit of Transurban Holding Trust for the year ended 30 June 2010, I declare that, to the best of my
knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Transurban Holding Trust and the entities it controlled during the period.
John Yeoman
Partner
PricewaterhouseCoopers
Melbourne
12 August 2010
Liability limited by a scheme approved under Professional Standards Legislation
-135-
135 Transurban annual reporT 2010
Transurban Holding Trust ARSN 098 807 419
Annual financial report - 30 June 2010
Financial statements
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members
Page
Page
137
137
138
138
139
139
140
140
141
141
142
142
205
205
206
206
This financial report covers Transurban Holding Trust and its subsidiaries. The financial report is presented in the
Australian currency.
Transurban Holding Trust is a Trust registered and domiciled in Australia. Its registered office and principal place of
business is:
Transurban Holding Trust
Level 3, 505 Little Collins Street
Melbourne VIC 3000
The financial report was authorised for issue by the directors on 12 August 2010. Transurban Infrastructure Management
Limited has the power to amend and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally.
All releases to the ASX and the media, financial reports and other information are available on our website:
www.transurban.com
136 Transurban annual reporT 2010
-136-
Revenue
Other income
Administration costs
Promissory notes
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and tax
Depreciation and amortisation expense
Finance income
Finance costs
Net finance income
Share of net profits (losses) of equity accounted investments
Profit before income tax
Income tax expense
Profit for the year
Profit is attributable to:
Owners of Transurban Holding Trust
Non-controlling interest
Transurban Holding Trust
Income statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
4
5
6
7
12
8
220,219
216,151
101,857
50,332
(3,403)
(919)
(4,322)
(3,522)
(1,193)
(4,715)
317,754
261,768
(92,106)
(95,203)
403,641
(322,142)
81,499
-
307,147
(1,645)
305,502
416,887
(311,062)
105,825
(7,556)
264,834
(1,081)
263,753
294,256
11,246
305,502
250,830
12,923
263,753
Earnings per unit for profit attributable to the ordinary unit holders:
Basic earnings per unit
Diluted earnings per unit
Cents
Cents
33
33
22.6
22.6
19.8
19.8
The above income statement should be read in conjunction with the accompanying notes.
-137-
137 Transurban annual reporT 2010
Profit for the year
Other comprehensive income/(loss)
Changes in the fair value of cash flow hedges, net of tax
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Transurban Holding Trust
Non-controlling interest
Transurban Holding Trust
Statement of comprehensive income
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
305,502
263,753
(3,355)
(3,355)
(16,658)
(16,658)
302,147
247,095
291,570
10,577
302,147
235,659
11,436
247,095
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
-138-
138 Transurban annual reporT 2010
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total current assets
Non-current assets
Receivables
Term loan notes
Derivative financial instruments
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
UNIT HOLDERS' FUNDS
Issued units
Reserves
Accumulated losses
Non-controlling interests
Total unitholders' funds
Transurban Holding Trust
Balance sheet
As at 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
9
10
14
11
13
14
15
16
17
18
14
19
20
18
14
20
21
22
22
4,177
569,227
257
573,661
5,981,577
678,044
3,172
988
2,706,536
9,370,317
28,418
208,518
-
236,936
5,864,912
633,272
9,134
64
2,798,642
9,306,024
9,943,978
9,542,960
161,855
-
2,667
1,516
197,478
-
363,516
109,978
515,500
3,336
2,585
171,645
79,080
882,124
4,142,699
10,257
16,645
4,169,601
3,607,312
8,184
10,613
3,626,109
4,533,117
4,508,233
5,410,861
5,034,727
7,103,500
(3,985)
(1,731,625)
42,971
6,692,365
(330)
(1,701,315)
44,007
5,410,861
5,034,727
The above balance sheet should be read in conjunction with the accompanying notes.
-139-
139 Transurban annual reporT 2010
Transurban Holding Trust
Statement of changes in equity
For the year ended 30 June 2010
Consolidated
Attributable to members of
Transurban Holding Trust
Contributed
equity
$'000
Reserves
$'000
Retained
earnings
$'000
Notes
Non-
controlling
interests
$'000
Total
equity
$'000
Balance at 1 July 2008
6,507,180
17,392
(1,671,191)
47,261 4,900,642
Total comprehensive income for the year
-
(15,171)
250,830
11,436
247,095
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs
Treasury securities
Distribution reinvestment plan
Change in value of share-based payment
reserve
Distribution provided for or paid
Distributions paid to non-controlling interest
21
21
21
22
6,049
4,993
174,143
-
-
-
185,185
-
-
-
-
-
-
-
-
-
6,049
4,993
174,143
(2,551)
-
-
(2,551)
-
(280,954)
-
(280,954)
-
-
(14,690)
(14,690)
(2,551)
(280,954)
(14,690)
(113,010)
Balance at 30 June 2009
6,692,365
(330)
(1,701,315)
44,007 5,034,727
Balance at 1 July 2009
6,692,365
(330)
(1,701,315)
44,007
5,034,727
Total comprehensive income for the year
-
(2,686)
294,256
10,577
302,147
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs
Treasury securities
Distribution reinvestment plan
Change in value of share-based payment
reserve
Distribution provided for or paid
Distributions paid to non-controlling interest
21
21
21
22
360,002
6,673
44,460
-
-
-
411,135
-
-
-
-
-
-
-
-
-
360,002
6,673
44,460
(969)
-
-
(969)
-
(324,566)
-
(324,566)
-
-
(11,613)
(11,613)
(969)
(324,566)
(11,613)
73,987
Balance at 30 June 2010
7,103,500
(3,985)
(1,731,625)
42,971
5,410,861
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-140-
140 Transurban annual reporT 2010
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payment for equity accounted investments
Payment for acquisition of term loan notes
Payment for settlement of CityLink Concession Notes
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of units, net of costs
Proceeds from sale of treasury units, net of costs
Proceeds from borrowings, net of costs
Repayment of borrowings
Loans to/from related parties
Repayment of loans to/from related parties
Distributions paid to Transurban Group's security holders
Distributions paid to non-controlling interests in subsidiaries
Net cash (outflow) inflow from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
Transurban Holding Trust
Cash flow statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
224,026
(409)
187,769
(257,962)
(3,641)
149,783
-
-
(61,795)
(61,795)
368,830
3,489
500,292
(515,500)
(429,403)
204,956
(230,451)
(14,442)
(112,229)
(24,241)
28,418
4,177
220,713
(2,343)
117,867
(235,947)
(708)
99,582
(7,556)
(30,444)
(148,307)
(186,307)
6,041
2,139
457,414
(459,000)
267,240
(17,056)
(172,161)
(15,356)
69,261
(17,464)
45,882
28,418
31
28
23
9
The above cash flow statement should be read in conjunction with the accompanying notes.
-141-
141 Transurban annual reporT 2010
Contents of the notes to the financial statements
Transurban Holding Trust
Notes to the financial statements
30 June 2010
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Summary of significant accounting policies
Trust formation and termination
Segment information
Revenue
Other income
Expenses
Net finance costs
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Non-current assets - Receivables
Equity accounted investments
Non-current assets - Term loan notes
Derivative financial instruments
Deferred tax assets and liabilities
Non-current assets - Intangible assets
Current liabilities - Trade and other payables
Borrowings
Current liabilities - Provisions
Other liabilities
Contributed equity
Reserves and accumulated losses
Distributions
Remuneration of auditors
Contingencies
Intra-group guarantees
Commitments
Related party transactions
Subsidiaries
Events occurring after the balance sheet date
Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities
Non-cash investing and financing activities
Earnings per unit
Parent entity financial information
Critical accounting estimates and judgements
Financial risk management
Key management personnel disclosures
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179
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142 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
The financial report includes the consolidated entity consisting of the Transurban Holding Trust and its subsidiaries (the
Group).
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations
and the Corporations Act 2001.
Where necessary, comparatives have been reclassified for consistency with current year disclosures. In the Cash flow
statement, $191.0 million of related party interest and rental income has been reclassified from financing to operating cash
flows in the prior year comparatives as this is considered a more appropriate classification.
Compliance with IFRS
The consolidated financial statements of the Transurban Holding Trust also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standards early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
other financial assets and liabilities (including derivative financial instruments).
Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January
2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement
of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income.
As a consequence, the Group had to change the presentation of its financial statements. Comparative information has
been re-presented so that it is also in conformity with the revised standard.
Rounding of amounts
The Group is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The aggregated financial statements incorporate an elimination of inter-entity transactions and balances and other
adjustments necessary to present the financial statements on a combined basis. The accounting policies adopted in
preparing the financial statements have been consistently applied by the individual entities comprising the Group except
as otherwise indicated.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(g)).
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, balance sheet and statement of changes in equity respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Transurban Holding Trust.
Associates and joint ventures
Associates are all entities over which the Group has significant influence but not control. Interests in joint ventures are
where the Group jointly controls an entity with another party. (refer to note 12).
-143-
143 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.
The Group’s share of its associates’ and joint ventures' post-acquisition profits or losses is recognised in the income
statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-
acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in
an associate or joint venture equals or exceeds its interest in the associate or joint venture, the Trust does not recognise
further losses. Dividends received from associates and joint ventures reduce the carrying amount of the investment.
Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with
equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
reserve within equity.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer
(the chief operation decision maker) and the Executive Committee, who report to the Chief Executive Officer (CEO).
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting.
The new standard requires a 'management approach', under which segment information is presented on the same basis
as that used for internal reporting purposes. In addition, the segments are reported in a manner that is consistent with the
internal reporting provided to the CEO. There has been no impact on the measurement of the Group's assets and
liabilities. Comparatives for 2009 have been restated.
(d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised in the major business activities as follows:
!
!
!
Rental revenue - Rental revenue is recognised as earned in accordance with the lease contract.
Interest income - Interest income is recognised on a time proportionate basis using the effective interest method.
Distribution revenue - Distribution revenue is recognised when the Trust’s right to receive payment is established.
(e)
Income tax
Pursuant to the provisions of the Income Tax Legislation, Trusts are not liable to income tax provided that its taxable
income (including assessable realised capital gains) is fully distributed to unit holders.
Income tax is brought to account in the financial statements to the extent it relates to companies in the Group. The income
tax expense or benefit for the period is the tax payable or benefit on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Trust's subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
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144 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(e)
Income tax (continued)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax is recognised in the income statement, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income,
or directly in equity, respectively.
(f) Leases
Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight line basis over the period of the lease.
(g) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the Trust. The consideration transferred also includes
the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the
subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition basis, the Trust recognises any non-controlling interest in the acquiree
either at fair value or at the non-controlling interest's proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Trust's share of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit
or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Change in accounting policy
A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to
apply the acquisition method to business combinations, there have been some significant changes.
All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt
are subsequently remeasured through profit or loss. Under the Trust's previous policy, contingent payments were only
recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment
to the cost of acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and
therefore included in goodwill.
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145 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(g) Business combinations (continued)
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest's
proportionate share of the acquiree's net identifiable assets. This decision is made on an acquisition-by-acquisition basis.
Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree's net identifiable
assets.
If the Group recognises previously acquired deferred tax assets after the initial acquisition accounting is completed there
will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the
Group's net profit after tax.
The changes were implemented prospectively from 1 July 2009. There has been no impact on the Group as a result of
applying the new standard.
(h)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
(i) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(j)
Investments and other financial assets
Classification
The Group classifies its investments and other financial assets in the following categories: financial assets at fair value
through profit or loss, loans and receivables, and held-to-maturity investments. The classification depends on the purpose
for which the investments were acquired. The classification of the Group's investments are determined at initial
recognition and re-evaluated at each reporting date.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in
this category if acquired principally for the purpose of selling in the short-term. Derivatives are classified as held for
trading unless they are designated as hedges. Assets in this category are classified as current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after the
reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables in the balance sheet (note 10) and (note 11).
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less allowance for impairment. Trade receivables are due for settlement no more than 30 days from the
date of revenue recognition.
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146 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(j)
Investments and other financial assets (continued)
Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An impairment allowance account (provision for impairment of trade receivables)
is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original
terms of receivables. The amount of the impairment allowance is the difference between the asset’s carrying amount and
the present value of estimated future cash flows. The amount of the impairment allowance is recognised in the income
statement.
Held-to-maturity investments (term loan notes)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than
an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as
available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less
than 12 months from the reporting date, which are classified as current assets.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statements. Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all
the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit and loss as gains and losses from investment securities.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss'
category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend
income from financial assets at fair value through profit or loss is recognised in profit or loss as part of revenue from
continuing operations when the Trust's right to receive payments is established.
Impairment
The Group assesses at each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged
decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the
income statement - is reclassified from equity and recognised in the income statement as a reclassification adjustment.
Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not
reversed through the income statement.
(k) Derivatives and hedging activities
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 the end of each reporting period. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Company designates certain derivatives as either:
!
!
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges), or
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow 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 flows of hedged items.
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147 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(k) Derivatives and hedging activities (continued)
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 14. Movements
in the hedging reserve in shareholders' equity are shown in note 22. The full fair value of a hedging derivative is classified
as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified
as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives
are classified as a current asset or liability.
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 and cross currency swaps hedging fixed rate
borrowings is recognised in the income statement within finance costs together with changes in the fair value of the
hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is
recognised in the income statement.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for
which the effective interest method is used is amortised to profit or loss over the period to maturity using a recalculated
effective interest rate.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately
in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit
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.
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 at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is immediately reclassified to the income statement.
Derivatives that do not qualify for 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.
(l)
Intangible assets
Concession Assets
Concession assets represent the Group's right to operate roads under Service Concession Arrangements. Concession
assets constructed by the Group are recorded at the fair value of consideration received or receivable for the construction
services delivered. Concession assets acquired by the Group are recorded at the fair value of the assets at the date of
acquisition. All Concession assets are classified as intangible assets and are amortised over the term of the right to
operate the asset on a straight line basis.
Where work is in progress, it is classified as assets under construction.
-148-
148 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(m) Financial liabilities
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Concession and promissory notes
The Group has non-interest bearing long term debt, represented by Concession and Promissory Notes, payable to the
government, measured at the net present value of expected future payments.
(n) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption amount is
recognised in the income statement over the period of the borrowings using an effective interest method.
Borrowings are removed from the balance sheets when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as finance income or finance costs.
Borrowings are classified as current liabilities unless the Trust has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
(o) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except to the extent to which they
relate to the construction of qualifying assets in which case specifically identifiable borrowing costs are capitalised into the
cost of the asset. Borrowing costs include interest on short-term and long-term borrowings.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective period of
the funding.
(p) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Provisions are discounted to the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
discount unwinding over the passage of time is recognised as a finance cost.
Provision for distribution
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(q) Contributed equity
Units in the trust are classified as equity.
Incremental costs directly attributable to the issue of new units are shown in equity as a reduction, net of tax, from the
proceeds.
If the Group reacquires its own units, those units are deducted from equity. No gain or loss is recognised in the profit or
loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised
directly in equity.
-149-
149 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(r) Parent entity financial information
The financial information for the parent entity, Transurban Holding Trust, disclosed in note 34 has been prepared on the
same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Transurban Holding Trust. Dividends received from associates are recognised in the parent entity's profit or loss, rather
than being deducted from the carrying amount of these investments.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(t) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2010
reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
(effective for annual periods beginning on or after 1 January 2010)
In May 2009, the AASB issued a number of improvements to existing Australian Accounting Standards. The Group does
not expect any adjustments will be necessary as a result of applying the revised rules.
AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions
[AASB2] (effective from 1 January 2010)
The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share-based
payment arrangement must recognise an expense for those goods or services regardless of which entity in the group
settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based
payment arrangement should be measured, that is, whether it is measured as an equity or a cash-settled transaction.
There will be no impact on the financial report of the Group as this is consistent with the Group's current accounting policy.
AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
(effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the
Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early
adoption. Management continue to assess the impact of AASB 9.
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods
beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the
definition of a related party and removes the requirement for government-related entities to disclose details of all
transactions with the government and other government-related entities. There will be no impact on the financial report of
the Group as this is consistent with the Group's current accounting policy.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB
2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective
from 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's
annual improvements project. The Group will apply the amendments from 1 July 2010. Management continue to assess
the impact of AASB 2010-3 and AASB 2010-4 and does not expect that any adjustments will be necessary as the result of
applying the revised rules.
-150-
150 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(t) New accounting standards and interpretations (continued)
AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements.
Transurban Holding Trust is listed on the ASX and is therefore not eligible to adopt the new Australian Accounting
Standards - Reduced Disclosure Requirements. The two standards will have no impact on the financial statements of the
Group.
2 Trust formation and termination
The Transurban Holding Trust was established on 15 November 2001. The Trust was due to terminate on 20 December
2081 unless terminated earlier. However, amendments made to the Trust Deed have extended the Trust to perpetuity.
The Trust was registered as a managed investment scheme by the Australian Securities and Investments Commission on
28 November 2001.
3 Segment information
Business segment
Management has determined that Transurban Holding Trust has one operating segment, based on the review and
management of the consolidated Group.
Transurban Holding Trust operations involve the leasing of assets and the provision of funding to the Transurban Group or
associates of the Transurban Group. All revenues and expenses are directly attributable to these activities. The
management structure and internal reporting of the Trust are based on this operating segment.
4 Revenue
Rental income
Other revenue
(a) Rental income
Notes
(a)
30 June
2010
$'000
30 June
2009
$'000
219,952
267
220,219
215,772
379
216,151
Rental income is derived from property held by the trust and is recognised in the income statement on a straight-line basis
over the term of the lease.
-151-
151 Transurban annual reporT 2010
5 Other income
Concession notes
Remeasurement of concession notes
(a) Concession notes
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Notes
(a)
(a)
30 June
2010
$'000
30 June
2009
$'000
23,087
78,770
101,857
19,524
30,808
50,332
Income from concession notes relates to the CityLink concession notes, following agreements reached with the State of
Victoria and Vic Roads. Under the agreements, the Group paid a total of $765 million to reassign all current and future
concession notes incurred under the provisions of the Melbourne CityLink Concession Deed to Transurban Holding Trust.
The Group recognises income as additional notes are issued by CityLink Melbourne Limited semi-annually.
(b) Remeasurement of concession notes
Remeasurement of concession notes represent the discount unwinding over the passage of time on these notes and the
change in the payment profile of the concession notes.
6 Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation expense - operating cost
7 Net finance costs
Finance income
Interest income from related parties
Other interest income
Foreign exchange gains
Net movement in promissory note payable
Total finance income
Finance costs
Interest and finance charges paid/payable
Interest rate hedging charges paid/payable
Remeasurement of M1 Upgrade payable
Foreign exchange losses
Net movement in promissory note payable
Total finance costs
30 June
2010
$'000
30 June
2009
$'000
92,106
92,106
95,203
95,203
30 June
2010
$'000
30 June
2009
$'000
403,287
354
-
-
403,641
(248,121)
(67,390)
-
(1,877)
(4,754)
(322,142)
406,209
2,118
5,306
3,254
416,887
(265,515)
(22,101)
(23,446)
-
-
(311,062)
Net finance income
81,499
105,825
-152-
152 Transurban annual reporT 2010
8 Income tax expense
Income tax expense
Current tax
Deferred tax
Under/(Over) provided in prior years
Deferred income tax (revenue) expense included in income tax expense comprises:
Decrease (increase) in deferred tax assets (note 15)
(Decrease) increase in deferred tax liabilities
Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30% (2009 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Trust income not subject to tax
Under/(Over) provided in prior years
Income tax expense
9 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
10 Current assets - Trade and other receivables
Loans to related parties
Prepayments
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
2010
$'000
2009
$'000
3,184
(1,537)
(2)
1,645
(1,619)
82
(1,537)
307,147
92,144
(90,497)
1,647
(2)
1,645
2,444
(1,278)
(85)
1,081
(1,623)
345
(1,278)
264,834
79,450
(78,284)
1,166
(85)
1,081
30 June
2010
$'000
30 June
2009
$'000
4,177
4,177
28,418
28,418
Notes
(a)
(b)
30 June
2010
$'000
30 June
2009
$'000
568,063
1,164
569,227
207,701
817
208,518
No class within trade and other receivables contain impaired or past due assets. Based on the credit history, it is expected
these amounts will be received when due. The Group does not hold any collateral in relation to these receivables.
-153-
153 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
10 Current assets - Trade and other receivables (continued)
Description of trade and other receivables
(a) Loans to related parties
Loans to related parties predominantly represent interest and finance charges on funds loaned from Transurban Finance
Company, distributions receivable from its subsidiaries and accrued interest from a related party. There is no allowance for
doubtful debts as the counterparties are related parties.
(b) Prepayments
Prepayments relate to expenses that have been paid but not yet incurred as at 30 June 2010.
11 Non-current assets - Receivables
Concession notes
Loans to related parties
Notes
(a)
30 June
2010
$'000
30 June
2009
$'000
479,967
5,501,610
5,981,577
378,110
5,486,802
5,864,912
None of the non-current receivables are impaired or past due but not impaired.
(a) Concession notes
The Group reached agreements with the State of Victoria and Vic Roads, under which the Group paid $765 million to the
State to reassign all current and future concession notes incurred under the provisions of the Melbourne CityLink
Concession Deed to Transurban Holding Trust.
-154-
154 Transurban annual reporT 2010
12 Equity accounted investments
Carrying amounts
Name of company
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Ownership
interest
30
June
2010
%
50
50
50
30
June
2009
%
50
50
50
Carrying amount
30 June
2010
$'000
30 June
2009
$'000
-
-
-
-
-
-
-
-
On 28 August 2008, Transurban completed its acquisition of an additional 2.5 per cent of the Westlink M7, for
consideration of $38.0 million. The acquisition comprised term loan notes of $30.4 million and an increase in its equity
investment of $7.6 million.
Each of the above is a member of the Westlink Motorway Group, established to invest in, construct and operate the
Westlink M7 toll road in Sydney. All were incorporated in Australia.
Westlink Motorway Limited is the nominee manager of the Westlink Motorway Partnership and is carried at $90.
WSO Finance Pty Limited is the financier of the Westlink M7 toll road and is carried at $90.
Westlink Motorway Partnership was responsible for the construction of the Westlink M7 Motorway in Sydney. The M7
opened for operation on 16 December 2005.
Summarised financial information of associates
2010
Westlink Motorway
2009
Westlink Motorway
Ownership
Interest
%
50
50
Group's share of:
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit/(loss)
$'000
714,035
714,035
(869,990)
(869,990)
54,573
54,573
(23,779)
(23,779)
749,261
749,261
(870,467)
(870,467)
46,435
46,435
(81,795)
(81,795)
-155-
155 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
12 Equity accounted investments (continued)
Movements in carrying amounts
Carrying amount at the beginning of the financial year
Share of losses after income tax
Additional investment acquired
Carrying amount at 30 June
Share of profits or losses
Loss before income tax
Losses not recognised
Balance at 1 July
Unrecognised losses for the year
Balance at 30 June
M7 Motorway
30 June
2010
$'000
30 June
2009
$'000
-
-
-
-
-
-
110,236
23,779
134,015
-
(7,556)
7,556
-
7,556
7,556
35,997
74,239
110,236
Share of expenditure commitments
As at the reporting date, there are no expenditure commitments.
Contingent liabilities of associates
As at reporting date, there are no contingent liabilities.
13 Non-current assets - Term loan notes
Term loan notes
30 June
2010
$'000
30 June
2009
$'000
678,044
678,044
633,272
633,272
Term Loan Notes (TLN's) represent Transurban’s debt funding contribution to the Westlink Motorway. The fixed maturity
date of the TLN's is the earlier of 34 years and the termination of the “Agreement to Lease” between the Roads and Traffic
Authority of New South Wales and Westlink Motorway Limited.
The interest rate charged on these notes is 11.93 per cent and any unpaid interest capitalises into additional notes.
During the year ended 30 June 2010 the Group capitalised interest of $44.8 million (2009: $44.6 million). The TLN's are
accounted for as held-to-maturity investments.
Impairment and risk exposure
None of the TLN's are either past due or impaired. All TLN's are denominated in Australian currency. As a result, there is
no exposure to foreign currency risk. There is also no exposure to price risk as the investments will be held to maturity.
-156-
156 Transurban annual reporT 2010
14 Derivative financial instruments
Current assets
Interest rate swap contracts - cash flow hedges
Total current derivative financial instrument assets
Non-current assets
Interest rate swap contracts - cash flow hedges
Total non-current derivative financial instrument assets
Total derivative financial instrument assets
Current liabilities
Interest rate swap contracts - cash flow hedges
Total current derivative financial instrument liabilities
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Total non-current derivative financial instrument liabilities
Total derivative financial instrument liabilities
Instruments used by the Company
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
257
257
3,172
3,172
3,429
2,667
2,667
10,257
10,257
12,924
-
-
9,134
9,134
9,134
3,336
3,336
8,184
8,184
11,520
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in interest and foreign exchange rates in accordance with the Group's financial risk management policies.
(refer to note 36).
Interest rate swap contracts - cash flow hedges
The Group uses interest rate swap contracts for hedging purposes to convert variable rate borrowings to fixed interest.
Variable rate borrowings of the Group currently bear an average variable interest rate of 7.5 per cent (2009: 4.80 per cent).
It is policy to protect part or all of the loans from exposure to increasing interest rates. Accordingly, the Group has entered
into interest rate swap contracts under which it receives interest at variable rates and pays interest at fixed rates.
Swaps taken out by the Group cover 100 per cent (2009: 87 per cent) of long term variable debt excluding working capital
facilities. After hedging, the Group's variable rate borrowings bear an average fixed rate of 8.2 per cent (2009: 6.90 per
cent).
The contracts require settlement of net interest receivable or payable. The settlement dates coincide with the dates on
which interest is payable on the underlying debt. The contracts are settled on a net basis.
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the
extent that the hedge is effective, and reclassified into profit and loss when the hedged interest expense is recognised.
The ineffective portion is recognised in income immediately. There was no ineffectiveness recognised in the current or
prior period.
-157-
157 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
15 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
The balance comprises
temporary differences
attributable to:
Current and prior year losses
Receivables
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited/(charged) to the income
statement
Tax losses utilised
Closing balance at 30 June
Deferred tax assets to be
recovered after more than 12
months
2,212
-
2,212
(1,224)
988
1,204
1,619
(611)
2,212
1,204
-
1,204
(1,140)
64
-
1,623
(419)
1,204
-
(1,224)
(1,224)
1,224
-
(1,140)
(84)
-
(1,224)
-
(1,140)
(1,140)
1,140
-
(795)
(345)
-
(1,140)
2,212
(1,224)
988
-
988
64
1,535
(611)
988
1,204
(1,140)
64
-
64
(795)
1,278
(419)
64
2,212
2,212
1,204
1,204
(1,224)
(1,224)
(1,140)
(1,140)
988
988
64
64
-158-
158 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
CityLink
$'000
Hills M2
Motorway
$'000
Total
$'000
1,207,442
(175,813)
1,031,629
2,116,141
(253,925)
1,862,216
3,323,583
(429,738)
2,893,845
1,031,629
(40,718)
990,911
1,862,216
(54,485)
1,807,731
2,893,845
(95,203)
2,798,642
1,207,442
(216,531)
990,911
2,116,141
(308,410)
1,807,731
3,323,583
(524,941)
2,798,642
990,911
(37,632)
953,279
1,807,731
(54,474)
1,753,257
2,798,642
(92,106)
2,706,536
1,207,442
(254,163)
953,279
2,116,141
(362,884)
1,753,257
3,323,583
(617,047)
2,706,536
16 Non-current assets - Intangible assets
At 1 July 2008
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2009
Opening net book amount
Amortisation charge
Closing net book amount
At 30 June 2009
Cost
Accumulated amortisation
Net book amount
Year 30 June 2010
Opening net book amount
Amortisation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated amortisation
Net book amount
Description of intangible assets
Concession assets
The CityLink and Hills M2 Service Concession Arrangements have been accounted for in accordance with AASB-I 12 and
therefore the concession assets have been classified as Intangible Assets.
CityLink Concession Asset
Transurban holds the Concession for Melbourne’s CityLink tollway which grants the Group the right to design, build,
operate and maintain CityLink for the Concession period, ending 14 January 2034, being 34 years following completion of
construction. Transurban has the right to collect tolls from CityLink for the duration of the Concession Arrangement and
maintains the tollway to ensure continuous availability for public use. Tolls are escalated in accordance with the maximum
allowable increases in the Concession Deed, being a quarterly escalation at the greater of quarterly CPI or 1.1065 per cent
(equivalent to an annual escalation rate of 4.5 per cent) for the first 15 years then quarterly by CPI, but no greater than
annual CPI plus 2.5 per cent. At the end of the Concession period, all Concession Assets are to be returned to the
Victorian State Government.
Hills M2 Concession Asset
Transurban has the right to toll the Hills M2 Motorway until 2042. The Concession Deed also requires Transurban to
maintain the Motorway.
Toll increases for the Motorway are based on a maximum toll increase as defined in the Concession Deed, being a
quarterly escalation at the greater of quarterly CPI or 1 per cent, subject to integer rounding. At the end of the concession
period, all concession assets will be returned to the NSW State Government.
159 Transurban annual reporT 2010
-159-
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
16 Non-current assets - Intangible assets (continued)
Impairment testing of intangible assets
Impairment testing
The Group tests whether intangible assets have suffered any impairments, in accordance with the accounting policy stated
in note1(h). The recoverable amount of assets and cash-generating units have been determined based on the greater of
value-in-use and fair value less cost to sell calculations. These calculations require the use of assumptions regarding
traffic flows, discount rates, growth rates and other factors affecting operating activities of cash-generating units.
Key assumptions used for calculating the recoverable amount
The Group makes assumptions in calculating the recoverable amount of its cash generating units. These include
assumptions around expected traffic flows and forecast operational costs. In performing the calculations the Group has
applied a discount rate of 8.8 per cent (2009: 8.8 per cent), representing the implied discount rate applicable to the risk
profile of the Group's assets, to discount the forecast future attributable cash flows. In determining future cash flows, the
Group has also applied rates of growth to underlying operating assumptions to reflect the expected performance of the
assets beyond the budget period in accordance with the respective concessions. The operating costs have been
escalated in line with a combination of Consumer Price Index (CPI) and Average Weekly Earnings (AWE) forecasts. A
long term CPI rate of 2.5 per cent (2009: 2.5 per cent) and AWE of 4.0 per cent (2009: 4.0 per cent) have been used.
17 Current liabilities - Trade and other payables
Trade payables
Related party payables
Other payables
18 Borrowings
Current
Term debt
Non-current
Term debt
Loans from related parties
Total borrowings
30 June
2010
$'000
30 June
2009
$'000
84
153,805
7,966
161,855
345
94,876
14,757
109,978
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(a)
(b)
-
-
515,500
515,500
964,507
3,178,192
4,142,699
457,739
3,149,573
3,607,312
4,142,699
4,122,812
-160-
160 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
18 Borrowings (continued)
Description of borrowings
(a) Term debt
The term debt facilities are comprised of a $515.0 million facility entered into by AMT Management Limited (as trustee for
Airport Motorway Trust) and a $465.0 million facility entered into by Hills Motorway Management Limited (as trustee for
Hills Motorway Trust). The facilities have deferred borrowing costs of $9.6 million and $5.9 million respectively.
The Airport Motorway facility was refinanced in July 2009 and is fully secured against the respective rights of Airport
Motorway Limited and Airport Motorway Trust and their assets. The facility is a non-recourse syndicated facility with terms
of three years ($195.0 million), five years ($260.0 million) and seven years ($60.0 million). The current floating interest rate
applicable to the facility is 7.6 per cent (2009: 4.0 per cent). The facility is fully hedged to an all-in rate after hedging of 8.4
per cent.
The Hills M2 facility is a non-recourse syndicated facility with terms of three years ($290.5 million) and five years ($174.5
million). The current floating interest rate applicable to the facility is 7.3 per cent (2009: 5.9 per cent). The facility is fully
hedged to an all-in rate after hedging of 7.8 per cent.
(b) Loans from related parties
The Group receives funding from a related party, Transurban Finance Company Pty Ltd, which is used to finance its
activities.
Covenants
The Transurban Group's debt has the following Interest Coverage Ratio ("ICR") covenants:
!
!
CityLink - ICR greater than 1.1 times
Group - ICR greater than 1.25 times
In addition, the Group has a market capitalisation clause where gearing must not exceed 60%. Based on the balance
sheet at 30 June 2010, the Group's Security price would need to close below $1.88 per Security for 20 consecutive
business days to trigger this clause.
In addition, the non-recourse debt at M1 Eastern Distributor and Hills M2 Motorway has the following covenants:
!
!
M1 Eastern Distributor - ICR greater than 1.2 times
Hills M2 Motorway - ICR greater than 1.2 times
-161-
161 Transurban annual reporT 2010
19 Current liabilities - Provisions
Distribution to security holders
Distribution to non-controlling interests in subsidiaries
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
169,816
27,662
197,478
141,152
30,493
171,645
The provision recognised in June 2009 was paid to security holders on 28 August 2009. The final 2010 distribution is
payable on 27 August 2010.
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Carrying amount at start of year
Provision recognised
Amounts paid / utilised during the year
Carrying amount at end of year
Distribution to
security
holders
$'000
Distribution to
non-controlling
interests in
subsidiaries
$'000
141,152
324,566
(295,902)
169,816
30,493
11,613
(14,444)
27,662
-162-
162 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(a)
(b)
(c)
-
-
-
-
16,645
16,645
17,269
16
61,795
79,080
10,613
10,613
16,645
89,693
20 Other liabilities
Current
Unearned income (related parties)
Unearned income (other)
Payable for settlement of Citylink concession notes
Non-current
Promissory notes
Total other liabilities
Description of other liabilities
(a) Unearned income
Unearned income related to rental income received in advance from a related party.
(b) Payable for settlement of Citylink concession notes
Transurban reached an agreement with the State of Victoria and Vic Roads to jointly fund upgrades and improvements
to75 kilometres of the West Gate - CityLink (Southern Link) - Monash Freeway corridor. To fund the upgrade Transurban
agreed to pay the State $614.3 million over three years in satisfaction of its current and future obligations to repay
concession notes issued to the State.
The agreement effectively represents the termination of any future obligation to the State of Victoria by the Group by
assigning the right to receive future concession payments made by CityLink Melbourne to Transurban Holding Trust. On a
Group basis, the impact of concession notes on the balance sheet and income statement is nil, as the Group has a right of
offset.
(c) Promissory notes
The Hills Motorway Trust has entered into leases with the Roads and Traffic Authority of New South Wales (“RTA”).
Annual lease liabilities under these leases total $7.0 million, indexed annually to the Consumer Price Index over the
estimated period that the M2 Motorway will be used. Until such time as a threshold return is achieved, payments under
these leases can be made at any time at the discretion of the Responsible Entity of the Trust, by means of the issue of
non-interest bearing promissory notes to the RTA.
Promissory Notes have been included in the Financial Report as non-interest bearing liabilities at the present value of
expected future repayments. As the timing and profile of these repayments is largely determined by the available equity
cash flows of the M2 Motorway, the present value of the expected future repayments is determined using a discount rate of
12 per cent (2009: 12 per cent) which recognises their subordinated nature.
The face value of promissory Notes on issue at 30 June 2010 is $116.2 million (2009: $106.2 million). The Net Present
Value at 30 June 2010 of the redemption payments relating to these Promissory Notes is $16.6 million (2009: $10.6
million).
-163-
163 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
21 Contributed equity
The issued units of the Trust are a component of a parcel of stapled securities, each parcel comprising one share in
Transurban Holdings Limited, one unit in Transurban Holding Trust and one share in Transurban International Limited.
The individual securities comprising a parcel of stapled securities cannot be traded separately.
Units on issue
Ordinary units fully paid
Units on issue
Ordinary units fully paid
Trust units
2010
$'000
2009
$'000
7,103,500
7,103,500
6,692,365
6,692,365
2010
Number
'000
2009
Number
'000
1,414,295
1,414,295
1,281,363
1,281,363
The number of units on issue is 1,414,667,986 (2009: 1,282,682,606). The difference of 373,804 (2009: 1,319,606) relates
to treasury securities.
Units entitle the holder to participate in distributions and the winding up of Transurban Holding Trust in proportion to the
number of and amounts paid on the units held.
On a show of hands every holder of units present at a meeting in person or by proxy is entitled to one vote.
All units issued form part of the Transurban Group stapled securities issued. The amounts above represent the value
apportioned to Transurban Holding Trust, with the remaining value apportioned to Transurban Holdings Limited and
Transurban International Limited.
Capital risk management
The Group is subject to a gearing ratio covenant imposed by Senior Secured lenders. The Group monitors capital on the
basis of the gearing ratio to ensure compliance with the covenant. There have been no breaches of the covenant. For
further information refer to note 18.
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they
can continue to provide returns to security holders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of distributions paid to security
holders, return capital to security holders, issue new securities or sell assets to reduce debt.
-164-
164 Transurban annual reporT 2010
21 Contributed equity (continued)
Movements in issued units
Opening balance at 1 July 2008
Distribution Reinvestment Plan
Purchase, disposal and vesting of treasury securities
Share purchase plan, net of transaction costs
Closing balance at 30 June 2009
Opening balance at 1 July 2009
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Equity raising, net of transaction costs
Closing balance at 30 June 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Number of
units
'000
Notes
(a)
(b)
(c)
(a)
(b)
(d)
1,218,263
60,591
679
1,830
1,281,363
1,281,363
14,069
946
117,917
1,414,295
$'000
6,507,180
174,143
4,993
6,049
6,692,365
6,692,365
44,460
6,673
360,002
7,103,500
(a) Distribution reinvestment plan
The Transurban Group has established a distribution reinvestment plan under which holders of Stapled Securities may
elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather than by cash.
Securities are to be issued under the plan at a 2.5 per cent discount to the market price for the 30 June 2010 distribution.
(b) Treasury Units
Stapled Securities (including units in the Trust) were issued to executives under Share Based Payment Plans. The
stapled securities are held by the executive but will only vest in the executive in accordance with the terms of the plans.
The acquired securities cannot be transferred or sold prior to vesting date. On forfeit the securities are sold on market.
(c) Share purchase plan
In the prior year, the Transurban Group raised $10.0 million via a share purchase plan, issuing 1.8 million stapled
securities to eligible security holders. THT's share was $6.0 million, net of costs.
(d) Equity placement
Transurban raised $542.4 million via an equity raising, issuing 117.9 million stapled securities. THT's share was $360.0
million.
-165-
165 Transurban annual reporT 2010
22 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross (note 14)
Transfer to net profit
Transfer to net profit attributable to minority interest
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Employee distribution
Transfer to equity (vested loan)
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
Balance 1 July
Net profit/(loss) for the year
Distributions
Balance 30 June
Nature and purpose of reserves
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
(7,339)
3,354
(3,985)
(4,653)
4,323
(330)
(4,653)
(721)
(2,634)
669
(7,339)
4,323
2,164
63
(3,196)
3,354
10,518
(25,622)
8,963
1,488
(4,653)
6,874
738
(70)
(3,219)
4,323
30 June
2010
$'000
30 June
2009
$'000
(1,701,315)
294,256
(324,566)
(1,731,625)
(1,671,191)
250,830
(280,954)
(1,701,315)
Cash flow hedges
The cash flow hedges reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are
recognised in other comprehensive income, as described in note 1(k). Amounts are reclassified to profit and loss when
the associated hedged transaction affects profit and loss.
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not exercised.
-166-
166 Transurban annual reporT 2010
23 Distributions
Distributions proposed
Final distribution payable and recognised as a liability: 12.0 cents (2009: 11.0 cents)
per fully paid Stapled Security payable 27 August 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
169,760
169,760
141,095
141,095
Final distribution for 2009 financial year of 11.0 cents (2008: 29.0 cents) per fully paid
Stapled Security paid 28 August 2009
Interim distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully
paid Stapled Security paid 26 February 2010
Total dividends provided for or paid
141,095
319,076
154,806
295,901
140,041
459,117
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities (a)
Funds available for future distribution reinvestment plans
230,451
65
65,381
4
295,901
172,161
551
286,418
(13)
459,117
(a) The value of stapled securities represents the total value of securities issued, however, this value is apportioned
between Transurban Holding Trust ($44.5 million), Transurban Holdings Limited ($15.0 million) and Transurban
International Limited ($5.9 million).
24 Remuneration of auditors
The audit fee for the current and prior year has been borne and paid by a related party, Transurban Limited.
25 Contingencies
Contingent liabilities
The Group and parent entity had contingent liabilities at 30 June 2010 in respect of:
Equity guarantee
Transurban DRIVe Holdings LLC (DRIVe), a related party of the Transurban Group, holds a concession agreement with
The Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on the Capital Beltway (Capital
Beltway project), a ring road that runs around Washington DC. The project is currently in the construction phase.
Construction is expected to take five years and the tolling concession will operate for 75 years.
On 20 December 2007 (and as amended on 12 June 2008) the Transurban Group, through the entities in the triple staple,
being Transurban Holdings Limited, Transurban International Limited and Transurban Infrastructure Management Limited
(as responsible entity of the Transurban Holding Trust), entered into an agreement with Capital Beltway Express LLC
(Capital Beltway Express), a subsidiary of DRIVe, the Virginia Department of Transportation, Goldman Sachs Capital
Markets L.P., Depfa Bank plc and Wells Fargo Bank N.A. to provide an Equity Funding Guarantee (the Guarantee) over all
of DRIVe’s equity obligations associated with funding the equity contributions to the Capital Beltway project.
The Transurban Group owns 75 per cent of the equity of DRIVe and recognises this investment in the consolidated
financial statements using the equity method of accounting. DRIVe holds 90% of the equity in Capital Beltway Express
and, from time to time, is required to make equity contributions to Capital Beltway Express to fund the equity component of
the Capital Beltway project costs. The total equity contribution DRIVe is obliged to make to Capital Beltway Express is
US$313,825,757, of which US$133,064,838 had been paid at balance sheet date.
-167-
167 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
25 Contingencies (continued)
In accordance with the DRIVe Holdings LLC Agreement, should a DRIVe member default on any capital calls, the
Transurban Group has the right to acquire their share of DRIVe at a 50 per cent discount to its fair value. As such in the
instance of the Guarantee being called, the Transurban Group may exercise its right to the interest in DRIVe at a
discounted value.
26 Intra-group guarantees
As at 30 June 2010, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and
Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities within
the group on a continual basis.
27 Commitments
Promissory Notes
The Responsible Entity, on behalf of the Hills Motorway Trust, has entered into an agreement with the Roads and Traffic
Authority of New South Wales (“RTA”). Annual liabilities under this agreement total $7.0 million indexed annually to the
Consumer Price Index over the estimated period that the Hills M2 Motorway will be used. Until such time as a threshold
return is achieved, payments under this agreement can be made at the discretion of the Responsible Entity, by means of
the issue of non-interest bearing promissory notes to the RTA. For further information refer to note 20.
-168-
168 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
28 Related party transactions
Other related parties
All of the directors of Transurban Infrastructure Management Limited are also directors of Transurban Holdings Limited.
Mr Ryan and Mr Lynch are directors of Transurban International Limited. The following services are provided by the Trust
to these consolidated entities:
-
-
Financial support through interest bearing and non-interest bearing loans; and/or
The rental of land.
Financial support is received from Transurban Finance Company in the form of an interest bearing loan. The Trust pays
interest and related finance charges for such loan.
Transurban Infrastructure Management Limited is the Responsible Entity of Transurban Holding Trust, CityLink Trust and
CARS Trust and receives Responsible Entity and Management Fees.
Aggregate amounts of each of the above types of other transactions with directors of Transurban Infrastructure
Management Limited:
Amounts recognised as revenue
Rental income
Interest income
Term loan notes interest revenue
Amounts recognised as expenses
Interest and other related charges paid
Responsible Entity fees
Aggregate amounts of related party receivables at balance date:
Current receivables
Term loan notes (loan to associate)
Non-current receivables
Aggregate amounts of related party payables at balance date:
Current payables
Non-current payables
Unearned income
30 June
2010
$
30 June
2009
$
219,951,604
324,407,165
78,789,621
623,148,390
215,771,599
333,309,349
72,826,036
621,906,984
176,858,817
2,553,236
179,412,053
202,455,835
2,504,646
204,960,481
568,063,115
678,044,167
5,501,610,391
6,747,717,673
207,700,914
633,272,067
5,486,801,845
6,327,774,826
153,805,376
3,178,191,878
-
3,331,997,254
94,876,246
3,149,572,527
17,268,888
3,261,717,661
Loan to/from related parties
No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts from related parties.
-169-
169 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
28 Related party transactions (continued)
Loan to associate
The “loan to associate” is via Term Loan Notes (“TLN”). The TLN represent the Group’s funding contribution to the
Westlink Motorway Partnership and earn interest at a fixed rate of 11.93 per cent until the earlier of 34 years and the
termination of the “Agreement to Lease” between the Roads and Traffic Authority of New South Wales and Westlink
Motorway Limited.
Any unpaid interest is capitalised and deemed to subscribe for further loan notes with an aggregate principal amount equal
to that unpaid interest.
The TLN have not been affected by equity accounting losses from the associate.
Terms and conditions of transactions with related parties other than key management personnel or entities
related to them
All transactions were made on normal terms and conditions and at market rates.
29 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Name of entity
incorporation Class of shares
Equity holding
Country of
The CityLink Trust
Transurban Finance Trust
Transurban AL Trust
Transurban CARS Trust
Transurban WSO Trust
Hills Motorway Trust
T (895) Finance Trust
Abigroup Westlink Partner Holding No.4 Pty Ltd
Abigroup Westlink Partner No.4 Pty Ltd
LMI Westlink Partner Holding No.4 Pty Ltd
LMI Westlink Partner No.4 Pty Ltd
Abigroup Westlink Partner Holding No.2 Pty Ltd
Abigroup Westlink Partner No.2 Pty Limited
LMI Westlink Partner Holding No.2 Pty Limited
LMI Westlink Partner No.2 Pty Limited
Sydney Roads Trust
Eastern Distributor Funding Trust
Airport Motorway Trust
LCT-MRE Trust *
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
*
**
Established on 7 May 2010.
The proportion of ownership interest is equal to the proportion of voting power held.
2010
%
2009
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
75.10
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75.10
-
30 Events occurring after the balance sheet date
Subsequent to the end of the financial year, the Group has completed the acquisition of the assets and motorway
concession deed connected with the Lane Cove Tunnel in Sydney. The Group took control of the assets and concession
deed on 10 August 2010. The acquisition was funded through cash on hand from a capital raising in May 2010 and
external borrowings.
-170-
170 Transurban annual reporT 2010
31 Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Profit for the year
Depreciation and amortisation
Share of net profits (losses) of equity accounted investments
Capitalised term loan note interest
Non-cash concession notes income
Distribution income
Non cash finance costs
Change in operating assets and liabilities
(Increase) decrease in receivables & prepayments
(Increase) in operating related party balances
Movement in current tax liabilities and deferred taxes
(Decrease) increase in payables
(Decrease) in unearned income
Increase (decrease) in Promissory Note liability
Net cash inflow from operating activities
32 Non-cash investing and financing activities
Distributions satisfied by the issue of units under the distribution reinvestment plan
30 June
2010
$'000
30 June
2009
$'000
305,502
92,106
-
(44,772)
(101,857)
-
10,546
-
(347)
(92,944)
(145)
(7,053)
(17,285)
6,032
149,783
263,753
95,203
7,556
(44,604)
(50,332)
-
67,031
-
305
(222,567)
376
2,657
(17,436)
(2,360)
99,582
30 June
2010
$'000
30 June
2009
$'000
44,460
44,460
174,142
174,142
-171-
171 Transurban annual reporT 2010
33 Earnings per unit
Basic earnings per unit
Earnings from continuing operations attributable to the ordinary unit holder
Total basic earnings per unit attributable to the ordinary unit holders of the trust
Diluted earnings per unit
Earnings from continuing operations attributable to the ordinary unit holder
Total diluted earnings per unit attributable to the ordinary unit holders of the trust
Reconciliations of earnings used in calculating earnings per unit
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
Cents
30 June
2009
Cents
22.6
22.6
22.6
22.6
19.8
19.8
19.8
19.8
30 June
2010
$'000
30 June
2009
$'000
Basic and diluted earnings per share
Profit for the year
Profit attributable to non-controlling interests
Profit attributable to the ordinary unit holders of the trust used in calculating basic and
diluted earnings per unit
305,502
(11,246)
263,753
(12,923)
294,256
250,830
Weighted average number of shares used as the denominator
30 June
2010
Number
30 June
2009
Number
Weighted average number of units used in calculating basic and diluted earnings per
unit
Adjustments for calculation of diluted earnings per unit:
Performance rights
Weighted average number of ordinary units and potential ordinary units used as the
denominator in calculating diluted earnings per unit
1,301,035,941
1,267,502,187
2,750,885
1,297,389
1,303,786,826
1,268,799,576
Basic earnings per unit
Basic earnings per unit is determined by dividing the profit attributable to unit holders excluding any non-controlling interest
and costs of servicing equity other than distributions, by the weighted average number of units outstanding during the
financial year.
Diluted earnings per unit
Diluted earnings per unit adjusts the figures used in the determination of basic earnings per unit to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential units and the weighted
average number of units that would have been outstanding assuming the conversion of all dilutive potential units.
-172-
172 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
34 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Retained earnings
Minority interest
Profit or loss for the year
Total comprehensive income
Contingent liabilities of the parent entity
For details of contingent liabilities of the parent entity, refer to note 25.
30 June
2010
$'000
30 June
2009
$'000
779,105
818,955
6,897,760
6,417,783
7,676,865
7,236,738
169,817
210,351
1,989,922
1,862,515
2,159,739
2,072,866
7,103,500
3,353
(1,589,727)
-
5,517,126
6,692,365
4,323
(1,532,816)
-
5,163,872
267,656
292,078
267,656
292,078
-173-
173 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
35 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Valuation of Promissory notes and Concession Notes Receivable
The Trust holds non-interest bearing long term debt represented by promissory notes and a long term receivable that
offsets a concession notes liability held in CityLink Melbourne, that are included in the financial statements at the present
value of expected future repayments. The calculations to discount these notes to their present value are based on the
timing and profile of the repayments. Assumptions are made in determining the timing and profile, based on expected
available equity cash flows of the Trust’s cash generating units.
A discount rate is used to value the promissory notes and concession notes receivable to their present value, which is
determined through reference to other facilities in the market with similar characteristics.
Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
The Group uses its judgement to select a variety of methods and makes assumptions that are mainly based on market
conditions existing at each balance date.
Impairment of Assets
The Group tests whether its assets have suffered any impairment when an event occurs that indicates that this may be the
case. The recoverable amount of any cash generating units have been determined based on the greater of value-in-use
and fair value less cost to sell calculations. These calculations require the use of assumptions regarding traffic flows,
discount rates, growth rates and other factors affecting operating activities.
36 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk),
credit risk and liquidity risk. The financial risk management function is carried out centrally by the Transurban Group
Treasury team (Treasury) under policies approved by the Board. Treasury work closely with the Group’s operating units to
actively identify and monitor all financial risks, and put hedging in place where appropriate. The Board are informed on a
regular basis of any material exposures to financial risks.
The Group’s hedging strategies are detailed below, and include the use of derivative financial instruments. The Group’s
policies allow derivative transactions to be undertaken only for the purpose of reducing risk, and do not permit speculative
trading. Treasury continuously monitor risk exposures over time through review of cashflows, price movements, market
analysis and ongoing communication within the Group. When measuring financial risk, Treasury consider positive and
negative exposures, existing hedges and the ability to offset exposures where possible.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk when future commercial transactions and
recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
Foreign currency exposures are viewed as either investment exposures or operating exposures. Exposures from
investment in foreign assets are generally managed using foreign currency debt. All known material operating exposures
out to 12 months are hedged, using hedging instruments, offsetting exposures or drawing on foreign currency funds.
-174-
174 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
36 Financial risk management (continued)
The Group's exposure to foreign currency risk at the reporting date, denominated in the currency in which the risk arises,
was as follows:
Consolidated
Receivables
Borrowings
Net exposure
Exposure to other foreign exchange movements is not material.
30 June
2010
USD
$'000
30 June
2009
USD
$'000
336,666
(276,001)
60,665
310,023
(233,255)
76,768
Sensitivity
Based on the financial instruments held at end of the period, had the Australian dollar strengthened/weakened by 10 cents
against the U.S. dollar with all other variables held constant, the Group’s post-tax profit for the year would have been
$7,474,000 lower (2009: $10,381,000 lower) or $9,461,000 higher (2009: $13,299,000 higher), as a result of foreign
exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.
Equity is not impacted by movements in foreign exchange. The Group’s exposure to other foreign exchange movements
is not material.
Cash flow interest rate risk
The Group’s main exposure to interest rate risk arises from cash equivalents, loans and other receivables with variable
interest rates, and long-term borrowings. Treasury manages interest rate risk by entering into fixed rate debt facilities or
using interest rate swaps to convert floating rate debt. Generally, the Group raises long term borrowings at floating rates
and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. The
Group’s policy is to hedge interest rate exposure at a minimum in compliance with the covenant requirements of funding
facilities and up to 100 per cent. Covenant requirements vary by debt facility, and require a minimum of between 50 per
cent and 80 per cent of interest rate exposure to be hedged. At 30 June 2010, 100 per cent of the Group’s interest rate
exposure on variable rate borrowings was hedged.
As at the end of the reporting period, the Company had the following variable rate borrowings and interest rate swap
contracts outstanding:
30 June 2010
30 June 2009
Weighted
average
interest rate
%
Balance
$'000
Weighted
average
interest rate
%
Balance
$'000
Cash and cash equivalents
Floating rate borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
%4.1
%7.5
%4.8
(4,177)
980,000
(980,000)
(4,177)
%2.9
%4.7
%3.4
(28,418)
1,075,321
(851,625)
195,278
An analysis by maturities is provided in liquidity risk below.
Sensitivity
At 30 June 2010, if interest rates had changed by +/-100 basis points from the year-end rates with all other variables held
constant, post-tax profit for the year would have been $42,000 higher/lower (2009: $1,953,000 lower/higher).
-175-
175 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
36 Financial risk management (continued)
Credit risk
The Group has no significant concentrations of credit risk from operating activities, and has policies in place to ensure that
transactions are made with commercial customers with an appropriate credit history. However as an owner and operator of
large infrastructure assets, the Group is exposed to credit risk with its financial counterparties through undertaking
financial transactions intrinsic to its business. These include funds held on deposit, cash investments and the market value
of derivative transactions.
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by multiple
independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to higher rated
counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only dealing with credit
worthy counterparties, limiting the exposure to any one counterparty, minimising the size of the exposure where possible
through netting offsetting exposures, diversifying exposures across counterparties, closely monitoring changes in total
credit exposures and changes in credit status, and taking mitigating action when necessary.
The Group’s investment in the Westlink Motorway is through term loan notes (see note 13 for details). The return on these
notes is ultimately dependent on the performance of the Motorway. The Group continually monitors the performance and
expected cash flows of the Motorway.
Liquidity risk
The Group maintains sufficient cash and undrawn facilities to maintain short term flexibility and enable the Group to meet
financial commitments in a timely manner. Treasury assesses liquidity over the short term (up to 12 months) and medium
term (1 – 5 years) by maintaining accurate forecasts of operating expenses, committed capital expenditure and payments
to security holders. Long term liquidity requirements are reviewed as part of the annual strategic planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group’s forecast
annual operating costs and certain risk exposure scenarios as maintained by the Group’s strategic risk register, and is
maintained as cash and undrawn facilities. The reserve is maintained on a rolling 12 month basis. Medium term liquidity
forecasting is maintained on a rolling 5 year horizon.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
Expiring within one year
Expiring beyond one year
Consolidated
2010
$'000
2009
$'000
270,971
230,000
500,971
111,156
305,179
416,335
The facilities are committed for the term of the facility and cannot be withdrawn by the bank without notice.
-176-
176 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
36 Financial risk management (continued)
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities, net and gross settled derivative financial instruments into
relevant maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal
their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows have been
estimated using forward interest rates applicable at the end of the reporting period.
Contractual
maturities of
financial liabilities
1 year or
less
Over 1 to 2
years
Over 2 to 3
years
Over 3 to 4
years
Over 4 to 5
years
Over 5
years
Total
contractual
cash flows
At 30 June 2010
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled (interest
rate swaps)
Total derivatives
At 30 June 2009
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled (interest
rate swaps)
Total derivatives
354,513
112,339
189,821
-
365,084
489,821
-
247,682
546,821
-
213,346
399,321
-
285,474
370,006
116,184
64,984
2,123,185
470,697
1,288,909
4,118,975
371,158
1,000,111
3,142,588
656,673
854,905
794,503
612,667
655,480
2,304,353
5,878,581
4,513,857
5,932
5,932
3,266
3,266
3,070
3,070
(209)
(209)
222
222
71
71
12,352
12,352
9,495
9,495
1 year or
less
Over 1 to 2
years
Over 2 to 3
years
Over 3 to
4 years
Over 4 to 5
years
Over 5 years
Total
contractual
cash flows
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
338,960
647,096
349,934
-
41,311
190,184
-
319,299
490,184
-
11,627
545,684
-
186,537
146,309
106,234
-
2,397,212
445,194
1,205,870
4,119,507
349,573
1,075,321
3,047,491
1,335,990
231,495
809,483
557,311
332,846
2,503,446
5,770,571
4,472,385
12,216
12,216
1,876
1,876
(6,075)
(6,075)
(2,600)
(2,600)
(2,397)
(2,397)
-
-
3,020
3,020
2,386
2,386
-177-
177 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
36 Financial risk management (continued)
Fair value measurements
The carrying value of financial assets and financial liabilities brought to account at balance sheet date approximates fair
value.
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
As of 1 July 2009, Transurban Holding Trust has adopted the amendment to AASB 7 Financial Instruments: Disclosures
which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(a)
(b)
(c)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (level 2), and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3).
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2010.
Comparative information has not been provided as permitted by the transitional provisions of the new rules.
At 30 June 2010
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
3,429
3,429
12,924
12,924
-
-
-
-
3,429
3,429
12,924
12,924
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at the end of each reporting period. The fair value of interest rate swaps are calculated as the
present value of the estimated future cash flows. These instruments are included in level 2.
-178-
178 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures
Directors
With the exception of the changes noted below, the following persons were directors of Transurban Infrastructure
Management Limited, the responsible entity of the Trust during the financial year:
(i)
Executive directors
Christopher J Lynch
(ii) Non-executive directors
David J Ryan
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy GA Davis
Robert J Edgar (appointed 21 July 2009)
Lindsay P Maxsted
Rodney Slater
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the
Company, directly or indirectly, during the financial year:
B Bourke
D Cardiff
K Daley
M Fletcher
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Chief Operating Officer
Group General Manager Human Resources (resigned 30 November 2009)
President International Development
Group General Manager Public Affairs
Group General Manager Strategy & Corporate Development
Acting Group General Manager, People, Legal and Governance
Chief Financial Officer
President Transurban North America
Chief Legal Counsel & Company Secretary
2010 REMUNERATION REPORT
INTRODUCTION
The Directors present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001
for Transurban Holding Trust and its controlled entities for the year ended 30 June 2010. The information provided in the
Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. This report is for the
Transurban Group as a whole (the Group). It is considered the most appropriate disclosure for the readers of the financial
statements.
The Remuneration Report contains detailed information regarding the remuneration arrangements for the directors and
senior executives who are the 'key management personnel' (KMP) of the Group. The KMP include the five highest
remunerated executives of the Group for the year ended 30 June 2010, and are listed in the tables below:
-179-
179 Transurban annual reporT 2010
37 Key management personnel disclosures (continued)
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Non-Executive Directors
Name
David Ryan
Senior Executives
Name
Chris Lynch
Brendan Burke
Tom Honan
Elizabeth Mildwater
Neil Chatfield
Geoff Cosgriff
Jeremy Davis
Position
Executive Director, Chief Executive
Officer (CEO)
Chief Operating Officer
Chief Financial Officer
Chief Legal Counsel and Company
Secretary
Group General Manager, Strategy
and Development
Group General Manager, Public
Affairs
Acting Group General Manager,
People, Legal and Governance
Group General Manager, Human
Resources
President, International Development
President, Transurban North America
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. Upon her return she fulfilled the role of Group
General Manager People, Legal and Governance for Elizabeth Mildwater who was on study leave.
David Cardiff resigned with effect from 30 November 2009.
Lindsay Maxsted
Rodney Slater
Bob Edgar
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
1
2
During the year ended 30 June 2010, the Board reviewed key aspects of the remuneration of the CEO and other senior
executives, taking into account feedback received from security holders on the 2009 Remuneration Report. As a result of
the review, certain changes were implemented. The Group also revised the format of the Remuneration Report in an effort
to improve security holder understanding of its remuneration arrangements.
The remuneration information contained in the Remuneration Report is presented as follows:
Content
Remuneration governance
Remuneration in context
CEO and senior executive remuneration:
!
!
!
!
!
!
!
!
!
Remuneration strategy and policy
Relative weightings of remuneration
Key changes for the year ended 30 June 2010
Fixed remuneration, Short term incentives, Long term
incentives
Other equity plans
Legacy LTI plans
Dealings in securities
Remuneration paid to the CEO and other senior executives
Service Agreements
Link between Group performance, security holder wealth and
remuneration
Non-executive director remuneration
Glossary of terms
Page
Page 181
Page 181
Page 182
Page 182
Page 183
Page 183
Page 184
Page 192
Page 193
Page 196
Page 197
Page 198
Page 198
Page 201
Page 204
-180-
180 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
REMUNERATION GOVERNANCE
Board and Remuneration Committee responsibility
The Remuneration Committee assists the Board in fulfilling its responsibilities relating to the remuneration of directors, the
remuneration of, and incentives for, the CEO and other senior executives, and remuneration practices, strategies and
disclosures generally.
It is critical that the Remuneration Committee is independent of management when making decisions affecting employee
remuneration. Accordingly, the Remuneration Committee is comprised of non-executive directors, all of whom are
independent. Where appropriate, members of management attend Remuneration Committee meetings by invitation,
however they do not participate in formal decision making.
Engagement of remuneration consultants
To ensure it has all relevant information at its disposal when making remuneration decisions, the Remuneration
Committee seeks and considers advice from independent remuneration consultants where appropriate. Any advice and
recommendations from external consultants are used to guide the Remuneration Committee and the Board, but do not
serve as a substitute for thorough consideration of the issues by Directors.
Potential conflicts of interest are taken into account when remuneration consultants are selected, and their terms of
engagement regulate their level of access to, and require their independence from, management.
During the year ended 30 June 2010, market remuneration data was used to assist the Remuneration Committee in
making decisions regarding non-executive director and senior executive remuneration. It was provided by Hay Group, an
independent external consultant who were engaged by the Remuneration Committee.
REMUNERATION IN CONTEXT
Toll road concessions are an asset class characterised by defensive, predictable cash flows, which grow over the life of
long dated concession agreements. There is high upfront capital expenditure during the construction phase of a project,
which shifts to a low cost, high margin cash generative business for the remainder of the concession life. The investment
proposition for high quality toll road assets lies in providing investors with access to long dated, predictable, growing cash
flows generated by the assets over the life of the concessions.
The Group is an international toll road developer and manager with interests in Australia and the US. The Group is
focused on the long-term management of toll road assets at various stages of maturity to achieve the best outcomes for
investors, government partners and the community.
In Australia, the Group's interests include whole ownership of CityLink in Melbourne, and the Hills M2 and Lane Cove
Tunnel (control taken on 10 August 2010) in Sydney. The Group has partial interests in a further three roads on the
Sydney orbital network, being the M1 Eastern Distributor (75.1%), M5 (50.0%), and M7 (50.0%). In North America, the
Group has interests in two assets, Pocahontas 895 (75%) and the Capital Beltway Express (67.5%), which is under
construction in Northern Virginia.
The Board and management are focused on ensuring security holder value is enhanced through the strong performance
of the current portfolio of assets. In addition, development activities provide opportunities to further expand the portfolio in
value accretive ways. The maximisation of free cash available to security holders over the near, medium and longer term
is central to achieving this aim and the remuneration framework has been determined having regard to this.
The Group's remuneration strategy uses three critical measures of performance to align management and investors; total
shareholder return (TSR), proportional net costs and proportional Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA). TSR is a commonly utilised measure of company performance and this coupled with the other
measures align with particular character of the Transurban Group. Further explanation of these measures and the
rationale for their utilisation is outlined in sections 5 and 6. These measures, along with KPIs related to individual areas of
accountability form the core elements of the Group's remuneration framework.
-181-
181 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
CEO AND SENIOR EXECUTIVE REMUNERATION
1
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate an appropriately qualified and
experienced management team with the necessary skills and attributes to lead the Group in achieving its business
objective of creating security holder value. The remuneration strategy also aims to encourage management to strive for
superior performance by rewarding the achievement of targets that are challenging, clearly understood and within the
control of individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
(cid:4)
Remuneration Strategy
Attract, retain, motivate and reward executives who are critical to the Group's growth and success by:
!!
!!
Offering competitive remuneration that is benchmarked against the external market.
Providing a balance of fixed and variable or 'at risk' remuneration.
Align executive rewards with individual and Group performance by:
!!
!!
!!
Making short term and long term components of remuneration 'at risk' based on performance.
Assessing rewards against appropriate financial and non-financial performance measures.
Encouraging executive security holdings.
Fixed
Fixed Remuneration:
(cid:4)
Remuneration Structure
!
!
!
Comprises cash salary, superannuation and other prescribed benefits.
Provides a base level of reward for effective completion of Group and specific accountabilities.
Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable or 'at risk'
Short Term Incentive:
!
!
!
Cash rewards tied to pre-determined individual and Group annual performance measures.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
Group performance targets linked to earnings and cost management.
Long Term Incentive:
!
!
!
Equity rewards to align executive and security holder interests.
Vest after 3 years, subject to relative total security holder return and Group earnings growth.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
-182-
182 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
2
RELATIVE WEIGHTINGS OF REMUNERATION
The remuneration of the CEO and other Senior Executives is structured as a mix of fixed remuneration and variable or 'at
risk' remuneration (through short term and long term incentive components).
The relative weightings of the three remuneration components for the CEO and other senior executives are determined by
the Board (on the advice of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components1
% of total remuneration (annualised)
Fixed
remuneration
Variable remuneration (performance-
based)
CEO
Other Senior Executives
34
50-56
STI
33
25-22
LTI
33
25-22
1
These figures do not reflect the relative value derived from each of the components, which is dependent on actual performance
against targets for the variable components. This is discussed in sections 5 and 6 below. The above STI percentages are based
on achieving 100% of the relevant performance targets. The above LTI percentages are based on the maximum LTI available to
each executive if 100% of the awards granted vest.
3
KEY CHANGES FOR THE YEAR ENDED 30 JUNE 2010
Following careful consideration by the Board, the following changes to various components of remuneration were
implemented during the year ended 30 June 2010. In making these changes, the Board has sought to address the
feedback received from security holders and other stakeholders. The Board has also taken into account the shift in
corporate governance expectations regarding remuneration issues, whilst recognising the need to appropriately
remunerate strong performance.
Change
Fixed remuneration
Salary freeze: A salary 'freeze' was instituted for the CEO and other senior executives, and the majority of employees on
salaries of $200,000 or more, for the year ended 30 June 2010. Fixed remuneration increases for all employees averaged
2.2% during the same period.
The Board approved the salary freeze in light of both an anticipated slowdown in the broader Australian economy and
business objectives regarding cost reductions.
Variable remuneration - short term incentives (STIs)
CEO's STI: In the year ended 30 June 2009, as a one-off arrangement, the CEO had a guaranteed minimum annual STI
payment of 50% of his annual TEC. This guarantee has ceased. For the year ended 30 June 2010 and future years, the
CEO's STI is performance based and 100% at risk. There is no minimum guaranteed STI payment.
STI performance measures: For the year ended 30 June 2010, STI performance measures for the CEO and other senior
executives consisted of:
!
!
!
individual key performance indicators (KPIs);
a shared senior executive KPI; and
Group performance measures based on proportional EBITDA (from the Group's audited financial statements) and
cost management.
The inclusion of a cost management target for STIs is a new initiative for the year ended 30 June 2010.
-183-
183 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
Variable remuneration - long term incentives (LTIs)
Cessation of Executive Equity Plan (EEP): Grants under the Executive Equity Plan (EEP), which were made during the
year ended 30 June 2009, have ceased. The EEP was used to achieve retention of key personnel during a period of
transition for the business and is no longer required.
All LTIs granted to the CEO and other senior executives during the year ended 30 June 2010 are subject to performance
hurdles.
No retesting: LTIs in the form of Performance Awards granted in the year ended 30 June 2010 are tested once at the end
of the 3 year performance period. No retesting of Performance Awards granted under the LTI plan is available.
Proportional EBITDA target: The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA
results included in the Group's audited financial statements and is adjusted for acquisitions and divestments that may
occur during the performance period and is subject to Board approval. For further proportional EBITDA information see
Note 2 Segment information in the Transurban Holdings Limited financial statements.
Following a review of the Group's LTI arrangements, the Board concluded that proportional EBITDA continues to best
reflect the underlying performance of the Group and be an appropriate LTI performance measure.
Performance hurdles for the proportional EBITDA measure have been increased to 6 - 9% compound growth (in actual
proportional EBITDA results for the year ended 30 June 2009), for the 2010 LTI plan. This is a change from the 5 - 9%
applied in the prior period. The 6-9% range was determined based on the Group's understanding of a range of business
parameters including forecast on traffic growth, toll increases and operating costs.
Security holder approval of CEO LTIs: The Group intends to seek security holder approval of the CEO's LTI grant for
the year ended 30 June 2011 at the 2010 Annual General Meeting. The Group considers seeking such approval to be
good corporate governance practice. The LTI grants will be made under the CEO's employment agreement. Due to
contractual arrangements, in the event that security holders fail to approve the proposed grant, a cash payment equivalent
to the remuneration value of the LTI awards will be made to Mr Lynch subject to the terms and conditions of the LTU plan
offered for the year ended 30 June 2011.
4
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
The remuneration for all senior executives is represented by total employment cost (TEC) comprising base salary,
company superannuation contributions and benefits such as salary continuance, death and disability insurance.
This amount of remuneration is not ‘at risk’ but is set by reference to appropriate benchmark information for an individual’s
responsibilities, performance, qualifications and experience.
There are no guaranteed base salary increases in any senior executive's employment agreement. In light of both an
anticipated slowdown in the broader Australian economy and business objectives regarding cost reductions, the CEO
recommended, and the Board approved, a salary 'freeze' for the CEO and other senior executives for the year ended 30
June 2010.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year by reference to
relevant comparative compensation in the market, as well as each senior executive’s performance. Independent
remuneration consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also
reviewed upon promotion.
5
SHORT TERM INCENTIVE (STI)
What is the STI plan?
The STI plan is an annual cash incentive plan linked to specific pre-determined individual and Group performance
measures set as a fixed percentage of TEC.
Who participates in the STI plan?
-184-
184 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
All permanent Group employees including the CEO and other senior executives participate in the STI plan. Fixed term
employees with tenure greater than two years are also eligible participants.
Why does the Board consider the STI an appropriate incentive for senior executives?
The STI plan puts a significant proportion of senior executive remuneration 'at risk' against meeting specific targets linked
to the Group's business objectives. The STI plan focuses participants on achieving performance targets and provides
incentive for high performance. This aligns executive interests with the Group's financial performance, as well as
management principles and the cultural values of the Group.
What proportion of fixed remuneration does the STI plan represent?
For the year ended 30 June 2010, the CEO had a target STI opportunity of 100% of his annualised TEC. Other senior
executives had a target STI opportunity of 40% - 50% of their annualised TEC.
What are the performance measures?
STI performance measures are set at the beginning of the financial year.
There were three categories of performance measures for the CEO and other senior executives for the year ended 30
June 2010. They are described below and were chosen to provide a balance between individual, Group, operational,
strategic, financial and non-financial aspects of performance.
2010 STI performance measures for the CEO and other senior executives
Performance
measure
Individual key
performance
indicators (KPIs)
% of target STI
amount performance
measure applies to
40%
Target(s) for performance measure
Individual KPIs are unique to the individual's area of accountability, but
relate to critical business sustainability measures including: operational
performance; cost reduction; customer satisfaction; project outcomes;
succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group, and are capable
of measurement. Individuals have a clear line of sight to KPIs and are able
to directly affect results through their actions.
Shared Senior
Executive KPI
10%
To achieve the business objective of creating and maintaining a safety
culture, the senior executive team shared a safety KPI that required
outcomes relating to:
!!
!!
!!
a reduction in lost time injury frequency rates;
implementation of an OHS Management Framework in Australia and
US; and
the completion of risk and ergonomics assessments.
Group
performance
targets
50%
To ensure that STI payments are aligned with business performance and the
creation of value for security holders, there are two Group performance
targets:
a proportional EBITDA target; and
a cost management target based on proportional net costs.
!!
!!
Each accounts for half of the group performance targets.
The CEO's individual KPIs are set by the Board. All other senior executives individual KPIs and the shared senior
executive KPI are set by the CEO and approved by the Board. The Board sets the Company performance targets.
-185-
185 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
What is proportional EBITDA and why does Transurban use it as a performance measure?
EBITDA is a common operational performance measure used by many companies.
Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's percentage ownership, as
well as any contribution from Group functions.
Proportional EBITDA is one the primary measures that the Board uses to assess the operating performance of the Group.
It reflects the contribution from individual assets to the Group's operating performance and focuses on elements of the
result that management can influence to drive improvements in short term earnings.
Unlike companies in some industries toll roads do not require any discretionary capital expenditure except in the
occasional upgrade project such as the M1 upgrade. These are rigorously analysed as projects and incorporated in
EBITDA targets once completed. Therefore, proportional EBITDA for Transurban captures the critical measure of
performance that management can control.
Since 2009, proportional EBITDA has been used as a performance hurdle for both STIs and LTIs to ensure that the long
term growth and activities of the Group are not sacrificed in the short term to achieve a desired operating result in a given
year.
Proportional EBITDA figures used to assess performance are extracted from the financial statements which have been
audited by PricewaterhouseCoopers.
The Board can decide to exclude specific items from Proportional EBITDA to provide an underlying result. These items
reflect one-off, non-recurring items, both revenue and expenses, that will not contribute to the Group’s performance in
future periods. Where they are not reflective of the Group’s ongoing operating performance, these one-offs are also
excluded when determining performance incentives. For the year ended 30 June 2010 the Board has excluded corporate
advisory costs incurred in advising the Board with respect of the joint change of control proposals made by CPPIB, OTPP
and CP2 during the year ended 30 June 2010.
Why is proportional EBITDA a better performance measure than statutory EBITDA?
Proportional EBITDA provides a better reflection of the operating performance of the Group and the EBITDA generated
from its portfolio. The presentation of proportional EBITDA permits a meaningful and appropriate analysis of the
underlying performance of the Group's assets.
The EBITDA calculation from the statutory accounts would not include the operating performance of the M5, M7 or DRIVe
(which are equity accounted in the statutory results). These assets are meaningful contributors to the Group's
performance and it is therefore appropriate that they be included in the measure of executive performance.
What is the cost management measure and why does Transurban use it as a performance measure?
The cost management measure is based on proportional net costs. Proportional net costs are the operating, corporate
and business development costs of the Group less non-toll revenues (fees and other). The deduction of these non-toll
revenues from costs encourages and allows management to incur additional costs where these are justified by increased
revenue results (e.g. toll collection activities such as video tolling and/or enforcement). The inclusion of a cost measure in
Transurban's performance rewards reflects the fact that management has the ability to influence the expenditure of the
business. Strong cost management throughout the business drives an increase in proportional EBITDA and cash flow and
ultimately security holder value. The year ended 30 June 2010 was the first year that proportional net costs have been
used by the Group as a performance measure.
As with proportional EBITDA, in specific cases items are excluded from proportional net costs to provide underlying net
costs. Underlying net costs are used when determining performance incentives. For the year ended 30 June 2010 the
Board has excluded corporate advisory costs incurred in advising the Board with respect of the joint change of control
proposals made by CPPIB, OTPP and CP2.
-186-
186 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
What are the proportional EBITDA and proportional net cost targets for the year ended 30 June 2010?
The proportional EBITDA and proportional net cost targets for the year ended 30 June 2010 are set out in the table below:
Proportional EBITDA Target
Percentage of STU that vest*
Proportional net costs target
Actual proportional EBITDA result
is below that for the year ended
30 June 2009
0%
Actual proportional EBITDA result
achieved is the same as for the
year ended 30 June 2009
50%
Budgeted proportional EBITDA
achieved for the year ended 30
June 2010
5% above the budgeted
proportional EBITDA for the year
ended 30 June 2010
100%
150%
* straight line vesting applies between 50-150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2010
Actual underlying proportional net costs on budget
for the year ended 30 June 2010
Actual underling proportional net costs are 5%
below the budgeted underlying proportional net
costs for the year ended 30 June 2010
15% below the budgeted underlying proportional
net costs for the year ended 30 June 2010
The targets were set against the year ended 30 June 2009 results (which include a full year of M4 contributions) and the
30 June 2010 budget.
How are the varying levels of performance achievement rewarded?
The STI targets are designed to differentiate and reward high performance.
50% of the available STI vests for on target performance, 100% vests for achievement of high performance and an
additional 50% can be earned for outperformance. These targets are consistent for all of the Group's permanent
employees.
Given that STI payments are contingent on performance across a range of measures; maximum STI payments can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Individual KPIs
The CEO's performance is assessed by the Remuneration Committee which then makes recommendations to the Board.
Group performance targets
The performance of senior executives against the Group performance targets is assessed by the Board.
Shared senior executive KPIs
The CEO's performance, and the performance against the senior executive team's shared KPI, is assessed by the
Remuneration Committee which then makes recommendations to the Board. These results are also independently
reviewed.
Board approval
Once KPIs have been assessed, the Board approves STI amounts for payment, typically in August each year.
The Board believes the above methods of assessment are rigorous and transparent, and provide a balanced evaluation of
the CEO and each other Senior Executive's performance.
What if a senior executive ceases employment?
If the CEO's employment is terminated before STI targets are achieved, the CEO will receive the higher of pro rata target
STI or actual performance.
-187-
187 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
If a senior executive ceases employment with the Group before STI targets are achieved, the senior executive will
generally not be entitled to receive any STI payment, unless otherwise determined by the Board.
What STIs did senior executives earn in 2010?
STI payments for the year ended 30 June 2010 are set out in the table below.
STIs awarded in respect of the year ended 30 June 2010
Actual STI awarded 3
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
$
2,740,000
432,400
648,250
273,750
271,300
185,050
49,500
-
471,200
725,390
%
132
118
130
122
136
116
124
-
126
124
%
-
-
-
-
-
-
-
100
-
-
1
2
3
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. The actual STI awarded reflects a pro-rated
payment.
David Cardiff resigned with effect from 30 November 2009.
The target level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI
which would have been awarded in respect of the year ended 30 June 2010 was nil. The STI payments in respect of the year
ended 30 June 2010 are paid in September 2010.
6
LONG TERM INCENTIVE (LTI)
What is the purpose of the LTI program?
The LTI program aligns reward with security holder wealth by tying this component of executive remuneration to the
achievement of performance conditions which underpin sustainable long term growth.
Who participates in the LTI program?
Participation in the LTI program is only offered to senior executives, and certain other senior managers approved by the
Board.
What proportion of TEC was granted under LTI program in the year ended 30 June 2010?
For the year ended 30 June 2010, the CEO was offered an LTI grant equivalent to 100% of his annualised TEC. Other
senior executives were offered grants representing approximately 40% - 50% of their annualised TEC.
All grants made to senior executives in the year ended 30 June 2010 are subject to performance conditions.
How is reward delivered under the LTI program?
LTI grants are delivered in the form of Performance Awards under the Group’s Performance Awards Plan (PAP).
Performance awards are offered at no cost to the participants. Each performance awards is an entitlement to receive a
fully-paid Transurban security on terms and conditions determined by the Board, including the achievement of certain
vesting conditions linked to performance over a three year period.
-188-
188 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
If the vesting conditions are satisfied, the performance awards vest and Transurban securities will be delivered to the
senior executive.
Whilst the Board has discretion to grant cash payments of equivalent value at the end of the performance period, it is the
Board's current intention to settle any vested performance awards in Transurban securities.
What rights are attached to the performance awards?
Performance awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of performance awards will carry the same rights as other Transurban securities.
What are the performance measures?
None of the participants derive actual value from their LTI grants unless performance hurdles are achieved.
Performance awards are subject to dual performance measures over a three year performance period:
!
!
relative total security holder return (TSR); and
growth in proportional EBITDA.
Each condition applies to 50% of the available LTI award.
What are the performance hurdles?
Relative TSR
The relative TSR component of the performance awards will vest if the Group's relative TSR performance is at least above
the median of the S&P/ASX100 group of companies at the end of the three year performance period, in accordance with
the following table:
TSR vesting schedule
The Group's relative TSR
ranking in the S&P/ASX100
Index
% of performance awards that vest
At or below the 50th percentile
Nil
Above the 50th percentile but
below the 75th percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Proportional EBITDA
The percentage of performance awards that will vest will depend on the Group's percentage compound proportional
EBITDA growth over a three financial year performance period including on a part-year basis. The measure will be
adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may occur during the
performance period. The proportional EBITDA vesting schedule is set out below:
Since 2009, proportional EBITDA has been used as a performance measure in both the LTI and STI plans. This measure
is effective for the STI plan as it maintains a focus on the Group's operating results and associated cash generation.
Proportional EBITDA also acts to ensure that the long term growth and activities of the Group are not sacrificed in the
short term to achieve a desired operating result in a given year and therefore it is also the measure utilised for the LTI
plan.
The movement in proportional EBITDA best reflects Transurban's underlying business performance and its goal of long
term sustainable growth in earnings from existing operations. In addition, there are many aspects of proportional EBITDA
that management can influence to drive improvements in short term earnings.
-189-
189 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
Proportional EBITDA vesting schedule
% compound proportional
EBITDA annual growth
% of performance awards that vest
6%
50%
Between 6% and 9%
Straight line vesting between 50-100%
9% or more
100%
Why have these performance measures been chosen?
The TSR hurdle is a relative, external, market-based performance measure against those companies with which the Group
competes for capital, customers and talent. It provides a direct link between executive reward and security holder return.
The proportional EBITDA hurdle provides evidence of the Group's growth in earnings and is linked to the Group's overall
strategic objectives.
Why does the Board think that the S&P/ASX 100 index is an appropriate comparator group?
The S&P/ASX100 comparator group was chosen due to a lack of publicly listed companies in the toll road sector in
Australia.
Additionally, this Group reflects Transurban's competitors for security holder capital and talent. As each of the ASX100
companies are subject to similar challenges, opportunities and market sentiment, the Group’s performance in comparison
to that of these companies should more fairly reflect the strength of the Group's performance.
How are the performance hurdles measured?
Relative TSR
The Group receives an independent report that sets out the Group's TSR growth and that of each company in the peer
group. A volume weighted average price of securities for the one week up to and including the test date is used in the
calculation of TSRs for Transurban and the comparator group.
The level of TSR growth achieved by the Group is given a percentile ranking having regard to its performance compared to
the performance of other companies in the group (the highest ranking company being ranked at the 100th percentile).
This ranking determines the extent to which performance awards subject to this hurdle will vest.
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA results included in the Group's
audited financial statements and is adjusted for acquisitions and divestments that may occur during the performance
period and is subject to Board approval. For further proportional EBITDA information see Note 2 Segment information in
the Transurban Holdings Limited financial statements.
What if a Senior Executive ceases employment?
If the CEO ceases employment with the Group before the performance condition is tested, then he is entitled to retain any
unvested performance awards, which will vest in accordance with the performance conditions under the LTI plan as at the
time of grant.
If senior executives cease employment with the Group before the performance condition is tested, then their unvested
performance awards will lapse, unless the Board determines otherwise.
What happens in the event of a change in control?
LTIs form part of the CEO and senior executives’ remuneration. In the event of a takeover or change of control of the
Group, any unvested Performance Awards will automatically vest.
Performance awards that vest following a change of control will not generally be subject to restrictions on dealing.
-190-
190 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
What was the grant, movement in the number and value of Performance Awards by Senior Executives during the
year ended 30 June 2010?
These are summarised in the tables below.
Performance Awards granted in the year ended 30 June 2010
Performance criteria Grant date
Vesting date
TSR
EBITDA
11-Dec-09
11-Dec-09
11-Dec-12
11-Dec-12
1
The fair value was calculated as at the grant date of 11 December 2009.
Performance Awards granted in the year ended 30 June 2010
Fair value of awards
at grant date1
VWAP at grant date
$
3.33
4.97
$
5.55
5.55
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
Number of performance
awards granted 3
Value at grant date
Maximum total value of
grant yet to vest 4
617,211
109,050
148,368
66,766
59,347
47,478
47,478
-
111,276
161,956
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
Performance Awards vest subject to performance over the period from 11 December 2009 through to 11 December
2012.
Performance Awards lapse where the performance conditions are not satisfied on testing. As the Performance
Awards only vest on satisfaction of performance and service conditions which are to be tested in future financial
periods, none of the senior executives forfeited Performance Awards during the year.
1
2
3
4
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010.
David Cardiff resigned with effect from 30 November 2009.
The grants made to senior executives constituted their full LTI entitlement for the year ended 30 June 2010
and were made on 11 December 2009 on the terms summarised above.
The maximum value of the grant has been estimated based on the fair value per instrument at date of grant.
The minimum total value of the grant, if the applicable performance conditions are not met, is nil.
-191-
191 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
7
OTHER EQUITY PLANS
The Group operates three broad employee-based security plans as described below.
ShareLink Incentive Plan
Under this plan, subject to Board approval, an allocation of securities or cash payments may be made to eligible
employees (excluding the CEO but including other senior executives) in recognition of the Group’s prior year performance.
Eligible employees received a grant of 100 securities at no cost to them on 5 February 2010. Eligible employees in the US
received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's past performance and is not intended to serve as a
future incentive, there are no performance conditions attached to grants of securities or cash payments under the plan.
ShareLink Investment Tax Exempt Plan
This plan provides eligible employees the opportunity to invest in Transurban securities, on a tax-exempt basis, up to
$1,000 per annum, of which half is contributed by the Group and half is contributed by the employee through salary
sacrifice. All permanent employees are eligible to participate in this plan. For the year ended 30 June 2010, securities
were acquired by plan participants on 26 March 2010 and 18 June 2010.
Grants of securities under this plan are designed to encourage employee security holdings and to align the interests of
employees with the Group and therefore are not subject to performance conditions.
ShareLink Investment Tax Deferred Plan
This plan was suspended in May 2009 due to proposed changes in tax legislation governing employee share plans in
Australia. This plan was reviewed and a new offer was made to eligible employees during the year ended 30 June 2010
and will take effect in the year ended 30 June 2011.
This plan now provides eligible employees with the opportunity to invest in Transurban securities, on a salary sacrifice
basis, up to $5,000 per annum. Participants also receive up to $3,000 of matching component from the Group. The plan
has a maximum disposal restriction period of three years including a twelve month forfeiture period.
Equity grants under this plan are designed to encourage employee security holding and to align the interests of employees
with the Group and therefore are not subject to performance conditions.
-192-
192 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
8
LEGACY LTI PLANS
There are a number of legacy LTI plans that are no longer offered to new entrants but which have existing participants.
Details of these plans are in the following tables.
2007 Executive Loan Plan (ELP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Plan Terms and Conditions
Grant date:
Vesting date:
Expiry date:
Grant price:
Value per unit at grant date:
Details of Plan
1 Nov 2006
1 Nov 2009
31 Dec 2009
$7.28
$1.37
Australian participants were granted Transurban securities purchased using interest free loans provided by the Group.
These securities vest in the participants subject to meeting the stipulated performance condition. Outstanding loans are
repaid upon vesting.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance condition.
Performance Hurdles
TSR vesting schedule
Relative TSR ranking in the comparator
group
% of awards that vest
At or below the 50th percentile
Nil
Above the 50th percentage but below the 75th
percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Result (movements in plan for the year ended 30 June 2010)
The 2007 award matured on 1 November 2009. No awards vested as the prescribed performance condition was not met.
The following Transurban securities and performance rights lapsed during the year ended 30 June:
B Bourke (160,000)
D Cardiff (35,000)
A Head (22,500)
K Daley (100,000)
M Fletcher (15,000)
M Kulper (100,000)
The value of the securities which lapsed during the year, based on the original loan was:
B Bourke $987,854
D Cardiff $216,090
-193-
193 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
A Head $138,913
The value of performance rights for overseas participants which lapsed during the year was:
K Daley $137,000
M Fletcher $20,550
M Kulper $137,000
2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan Terms and Conditions
Grant date:
Vesting date:
1 Nov 2007
1 Nov 2010
Fair value per right at grant date:
TSR $3.50, Statutory EBITDA $5.96
Spot price at grant date:
$7.29
Details of Plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance conditions.
Performance Hurdles
For Australian participants, the Plan has two performance measures, statutory EBITDA and relative TSR against the
S&P/ASX 100 Industrials, each applied to 50% of the awards.
For overseas participants, the Plan has two performance measures, DRIVe management fee growth and relative TSR
against the S&P/ASX 100 Index, each applied to 50% of the awards.
The TSR vesting schedule is as per the above table.
Statutory EBITDA and DRIVe management fee vesting schedule*
% compound statutory EBITDA annual
growth
% of awards that vest
10%
50%
Between 10% and 15%
Straight line vesting between 50-100%
15% or more
100%
% compound growth of the DRIVe
management fee
% of awards that vest
20%
50%
Between 20% and 25%
Straight line vesting between 50-100%
25%
10%
Result (movements in plan for the year ended 30 June 2010)
8,401 performance rights were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed Rights
was $39,737. The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 19,027 performance rights to
be vested post employment subject to the terms and conditions of the plan.
-194-
194 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
2009 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan Terms and Conditions
Grant date:
Vesting date:
1 Nov 2008
1 Nov 2011
Fair value per right at grant date:
TSR $3.30, proportional EBITDA $4.27
Spot price at grant date:
$5.22
Details of Plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions. The Board has discretion to award
cash payments to equivalent value upon vesting.
Performance hurdles
The plan has two performance measures, proportional EBITDA and relative TSR against the S&P/ASX 100, each applied
to 50% of the awards.
The awards are tested at the end of each of the three year performance period. If the performance measures are satisfied
for the year, one third of the awards are preserved until the vesting date. At the end of the three years a cumulative test of
the performance measures is applied to any unvested awards.
The TSR vesting schedule is as per the above table.
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual
growth
% of awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Result (movements in plan for the year ended 30 June 2010)
The table below sets out the performance hurdles achieved over the testing period, the vesting scale, banked Awards and
Awards to be carried forward for tranche 2 for testing.
Performance
measure
Number of
awards subject to
testing
Testing period
Vesting scale
Number of
awards banked in
tranche 1
Number of
awards to be
carried forward to
tranche 2
TSR
Proportional
EBITDA
219,048
219,048
31 Oct 2008 to 30
Oct 2009
Year ended 30
June 2009
$
0%
83%
$
$
-
219,048
181,810
37,238
29,749 performance awards were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
Awards was $112,600.
The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 16,763 Performance Awards to be vested
post employment, subject to the terms and conditions of the plan.
-195-
195 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
2009 Executive Equity Plan (EEP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Grant price:
Value per unit at grant date:
Details of plan
1 Nov 2008
1 Nov 2011
$5.22
$4.27
Australian participants received a grant of Transurban securities at no cost subject to disposal restrictions for three years
from the grant date.
Executives based outside Australia receive a grant of performance rights at no cost which entitles participants to receive
Transurban securities which vest at the end of the vesting period of three years.
Performance Hurdles
Vesting is based on service during the three year performance period.
Result (movements in plan for the year ended 30 June 2010)
19,146 Transurban securities were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
securities was $104,729.
9
DEALINGS IN SECURITIES
In accordance with Transurban's Dealing in Securities Policy, employees who have performance awards under an LTI plan
may not hedge against those rights until they have vested. Employees may hedge after vesting if the hedge is both
initiated in and arranged so that the specified exercise date falls within an open period.
Employees are not permitted to obtain margin loans using Transurban securities (either solely or as part of a portfolio) as
security for loans.
-196-
196 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
10 REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration of key management personnel, who included the five highest paid executives of the Group. All values are
in Australian dollars unless otherwise stated.
Remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Post-
employme
nt benefits
Long
term
benefits
Termina-
tion
benefits
Share based benefits2
Total
Value of
equities
acquired
in lieu of
cash
salary/fee
s
Cash salary
and fees
Executive director
C Lynch
2010
2009
Other key management personnel
2,030,860
1,980,839
-
-
-
-
-
-
-
-
-
-
-
-
-
-
687,093
635,976
157,544
344,033
706,407
658,635
296,196
274,381
376,772
368,033
134,569
355,355
B Bourke
2010
2009
D Cardiff3
2010
2009
K Daley4
2010
2009
M Fletcher
2010
2009
A Head
2010
2009
S Hogg
2010
2009
T Honan5
2010
2009
M Kulper
2010
2009
E Mildwater
2010
2009
Total
2010
2009
Cash
Bonus1
Non-
monetary
benefits
Superann-
uation
Long
service
leave
2008
PRP/2009
& 2010
PAP
2009
EEP
2007 ELP
2,740,000
2,800,000
6,049
36,881
50,000
100,000
-
-
432,400
329,800
6,049
7,845
49,107
100,241
13,148
15,913
-
-
-
-
-
-
1,079,488
404,265
113,261
75,093
6,019,658
5,397,078
24,800
88,498
346,315
217,564
132,046
18,051
1,690,958
1,413,888
-
314,500
-
-
10,420
57,042
4,443
16,198
268,637
-
5,425
20,303
(65,233)
82,038
(29,389)
18,051
351,847
852,165
1,271,200
383,400
53,677
97,354
49,004
94,694
14,168
46,917
185,050
163,600
-
6,301
24,481
28,319
11,697
15,327
271,300
204,500
49,500
170,000
976,396
690,950
-
250,000
648,250
1,750,000
1,126,355
1,235,047
410,093
322,142
-
-
-
-
725,390
630,022
273,750
217,000
-
-
-
-
-
-
-
-
-
-
24,330
33,042
15,080
16,419
11,292
31,900
25,000
36,226
-
-
-
-
8,729
110,949
52,446
72,102
24,330
28,911
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
280,674
181,986
27,226
18,051
2,402,356
1,481,037
-
1,679
95,895
47,003
27,226
18,051
640,545
554,661
3,488
12,850
127,201
62,254
27,226
18,051
845,397
715,149
-
-
-
-
-
-
-
-
65,449
19,436
21,780
14,440
282,590
591,131
406,064
194,358
121,547
36,103
2,177,257
2,957,637
415,367
244,528
34,049
22,575
2,362,336
2,315,223
87,458
24,295
27,226
18,051
822,857
610,399
6,902,285
6,865,391
-
250,000
6,596,840
6,962,822
65,775
148,381
276,693
621,324
110,982
182,876
268,637
-
33,713
123,330
2,838,678
1,477,727
502,198
256,517
17,595,801
16,888,368
-197-
197 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
Notes:
1
2
3
4
5
The amount represents cash STI payments to the senior executive for the year ended 30 June 2010, which are paid in September
2010.
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards awarded under the LTI plan). The fair value of
equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included
as remuneration may be different to the benefit (if any) that senior executives may ultimately realise should the equity instruments
vest. The fair value of Performance Awards at the date of their grant has been determined in accordance with AASB 2 applying a
Black-Scholes valuation method.
An ex-gratia payment of $268,637 was made to David Cardiff upon resignation in recognition of his contribution in the period of
business transition.
Ken Daley's cash bonus includes his STI payment as per note 1 above of $471,200 as well as a payment of $800,000 as part of
his service agreement as noted in section 11 below.
Tom Honan elected to receive part of his sign-on award in Transurban securities which were purchased on market.
11 SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other senior executives are formalised in service
agreements which have no specified term. Each of these agreements provides for access to performance-related STIs
and other prescribed benefits. Although not specified in agreements, the CEO and other senior executives are eligible to
participate in the LTI plan (or equivalent cash plans for those executives located outside Australia).
Some key aspects of the agreements are outlined below:
Period of notice to terminate
(executive)
Period of notice to terminate
(the Company)*
CEO
Other senior executives
6 months
3 months
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
Pursuant to his service contract, a cash payment of $800,000 was made to Ken Daley. This reflects 80% achievement of
the stipulated performance criteria under a performance incentive arrangement.
LINK BETWEEN COMPANY PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other senior executives is linked to the performance of the Group through the use of
incentive hurdles based on the operating performance of the business for both short and long term incentives, as noted
below.
1
GROUP PERFORMANCE AND STI
25% of executive short term incentives are determined with reference to Proportional EBITDA and 25% with reference to
Net Costs as discussed on page 184. This aligns the executive’s interests with the Group's financial performance.
Proportional EBITDA
The underlying proportional EBITDA result for the year ended 30 June 2010 was $635.4 million, an 8.9% increase from the
prior year result. The year ended 30 June 2010 result exceeded budget by 5.4%, allowing the payment of 150% of STIs
attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued focus on cost
control and the performance of the asset portfolio, characterised by strong traffic volumes on all Australian assets,
particularly Melbourne’s CityLink following the completion of the Southern Link Upgrade.
-198-
198 Transurban annual reporT 2010
Notes:
2010.
1
2
3
4
5
Black-Scholes valuation method.
business transition.
11 SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other senior executives are formalised in service
agreements which have no specified term. Each of these agreements provides for access to performance-related STIs
and other prescribed benefits. Although not specified in agreements, the CEO and other senior executives are eligible to
participate in the LTI plan (or equivalent cash plans for those executives located outside Australia).
Some key aspects of the agreements are outlined below:
CEO
Other senior executives
Period of notice to terminate
Period of notice to terminate
(executive)
6 months
3 months
(the Company)*
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
Pursuant to his service contract, a cash payment of $800,000 was made to Ken Daley. This reflects 80% achievement of
the stipulated performance criteria under a performance incentive arrangement.
LINK BETWEEN COMPANY PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other senior executives is linked to the performance of the Group through the use of
incentive hurdles based on the operating performance of the business for both short and long term incentives, as noted
below.
1
GROUP PERFORMANCE AND STI
Proportional EBITDA
25% of executive short term incentives are determined with reference to Proportional EBITDA and 25% with reference to
Net Costs as discussed on page 184. This aligns the executive’s interests with the Group's financial performance.
The underlying proportional EBITDA result for the year ended 30 June 2010 was $635.4 million, an 8.9% increase from the
prior year result. The year ended 30 June 2010 result exceeded budget by 5.4%, allowing the payment of 150% of STIs
attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued focus on cost
control and the performance of the asset portfolio, characterised by strong traffic volumes on all Australian assets,
particularly Melbourne’s CityLink following the completion of the Southern Link Upgrade.
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
37 Key management personnel disclosures (continued)
The amount represents cash STI payments to the senior executive for the year ended 30 June 2010, which are paid in September
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards awarded under the LTI plan). The fair value of
equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included
as remuneration may be different to the benefit (if any) that senior executives may ultimately realise should the equity instruments
vest. The fair value of Performance Awards at the date of their grant has been determined in accordance with AASB 2 applying a
Proportional net costs
The underlying proportional net cost result for the year ended 30 June 2010 was $174.3 million. This represents a
decrease from the year ended 30 June 2009 of 10.8%, resulting in the payment of 139.2% of STIs attributable to
proportional net costs. As with proportional EBITDA, the Group's continued focus on cost management resulted in a
decrease in the cost base across operational, corporate and business development costs. A number of value initiatives
implemented have also contributed to the cost reductions with developments in revenue collection also contributing to
overall net costs through improved fee revenue.
An ex-gratia payment of $268,637 was made to David Cardiff upon resignation in recognition of his contribution in the period of
Safety
Ken Daley's cash bonus includes his STI payment as per note 1 above of $471,200 as well as a payment of $800,000 as part of
his service agreement as noted in section 11 below.
Tom Honan elected to receive part of his sign-on award in Transurban securities which were purchased on market.
In 2010, the safety performance measure applied to senior executives resulted in the payment of 114% of the eligible short
term incentive. The hurdle included three components as discussed on page 185 of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2010 lost time injury frequency rates decreased from 6.94 to
3.64.
2
GROUP PERFORMANCE AND LTI
Long Term Incentives are linked to proportional EBITDA and relative TSR.
The performance hurdles for the current plans are outlined on page 188 - 192.
Proportional EBITDA
The performance hurdle for proportional EBITDA of between 6% and 9% is considered appropriately target in the current
economic climate and for the anticipated level of organic growth in a mature toll road portfolio. Ring fencing arrangements
mean that only the existing portfolio of assets contribute to the calculation.
In general, long term incentive hurdles are based on cumulative performance in relation to proportional EBITDA over
preceding years. The following graph shows the growth in proportional EBITDA since 2007. This growth is driven by
increased traffic volumes and revenue collection processes and more specifically cost control that has been a focus of the
Group since 2008.
1. the result for the year ended 30 June 2010 includes the M4 until 15 February 2010 when the concession deed ended.
The table below illustrates the Group's annual compound growth for the relevant non-market measure of each plan:
Long term incentive plan
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
Company Compound growth as at 30 June 2010
7%
-
9%
12%
-198-
-199-
199 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
TSR performance
The table below summarises the relative TSR performance over the Performance Period to date in respect of unvested
long term incentives.
Long term incentive plan
Company TSR as at 30 June 2010
Indicative percentile rank
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
(26.3)%
(26.3)%
(8.7)%
(18.1)%
60.7%
60.7%
22.4%
14.6%
-200-
200 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
NON-EXECUTIVE DIRECTOR REMUNERATION
1
REMUNERATION POLICY
The Group's non-executive director remuneration policy as set by the Board is summarised below:
Aggregate remuneration is approved by security holders
The amount of aggregate remuneration that may be paid to non-executive directors in any year is capped at a level
approved by security holders. The current aggregate fee pool for non-executive directors of $2,100,000 per year
(excluding the superannuation guarantee levy) was approved by security holders at the 2007 Annual General Meeting.
The Board intends to seek security holder approval at the 2010 AGM to increase the aggregate fee pool for non-executive
directors. The key reasons for the proposed increase are to provide the Board with the strategic flexibility to make
additional non-executive director appointments and to facilitate orderly Board succession planning.
Fees are set by reference to key considerations
The aggregate fee pool for non-executive directors and the manner in which it is apportioned amongst the non-executive
directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board after taking into
consideration a number of relevant factors including:
!
!
!
!
the responsibilities and risks attached to the role of non-executive director;
the time commitment expected of non-executive directors;
the fees paid by peer companies to non-executive directors; and
benchmark data provided by independent external advisors.
Remuneration is structured to preserve independence whilst creating alignment
The remuneration of non-executive directors consists of base (director) fees and Committee fees. To preserve
independence and impartiality, no element of non-executive director remuneration is 'at risk'. In other words, it is not based
on the performance of the Group.
Retirement benefits
In September 2005, the Board resolved to discontinue previously provided retirement benefits for non-executive directors
with effect from 30 September 2005. The value of benefits accrued up to this date attracts interest at the statutory fringe
benefits rate. Accrued 'frozen' retirement benefits plus interest will be paid to Geoff Cosgriff and Jeremy Davis on their
retirement from the Board. No other current directors are entitled to any retirement benefits.
Cumulatively an amount of $605,725 (2009: $565,178) has been provided as at 30 June 2010 and $40,547 (2009:
$64,388) expensed in the current year. Retirement benefits of $nil (2009: $405,134) were paid out in the current year.
Remuneration review
The Remuneration Committee and the Board annually reviews its approach to non-executive director remuneration to
ensure it remains in line with general industry practice and best practice principles of corporate governance. Independent
external consultants are commissioned from time to time to attain relevant information.
-201-
201 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
2
COMPONENTS OF NON-EXECUTIVE DIRECTORS REMUNERATION
Director / Committee fees*
Current base (director) fees per year are:
!
$455,000 for the Chairman and $170,000 for other non-executive directors.
Current Committee fees* per year are:
!
!
!
!
$40,000 for chair of the Audit and Risk Committee and $20,000 for members of that committee;
$25,000 for chair of the Remuneration Committee and $20,000 for members of that committee;
$25,000 for chair of the Sustainability Committee and $15,000 for members of that committee1; and
$10,000 for chair of the Nomination Committee and $10,000 for members of that committee.
* The Chairman does not receive any additional fees for his Committee responsibilities.
The fees as outlined above took effect on 1 January 2010 following an independent review of non-executive director and
Committee fees by an external remuneration consultant. The decision to increase fees was based on the following factors:
!
!
!
the length of time since the last increase (October 2006 for the Chair and October 2005 for other non-executive
directors);
benchmarking data from relevant comparator groups; and
alignment of fees with a revised Committee structure.
Other fees / benefits
Certain non-executive directors were entitled to retirement benefits, however, the retirement benefits plan was frozen on
30 September 2005 and no further benefits have been provided under that plan since that date.
Non-executive directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year.
Non-executive directors are also entitled to be reimbursed for all business related expenses, including travel, as may be
incurred in the discharge of their duties.
Post-employment benefits*
Superannuation contributions are made on behalf of the non-executive directors at a rate of 9%, which satisfies the
Company’s statutory superannuation obligations.
* Director and committee fees are included in the security holder approved cap.
1. As of 11 August 2010, the Sustainability Committee is no longer a separate committee of the Board. Sustainability is
considered by the Board to be embedded in Transurban's business and business practices, and the Board has
responsibility for sustainability oversight.
Under the ShareLink Investment Tax Deferred Plan, non-executive directors are able to sacrifice up to 50% of their pre-tax
fees to acquire Transurban securities through a tax deferred arrangement. The plan was suspended in May 2009 due to
the proposed changes to tax arrangements on share plans. No offers or purchases were made under the plan during the
year ended 30 June 2010. Following a review of the plan, eligible participants (including non-executive directors) have the
opportunity to invest in Transurban securities up to $5,000 per annum. The offer for the year ending 30 June 2011 was
made to eligible employees and non-executive directors on 1 June 2010. No non-executive directors currently participate
in the plan.
The Group conducted a review of the Tax Deferred Plan following the passing of the tax legislation on 14 December 2009.
The offer for the 2010/11 financial year was made to eligible employees and the non-executive directors on 1 June 2010.
-202-
202 Transurban annual reporT 2010
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
3
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of non-executive directors' remuneration for the years ended 30 June 2010 and 30 June 2009 are set out in the
table below.
Non-executive director remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Current non-executive directors
Fees
Superannuation
Contributions1
Post-employment
benefits
Retirement benefits2
Total
David Ryan
2010
2009
Neil Chatfield
2010
2009
Geoff Cosgriff
2010
2009
Jeremy Davis
2010
2009
Bob Edgar
2010
2009
Lindsay Maxsted
2010
2009
Rodney Slater
2010
2009
Jennifer Eve
2010
2009
James Keyes
401,546
385,306
167,818
51,035
171,880
165,131
175,084
158,760
155,739
-
194,826
174,399
125,975
4,098
77,315
47,030
2010
2009
Former non-executive directors
39,597
47,030
Susan Oliver3
2010
2009
Chris Renwick
2010
2009
Total
2010
2009
-
166,367
-
119,293
1,509,780
1,318,449
203 Transurban annual reporT 2010
36,139
34,694
15,104
4,593
15,469
14,869
22,500
24,000
14,016
-
17,534
15,696
10,932
-
-
-
-
-
-
14,973
-
56,778
131,694
165,603
-203-
-
-
-
-
15,210
14,192
25,338
23,642
-
-
-
-
-
-
-
-
-
-
-
26,554
-
-
40,548
64,388
437,685
420,000
182,922
55,628
202,559
194,192
222,922
206,402
169,755
-
212,360
190,095
136,907
4,098
77,315
47,030
39,597
47,030
-
207,894
-
176,071
1,682,022
1,548,440
Transurban Holding Trust
Notes to the financial statements
30 June 2010
(continued)
37 Key management personnel disclosures (continued)
1
2
3
Superannuation contributions made on behalf of non-executive directors to satisfy the Company’s obligations
under applicable Superannuation Guarantee legislation.
Amounts provided for by the Company during the financial year in relation to the contractual retirement
benefits which the Non-Executive Director will be entitled to upon retirement from office.
Susan Oliver retired on 22 June 2009 and received payment of $405,134 in retirement benefits.
GLOSSARY OF TERMS
Term
EBITDA
Proportional EBITDA
Statutory EBITDA
Net Costs
Total employment cost (TEC)
Short term incentive (STI)
Long term incentive (LTI)
Relative total share holder return (TSR)
Definition
Earnings before interest, tax, depreciation and amortisation.
EBITDA calculated based on percentage of Transurban
asset ownership as follows: CityLink (100%), Hills M2
(100%), Roam (100%), Tollaust (100%), M1 Eastern
Distributor (75.1%), M4 (50.61%), M5 (50%), M7 (50%) and
DRIVe (75% including 67.5% of Capital Beltway Express
and 75% of Pocahontas 895).
The proportional EBITDA result is included in the audited
financial statements.
100% of the EBITDA from controlled entities (CityLink, Hills
M2, M1 Eastern Distributor, M4, Roam, Tollaust) regardless
of Transurban’s ownership. It excludes the EBITDA
contribution from non-controlled interests (M5 Motorway,
Westlink M7 and DRIVe)
Net costs include the operating, corporate and business
development costs of the Group less non-toll revenues (fees
and other).
Base salary and other benefits including superannuation
paid to an executive
An 'at' risk component of executive remuneration under
which a cash reward may be payable based on achievement
of individual and Group performance measures.
An 'at' risk component of executive remuneration under
which an equity reward may be provided to participants
based on achievement of specific performance conditions
TSR measures total return on investment of a security,
taking into account both capital appreciation and distributed
income which was reinvested on a pre-tax basis.
Relative TSR measures the return on investment of a
company relative to a peer group of companies.
Relative TSR is one of the performance measures in
determining the vesting of Transurban LTI program.
-204-
204 Transurban annual reporT 2010
In the directors' opinion:
Transurban Holding Trust
Directors' declaration
30 June 2010
(a)
the financial statements and notes set out on pages 136 to 204 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Group's financial position as at 30 June 2010 and of its performance for
the financial year ended on that date.
(ii)
(b)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
David J Ryan
Director
Christopher J Lynch
Director
Melbourne
12 August 2010
-205-
205 Transurban annual reporT 2010
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
Independent audit report to the members of
Transurban Holding Trust
Report on the financial report
We have audited the accompanying financial report of Transurban Holding Trust (the Trust), which comprises the balance
sheet as at 30 June 2010, and the income statement, the statement of comprehensive income, statement of changes in
equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors’ declaration for the Transurban Holding Trust Group (the consolidated entity). The
consolidated entity comprises the Trust and the entities it controlled at the year’s end or from time to time during the
financial year.
Directors' responsibility for the financial report
The directors of the Transurban Infrastructure Management Limited, the Responsible Entity of the Trust, are responsible
for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards
(including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is
free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance
with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation
-206-
206 Transurban annual reporT 2010
Independent audit report to the members of
Transurban Holding Trust (continued)
Auditor's opinion
In our opinion:
(a)
the financial report of Transurban Holding Trust is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
PricewaterhouseCoopers
John Yeoman
Partner
Melbourne
12 August 2010
-207-
207 Transurban annual reporT 2010
Transurban International Limited and
Controlled Entities
ARBN 121 746 825
Annual financial report
for the year ended 30 June 2010
208 Transurban annual reporT 2010
Transurban International Limited ARBN 121 746 825
Annual financial report - 30 June 2010
Contents
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
210
240
241
290
291
209 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
Directors' report
The directors of Transurban International Limited present their report on the consolidated entity (and referred to as "the
Group") consisting of Transurban International Limited (TIL) and the entities it controlled at the end of, or during, the year
ended 30 June 2010.
TIL forms part of the Transurban Group. The securities of the entities comprising Transurban Group are stapled. A
Stapled Security comprises one share in Transurban Holdings Limited, one share in Transurban International Limited and
one unit in Transurban Holdings Trust. None of the components of the Stapled Security can be traded separately.
Directors
With the exception of the changes noted below, the following persons were directors of TIL during the whole of the
financial year and up to the date of this report.
Non-executive Directors
David J Ryan AO
Jennifer S Eve
James M Keyes
Executive Director
Christopher J Lynch
Principal activities
During the year the Group’s principal activity was providing management services to, and acting as the holding entity of,
the Transurban Group's investment in Transurban DRIVe Holdings LLC (DRIVe), an unlisted co-investment vehicle which
invests in existing and new toll roads and similar or related opportunities in North America. TIL currently holds a 75 per
cent interest in DRIVe.
Dividends
No dividends were declared or paid during the financial year.
Review of operations
The consolidated net loss for the year ended for the Group was $34,112,000 (2009: $39,701,000).
Key highlights for the Group's during the period were as follows:
Pocahontas 895 (Virginia USA)
Toll revenue for Pocahontas 895 was US$13.8m, a decrease of 0.7 per cent on the prior corresponding period. The
conditions in the Richmond economy drove under performance in traffic and revenue in the current year.
Construction on the Richmond Airport Connector continued during the year ended 30 June 2010 and is expected to be
completed in 2011. Pocahontas 895 also commenced the installation process for a new Electronic Toll System to
improve revenue capture and recovery.
Capital Beltway Express (Virginia USA)
Construction on the Capital Beltway (I-495) High Occupancy Toll (HOT) lane project is now over 40 per cent complete.
The project remains on target for completion in late 2012, with first tolls expected in 2013.
The business case behind the Capital Beltway project remains strong with the corridor being one of the three most
heavily congested roads in the US and economic conditions in Fairfax County remaining strong through the US
recession.
Other elements of the Capital Beltway project have also progressed well during the year with construction on the HOT
Operations Centre commencing as well as the continued progress on the development of the Tolling and Traffic
Management System.
Capital raising
On 10 May 2010, the Transurban Group announced that it would undertake a capital raising comprising a fully
underwritten accelerated renounceable 1 for 11 entitlement offer to raise $542.3million at an offer price of $4.60 per
security. TIL's share of this equity raising was $47.6 million, net of costs.
The capital raising was successfully completed on 10 June 2010.
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210 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Significant changes in the state of affairs
There were no significant changes to the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
At the date of this report the directors are not aware of any circumstances that have arisen since 30 June 2010 that have
significantly affected or may significantly affect the Group's operations in future financial years, the results of those
operations in future financial years, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Likely developments in the operations of the Group and the expected results of operations have not been included in these
financial statements because the directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain applicable
laws in the USA. The Group maintains a comprehensive environmental management plan to monitor the performance of
its motorways, and any external parties responsible for operating any of the Group's motorways, and takes remedial steps
where necessary.
There were no significant breaches reported during the financial year on the Group's controlled assets.
Information on directors
David J Ryan AO, BBus, FCPA, FAICD.
Chairman & Independent non-executive director
Term of office
Director since 29 April 2003. Chairman since 28 February 2007.
David has a background in commercial banking, investment banking and operational business management. He has
held senior executive management positions in investment banking and industry, as well as being the Chairman or a
non-executive director of a number of listed public companies.
David is a non-executive director of Lend Lease Corporation Limited and non-executive Chairman of Tooth & Co
Limited and ABC Learning Centres Limited (administrators appointed) (receivers and managers appointed).
David holds interests in 66,486 stapled securities.
Transurban Board Committee membership
Chairman of each of the Nomination and Sustainability Committees and a member of each of the Audit and Risk and
Remuneration Committees.
Christopher J Lynch B Comm, MBA, FCPA
Chief Executive Officer
Term of office
Director since 18 February 2008. CEO since April 2008.
Chris came to Transurban from one of the world’s largest resources and mining companies, BHP Billiton. He held a
series of senior appointments there, including 5 years as CFO. His last position at BHP Billiton was Executive Director
and Group President - Carbon Steel Materials. Prior to his time at BHP Billiton the bulk of Chris’ career was with Alcoa
Inc where his roles included Vice President and CIO (1999-2000), CFO Europe (1997-1999), and Managing Director of
KAAL Australia Limited (1996-1997).
Chris has experience in senior leadership roles in global corporations operating across multiple markets and the
development and operation of major projects with large up-front capital requirements.
Chris is also a Commissioner of the Australian Football League, and a former director of BHP Billiton Limited (January
2006 – June 2007), BHP Billiton Plc (January 2006 – June 2007), Samancor Limited (January 2006 – June 2007), and
Samarco Limited (January 2006 – June 2007).
Chris holds interests in 254,966 stapled securities and 1,100,932 Performance Awards.
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Directors' report
30 June 2010
(continued)
Information on directors (continued)
Jennifer S Eve BA, LLB (Hons), LLM in Corporate Law
Director of TIL since 18 September 2006.
Term of office
Jennifer is an associate and member of the Funds and Investment Services Team within the Corporate and
Commercial Practice Group at offshore law firm Appleby. She practices in the area of company and commercial law,
specialising in the formation and administration of investment vehicles. Jennifer also has experience involving debt
restructuring and intergroup restructuring. She is a local team member of the Segregated Accounts Portfolio Team
and the Global Islamic Finance Team.
Jennifer was educated in Bermuda, Canada and the United Kingdom. She is a member of the Bar of England and
Wales (non-practicing) and Bermuda.
Jennifer holds no stapled securities.
James M Keyes MA. (Hons)
Independent non-executive director
Term of office
Director of TIL since 18 September 2006.
James is Managing Director of Renaissance Capital. He is responsible for the Bermuda office, which he established
for Renaissance in 2008. He was previously a partner at offshore law firm Appleby. He practised as a lawyer for over
15 years, specialising in mutual funds, corporate finance and securities.
James attended Oxford University in England and graduated as a Rhodes Scholar.
James holds no stapled securities.
Company secretary
Elizabeth Mildwater BEc, LLB (Hons), MA, GAICD
Elizabeth joined Transurban in May 2008. She is responsible for company secretarial, compliance, risk, legal and
human resource functions within the business. Before joining Transurban, Elizabeth was General Counsel and
Company Secretary of SP AusNet for three years. She has over 17 years of legal, company secretarial and other
relevant experience, mostly within the infrastructure sector. Her experience includes several years of international
project development in the power generation and water industries, as well as more recent experience within the
Australian regulated electricity sector. Prior to her in-house work, Elizabeth was a solicitor with Australian law firms
Blake Dawson Waldron and Freehills. Elizabeth recently completed the Advanced Management Programme at
Harvard Business School in the US.
Stephen Byrne LLB, BEc, Dip Leg. Practice
Stephen joined Transurban in February 2010 as General Counsel, Australia. He is responsible for all Australian legal
matters. He has over 16 years of legal, company secretarial and other relevant experience, mostly within the
infrastructure and chemicals sector. Stephen is an experienced manager of legal teams, having previously held
General Counsel roles with Veolia Water (Australia, New Zealand) and BOC Gases (Asia Pacific, the Americas), where
his work included large engineering projects, joint ventures and M&A.
J (Brett) Burns BCom, LLB
Brett was General Counsel, Australia until 18 September 2009. Brett was with Transurban for seven years, initially as
an external legal adviser and, from 2003, was responsible for Australian legal matters and providing support to
Company Secretariat and the North American business.
Juliet Evans
Juliet Evans is a Corporate Administrator on the Funds and Investment Services team at Appleby Corporate Services.
She holds the ICSA Certificate in Offshore Business Administration and has eight years of experience in the corporate
administration field. Juliet is Company Secretary of TIL.
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Directors' report
30 June 2010
(continued)
Meetings of directors
The numbers of meetings of the board of directors of TIL held during the year ended 30 June 2010, and the numbers of
meetings attended by each director are listed below:
David J Ryan
James M Keyes
Jennifer S Eve
Christopher J Lynch
Attended Held#
4
4
4
4
4
4
4
4
# = Number of meetings held during the time the director held office
The number of meetings of each board committee of TIL, Transurban Holdings Limited and Transurban Holding Trust held
during the year ended 30 June 2010, and the number of meetings attended by each director are set out in the following
table:
Name
Audit and Risk
Committee(1)
Sustainability
Committee(4)
Attended Held# Attended Held# Attended Held# Attended Held#
Remuneration
Committee(2)
Nomination
Committee(3)
David J Ryan
James M Keyes
Jennifer S Eve
Christopher J Lynch
7
*
*
7
7
*
*
*
8
*
*
7
8
*
*
*
1
*
*
1
1
*
*
*
3
*
*
3
3
*
*
*
# = Number of meetings held during the time the director held office or was a member of the committee during the year
* = Not a member of the relevant committee
(1)Chris Lynch was not a member of the Audit and Risk Committee but attended meetings during the year.
(2)Chris Lynch was not a member of the Remuneration Committee but attended meetings during the year. Chris Lynch
was excluded from discussions involving his remuneration during meetings of the Remuneration Committee which he
attended.
(3)Chris Lynch was not a member of the Nomination Committee but attended the meeting during the year.
(4)Chris Lynch was not a member of the Risk Committee but attended meetings during the year.
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213 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
2010 REMUNERATION REPORT
INTRODUCTION
The Directors present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001
for Transurban International Limited and its controlled entities for the year ended 30 June 2010. The information provided
in the Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. This report is
for the Transurban Group (the Group) as a whole. It is considered the most appropriate for the readers of the financial
statements.
The Remuneration Report contains detailed information regarding the remuneration arrangements for the Directors and
senior executives who are the 'key management personnel' (KMP) of the Group. The KMP include the five highest
remunerated executives of the Group for the year ended 30 June 2010, and are listed in the tables below:
Senior Executives
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
1
Non-Executive
Directors
Name
David Ryan
Jennifer Eve
James Keyes
Position
Executive Director, Chief Executive Officer (CEO)
Chief Operating Officer
Chief Financial Officer
Chief Legal Counsel and Company Secretary
Group General Manager, Strategy and Development
Group General Manager, Public Affairs
Acting Group General Manager, People, Legal and Governance
Group General Manager, Human Resources
President, International Development
President, Transurban North America
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. Upon her return she fulfilled the role of Group
General Manager People, Legal and Governance for Elizabeth Mildwater who was on study leave.
David Cardiff resigned with effect from 30 November 2009.
2
During the year ended 30 June 2010, the Board reviewed key aspects of the remuneration of the CEO and other senior
executives, taking into account feedback received from security holders on the 2009 Remuneration Report. As a result of
the review, certain changes were implemented. The Group also revised the format of the Remuneration Report in an effort
to improve security holder understanding of its remuneration arrangements.
The remuneration information contained in the Remuneration Report is presented as follows:
Content
Remuneration governance
Remuneration in context
CEO and senior executive remuneration:
!
Remuneration strategy and policy
!
Relative weightings of remuneration
!
Key changes for the year ended 30 June 2010
!
Fixed remuneration, Short term incentives, Long term
incentives
Other equity plans
Legacy LTI plans
Dealings in securities
Remuneration paid to the CEO and other senior executives
!
!
!
!
Link between Group performance, security holder wealth and
remuneration
Non-executive director remuneration
Glossary of terms
Page
Page 215
Page 215
Page 216
Page 216
Page 217
Page 217
Page 218
Page 226
Page 226
Page 230
Page 231
Page 232
Page 234
Page 237
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214 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
REMUNERATION GOVERNANCE
Board and Remuneration Committee responsibility
The Remuneration Committee assists the Board in fulfilling its responsibilities relating to the remuneration of directors, the
remuneration of, and incentives for, the CEO and other senior executives, and remuneration practices, strategies and
disclosures generally.
It is critical that the Remuneration Committee is independent of management when making decisions affecting employee
remuneration. Accordingly, the Remuneration Committee is comprised of Non-Executive Directors, all of whom are
independent. Where appropriate, members of management attend Remuneration Committee meetings by invitation,
however they do not participate in formal decision making.
Engagement of remuneration consultants
To ensure it has all relevant information at its disposal when making remuneration decisions, the Remuneration
Committee seeks and considers advice from independent remuneration consultants where appropriate. Any advice and
recommendations from external consultants are used to guide the Remuneration Committee and the Board, but do not
serve as a substitute for thorough consideration of the issues by directors.
Potential conflicts of interest are taken into account when remuneration consultants are selected, and their terms of
engagement regulate their level of access to, and require their independence from, management.
During the year ended 30 June 2010, market remuneration data was used to assist the Remuneration Committee in
making decisions regarding non-executive director and senior executive remuneration. It was provided by the Hay Group,
an independent external consultant who were engaged by the Remuneration Committee.
REMUNERATION IN CONTEXT
Toll road concessions are an asset class characterised by defensive, predictable cash flows, which grow over the life of
long dated concession agreements. There is high upfront capital expenditure during the construction phase of a project,
which shifts to a low cost, high margin cash generative business for the remainder of the concession life. The investment
proposition for high quality toll road assets lies in providing investors with access to long dated, predictable, growing cash
flows generated by the assets over the life of the concessions.
The Group is an international toll road developer and manager with interests in Australia and the US. The Group is
focused on the long-term management of toll road assets at various stages of maturity to achieve the best outcomes for
investors, government partners and the community.
In Australia, the Group's interests include whole ownership of CityLink in Melbourne, and the Hills M2 and Lane Cove
Tunnel (control taken on 10 August 2010) in Sydney. The Group has partial interests in a further three roads on the
Sydney orbital network, being the M1 Eastern Distributor (75.1%), M5 (50%), and M7 (50%). In North America, the Group
has interests in two assets, Pocahontas 895 (75%) and the Capital Beltway Express (67.5%), which is under construction
in Northern Virginia.
The Board and management are focused on ensuring security holder value is enhanced through the strong performance
of the current portfolio of assets. In addition, development activities provide opportunities to further expand the portfolio in
value accretive ways. The maximisation of free cash available to security holders over the near, medium and longer term
is central to achieving this aim and the remuneration framework has been determined having regard to this.
The Group’s remuneration strategy uses three critical measures of performance to align management and investors; total
security holder return (TSR), proportional net costs and proportional Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA). TSR is a commonly utilised measure of company performance and this coupled with the other
measures align with the particular character of the Transurban Group. Further explanation of these measures and the
rationale for their utilisation is outlined in Sections 5 and 6. These measures, along with KPIs related to individual areas of
accountability, collectively form the core elements of the Group’s remuneration framework.
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Directors' report
30 June 2010
(continued)
CEO AND SENIOR EXECUTIVE REMUNERATION
1
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate an appropriately qualified and
experienced management team with the necessary skills and attributes to lead the Group in achieving its business
objective of creating security holder value. The remuneration strategy also aims to encourage management to strive for
superior performance by rewarding the achievement of targets that are challenging, clearly understood and within the
control of individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
(cid:4)
Remuneration Strategy
Attract, retain, motivate and reward executives who are critical to the Company's growth and success by:
!!
!!
Offering competitive remuneration that is benchmarked against the external market.
Providing a balance of fixed and variable or 'at risk' remuneration.
Align executive rewards with individual and Group performance by:
!!
!!
!!
Making short term and long term components of remuneration 'at risk' based on performance.
Assessing rewards against appropriate financial and non-financial performance measures.
Encouraging executive security holdings.
Fixed
Fixed Remuneration:
(cid:4)
Remuneration Structure
!
!
!
Comprises cash salary, superannuation and other prescribed benefits.
Provides a base level of reward for effective completion of Group and specific accountabilities.
Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable or 'at risk'
Short term incentive:
!
!
!
Cash rewards tied to pre-determined individual and Group annual performance measures.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
Group performance targets linked to earnings and cost management.
Long term incentive:
!
!
!
Equity rewards to align executive and security holder interests.
Vest after 3 years, subject to relative total security holder return and Group earnings growth.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
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216 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
2
RELATIVE WEIGHTINGS OF REMUNERATION
The remuneration of the CEO and other senior executives is structured as a mix of fixed remuneration and variable or 'at
risk' remuneration (through short term and long term incentive components).
The relative weightings of the three remuneration components for the CEO and other senior executives are determined by
the Board (on the advice of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components1
CEO
Other senior executives
% of total remuneration (annualised)
Fixed
remuneration
Variable remuneration (performance-
based)
34
50-56
STI
33
25-22
LTI
33
25-22
1
These figures do not reflect the relative value derived from each of the components, which is dependent on actual performance
against targets for the variable components. This is discussed in sections 5 and 6 below. The above STI percentages are based
on achieving 100% of the relevant performance targets. The above LTI percentages are based on the maximum LTI available to
each executive if 100% of the awards granted vest.
3
KEY CHANGES FOR THE YEAR ENDED 30 JUNE 2010
Following careful consideration by the Board, the following changes to the various components of remuneration were
implemented during the year ended 30 June 2010. In making these changes, the Board has sought to address the
feedback received from security holders and other stakeholders. The Board has also taken into account the shift in
corporate governance expectations regarding remuneration issues, whilst recognising the need to appropriately
remunerate strong performance.
Change
Fixed remuneration
Salary freeze: A salary 'freeze' was instituted for the CEO and other senior executives, and the majority of employees on
salaries of $200,000 or more, for the year ended 30 June 2010. Fixed remuneration increases for all employees averaged
2.2% during the same period.
The Board approved the salary freeze in light of both an anticipated slowdown in the broader Australian economy and
business objectives regarding cost reductions.
Variable remuneration - short term incentives (STIs)
CEO's STI: In the year ended 30 June 2009, as a one-off arrangement, the CEO had a guaranteed minimum annual STI
payment of 50% of his annual TEC. This guarantee has ceased. For the year ended 30 June 2010 and future years, the
CEO's STI is performance based and 100% at risk. There is no minimum guaranteed STI payment.
STI performance measures: For the year ended 30 June 2010, STI performance measures for the CEO and other senior
executives consisted of:
!
!
!
individual key performance indicators (KPIs);
a shared senior executive KPI; and
Group performance measures based on proportional EBITDA (from the Group's audited financial statements) and
cost management.
The inclusion of a cost management target for STIs is a new initiative for the year ended 30 June 2010.
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217 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Variable remuneration - long term incentives (LTIs)
Cessation of Executive Equity Plan (EEP): Grants under the EEP, which were made during the year ended 30 June
2009, have ceased. The EEP was used to achieve retention of key personnel during a period of transition for the business
and is no longer required.
All LTIs granted to the CEO and other senior executives during the year ended 30 June 2010 are subject to performance
hurdles.
No retesting: LTIs in the form of Performance Awards granted in the year ended 30 June 2010 are tested once at the end
of the 3 year performance period. No retesting of Performance Awards granted under the LTI plan is available.
Proportional EBITDA target: The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA
results included in the Group's audited financial statements and is adjusted for acquisitions and divestments that may
occur during the performance period and is subject to Board approval. For further proportional EBITDA information see
Note 2 Segment information in the Transurban Holdings Limited financial statements.
Following a review of the Group's LTI arrangements, the Board concluded that proportional EBITDA continues to best
reflect the underlying performance of the Group and be an appropriate LTI performance measure.
Performance hurdles for the proportional EBITDA measure have been increased to 6 - 9% compound growth (on actual
proportional EBITDA results for the year ended 30 June 2009), for the 2010 LTI plan. This is a change from the 5 - 9%
applied in the prior period. The 6-9% range was determined based on the Group's understanding of a range of business
parameters including forecast on traffic growth, toll increases and operating costs.
Security holder approval of CEO LTIs: The Group intends to seek security holder approval of the CEO's LTI grant for
the year ended 30 June 2011 at the 2010 Annual General Meeting. The Group considers seeking such approval to be
good corporate governance practice. The LTI grants will be made under the CEO's employment agreement. Due to
contractual arrangements, in the event that security holders do not approve the proposed grant, a cash payment
equivalent to the remuneration value of the LTI awards will be made to Mr Lynch subject to the terms and conditions of the
LTI plan offered for the year ended 30 June 2011.
4
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
The remuneration for all senior executives is represented by total employment cost (TEC) comprising base salary,
company superannuation contributions and benefits such as salary continuance, death and disability insurance.
This amount of remuneration is not ‘at risk’ but is set by reference to appropriate benchmark information for an individual’s
responsibilities, performance, qualifications and experience.
There are no guaranteed base salary increases in any senior executive's employment agreement. In light of both an
anticipated slowdown in the broader Australian economy and business objectives regarding cost reductions, the CEO
recommended, and the Board approved, a salary 'freeze' for the CEO and other senior executives for the year ended 30
June 2010.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year by reference to
relevant comparative compensation in the market, as well as each senior executive’s performance. Independent
remuneration consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also
reviewed upon promotion.
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218 Transurban annual reporT 2010
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Directors' report
30 June 2010
(continued)
5
SHORT TERM INCENTIVE (STI)
What is the STI plan?
The STI plan is an annual cash incentive plan linked to specific pre-determined individual and Group performance
measures set as a fixed percentage of TEC.
Who participates in the STI plan?
All permanent Group employees including the CEO and other senior executives participate in the STI plan. Fixed term
employees with tenure greater than two years are also eligible participants.
Why does the Board consider the STI an appropriate incentive for senior executives?
The STI plan puts a significant proportion of senior executive remuneration 'at risk' against meeting specific targets linked
to the Group's business objectives. The STI plan focuses participants on achieving performance targets and provides
incentive for high performance. This aligns executive interests with the Group's financial performance, as well as
management principles and the cultural values of the Group.
What proportion of fixed remuneration does the STI plan represent?
For the year ended 30 June 2010, the CEO had a target STI opportunity of 100% of his annualised TEC. Other senior
executives had a target STI opportunity of 40% - 50% of their annualised TEC.
What are the performance measures?
STI performance measures are set at the beginning of the financial year.
There were three categories of performance measures for the CEO and other senior executives for the year ended 30
June 2010. They are described below and were chosen to provide a balance between individual, Group, operational,
strategic, financial and non-financial aspects of performance.
2010 STI performance measures for the CEO and other senior executives
Performance
measure
Individual key
performance
indicators (KPIs)
% of target STI
amount performance
measure applies to
40%
Target(s) for performance measure
Individual KPIs are unique to the individual's area of accountability, but
relate to critical business sustainability measures including: operational
performance; cost reduction; customer satisfaction; project outcomes;
succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group, and are capable
of measurement. Individuals have a clear line of sight to KPIs and are able
to directly affect results through their actions.
Shared senior
executive KPI
10%
To achieve the business objective of creating and maintaining a safety
culture, the senior executive team shared a safety KPI that required
outcomes relating to:
!!
!!
!!
a reduction in lost time injury frequency rates;
implementation of an OHS Management Framework in Australia and
US; and
the completion of risk and ergonomics assessments.
Group
performance
targets
50%
To ensure that STI payments are aligned with business performance and the
creation of value for security holders, there are two Group performance
targets:
a proportional EBITDA target; and
a cost management target based on proportional net costs.
!!
!!
Each accounts for half of the group performance targets.
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219 Transurban annual reporT 2010
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Directors' report
30 June 2010
(continued)
The CEO's individual KPIs are set by the Board. All other senior executives individual KPIs and the shared senior
executive KPI are set by the CEO and approved by the Board. The Board sets the Group performance targets.
What is proportional EBITDA and why does Transurban use it as a performance measure?
EBITDA is a common operational performance measure used by many companies.
Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's percentage ownership, as
well as any contribution from Group functions.
Proportional EBITDA is one of the primary measures that the Board uses to assess the operating performance of the
Group. It reflects the contribution from individual assets to the Group's operating performance and focuses on elements of
the result that management can influence to drive improvements in short term earnings.
Unlike companies in other industries toll roads do not require any discretionary capital expenditure except in the
occasional upgrade project such as the M1 upgrade. These are rigorously analysed as projects and incorporated in
EBITDA targets once completed. Therefore, proportional EBITDA for Transurban captures the critical measure of
performance that management can control.
Since 2009, proportional EBITDA has been used as a performance hurdle for both STIs and LTIs to ensure that the long
term growth and activities of the Group are not sacrificed in the short term to achieve a desired operating result in a given
year.
Proportional EBITDA figures used to assess performance are extracted from the financial statements which have been
audited by PricewaterhouseCoopers.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result. These items
reflect one-off, non-recurring items, both revenue and expenses, that will not contribute to the Group’s performance in
future periods. Where they are not reflective of the Group’s ongoing operating performance, these one-offs are also
excluded when determining performance incentives. For the year ended 30 June 2010 the Board has excluded corporate
advisory costs incurred in advising the Board with respect of the joint change of control proposals made by CPPIB, OTPP
and CP2.
Why is proportional EBITDA a better performance measure than statutory EBITDA?
Proportional EBITDA provides a better reflection of the operating performance of the Group and the EBITDA generated
from its portfolio. The presentation of proportional EBITDA permits a meaningful and appropriate analysis of the
underlying performance of the Group's assets.
The EBITDA calculation from the statutory accounts would not include the operating performance of the M5, M7 or DRIVe
(which are equity accounted in the statutory results). These assets are meaningful contributors to the Group's
performance and it is therefore appropriate that they be included in the measure of executive performance.
What is the cost management measure and why does Transurban use it as a performance measure?
The cost management measure is based on proportional net costs. Proportional net costs are the operating, corporate
and business development costs of the Group less non-toll revenues (fees and other). The deduction of these non-toll
revenues from costs encourages and allows management to incur additional costs where these are justified by increased
revenue results (e.g. toll collection activities such as video tolling and/or enforcement). The inclusion of a cost measure in
Transurban's performance rewards reflects the fact that management has the ability to influence the expenditure of the
business. Strong cost management throughout the business drives an increase in proportional EBITDA and cash flow and
ultimately security holder value. The year ended 30 June 2010 was the first year that proportional net costs have been
used by the Group as a performance measure.
As with proportional EBITDA, in specific cases items are excluded from proportional net costs to provide underlying net
costs. Underlying net costs are used when determining performance incentives. For the year ended 30 June 2010 the
Board has excluded corporate advisory costs incurred in advising the Board with respect of the joint change of control
proposals made by CPPIB, OTPP and CP2.
-220-
220 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
What are the proportional EBITDA and proportional net costs targets for the year ended 30 June 2010?
The proportional EBITDA and proportional net costs targets for the year ended 30 June 2010 are set out in the table
below:
Proportional EBITDA target
Percentage of STI that vest*
Proportional net costs target
Actual proportional EBITDA result
is below that for the year ended
30 June 2009
0%
Actual proportional EBITDA result
achieved is the same as the year
ended 30 June 2009
50%
Budgeted proportional EBITDA
achieved for the year ended 30
June 2010
5% above the budgeted
proportional EBITDA for the year
ended 30 June 2010
100%
150%
* straight line vesting applies between 50-150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2010
Actual underlying proportional net costs on budget
for the year ended 30 June 2010
Actual underlying proportional net costs are 5%
below the budgeted underlying proportional net
costs for the year ended 30 June 2010
15% below the budgeted underlying proportional
net costs for the year ended 30 June 2010
The targets were set against the year ended 30 June 2009 results (which include a full year of M4 contributions) and the
30 June 2010 budget.
How are the varying levels of performance achievement rewarded?
The STI targets are designed to differentiate and reward high performance.
50% of the available STI vests for on target performance, 100% vests for achievement of high performance and an
additional 50% can be earned for outperformance. These targets are consistent for all of the Group's permanent
employees.
Given that STI payments are contingent on performance across a range of measures; maximum STI payments can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Individual KPIs
The CEO's performance is assessed by the Remuneration Committee which then makes recommendations to the Board.
The performance of other senior executives against their individual KPIs is assessed by the CEO, who confers with the
Remuneration Committee and then the Board regarding his assignment.
Group performance targets
The performance of senior executives against the Group performance targets is assessed by the Board and independently
audited.
Shared senior executive KPIs
The CEO's performance, and the performance against the senior executive team's shared KPI, is assessed by the
Remuneration Committee which then makes recommendations to the Board. These results are also independently
reviewed.
Board approval
Once KPIs have been assessed, the Board approves STI amounts for payment, typically in August each year.
The Board believes the above methods of assessment are rigorous and transparent, and provide a balanced evaluation of
the CEO and each senior executive's performance.
-221-
221 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
What if a senior executive ceases employment?
If the CEO's employment is terminated before STI targets are achieved, the CEO will receive the higher of pro rata target
STI or actual performance.
If a senior executive ceases employment with the Group before STI targets are achieved, the senior executive will
generally not be entitled to receive any STI payment, unless otherwise determined by the Board.
What STIs did senior executives earn in 2010?
STI payments for the year ended 30 June 2010 are set out in the table below.
STIs awarded in respect of the year ended 30 June 2010
Actual STI awarded 3
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
$
2,740,000
432,400
648,250
273,750
271,300
185,050
49,500
-
471,200
725,390
%
132
118
130
122
136
116
124
-
126
124
%
-
-
-
-
-
-
-
100
-
-
1
2
3
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010. The actual STI awarded reflects a pro-rated
payment.
David Cardiff resigned with effect from 30 November 2009.
The target level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI
which would have been awarded in respect of the year ended 30 June 2010 was nil. The STI payments in respect of the year
ended 30 June 2010 are paid in September 2010.
6
LONG TERM INCENTIVE (LTI)
What is the purpose of the LTI program?
The LTI program aligns reward with security holder wealth by tying this component of executive remuneration to the
achievement of performance conditions which underpin sustainable long term growth.
Who participates in the LTI program?
Participation in the LTI program is only offered to senior executives, and certain other senior managers approved by the
Board.
What proportion of TEC was granted under LTI program in the year ended 30 June 2010?
For the year ended 30 June 2010, the CEO was offered an LTI grant equivalent to 100% of his annualised TEC. Other
senior executives were offered grants representing approximately 40% - 50% of their annualised TEC.
All grants made to senior executives in the year ended 30 June 2010 are subject to performance conditions.
-222-
222 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
How is reward delivered under the LTI program?
LTI grants are delivered in the form of Performance Awards under the Company’s Performance Awards Plan (PAP).
Performance awards are offered at no cost to the participants. Each performance award is an entitlement to receive a fully-
paid Transurban security on terms and conditions determined by the Board, including the achievement of certain vesting
conditions linked to performance over a three year period.
If the vesting conditions are satisfied, the performance awards vest and Transurban securities will be delivered to the
senior executive.
Whilst the Board has discretion to grant cash payments of equivalent value at the end of the performance period, it is the
Board's current intention to settle any vested performance awards in Transurban securities.
What rights are attached to the performance awards?
Performance awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of performance awards will carry the same rights as other Transurban securities.
What are the performance measures?
None of the participants derive actual value from their LTI grants unless performance hurdles are achieved.
Performance Awards are subject to dual performance measures over a three year performance period:
!
!
relative total security holder return (TSR); and
growth in proportional EBITDA.
Each condition applies to 50% of the available LTI award.
What are the performance hurdles?
Relative TSR
The relative TSR component of the performance awards will vest if the Group's relative TSR performance is at least above
the median of the S&P/ASX100 group of companies at the end of the three year performance period, in accordance with
the following table:
TSR vesting schedule
The Group's relative TSR
ranking in the S&P/ASX100
Index
% of performance awards that vest
At or below the 50th percentile
Nil
Above the 50th percentile but
below the 75th percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Proportional EBITDA
The percentage of performance awards that will vest will depend on the Group's percentage compound proportional
EBITDA growth over a three financial year performance period including on a part-year basis. The measure will be
adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may occur during the
performance period. The proportional EBITDA vesting schedule is set out below:
Since 2009, proportional EBITDA has been used as a performance measure in both the LTI and STI plans. This measure
is effective for the STI plan as it maintains a focus on the Group’s operating results and associated cash generation.
Proportional EBITDA also acts to ensure that the long term growth and activities of the Group are not sacrificed in the
short term to achieve a desired operating result in a given year and therefore it is also the measure utilised for the LTI
plan.
The movement in proportional EBITDA best reflects Transurban's underlying business performance and its goal of long
term sustainable growth in earnings from existing operations. In addition, there are many aspects of proportional EBITDA
that management can influence to drive improvements in short term earnings.
-223-
223 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Proportional EBITDA vesting schedule
% compound proportional
EBITDA annual growth
% of performance awards that vest
6%
50%
Between 6% and 9%
Straight line vesting between 50-100%
9% or more
100%
Why have these performance measures been chosen?
The TSR hurdle is a relative, external, market-based performance measure against those companies with which the Group
competes for capital, customers and talent. It provides a direct link between executive reward and security holder return.
The proportional EBITDA hurdle provides evidence of the Group's growth in earnings and is linked to the Company's
overall strategic objectives.
Why does the Board think that the S&P/ASX 100 index is an appropriate comparator group?
The S&P/ASX100 comparator group was chosen due to a lack of publicly listed companies in the toll road sector in
Australia.
Additionally, this Group reflects Transurban's competitors for security holder capital and talent. As each of the ASX100
companies are subject to similar challenges, opportunities and market sentiment, the Group’s performance in comparison
to that of these companies should more fairly reflect the strength of the Group's performance.
How are the performance hurdles measured?
Relative TSR
The Group receives an independent report that sets out the Group's TSR growth and that of each company in the peer
group. A volume weighted average price of securities for the one week up to and including the test date is used in the
calculation of TSRs for Transurban and the comparator group.
The level of TSR growth achieved by the Group is given a percentile ranking having regard to its performance compared to
the performance of other companies in the group (the highest ranking company being ranked at the 100th percentile).
This ranking determines the extent to which performance awards subject to this hurdle will vest.
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate is calculated based on EBITDA results included in the Group's
audited financial statements and is adjusted for acquisitions and divestments that may occur during the performance
period and is subject to Board approval. For further proportional EBITDA information see Note 2 Segment information in
the Transurban Holdings Limited financial statements.
What if a senior executive ceases employment?
If the CEO ceases employment with the Group before the performance condition is tested, then he is entitled to retain any
unvested performance awards, which will vest in accordance with the performance conditions under the LTI plan as at the
time of grant.
If senior executives cease employment with the Group before the performance condition is tested, then their unvested
performance awards will lapse, unless the Board determines otherwise.
What happens in the event of a change in control?
LTIs form part of the CEO and senior executives’ remuneration. In the event of a takeover or change of control of the
Group, any unvested performance awards will automatically vest.
Performance awards that vest following a change of control will not generally be subject to restrictions on dealing.
-224-
224 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
What was the grant, movement in the number and value of performance awards by senior executives during the
year ended 30 June 2010?
These are summarised in tables below.
Performance awards granted in the year ended 30 June 2010
Performance criteria Grant date
Vesting date
TSR
EBITDA
11-Dec-09
11-Dec-09
11-Dec-12
11-Dec-12
Fair value of awards
at grant date1
VWAP at grant date
$
3.33
4.97
$
5.55
5.55
1
The fair value was calculated as at the grant date of 11 December 2009. An explanation of the pricing model used to calculate
these values is set out in Note 27 to the financial statements.
Performance awards granted in the year ended 30 June 2010
Number of performance
awards granted 3
Value at grant date
Maximum total value of
grant yet to vest 4
Name
Chris Lynch
Brendan Bourke
Tom Honan
Elizabeth Mildwater
Andrew Head
Megan Fletcher
Samantha Hogg1
David Cardiff2
Ken Daley
Michael Kulper
617,211
109,050
148,368
66,766
59,347
47,478
47,478
-
111,276
161,956
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
$
2,561,424
452,559
615,727
277,077
246,291
197,033
197,033
-
461,795
672,118
Performance awards vest subject to performance over the period from 11 December 2009 through to 11 December
2012.
Performance awards lapse where the performance conditions are not satisfied on testing. As the performance awards
only vest on satisfaction of performance and service conditions which are to be tested in future financial periods, none
of the senior executives forfeited performance awards during the year.
1
2
3
4
Samantha Hogg took maternity leave between 6 July 2009 and 7 April 2010.
David Cardiff resigned with effect from 30 November 2009.
The grants made to senior executives constituted their full LTI entitlement for the year ended 30 June 2010
and were made on 11 December 2009 on the terms summarised above.
The maximum value of the grant has been estimated based on the fair value per instrument at date of grant.
The minimum total value of the grant, if the applicable performance conditions are not met, is nil.
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225 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
7
OTHER EQUITY PLANS
The Group operates three broad employee-based security plans as described below.
ShareLink Incentive Plan
Under this plan, subject to Board approval, an allocation of securities or cash payments may be made to eligible
employees (excluding the CEO but including other senior executives) in recognition of the Group’s prior year performance.
Eligible employees received a grant of 100 securities at no cost to them on 5 February 2010. Eligible employees in the US
received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's past performance and is not intended to serve as a
future incentive, there are no performance conditions attached to grants of securities or cash payments under the plan.
ShareLink Investment Tax Exempt Plan
This plan provides eligible employees the opportunity to invest in Transurban securities, on a tax-exempt basis, up to
$1,000 per annum, of which half is contributed by the Group and half is contributed by the employee through salary
sacrifice. All permanent employees are eligible to participate in this plan. For the year ended 30 June 2010, securities
were acquired by plan participants on 26 March 2010 and 18 June 2010.
Grants of securities under this plan are designed to encourage employee security holdings and to align the interests of
employees with the Group and therefore are not subject to performance conditions.
ShareLink Investment Tax Deferred Plan
This plan was suspended in May 2009 due to proposed changes in tax legislation governing employee share plans in
Australia. This plan was reviewed and a new offer was made to eligible employees during the year ended 30 June 2010
and will take effect in the year ended 30 June 2011.
The plan now provides eligible employees with the opportunity to invest in Transurban securities, on a salary sacrifice
basis, up to $5,000 per annum. Participants also receive up to $3,000 of a matching component from the Group. The
plan has a maximum disposal restriction period of three years including a twelve month forfeiture period.
Equity grants under this plan are designed to encourage employee security holding and to align the interests of employees
with the Group and therefore are not subject to performance conditions.
8
LEGACY LTI PLANS
There are a number of legacy LTI plans that are no longer offered to new entrants but which have existing participants.
Details of these plans are in the following tables.
2007 Executive Loan Plan (ELP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Expiry date:
Grant price:
Value per unit at grant date:
Details of plan
1 Nov 2006
1 Nov 2009
31 Dec 2009
$7.28
$1.37
Australian participants were granted Transurban securities purchased using interest free loans provided by the Group.
These securities vest in the participants subject to meeting the stipulated performance condition. Outstanding loans are
repaid upon vesting.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance condition.
-226-
226 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Performance hurdles
The Plan had a single performance measure of relative TSR against the S&P/ASX 100 Industrials.
TSR vesting schedule
Relative TSR ranking in the comparator
group
% of awards that vest
At or below the 50th percentile
Nil
Above the 50th percentage but below the 75th
percentile
Straight line vesting between 50-100%
At or above the 75th percentile
100%
Result (movements in plan for the year ended 30 June 2010)
The 2007 award matured on 1 November 2009. No awards vested as the prescribed performance condition was not met.
The following Transurban securities and performance rights lapsed during the year ended 30 June 2010 for the following
key management personnel:
B Bourke (160,000)
D Cardiff (35,000)
A Head (22,500)
K Daley (100,000)
M Fletcher (15,000)
M Kulper (100,000)
The value of the securities which lapsed during the year, based on the original loan was:
B Bourke $987,854
D Cardiff $216,090
A Head $138,913
The value of performance rights for overseas participants which lapsed during the year was:
K Daley $137,000
M Fletcher $20,550
M Kulper $137,000
2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
1 Nov 2007
1 Nov 2010
Fair value per right at grant date:
TSR: $3.50, Statutory EBITDA $5.96
Spot price at grant date:
$7.29
Details of plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions.
Overseas participants were granted performance rights which provided for cash payments upon vesting, subject to
meeting the stipulated performance condition.
-227-
227 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Performance hurdles
For Australian participants, the Plan has two performance measures, statutory EBITDA and relative TSR against the
S&P/ASX 100 Index each applied to 50% of the awards.
For overseas participants, the Plan has two performance measures, DRIVE management fee growth and relative TSR
against the S&P/ASX 100 Index, each applied to 50% of the awards.
The TSR vesting schedule is as per the above table.
Statutory EBITDA and DRIVe management fee vesting schedule
% compound statutory EBITDA annual
growth
% of awards that vest
10%
50%
Between 10% and 15%
Straight line vesting between 50-100%
15% or more
100%
% compound growth of the DRIVe
management fee
% of awards that vest
20%
50 %
Between 20% and 25%
Straight line vesting between 50-100%
25%
100%
Result (movements in plan for the year ended 30 June 2010)
8,401 performance rights were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed Rights
was $39,737. The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 19,027 Performance Rights to
be vested post employment subject to terms and conditions of the Plan.
2009 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
1 Nov 2008
1 Nov 2011
Fair value per right at grant date:
TSR $3.30, Proportional EBITDA $4.27
Spot price at grant date:
$5.22
Details of plan
Participants were granted performance rights that entitled them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance conditions. The Board has discretion to award
cash payments of equivalent value upon vesting.
-228-
228 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Performance hurdles
The plan has two performance measures, proportional EBITDA and relative TSR against the S&P/ASX 100 Index, each
applies to 50% of the awards.
The awards are tested at the end of each of the three year performance period. If the performance measures are satisfied
for the year, one third of the awards are preserved until the vesting date. At the end of the three years a cumulative test of
the performance measures is applied to any unvested awards.
The TSR vesting schedule is as per the above table.
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual
growth
% of awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Result (movements in plan for the year ended 30 June 2010)
The table below sets out the performance hurdles achieved over the testing period, the vesting scale, banked awards and
awards to be carried forward for Tranche 2 for testing.
Performance
measure
Number of
awards subject to
testing
Testing period
Vesting scale
Number of
awards banked in
tranche 1
Number of
awards to be
carried forward to
tranche 2
TSR
Proportional
EBITDA
219,048
219,048
31 Oct 2008 to 30
Oct 2009
Year ended 30
June 2009
$
0%
83%
$
$
-
219,048
181,810
37,238
29,749 performance awards were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
Awards was $112,600.
The Board exercised its discretion in awarding D Cardiff, on a pro-rata basis, 16,763 Performance Awards to be vested
post employment, subject to the terms and conditions of the plan.
-229-
229 Transurban annual reporT 2010
2009 Executive Equity Plan (EEP) (Fully paid Transurban securities for Australian participants and Performance
Rights for overseas participants)
Transurban International Limited
Directors' report
30 June 2010
(continued)
Plan terms and conditions
Grant date:
Vesting date:
Grant price:
Value per unit at grant date:
Details of Plan
1 Nov 2008
1 Nov 2011
$5.22
$4.27
Australian participants received a grant of Transurban securities at no cost subject to disposal restrictions for three years
from the grant date.
Executives based outside Australia receive a grant of performance rights at no cost which entitles participants to receive
Transurban securities which vest at the end of the vesting period of three years.
Performance hurdles
Vesting is based on service during the three year performance period.
Result (movements in plan for the year ended 30 June 2010)
19,146 Transurban securities were forfeited by D Cardiff during the year ended 30 June 2010. The value of the lapsed
securities was $104,729.
9
DEALINGS IN SECURITIES
In accordance with Transurban's Dealing in Securities Policy, employees who have performance awards under an LTI plan
may not hedge against those rights until they have vested. Employees may hedge after vesting if the hedge is both
initiated in and arranged so that the specified exercise date falls within an open period.
Employees are not permitted to obtain margin loans using Transurban securities (either solely or as part of a portfolio) as
security for loans.
-230-
230 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
10 REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration of key management personnel, who included the five highest paid executives of the Group. All values are
in Australian dollars unless otherwise stated.
Remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Post-
employ-
ment
benefits
Long
term
benefits
Termi-
nation
benefits
Share based benefits2
Total
Value of
equities
acquired
in lieu of
cash
salary/
fees
Cash salary
and fees
Executive director
C Lynch
2010
2009
Other key management personnel
2,030,860
1,980,839
-
-
-
-
-
-
-
-
-
-
-
-
-
-
687,093
635,976
157,544
344,033
706,407
658,635
296,196
274,381
376,772
368,033
134,569
355,355
B Bourke
2010
2009
D Cardiff3
2010
2009
K Daley4
2010
2009
M Fletcher
2010
2009
A Head
2010
2009
S Hogg
2010
2009
T Honan5
2010
2009
M Kulper
2010
2009
E Mildwater
2010
2009
Total
2010
2009
Cash
Bonus1
Non-
monetary
benefits
Super-
annuation
Long
service
leave
2007
ELP
2008
PRP/2009
& 2010 PAP 2009 EEP
2,740,000
2,800,000
6,049
36,881
50,000
100,000
-
-
432,400
329,800
6,049
7,845
49,107
100,241
13,148
15,913
-
-
-
-
-
-
1,079,488
404,265
113,261
75,093
6,019,658
5,397,078
24,800
88,498
346,315
217,564
132,046
18,051
1,690,958
1,413,888
-
314,500
-
-
10,420
57,042
4,443
16,198
268,637
-
5,425
20,303
(65,233)
82,038
(29,389)
18,051
351,847
852,165
1,271,200
383,400
53,677
97,354
49,004
94,694
14,168
46,917
185,050
163,600
-
6,301
24,481
28,319
11,697
15,327
271,300
204,500
49,500
170,000
976,396
690,950
-
250,000
648,250
1,750,000
1,126,355
1,235,047
410,093
322,142
-
-
-
-
725,390
630,022
273,750
217,000
-
-
-
-
-
-
-
-
-
-
24,330
33,042
15,080
16,419
11,292
31,900
25,000
36,226
-
-
-
-
8,729
110,949
52,446
72,102
24,330
28,911
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
280,674
181,986
27,226
18,051
2,402,356
1,481,037
-
1,679
95,895
47,003
27,226
18,051
640,545
554,661
3,488
12,850
127,201
62,254
27,226
18,051
845,397
715,149
-
-
-
-
-
-
-
-
65,449
19,436
21,780
14,440
282,590
591,131
406,064
194,358
121,547
36,103
2,177,257
2,957,637
415,367
244,528
34,049
22,575
2,362,336
2,315,223
87,458
24,295
27,226
18,051
822,857
610,399
6,902,285
6,865,391
-
250,000
6,596,840
6,962,822
65,775
148,381
276,693
621,324
110,982
182,876
268,637
-
33,713
123,330
2,838,678
1,477,727
502,198
256,517
17,595,801
16,888,368
-231-
231 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Notes:
1
2
3
4
5
The amount represents cash STI payments to the Senior Executive for the year ended 30 June 2010, which are paid in
September 2010.
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards awarded under the LTI plan). The fair value of
equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included
as remuneration may be different to the benefit (if any) that senior executives may ultimately realise should the equity instruments
vest. The fair value of Performance Awards at the date of their grant has been determined in accordance with AASB 2 applying a
Black-Scholes valuation method. The assumptions underpinning these valuations are set out in Note 27 to the financial
statements.
An ex-gratia payment of $268,637 was made to David Cardiff upon resignation in recognition of his contribution in the period of
business transition.
Ken Daley's cash bonus includes his STI payment as per note 1 above of $471,200 as well as a payment of $800,000 as part of
his service agreement as noted in section 11 below.
Tom Honan elected to receive part of his sign-on award in Transurban securities which were purchased on market.
11 SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other senior executives are formalised in service
agreements which have no specified term. Each of these agreements provides for access to performance-related STIs
and other prescribed benefits. Although not specified in agreements, the CEO and other senior executives are eligible to
participate in the LTI plan (or equivalent cash plans for those executives located outside Australia).
Some key aspects of the agreements are outlined below:
Period of notice to terminate
(executive)
Period of notice to terminate (the
Group)*
CEO
Other senior executives
6 months
3 months
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
Pursuant to his service contract, a cash payment of $800,000 was made to Ken Daley. This reflects 80% achievement of
the stipulated performance criteria under a performance incentive arrangement.
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other Senior Executives is linked to the performance of the Group through the use of
incentive hurdles based on the operating performance of the business for both short and long term incentives, as noted
below.
1
GROUP PERFORMANCE AND STI
25% of executive short term incentives are determined with reference to proportional EBITDA and 25% with reference to
proportional net costs as discussed on page 219. This aligns the executive’s interests with the Group's financial performanc
Proportional EBITDA
The proportional EBITDA result for the year ended 30 June 2010 was $635.4 million, an 8.9% increase from the prior year
result. The year ended 30 June 2010 result exceeded the budget by 5.4%, allowing the payment of 150.0% of STIs
attributable to Proportional EBITDA. The Proportional EBITDA result was driven by the Group's continued focus on cost
control and the performance of the asset portfolio, characterised by strong traffic volumes on all Australian assets,
particularly Melbourne’s CityLink following the completion of the Southern Link Upgrade.
-232-
232 Transurban annual reporT 2010
Notes:
September 2010.
1
2
3
4
5
The amount represents cash STI payments to the Senior Executive for the year ended 30 June 2010, which are paid in
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards awarded under the LTI plan). The fair value of
equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included
as remuneration may be different to the benefit (if any) that senior executives may ultimately realise should the equity instruments
vest. The fair value of Performance Awards at the date of their grant has been determined in accordance with AASB 2 applying a
Black-Scholes valuation method. The assumptions underpinning these valuations are set out in Note 27 to the financial
statements.
business transition.
An ex-gratia payment of $268,637 was made to David Cardiff upon resignation in recognition of his contribution in the period of
Ken Daley's cash bonus includes his STI payment as per note 1 above of $471,200 as well as a payment of $800,000 as part of
his service agreement as noted in section 11 below.
Tom Honan elected to receive part of his sign-on award in Transurban securities which were purchased on market.
11 SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other senior executives are formalised in service
agreements which have no specified term. Each of these agreements provides for access to performance-related STIs
and other prescribed benefits. Although not specified in agreements, the CEO and other senior executives are eligible to
participate in the LTI plan (or equivalent cash plans for those executives located outside Australia).
Some key aspects of the agreements are outlined below:
CEO
Other senior executives
Period of notice to terminate
Period of notice to terminate (the
(executive)
6 months
3 months
Group)*
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
Pursuant to his service contract, a cash payment of $800,000 was made to Ken Daley. This reflects 80% achievement of
the stipulated performance criteria under a performance incentive arrangement.
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
The remuneration of the CEO and other Senior Executives is linked to the performance of the Group through the use of
incentive hurdles based on the operating performance of the business for both short and long term incentives, as noted
1
GROUP PERFORMANCE AND STI
25% of executive short term incentives are determined with reference to proportional EBITDA and 25% with reference to
proportional net costs as discussed on page 219. This aligns the executive’s interests with the Group's financial performanc
The proportional EBITDA result for the year ended 30 June 2010 was $635.4 million, an 8.9% increase from the prior year
result. The year ended 30 June 2010 result exceeded the budget by 5.4%, allowing the payment of 150.0% of STIs
attributable to Proportional EBITDA. The Proportional EBITDA result was driven by the Group's continued focus on cost
control and the performance of the asset portfolio, characterised by strong traffic volumes on all Australian assets,
particularly Melbourne’s CityLink following the completion of the Southern Link Upgrade.
REMUNERATION
below.
Proportional EBITDA
Transurban International Limited
Directors' report
30 June 2010
(continued)
Transurban International Limited
Directors' report
30 June 2010
(continued)
Proportional net costs
The underlying proportional net costs result for the year ended 30 June 2010 was $174.3 million. This represents a
decrease from the year ended 30 June 2009 by 10.8%, resulting in the payment of 139.2% of STIs attributable to
proportional net costs. As with proportional EBITDA, the Group's continued focus on cost management resulted in a
decrease in the cost base across operational, corporate and business development costs. A number of value initiatives
implemented have also contributed to the cost reductions with developments in revenue collection also contributing to
overall proportional net costs through improved fee revenue.
Safety
In 2010, the safety performance measure applied to senior executives resulted in the payment of 114% of the eligible short
term incentive. The hurdle included three components as discussed on page 223 of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2010 lost time injury frequency rates decreased from 6.94 to
3.64.
2
GROUP PERFORMANCE AND LTI
Long term incentives are linked to proportional EBITDA and relative TSR.
The performance hurdles for the current plans are outlined on page 222.
Proportional EBITDA
The performance hurdle for proportional EBITDA of between 6% and 9% compound growth is considered an appropriate
target in the current economic climate and for the anticipated level of organic growth in a mature toll road portfolio. Ring
fencing arrangements mean that only the existing portfolio of assets contribute to the calculation.
In general, long term incentive hurdles are based on cumulative performance in relation to proportional EBITDA over
preceding years. The following graph shows the growth in proportional EBITDA since 2007. This growth is driven by
increased traffic volumes and revenue collection processes and more specifically cost control that has been a focus of the
Group since 2008.
1. The result for the year ended 30 June 2010 includes the M4 until 15 February 2010 when the concession deed ended.
The table below illustrates the Group's annual compound growth for the relevant non-market measure of each plan:
Long term incentive plan
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
Group Compound growth as at 30 June 2010
7%
-
9%
12%
-232-
-233-
233 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
TSR performance
The table below summarises the relative TSR performance over the performance period to date in respect of unvested
long term incentives.
Long term incentive plan
Company TSR as at 30 June 2010
Indicative percentile rank
Performance Rights Plan 2008
Performance US Cash Rights Plan 2008
Performance Awards Plan 2009
Performance Awards Plan 2010
(26.3)%
(26.3)%
(8.7)%
(18.1)%
60.7%
60.7%
22.4%
14.6%
NON-EXECUTIVE DIRECTOR REMUNERATION
1
REMUNERATION POLICY
The Group's non-executive director remuneration policy as set by the Board is summarised below:
Aggregate remuneration is approved by security holders
The amount of aggregate remuneration that may be paid to non-executive directors in any year is capped at a level
approved by security holders. The current aggregate fee pool for non-executive directors of $2,100,000 per year
(including the superannuation guarantee levy) was approved by security holders at the 2007 Annual General Meeting.
The Board intends to seek security holder approval at the 2010 AGM to increase the aggregate fee pool for non-executive
directors. The key reasons for the proposed increase are to provide the Board with the strategic flexibility to make
additional non-executive director appointments and to facilitate orderly Board succession planning.
Fees are set by reference to key considerations
The aggregate fee pool for non-executive directors and the manner in which it is apportioned amongst the non-executive
directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board after taking into
consideration a number of relevant factors including:
!
!
!
!
the responsibilities and risks attached to the role of non-executive director;
the time commitment expected of non-executive directors;
the fees paid by peer companies to non-executive directors; and
benchmark data provided by independent external advisors.
Remuneration is structured to preserve independence whilst creating alignment
The remuneration of non-executive directors consists of base (director) fees and Committee fees. To preserve
independence and impartiality, no element of non-executive director remuneration is 'at risk'. In other words, it is not based
on the performance of the Group.
Retirement benefits
In September 2005, the Board resolved to discontinue previously provided retirement benefits for non-executive directors
with effect from 30 September 2005. The value of benefits accrued up to this date attracts interest at the statutory fringe
benefits rate. Accrued 'frozen' retirement benefits plus interest will be paid to Geoff Cosgriff and Jeremy Davis on their
retirement from the Board. No other current directors are entitled to any retirement benefits.
Cumulatively an amount of $605,725 (2009: $565,178) has been provided as at 30 June 2010 and $40,547 (2009:
$64,388) expensed in the current year. Retirement benefits of $nil (2009: $405,134) were paid out in the current year.
-234-
234 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
2
COMPONENTS OF NON-EXECUTIVE DIRECTORS REMUNERATION
Director / Committee fees*
Current base (director) fees per year are:
!
$455,000 for the Chairman and $170,000 for other non-executive directors.
Current Committee fees* per year are set out below:
!
!
!
!
$40,000 for chair of the Audit and Risk Committee and $20,000 for members of that committee;
$25,000 for chair of the Remuneration Committee and $20,000 for members of that committee;
$25,000 for chair of the Sustainability Committee and $15,000 for members of that committee1;and
$10,000 for chair of the Nomination Committee and $10,000 for members of that committee.
* The Chairman does not receive any additional fees for his Committee responsibilities.
The fees as outlined above took effect on 1 January 2010 following an independent review of non-executive director and
Committee fees by an external remuneration consultant. The decision to increase fees was based on the following factors:
!
!
!
the length of time since the last increase (October 2006 for the Chair and October 2005 for other non-executive
directors);
benchmarking data from relevant comparator groups; and
alignment of fees with a revised Committee structure.
Other fees / benefits
Certain non-executive directors were entitled to retirement benefits, however, the retirement benefits plan was frozen on
30 September 2005 and no further benefits have been provided under that Plan since that date.
Non-executive directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year.
Non-executive directors are also entitled to be reimbursed for all business related expenses, including travel, as may be
incurred in the discharge of their duties.
Post-employment benefits*
Superannuation contributions are made on behalf of the non-executive directors at a rate of 9%, which satisfies the
Group’s statutory superannuation obligations.
* Director and committee fees and post-employment benefits are included in the security holder approved cap.
1. As of 11 August 2010, the Sustainability Committee is no longer a separate committee of the Board. Sustainability is
considered by the Board to be embedded in Transurban's business and business practices, and the Board has
responsibility for sustainability oversight.
Under the ShareLink Investment Tax Deferred Plan, non-executive directors are able to sacrifice up to 50% of their pre-tax
fees to acquire Transurban securities through a tax deferred arrangement. The plan was suspended in May 2009 due to
proposed changes to tax legislation governing share plans. No offers or purchases were made under the plan during the
year ended 30 June 2010. Following a review of the plan, eligible participants (including non-executive directors) have the
opportunity to invest in Transurban securities up to $5,000 per annum. The offer for the year ending 30 June 2011 was
made to eligible employees and non-executive directors on 1 June 2010. No non-executive directors currently participate
in the plan.
The Group conducted a review of the Tax Deferred Plan following the passing of the tax legislation on 14 December 2009.
The offer for the 2010/11 financial year was made to eligible employees and the non-executive directors on 1 June 2010.
-235-
235 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
3
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of non-executive directors' remuneration for the years ended 30 June 2010 and 30 June 2009 are set out in the
table below.
Non-executive director remuneration for the years ended 30 June 2010 and 30 June 2009
Short-term employee benefits
Current non-executive directors
Fees
Superannuation
Contributions1
Post-employment
benefits
Retirement benefits2
Total
David Ryan
2010
2009
Jennifer Eve
2010
2009
James Keyes
2010
2009
Total
2010
2009
1
2
401,546
385,306
77,315
47,030
39,597
47,030
518,458
479,366
36,139
34,694
-
-
-
-
36,139
34,694
-
-
-
-
-
-
-
-
437,685
420,000
77,315
47,030
39,597
47,030
554,597
514,060
Superannuation contributions made on behalf of non-executive directors to satisfy the Group’s obligations
under applicable Superannuation Guarantee legislation.
Amounts provided for by the Group during the financial year in relation to the contractual retirement benefits
which the non-executive director will be entitled to upon retirement from office.
-236-
236 Transurban annual reporT 2010
GLOSSARY OF TERMS
Term
EBITDA
Proportional EBITDA
Statutory EBITDA
Proportional net costs
Total employment cost (TEC)
Short term incentive (STI)
Long term incentive (LTI)
Relative total shareholder return (TSR)
Transurban International Limited
Directors' report
30 June 2010
(continued)
Definition
Earnings before interest, tax, depreciation and amortisation.
EBITDA calculated based on percentage of Transurban
asset ownership as follows: CityLink (100%), Hills M2
(100%), Roam (100%), Tollaust (100%), M1 Eastern
Distributor (75.1%), M4 (50.61%), M5 (50%), M7 (50%) and
DRIVe (75% including 67.5 % of Capital Beltway Express
and 75% of Pocahontas 895).
The proportional EBITDA result is included in the audited
financial statements.
100% of the EBITDA from controlled entities (CityLink, Hills
M2, M1 Eastern Distributor, M4, Roam, Tollaust) regardless
of Transurban’s ownership. It excludes the EBITDA
contribution from non-controlled interests (M5 Motorway,
Westlink M7 and DRIVe).
Net costs include the operating, corporate and business
development costs of the Group less non-toll revenues (fees
and other).
Base salary and other benefits including superannuation
paid to an executive.
An 'at risk' component of executive remuneration under
which a cash reward may be payable based on achievement
of individual and Group performance measures.
An 'at risk' component of executive remuneration under
which an equity reward may be provided to participants
based on achievement of specific performance conditions.
TSR measures total return on investment of a security,
taking into account both capital appreciation and distributed
income which was reinvested on a pre-tax basis.
Relative TSR measures the return on investment of a
company relative to a peer group of companies.
Relative TSR is one of the performance measures in
determining the vesting of Transurban LTI program.
-237-
237 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Non-audit services
The Group has an "External Auditor Independence" policy which is intended to support the independence of the external
auditor by regulating the provision of services by the external auditor. The external auditor will not be engaged to perform
any service that may impair or be perceived to impair the external auditor's judgement or independence. The external
auditor will only provide a permissible non-audit service where there is a compelling reason for it to do so, and the aim is
for the external auditor not to provide non-audit services at all. All non-audit services must be pre-approved by the Chief
Financial Officer (services less than $5000) or the Chair of the Audit and Risk Committee (in all other cases).
The board of directors has considered the position and, in accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-
audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
!
the Audit and Risk Committee reviews the non-audit services to ensure they do not impact the impartiality and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants , including reviewing or auditing the auditor’s own work, acting in a
management or a decision making capacity for the Group, acting as advocate for the Group or jointly sharing
economic risk and rewards.
!
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of the
parent entity, its related practices and non-related audit firms:
Audit services
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
30 June
2010
$
30 June
2009
$
50,000
50,000
50,000
50,000
There were no non-audit services provided by the auditor of the parent entity, its related practices and non-related audit
firms during the current year.
Indemnification and Insurance
Each officer (including each director) of the Group is indemnified, to the maximum extent permitted by law, against any
liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is also indemnified
against reasonable costs (whether legal or otherwise) incurred in relation to relevant proceedings in which the officer is
involved because the officer is or was an officer.
The Group has arranged to pay a premium for a Directors and Officers Liability insurance policy to indemnify directors and
officers in accordance with the terms and conditions of the policy.
This policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered, the name of
the Insurer, the Limit of Liability and the Premium paid for this policy.
-238-
238 Transurban annual reporT 2010
Transurban International Limited
Directors' report
30 June 2010
(continued)
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 240.
Rounding of amounts
The company is of a kind referred to in Class Order 98/100, 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.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
David J Ryan
Director
Christopher J Lynch
Director
Melbourne
12 August 2010
-239-
239 Transurban annual reporT 2010
Auditor's Independence Declaration
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
As lead auditor for the audit of Transurban International Limited for the year ended 30 June 2010, I declare that to the best
of my knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Transurban International Limited and the entities it controlled during the period.
John Yeoman
Partner
PricewaterhouseCoopers
Melbourne
12 August 2010
Liability limited by a scheme approved under Professional Standards Legislation
-240-
240 Transurban annual reporT 2010
Transurban International Limited ARBN 121 746 825
Annual financial report - 30 June 2010
Contents
Financial statements
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members
Page
Page
242
242
243
243
244
244
245
245
246
246
247
247
290
290
291
291
These financial statements cover the consolidated financial statements for the consolidated entity consisting of Transurban
International Limited and its subsidiaries. The financial statements are presented in the Australian currency.
Transurban International Limited is domiciled and incorporated in Bermuda. Its registered office and principal place of
business is:
Transurban International Limited
22 Victoria Street
Hamilton
Bermuda
The financial report was authorised for issue by the directors on 12 August 2010. The company has the power to amend
and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally.
All releases to the ASX and the media, financial reports and other information are available on our website:
www.transurban.com
241 Transurban annual reporT 2010
-241-
Revenue
Construction revenue
Business development revenue
Administration costs
Business development costs
Construction costs
Loss before depreciation and amortisation, net finance costs, equity
accounted investments and tax
Depreciation and amortisation expense
Finance income
Finance costs
Net finance (costs)/income
Share of net (losses) of equity accounted investments
Loss before income tax
Income tax benefit (expense)
Loss for the year
Loss is attributable to:
Owners of Transurban International Limited
Transurban International Limited
Income statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
3
3
4
5
9
6
9,952
18,378
28,330
(6,816)
(16,976)
(9,952)
(33,744)
-
28,674
28,674
(7,392)
(37,373)
-
(44,765)
(5,414)
(16,091)
(332)
(3,380)
445
(13,999)
(13,554)
(19,438)
(38,738)
4,626
(34,112)
19,993
(13,590)
6,403
(24,950)
(38,018)
(1,683)
(39,701)
(34,112)
(34,112)
(39,701)
(39,701)
Earnings per share for loss from continuing operations attributable to the
ordinary equity holders of the company:
Basic earnings per share
Diluted earnings per share
26
26
Cents
Cents
(2.6)
(2.6)
(3.1)
(3.1)
The above income statement should be read in conjunction with the accompanying notes.
-242-
242 Transurban annual reporT 2010
Loss for the year
Other comprehensive income
Changes in the fair value of cash flow hedges, net of tax
Exchange differences on translation of US operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Transurban International Limited
Transurban International Limited
Statement of comprehensive income
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
(34,112)
(39,701)
(20,163)
1,337
(18,826)
(42,438)
29,405
(13,033)
(52,938)
(52,734)
(52,938)
(52,938)
(52,734)
(52,734)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
-243-
243 Transurban annual reporT 2010
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Equity accounted investments
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Transurban International Limited
Balance sheet
As at 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
7
8
9
10
11
12
13
14
13
15
16
16
13,743
9,905
23,648
242,321
681
8,615
251,617
400
21,915
22,315
269,315
918
6,417
276,650
275,265
298,965
227,467
6,831
8,962
243,260
257,048
6,045
5,349
268,442
23
23
95
95
243,283
268,537
31,982
30,428
192,977
(49,896)
(111,099)
31,982
138,983
(31,568)
(76,987)
30,428
The above balance sheet should be read in conjunction with the accompanying notes.
-244-
244 Transurban annual reporT 2010
Transurban International Limited
Statement of changes in equity
For the year ended 30 June 2010
Consolidated
Attributable to members of
Transurban International Limited
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2008
95,554
(18,700)
(37,286)
39,568
Total comprehensive income for the year
-
(13,033)
(39,701)
(52,734)
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction costs
Distribution reinvestment plan
Treasury securities
Changes in fair value of share based payment
reserve
15
15
15
16
1,411
41,530
488
-
43,429
-
-
-
165
165
-
-
-
-
-
1,411
41,530
488
165
43,594
Balance at 30 June 2009
138,983
(31,568)
(76,987)
30,428
Balance at 1 July 2009
138,983
(31,568)
(76,987)
30,428
Total comprehensive income for the year
-
(18,826)
(34,112)
(52,938)
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction costs
Distribution reinvestment plan
Treasury securities
Changes in fair value of share based payment
reserve
15
15
15
16
47,647
5,885
462
-
53,994
-
-
-
498
498
-
-
-
-
-
47,647
5,885
462
498
54,492
Balance at 30 June 2010
192,977
(49,896)
(111,099)
31,982
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-245-
245 Transurban annual reporT 2010
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Tax refunds / (income taxes paid)
Net cash inflow (outflow) from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payment for investments in equity accounted investments
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of costs
Proceeds from sale of treasury securities, net of costs
Loans from related parties
Repayment of loans to related parties
Net cash inflow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Transurban International Limited
Cash flow statement
For the year ended 30 June 2010
30 June
2010
$'000
30 June
2009
$'000
Notes
40,074
(30,336)
-
(172)
1,796
11,362
19,653
(29,717)
13
(65)
(3,430)
(13,546)
(151)
(24,804)
(24,955)
(1,181)
(24,954)
(26,135)
47,647
462
33,688
(54,623)
27,174
13,581
400
(238)
13,743
1,110
788
88,459
(50,951)
39,406
(275)
1,000
(325)
400
25
7
The above cash flow statement should be read in conjunction with the accompanying notes.
-246-
246 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
Contents of the notes to the financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Summary of significant accounting policies
Segment information
Revenue
Expenses
Net finance costs
Income tax benefit (expense)
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Equity accounted investments
Non-current assets - Property, plant and equipment
Deferred tax assets and liabilities
Current liabilities - Trade and other payables
Provisions
Current liabilities - Other liabilities
Contributed equity
Reserves and accumulated losses
Dividends
Remuneration of auditors
Contingencies
Intra-group guarantees
Related party transactions
Subsidiaries
Parent entity financial information
Events occurring after the balance sheet date
Reconciliation of profit after income tax to net cash inflow from operating activities
Loss per share
Share-based payments
Key management personnel disclosures
Critical accounting estimates and judgements
Financial risk management
Page
248
257
260
261
261
261
262
262
263
264
265
265
266
266
267
268
269
269
270
270
271
271
272
272
273
273
274
281
287
287
-247-
247 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
These general purpose financial report has been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the
Corporations Act 2001.
The financial report includes the consolidation entity consisting of Transurban International Limited and its subsidiaries
("the Group").
Where necessary, comparatives have been reclassified for consistency with current year disclosures.
Compliance with IFRS
The consolidated financial statements of the Transurban International Limited company also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standards early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
other financial assets and liabilities.
Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January
2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement
of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income.
As a consequence, the Group had to change the presentation of its financial statements. Comparative information has
been re-presented so that it is also in conformity with the revised standard.
Rounding of amounts
The Group is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date that control ceases.
The aggregated financial statements incorporate an elimination of inter-entity transactions and balances and other
adjustments necessary to present the financial statements on a combined basis. The accounting policies adopted in
preparing the financial statements have been consistently applied by the individual entities comprising the financial
statements except as otherwise indicated.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(h)).
Associates
Associates are all entities over which the Group has significant influence but not control. Investments in associates are
accounted for using the equity method of accounting, after initially being recognised at cost.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share
of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, the Group does not recognise further losses. Dividends received from associates
reduce the carrying amount of the investment.
-248-
248 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer
(the chief operating decision maker) and the Executive Committee, who report to the Chief Executive Officer (CEO).
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting.
The new standard requires a 'management approach,' under which segment information is presented on the same basis
as that used for internal reporting purposes. In addition, the segments are reported in a manner that is consistent with the
internal reporting provided to the CEO. There has been no impact on the measurement of the company's assets and
liabilities. Comparatives for 2009 have been restated.
(d) Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Transurban Holdings Limited’s (the
ultimate parent of the Transurban Group) functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the consolidated income statement, except when they are deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss. For example, Translation differences on non-monetary financial assets and liabilities
such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss
and translation differences on non-monetary financial assets such as equities classified as available-for-sale financial
assets are included in the fair value reserve in equity.
Group companies
The results and financial position of all Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
!
!
!
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are taken to shareholders’ equity.
-249-
249 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised for the major business activities as follows:
!
!
!
Business development revenue - Business development fees are recognised when receivable, and to the extent of
costs incurred and that these costs will be recovered.
Interest income - Interest income is recognised using the effective interest rate method.
Construction revenue - Construction revenue is recognised during the development phase of assets for sale to third
parties.
(f)
Income tax
Transurban International Limited is domiciled in Bermuda. There is no Bermuda income or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable by TIL under Bermudan tax legislation.
Non-Bermudian entities
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company's subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset, and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Investment allowances
Companies within the Company may be entitled to claim special tax deductions for investments in qualifying assets
(investment allowances). The Company accounts for such allowances as tax credits, which means that the allowance
reduces income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are
carried forward as tax losses.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor)
are charged to the profit or loss on a straight-line basis over the period of the lease.
Lease incentives are recognised as a reduction of the rental expense over the lease term on a straight-line basis.
-250-
250 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in
the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values
at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the
income statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in the income statement.
Changes in accounting policy
A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to
apply the acquisition method to business combinations, there have been some significant changes.
All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt are
subsequently remeasured through the income statement. Under the Group's previous policy, contingent payments were
only recognised when the payments were probable and could be measured reliably and were accounted for as an
adjustment to the cost of acquisition.
Acquisition-related costs are expensed as incurred. Previously they were recognised as part of the cost of acquisition and
therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest's
proportionate share of the acquiree's net identifiable assets. This decision is made on an acquisition-by-acquisition basis.
Under the previous policy, the non-controlling interest was always recognised at its share of the acquiree's net identifiable
assets.
If the Group recognises previously acquired deferred tax assets after the initial recognition accounting is completed there
will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the
Group's net profit after tax.
The changes were implemented prospectively from 1 July 2009. There has been no impact on the Group as a result of
applying the new standard.
(i)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount
through the income statement. The decrement in the carrying amount is recognised as an expense in the income
statement in the reporting period in which the impairment occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
-251-
251 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(j) Cash and cash equivalents
For cash flow presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(k)
Investments and other financial assets
Classification
The Group classifies its investments and other financial assets in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments and available -for-sale financial assets. The
classification depends on the purpose for which the investments were acquired. The classification of the Group's
investments at initial recognition and, in the case of assets classified as held-to-maturity, is re-evaluated at each reporting
period.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for
trading unless they are designated as hedges. Assets in this category are classified as current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables (note 8) in the balance sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. Trade receivables are due for settlement no more than 30
days from the date of revenue recognition.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An impairment allowance account (provision for impairment of
trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. The amount of the impairment allowance is the difference between
the asset’s carrying amount and the present value of estimated future cash flows. The amount of the impairment
allowance is recognised in the income statement.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all
the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are
included in the income statement as gains and losses from investment securities.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from
changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the income
statement within other income or other expenses in the period in which they arise. Dividend income from financial assets
at fair value through profit and loss is recognised in the income statement as part of revenue from continuing operations
when the Group's right to receive payments is established.
-252-
252 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
Impairment
The Group assessed at each balance date whether there is objective evidence that a financial asset or group of financial
assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the
fair value of a security below its cost is considered an indicator that the securities are impaired. If any such evidence
exists for available-for-sale, the cumulative loss - measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset previously recognised in the profit or loss - is reclassified from
equity and recognised in the income statement as a reclassification adjustment. Impairment losses recognised in the
income statement on equity instruments classified as available-for-sale are not reversed through the income statement.
(l) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Costs incurred on development projects (including
computer software and hardware) are recognised as an asset when it is probable that the project will, after considering its
commercial and technical feasibility, be completed and generate future economic benefits and its costs can be reliably
measured. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services,
direct labour and an appropriate proportion of overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
income statement.
Depreciation
Depreciation is calculated on a straight line basis so as to write-off the net costs of items of plant and equipment over their
expected useful lives. Estimates of remaining useful lives will be made annually for all assets. The expected useful lives
are 3 - 15 years.
Impairment
Fixed assets are assessed for impairment in line with the policy stated in note 1(i).
(m) Financial liabilities
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(n) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on
the establishment of loan facilities, are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent
there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
finance income or finance costs.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
-253-
253 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(o) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except to the extent to which they
relate to the construction of qualifying assets in which case specifically identifiable borrowing costs are capitalised into the
cost of the asset. Borrowing costs include interest on short-term and long term borrowings.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective period of
the funding.
(p) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Provisions are discounted at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The increase in the provision is due to the
discount unwinding over the passage of time and is recognised as a finance cost.
(q) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and short-term incentives, and long
service leave expected to be settled within 12 months after the end of the period are recognised in respect of employees'
services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave and short-term incentives, and long service leave expected to be settled within 12 months of
the reporting date is recognised in the provision for employee benefits. All other short-term employee benefit obligations
are presented in payables. An expense for non-accumulating sick leave is recognised when the leave is taken and
measured at the rates paid or payable.
Long-term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period is
recognised in the provision for employee benefits. It is measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash outflows.
Equity-based compensation benefits
Equity-based compensation benefits have been provided to some employees.
The fair value of units granted under the plans are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the period during which the employees
become unconditionally entitled to the units.
The fair value of units granted under cash settled share-based compensation plans is recognised as an expense over the
vesting period with a corresponding increase in liabilities. The fair value of the liability is remeasured at each reporting
date with any changes in fair value recognised in the income statement for the period.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into
account the exercise price, the term, the impact of dilution, the security price at grant date and expected price volatility of
the underlying security, the expected dividend yield and the risk free interest rate for the term of the plan.
The fair value granted is adjusted to reflect the market vesting conditions, but excludes the impact of any non-market
vesting conditions (for example, profitability and growth targets). Non-market vesting conditions are included in
assumptions about the number of units that are expected to become exercisable. At each reporting date, the Group
revises its estimate of the number of units that are expected to become exercisable. The employee benefit expense
recognised each reporting period takes into account the most recent estimate. The impact of the revision to original
estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.
-254-
254 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(q) Employee benefits (continued)
Superannuation
Superannuation is contributed to plans as nominated by the employee. The contribution is not less than the statutory
minimum. The superannuation plans are all accumulation funds.
The cost of current and deferred employee compensation and contributions to employee superannuation plans were
charged to the income statement.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy.
(r) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a reduction (net of tax) from the
proceeds.
If the Group reacquires its own equity shares, those shares are deducted from equity. No gain or loss is recognised in the
profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is
recognised directly in equity.
(s) Parent entity financial information
The financial information for the parent entity, Transurban International Limited, disclosed in note 23 has been prepared on
the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Transurban International Limited. Dividends received from associates are recognised in the parent entity's profit or loss,
rather than being deducted from the carrying amount of these investments.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(u) Working capital deficiency
As at 30 June 2010 the Group has a working capital deficiency represented by net current liabilities of $219.6 million
(2009: $246.1 million). This working capital deficiency reflects a number of specific factors primarily related to an
intercompany loan payable with another entity within the Transurban Group. The directors have considered the position
and believe it is unlikely that the loan will be called upon.
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255 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
1 Summary of significant accounting policies (continued)
(v) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2010
reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
(effective for annual periods beginning on or after 1 January 2010)
In May 2009, the AASB issued a number of improvements to existing Australian Accounting Standards. The Group does
not expect any adjustments will be necessary as a result of applying the revised rules.
AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions
[AASB2] (effective from 1 January 2010)
The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share-based
payment arrangement must recognise an expense for those goods or services regardless of which entity in the group
settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based
payment arrangement should be measured, that is, whether it is measured as an equity or a cash-settled transaction.
There will be no impact on the financial report of the Group as this is consistent with the Group's current accounting policy.
AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
(effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the
Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early
adoption. Management continue to assess the impact of AASB 9.
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods
beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the
definition of a related party and removes the requirement for government-related entities to disclose details of all
transactions with the government and other government-related entities. There will be no impact on the financial report of
the Group as this is consistent with the Group's current accounting policy.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB
2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective
from 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's
annual improvements project. The Group will apply the amendments from 1 July 2010. Management continues to assess
the impact of AASB 2010-3 and AASB 2010-4 and does not expect that any adjustments will be necessary as the result of
applying the revised rules.
AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements.
Transurban International Limited is listed on the ASX and is therefore not eligible to adopt the new Australian Accounting
Standards - Reduced Disclosure Requirements. The two standards will have no impact on the financial statements of the
Group.
-256-
256 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
2 Segment information
Description of segments
The Group operates in one business sector only, being the development, operation and maintenance of toll roads. The
CEO and Executive Committee therefore consider the business from the perspective of locations.
The Group's corporate function is not an operating segment under the requirements of AASB 8 as its revenue generating
activities are only incidental to the business. Management have aggregated and disclosed the corporate business units as
the contribution to the business is closely monitored.
The operating segments have been further broken down by asset to assist with external analysis of the financial
statements.
Segment information - Proportional Income Statement
The CEO and Executive Committee assess the performance of the operating segments based on a measure of proportional
EBITDA. EBITDA excludes the impact of interest income and expense which have been presented by segment where
applicable. Interest income and expense are allocated across segments where the charges are related specifically to the
assets. Otherwise they have been allocated to the Corporate function.
The segment information provided to the Executive Committee is presented on a proportional basis. The information for the
reportable segments for the year ended 30 June 2010 and 30 June 2009 is as follows:
30 June 2010
$'000
Toll revenue from external customers
Fee and other revenue
Total revenue
Underlying proportional EBITDA
Proportional EBITDA
Interest revenue
Interest expense
Depreciation and amortisation
Foreign exchange gain
Pocahontas
895
75.0%
Transurban DRIVe
Other
Transurban
DRIVe
75.0%
Capital
Beltway
67.5%
Total
Transurban
DRIVe
Corporate
Total
100.0%
11,756
51
11,807
4,853
4,853
87
(20,492)
(10,076)
-
-
-
-
-
-
3,513
-
-
-
-
-
-
11,756
51
11,807
-
262
262
11,756
313
12,069
(4,373)
(4,373)
480
480
(5,414)
(5,414)
(4,934)
(4,934)
-
-
-
-
3,600
(20,492)
(10,076)
-
24
(13,999)
(332)
422
3,624
(34,491)
(10,408)
422
Proportional profit (loss) before tax
(25,628)
3,513
(4,373)
(26,488)
(19,299)
(45,787)
Income tax benefit (expense)
Proportional net profit (loss)
8,330
(17,298)
-
3,513
(1,280)
(5,653)
7,050
(19,438)
4,626
(14,673)
11,676
(34,111)
-257-
257 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
2 Segment information (continued)
30 June 2009
$'000
Toll revenue from external customers
Fee and other revenue
Total revenue
Underlying proportional EBITDA
Proportional EBITDA
Interest revenue
Interest expense
Depreciation and amortisation
Foreign exchange gain
Proportional profit (loss) before tax
Income tax benefit (expense)
Proportional net profit (loss)
Pocahontas
895
75.0%
Transurban DRIVe
Other
Transurban
DRIVe
75.0%
Capital
Beltway
67.5%
Total
Transurban
DRIVe
Corporate
Total
100.0%
13,902
-
13,902
7,313
7,313
138
(27,385)
(12,421)
-
(32,355)
12,002
(20,353)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,902
-
13,902
-
359
359
13,902
359
14,261
(6,146)
(6,146)
1,167
1,167
(16,091)
(16,091)
(14,924)
(14,924)
-
-
-
-
138
(27,385)
(12,421)
-
12
(13,589)
(3,380)
20,106
150
(40,974)
(15,801)
20,106
(6,146)
(38,501)
(12,942)
(51,443)
1,549
(4,597)
13,551
(24,950)
(1,683)
(14,625)
11,868
(39,575)
Other segment information - Proportional income statement
Proportional basis of presenting results
The Executive Committee and the Chief Executive Officer receive information for assessing the business on an underlying
proportional basis reflecting the contribution of individual assets in the proportion of Transurban's equity ownership.
The Group's proportional EBITDA result reflects business performance and permits a more appropriate and meaningful
analysis of the Group's underlying performance on a comparative basis. This method of presentation differs from the
statutory accounting format and has been reconciled below.
EBITDA is earnings before interest, taxation, depreciation and amortisation.
-258-
258 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
2 Segment information (continued)
Segment revenue
Revenue from external customers is through toll and fee revenues earned on toll roads. There are no inter-segment
revenues.
Segment revenue reconciles to total statutory revenue as follows:
30 June
2010
$'000
30 June
2009
$'000
12,069
(15,407)
9,952
3,624
18,378
(286)
28,330
14,261
(14,040)
-
150
28,674
(371)
28,674
30 June
2010
$'000
30 June
2009
$'000
3,624
(3,600)
24
150
(138)
12
30 June
2010
$'000
30 June
2009
$'000
(4,934)
(4,853)
4,373
(5,414)
(13,554)
(332)
(19,438)
4,626
(34,112)
(14,924)
(7,313)
6,146
(16,091)
6,403
(3,380)
(24,950)
(1,683)
(39,701)
Total segment revenue (proportional)
Less: Revenue of non-controlled assets
Construction revenue
Interest revenue
Business development revenue
Other
Total statutory revenue (note 3)
Interest revenue
Interest revenue is earned through bank interest revenue.
Interest revenue reconciles to total statutory finance income as follows:
Total segment interest revenue (proportional)
Less: Interest revenue of non-controlled assets
Total statutory finance income
Proportional EBITDA
Proportional EBITDA reconciles to net loss for the year as follows:
Proportional EBITDA
Less: Proportional EBITDA of Pocahontas
Less: Proportional EBITDA of DRIVe
Statutory loss before depreciation and amortisation,
net finance costs, equity accounted investments and tax
Net finance costs
Statutory depreciation and amortisation
Share of associates profit/(loss)
Income tax benefit/(expense)
Loss for the year
-259-
259 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
2 Segment information (continued)
Segment information - Segment assets
The segment information provided to the CEO and Executive Committee in respect of asset are presented on a statutory
consolidated basis. The information for the reportable segments for the periods ended 30 June 2010 and 30 June 2009 are as
follows:
30 June 2010
Total segment assets
Total segment assets includes:
Investments in associates and joint venture partnerships
Additions to non-current assets (other than financial assets
and deferred tax)
30 June 2009
Total segment assets
Total segment assets includes:
Investments in associates and joint venture partnerships
Additions to non-current assets (other than financial assets
and deferred tax)
3 Revenue
Construction revenue
Business development revenue
(a) Construction revenue
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
242,321
32,944
275,265
242,321
-
-
95
242,321
95
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
269,315
29,650
298,965
269,315
-
269,315
-
1,181
1,181
Notes
(a)
(b)
30 June
2010
$'000
30 June
2009
$'000
9,952
18,378
28,330
-
28,674
28,674
Construction revenue is recognised during the development of assets for sale to third parties.
It should be noted that construction revenue is offset by an equal expense. This presentation is a requirement of AASB-I
12 Service Concession Arrangements, and does not have a net effect on the income statement for the Group.
(b) Business development revenue
Business development revenue relates to the provision of development services.
-260-
260 Transurban annual reporT 2010
4 Expenses
Loss before income tax includes the following specific expenses:
Employee benefits expense
Rental expense
5 Net finance costs
Finance income
Interest income
Foreign exchange gains
Total finance income
Finance costs
Interest and finance charges paid/payable
Total finance costs
Net finance (costs)/income
6 Income tax benefit (expense)
Income tax benefit (expense)
Current tax
Deferred tax
Under/(Over) provided in prior years
Deferred income tax (benefit) expense included in income tax expense comprises:
Decrease (increase) in deferred tax assets (note 11)
(Decrease) increase in deferred tax liabilities
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
12,927
1,424
15,334
1,955
30 June
2010
$'000
30 June
2009
$'000
24
421
445
12
19,981
19,993
(13,999)
(13,999)
(13,590)
(13,590)
(13,554)
6,403
30 June
2010
$'000
30 June
2009
$'000
(949)
(2,517)
(1,160)
(4,626)
(4,716)
2,199
(2,517)
(3,758)
2,722
2,719
1,683
4,179
(1,457)
2,722
-261-
261 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
6 Income tax benefit (expense) (continued)
Numerical reconciliation of income tax benefit (expense) to prima facie tax payable
Profit before income tax benefit (expense)
Tax at the Australian tax rate of 30% (2009 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Tax differential
Share of equity accounted results
Income not subject to tax
Sundry items
Under/(over) provision in prior years
Income tax benefit (expense)
7 Current assets - Cash and cash equivalents
Cash at bank and in hand
8 Current assets - Trade and other receivables
Loans to related parties
Other receivables
Current tax receivable
Prepayments
30 June
2010
$'000
30 June
2009
$'000
(38,738)
(11,621)
(38,018)
(11,405)
(2,481)
7,581
3,351
(296)
(1,160)
(4,626)
(3,088)
9,731
1,110
2,616
2,719
1,683
30 June
2010
$'000
30 June
2009
$'000
13,743
13,743
400
400
30 June
2010
$'000
30 June
2009
$'000
6,248
2,679
945
33
9,905
7,125
13,931
804
55
21,915
No class within trade and other receivables contain impaired or passed due assets. Based on the credit history, it is
expected that these amounts will be received when due. The Group does not hold any collateral in relation to these
receivables.
-262-
262 Transurban annual reporT 2010
9 Equity accounted investments
Transurban DRIVe Holdings LLC
Summarised financial information of associates
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
Ownership
interest
30
June
2010
%
30
June
2009
%
75
75
Carrying amount
30 June
2010
$'000
30 June
2009
$'000
242,321
242,321
269,315
269,315
2010
Transurban DRIVe Holdings LLC
2009
Transurban DRIVe Holdings LLC
Ownership
Interest
%
75
75
Company's share of:
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit/(loss)
$'000
2,105,467
2,105,467
(1,863,146)
(1,863,146)
11,807
11,807
(19,438)
(19,438)
2,014,388
2,014,388
(1,745,073)
(1,745,073)
14,550
14,550
(24,950)
(24,950)
DRIVe
30 June
2010
$'000
30 June
2009
$'000
269,315
24,452
(19,438)
(11,845)
(20,163)
242,321
(26,488)
7,050
(19,438)
250,441
24,809
(24,950)
61,453
(42,438)
269,315
(39,010)
14,060
(24,950)
780,440
134,782
915,222
860,591
154,827
1,015,418
Movements in carrying amounts
Carrying amount at 1 July
Investment in associate
Share of profits (losses) after income tax
Movements in exchange rates
Movements in reserves
Carrying amount at 30 June
Share of associates’ profits or losses
Loss before income tax
Income tax (expense) benefit
Loss after income tax
Share of expenditure commitments
Capital commitments
Operating commitments
Contingent liabilities of associates
As at the reporting date there are no contingent liabilities
-263-
263 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
9 Equity accounted investments (continued)
Transurban DRIVe Holdings LLC
Transurban owns 75 per cent of Transurban DRIVe Holdings LLC (DRIVe). DRIVe owns 100 per cent of Pocahontas 895
and 90 per cent of Capital Beltway Express, both in Virginia, USA. Pocahontas is a 99 year concession ending in June
2105. Toll are escalated according to a prescribed schedule until 2016, and the greater of CPI, real GDP or 2.8 per cent
thereafter. Capital Beltway Express is currently in construction phase and is scheduled to open in late 2012, and will have
a 75 year concession period.
10 Non-current assets - Property, plant and equipment
Opening balance
Cost
Accumulated depreciation
Net book amount
Movement for the year
Opening net book amount
Additions
Depreciation charge
Closing net book amount
Closing balance
Cost
Accumulated depreciation
Net book amount
Included in property, plant and equipment is operating systems, equipment and fittings.
30 June
2010
$'000
30 June
2009
$'000
4,786
(3,868)
918
918
95
(332)
681
4,712
(4,031)
681
3,970
(853)
3,117
3,117
1,181
(3,380)
918
4,786
(3,868)
918
-264-
264 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
11 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
30 June
2010
$'000
30 June
2009
$'000
The balance comprises
temporary differences
attributable to:
Accrued expenses
Provisions
Unearned income
Fixed Assets/ Intangibles
Other
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited/(charged) to the income
statement
Foreign exchange movements
Closing balance at 30 June
Deferred tax assets/(liabilities) to
be recovered after more than 12
months
70
1,772
10,209
-
-
12,051
(3,436)
8,615
132
1,278
6,176
-
140
7,726
(1,309)
6,417
(60)
-
(8)
(3,368)
-
(3,436)
3,436
-
(392)
-
-
(917)
-
(1,309)
1,309
-
7,726
9,845
(1,309)
(2,229)
4,716
(391)
12,051
(4,179)
2,060
7,726
(2,199)
72
(3,436)
1,457
(537)
(1,309)
10
1,772
10,201
(3,368)
-
8,615
-
8,615
6,417
2,517
(319)
8,615
(260)
1,278
6,176
(917)
140
6,417
-
6,417
7,616
(2,722)
1,523
6,417
12,051
12,051
7,726
7,726
(3,436)
(3,436)
(1,309)
(1,309)
8,615
8,615
6,417
6,417
12 Current liabilities - Trade and other payables
Trade payables and accruals
Loans from related parties (note 21)
30 June
2010
$'000
30 June
2009
$'000
3,904
223,563
227,467
3,291
253,757
257,048
-265-
265 Transurban annual reporT 2010
13 Provisions
Current
Employee benefits
Onerous contracts
Non-current
Employee benefits
Total provisions
Movements in provisions
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
Notes
(a)
(b)
(a)
4,318
2,513
6,831
23
23
3,065
2,980
6,045
95
95
6,854
6,140
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated - 2010
Carrying amount at start of year
Provision recognised
Amounts paid during the year
Movements in foreign exchange rates
Carrying amount at end of year
Description of provisions
(a) Employee benefits
Onerous
contracts
$'000
2,980
-
(340)
(127)
2,513
Employee benefits relate to the provision for annual leave, bonuses and long service leave.
(b) Onerous contracts
An onerous contract provision has been recognised for the lease of premises no longer occupied by the Group.
14 Current liabilities - Other liabilities
Unearned income
(a) Unearned income
Notes
(a)
30 June
2010
$'000
30 June
2009
$'000
8,962
8,962
5,349
5,349
Unearned income represents amounts received in advance and will be recognised when the income is earned.
-266-
266 Transurban annual reporT 2010
15 Contributed equity
Share capital
Fully paid ordinary shares
Fully paid ordinary shares
Movements in ordinary share capital:
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
192,977
192,977
138,983
138,983
Number
'000
Number
'000
1,414,294
1,414,294
1,281,363
1,281,363
Notes
Number of securities
'000
$'000
Opening balance at 1 July 2008
Distribution Reinvestment Plan
Purchase, disposal and vesting of treasury securities
Share purchase plan, net of transaction costs
Closing balance at 30 June 2009
Opening balance at 1 July 2009
Distribution Reinvestment Plan
Purchase, disposal and vesting of treasury securities
Equity placement, net of transaction costs
Closing balance at 30 June 2010
(a)
(b)
(c)
(a)
(b)
(d)
1,218,263
60,591
679
1,830
1,281,363
1,281,363
14,068
946
117,917
1,414,294
95,554
41,530
488
1,411
138,983
138,983
5,885
462
47,647
192,977
(a) Distribution Reinvestment Plan
The Transurban Group has established a distribution reinvestment plan under which holders of stapled securities may
elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather than by cash.
Securities are to be issued under the plan at a 2.5% discount to the market price for the 30 June 2010 distribution.
(b) Treasury securities
Stapled securities were issued to Transurban Group executives under the share-based payment plans. The securities are
held by the executive but will only vest in the executive in accordance with the terms of the plans. The acquired securities
cannot be transferred or sold prior to vesting date. On forfeit, the securities are sold on market.
(c) Share purchase plan
In the prior year, the Transurban Group raised $10.0 million via a share purchase plan, issuing 1.8 million stapled
securities to eligible security holders. TIL's share was $1.4 million, net of costs.
(d) Equity placement
The Transurban Group raised $542.4 million via an equity raising, issuing 117.9 million stapled securities. TIL's share was
$47.6 million, net of costs.
-267-
267 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
15 Contributed equity (continued)
Ordinary shares
The number of shares on issue is 1,414,667,986 (2009: 1,282,682,606). The difference of 373,804 (2009: 1,319,606)
relates to treasury securities of the Group.
All shares issued are a component of stapled securities issued by the Transurban Group. Prior to June 2008, a nil value
was assigned to TIL, with the value being apportioned between Transurban Holdings Limited and Transurban Holding
Trust.
Shares entitle the holder to participate in distributions and the winding up of the Transurban Group in proportion to the
number of and amounts paid on the shares held. On a show of hands, every holder of shares present at a meeting in
person or by proxy is entitled to one vote.
Capital risk management
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital on the
basis of the gearing ratio to ensure compliance with the covenant.
The Group’s objective when managing capital is to safeguard their ability to continue as a going concern, so that they can
continue to provide returns to security holders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of distributions paid to security
holders, return capital to security holders, issue new securities or sell assets to reduce debt.
16 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Foreign currency translation
Transactions with non-controlling interest
Movements:
Cash flow hedges
Balance 1 July
Movement in associate's reserve (note 9)
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Balance 30 June
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
-268-
268 Transurban annual reporT 2010
30 June
2010
$'000
30 June
2009
$'000
(75,765)
663
34,431
(9,225)
(49,896)
(55,602)
165
33,094
(9,225)
(31,568)
(55,602)
(20,163)
(75,765)
(13,164)
(42,438)
(55,602)
165
498
663
33,094
1,337
34,431
-
165
165
3,689
29,405
33,094
16 Reserves and accumulated losses (continued)
Transactions with non-controlling interests
Balance 1 July
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
Balance at 1 July
Net (loss) for the year
Balance 30 June
Nature and purpose of reserves
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$'000
30 June
2009
$'000
(9,225)
(9,225)
(9,225)
(9,225)
(76,987)
(34,112)
(111,099)
(37,286)
(39,701)
(76,987)
Cash flow hedges
The cash flow hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are
recognised in other comprehensive income and accumulated in this reserve in equity. Amounts are reclassified to profit or
loss when the associated hedged transaction affects profit and loss.
Share-based payments
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not exercised.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive
income as described in note 1(d) and accumulated in this reserve in equity.
Transactions with non-controlling interests
The transactions with non-controlling interests arose as a result of the acquisition of Transurban (USA) Holdings Inc. and
its subsidiaries Transurban (USA) Inc. and Transurban (USA) Operations Inc. from a commonly controlled Transurban
Group entity (Transurban Limited).
17 Dividends
No dividends were paid or declared during the year.
18 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity and its
related practices:
30 June
2010
$
30 June
2009
$
50,000
50,000
50,000
50,000
Amounts received or due and receivable by PricewaterhouseCoopers
Audit services
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
-269-
269 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
19 Contingencies
Contingent liabilities
The parent entity and the Group had contingent liabilities at 30 June 2010 in respect of:
Equity guarantee
Transurban DRIVe Holdings LLC (DRIVe), a related party of the Group, holds a concession agreement with The
Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on the Capital Beltway (Capital
Beltway project), a ring road that runs around Washington DC. The project is currently in the construction phase.
Construction is expected to take five years and the tolling concession will operate for 75 years.
On 20 December 2007 (and as amended on 12 June 2008) the Transurban Group, through the entities in the triple staple,
being Transurban Holdings Limited, Transurban International Limited and Transurban Infrastructure Management Limited
(as responsible entity of the Transurban Holding Trust), entered into an agreement with Capital Beltway Express LLC
(Capital Beltway Express), a subsidiary of DRIVe, the Virginia Department of Transportation, Goldman Sachs Capital
Markets L.P., Depfa Bank plc and Wells Fargo Bank N.A. to provide an Equity Funding Guarantee (the Guarantee) over all
of DRIVe’s equity obligations associated with funding the equity contributions to the Capital Beltway project.
The Group owns 75% of the equity of DRIVe and recognises this investment in the consolidated financial statements using
the equity method of accounting. DRIVe holds 90% of the equity in Capital Beltway Express and, from time to time, is
required to make equity contributions to Capital Beltway Express to fund the equity component of the Capital Beltway
project costs. The total equity contribution DRIVe is obliged to make to Capital Beltway Express is US$313,825,757, of
which US$133,064,838 had been paid at balance sheet date.
In accordance with the DRIVe Holdings LLC Agreement, should a DRIVe member default on any capital calls, the
Transurban Group has the right to acquire their share of DRIVe at a 50% discount to its fair value. As such, in the
instance of the Guarantee being called, the Transurban Group may exercise its right to the interest in DRIVe at a
discounted value.
Contingent assets
DRIVe capital sum
As a part of the establishment of Transurban DRIVe, DRIVe Holdings LLC agreed to make a "capital sum" compensation
payment to Transurban for contributing to DRIVe the right to negotiate the Capital Beltway and I-95.
The fee is payable to Transurban if the pre-financing/pre-tax net present value of Capital Beltway or I-95 is positive as at
financial close, when calculated three years after the completion of construction. Receipt of the capital sum is contingent
on the projects achieving positive net present value at the strike date, and as such this amount has not been recognised
on the balance sheet. Due to uncertainty associated with the amount and timing of the potential receipt, it is not practical
to quantify the potential amount.
20 Intra-group guarantees
As at 30 June 2010, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and
Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities within
the group on a continual basis.
-270-
270 Transurban annual reporT 2010
21 Related party transactions
The following transactions occurred with related parties:
Transactions with related parties
Revenue from services provided to associate
Business development fees
Management fees
Loans to/from related parties
Loans to related parties
Beginning of the period
Loans advanced
Repayment of loans
Foreign exchange movements
Loans from related parties
Beginning of the period
Loans advanced
Loan repayments
Foreign exchange movements
Other related parties
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
$
30 June
2009
$
18,079,638
297,821
18,377,459
28,259,082
413,752
28,672,834
7,124,659
15,177,946
(16,055,556)
924
6,247,973
45,837,702
124,163,519
(153,620,008)
(9,256,554)
7,124,659
253,755,701
316,571,583
(346,278,973)
(485,665)
223,562,646
261,605,671
620,371,574
(622,571,235)
(5,650,309)
253,755,701
Mr Lynch and Mr Ryan are directors of Transurban Holdings Limited and Transurban Infrastructure Management Limited.
Related party transactions have occurred with these Transurban Group entities and their wholly-owned subsidiaries.
Ms Eve is an Associate of Appleby (Legal from within Burmuda). During the year Transurban International Limited utilised
Appleby for various legal services. These services are based on normal commercial terms.
22 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Name of entity
incorporation Class of shares
Equity holding
Country of
Transurban International Holdings Limited
Transurban (USA) Holdings Inc
Transurban (USA) Inc
Transurban DRIVe Management LLC
Transurban (USA) Operations Inc.
**
The proportion of ownership interest is equal to the proportion of voting power held.
Bermuda
USA
USA
USA
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2010
%
2009
%
100
100
100
100
100
100
100
100
100
100
-271-
271 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
23 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Accumulated losses
Loss for the year
Total comprehensive income
Contingent liabilities and guarantees of the parent entity
For details of contingent liabilities and guarantees of the parent entity, refer to note 19.
30 June
2010
$'000
30 June
2009
$'000
207,204
156,888
1
1
207,205
156,889
71
-
71
-
-
-
192,977
15,157
(1,000)
207,134
138,983
18,872
(966)
156,889
(34)
(338)
(4,247)
18,309
24 Events occurring after the balance sheet date
There are no unusual matters or circumstances that have arisen since the end of the financial year that have significantly
affected or may significantly affect the operations of the entity, the results of those operations or the state of affairs of the
entity in subsequent financial years.
-272-
272 Transurban annual reporT 2010
25 Reconciliation of profit after income tax to net cash inflow from operating activities
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
Loss for the year
Depreciation and amortisation
Share of net profits (losses) of equity accounted investments
Change in operating assets and liabilities
Decrease in prepayments
Decrease (increase) in trade and other receivables
Non cash related party loans
Increase (decrease) in trade payables and accruals
Increase (decrease) increase in provisions
Increase in unearned income
Movement in current taxes and deferred taxes
Net cash inflow (outflow) from operating activities
26 Loss per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the company
Total basic loss per share attributable to the ordinary equity holders of the company
Diluted earnings per share
Loss from continuing operations attributable to the ordinary equity holders of the
company
Total diluted loss per share attributable to the ordinary equity holders of the company
Reconciliations of losses used in calculating loss per share
30 June
2010
$'000
30 June
2009
$'000
(34,112)
332
19,438
-
22
11,252
11,829
613
714
3,613
(2,339)
11,362
(39,701)
3,380
24,950
-
2
(5,364)
3,473
(1,410)
(1,340)
3,683
(1,219)
(13,546)
30 June
2010
Cents
30 June
2009
Cents
(2.6)
(2.6)
(2.6)
(2.6)
(3.1)
(3.1)
(3.1)
(3.1)
30 June
2010
$'000
30 June
2009
$'000
Basic and diluted earnings per share
Loss for the year
Loss attributable to the ordinary equity holders of the Group used in calculating basic
loss per share
(34,112)
(39,701)
(34,112)
(39,701)
-273-
273 Transurban annual reporT 2010
26 Loss per share (continued)
Weighted average number of shares used as the denominator
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 June
2010
Number
30 June
2009
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
Adjustments for calculation of diluted loss per share:
Performance rights
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted loss per share
1,301,035,941
1,267,502,187
2,750,885
1,297,389
1,303,786,826
1,268,799,576
Loss per share
Basic loss per share
Basic loss per share is calculated by dividing the loss attributable to members of the share excluding any non-controlling
interest and costs of servicing equity other than distributions, by the weighted average number of shares outstanding
during the financial year.
Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive
potential ordinary shares.
27 Share-based payments
The disclosure below represents the Share based payment plans offered by the Transurban Group.
2009 and 2010 Performance Awards Plan
The Performance Awards Plan (PAP) is a modified version of the 2008 Performance Rights Plan (PRP) discussed below.
Under the PAP, eligible executives receive a grant of Performance Awards which entitles participants to receive securities
at no cost subject to the achievement of performance conditions. The Board has discretion as to the form of the award at
the end of the performance period and may grant cash payments of equivalent value at vesting. No dividends or
distributions on securities are payable to participants prior to vesting.
Dual performance measures (earnings before interest, tax, depreciation and amortisation (EBITDA) measure and relative
total security holder return (TSR)) apply to Performance Awards, each representing 50 per cent of the award. The use of
dual measures balances the need to both improve the underlying performance of the business over the long term as well
as appropriate returns relative to the market.
Performance Awards were granted on 1 November 2008 and 11 December 2009 with a three year vesting period. For the
1 November 2008 grant, the awards are tested at the end of each year. If the performance measures are satisfied for the
year, one third of the awards are preserved until the end of the three year period. At the end of the three years a
cumulative test of the performance measures is applied to any unvested awards. For the 11 December 2009 grant, the
awards are tested at the end of the three year vesting period only.
-274-
274 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2010
1 Nov 2008
11 Dec 2009
Total
1 Nov 2011
11 Dec
2012
3.30
3.33
4.27
1,314,288
-
4.97
-
1,314,288
1,990,913
1,990,913
-
-
-
(36,658)
1,277,630
-
(36,658)
1,990,913
3,268,543
Weighted average exercise price
$3.79
$4.15
$-
$3.79
$4.01
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2009
1 Nov 2008
Total
1 Nov 2011
3.30
4.27
-
-
1,345,370
1,345,370
-
-
(31,082)
(31,082)
1,314,288
1,314,288
Weighted average exercise price
$-
$3.79
$-
$3.79
$3.79
2009 Executive Equity Plan
Equity awards were granted under the Executive Equity Plan (EEP) based on executives’ performance and were designed
to encourage retention of executives while focusing on business excellence.
Individuals who are high performers and in business critical roles were nominated for awards for their past contribution and
expected future performance. Board approval was required to grant EEP awards to nominated executives.
Under the EEP, eligible executives received a grant of stapled securities in the Transurban Group (”securities”) at no cost
that are subject to disposal restrictions for three years from the grant date. Participants are entitled to distributions paid on
their Securities during the restriction period. If the executive ceases employment with Transurban during the restriction
period, their Securities will be forfeited unless the Board decides otherwise.
Awards were last made under the EEP on 1 November 2008. The table below provides details of the awards granted.
Grant Date
Expiry date
Fair
value at
grant
date
Balance at
start of
the year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2010
1 Nov 2008
Total
1 Nov 2011
$4.27
611,692
611,692
-
-
(2,953)
(2,953)
(60,089)
(60,089)
548,650
548,650
Weighted average exercise price
$4.27
$-
$4.26
$4.13
$4.27
-275-
275 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Grant Date
Expiry date
Fair
value at
grant
date
Balance at
start of
the year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
2009
1 Nov 2008
Total
1 Nov 2011
$4.27
-
-
632,886
632,886
(722)
(722)
(20,472)
(20,472)
611,692
611,692
Weighted average exercise price
$-
$4.27
$4.27
$4.27
$4.27
2008 Performance rights plan
The Performance Rights Plan (PRP) enabled eligible executives to receive a grant of Performance Rights that entitled
participants to receive stapled securities in the Transurban Group (Securities) at no cost at the end of a three year
performance period, subject to the achievement of performance conditions. No dividends or distributions on Securities
were payable to participants prior to vesting. The Plan has two performance measures, EBITDA and relative TSR against
the S&P/ASX 100 Industrials, each applied to 50 per cent of the PRP award. For US participants of the plan, they will be
awarded a cash amount instead of stapled securities at the end of the three year performance period, subject to
performance conditions.
There is only one testing date at the end of the performance hurdles at the vesting date.
Awards were last made under the PRP in November 2007.
Australian based plan
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2010
3.50
5.96
345,854
345,854
-
-
(14,260)
(14,260)
331,594
331,594
Weighted average exercise price
$4.73
$-
$4.73
$4.73
Grant Date
2009
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2010
3.50
5.96
654,610
654,610
-
-
(308,756)
(308,756)
345,854
345,854
Weighted average exercise price
$4.73
$-
$4.73
$4.73
-276-
276 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Overseas based plan
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
DRIVe mgt
fee
Balance at
start of the
year
Granted
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
247,561
247,561
-
-
-
-
247,561
247,561
Weighted average exercise price
$4.26
$-
$-
$4.26
Grant Date
2009
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
DRIVe mgt
fee
Balance at
start of the
year
Granted
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
253,456
253,456
21,534
21,534
(27,429)
(27,429)
247,561
247,561
Weighted average exercise price
$3.32
$3.32
$3.32
$3.32
The assessed fair value of the US participants at reporting date is: TSR $4.33 (2009: $2.78) and DRIVe management fee
$4.18 (2009: 3.86).
2006 and 2007 Executive Loan Plan
The Executive Loan Plan (ELP) was discontinued as of the 2007 financial year. The ELP rewarded the improvements in
the price of Transurban’s stapled securities over a three year period with relative Total Security holder Return (TSR)
against the S&P/ASX 100 Industrials as a performance measure. Executives based outside Australia were eligible to
participate in a cash based plan similarly structured to the ELP.
Executives that participated in the ELP were provided with an interest free loan to assist them to acquire securities at
market price. The term of the loan is three years and there is only one testing date. The 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 otherwise provide. Holding locks are
applied to the securities to ensure that they can only be dealt with in accordance with the terms of the Plan. The acquired
securities cannot be transferred or sold while the loan is outstanding.
-277-
277 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Set out below are securities granted under the plan.
Australian Based Plan
Grant Date
2010
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2009
$7.28
897,346
897,346
-
-
-
-
(897,346)
(897,346)
-
-
Weighted average grant price
$7.28
$-
$-
$7.28
$-
Overseas Based Plan
Grant Date
2010
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2009
$7.28
270,000
270,000
-
-
-
-
(270,000)
(270,000)
-
-
Weighted average grant price
$7.28
$-
$-
$7.28
$-
-278-
278 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Australian Based Plan
Grant Date
2009
1 Nov 2005
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2008
1 Nov 2009
$6.47
$7.28
814,200
1,175,000
1,989,200
-
-
-
(696,831)
-
(696,831)
(117,369)
(277,654)
(395,023)
-
897,346
897,346
Weighted average grant price
$6.95
$-
$6.47
$7.04
$7.28
Overseas Based Plan
Grant Date
2009
1 Nov 2005
1 Nov 2006
Total
Expiry date
Grant
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2008
1 Nov 2009
$6.47
$7.28
189,700
300,000
489,700
-
-
-
(189,700)
-
(189,700)
-
(30,000)
(30,000)
-
270,000
270,000
Weighted average grant price
$6.95
$-
$6.47
$7.28
$7.28
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined using a Black-Scholes option
pricing model that takes into account the term of the right/award, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right/award.
-279-
279 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
27 Share-based payments (continued)
Employee security scheme
The Transurban Employee Security Ownership Plan (the Plan) provides employees with an opportunity to be a part owner
of Transurban and partner in its continued success.
All Australian based permanent employees are eligible to participate in either the Investment Tax Exempt Plan or the
Investment Tax Deferred Plan. Under the plans, Transurban provides participants with a matching component toward the
acquisition of the stapled securities. For the period 1 July 2009 to 30 June 2010, the cost of company matches was
$125,517 (2009: $33,292) for the Investment Tax Exempt Plan and $nil (2009: $207,417) for the Investment Tax Deferred
Plan. These plans were suspended in May 2009 following changes to taxation announced in the Federal budget. The
Group reactivated the Tax Exempt Plan in the year ended 30 June 2010 and has reactivated the Investment Tax Deferred
Plan for the 2011 financial year. These have been reactivated with the required modifications as a result of legislation
changes.
The third element under the Plan is the Incentive Plan. Subject to Board approval and the performance of the company,
eligible employees may receive a certain number of Transurban securities at no cost to them.
In February 2010, each participant was allocated 100 stapled securities at a value of $5.27 per security. Stapled securities
provided under the Plan were acquired on the open market.
2010
Number
2009
Number
Shares purchased on the market under the plan and provided to participating employees
44,800
45,300
Expenses arising from shared-based payments
Total expenses arising from share-based payment transaction recognised during the period as part of employee benefit
expense was $5.2 million (2009: $1.6 million).
-280-
280 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures
Directors
The following persons were directors of Transurban International Limited during the financial year:
Executive directors
Christopher Lynch
Non-executive directors
David J Ryan (Chairman)
Jennifer S Eve
James M Keyes
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, during the financial year:
T Honan
B Bourke
D Cardiff
K Daley
M Kulper
S Hogg
M Fletcher
A Head
E Mildwater
Chief Finance Officer (from 14 October 2008)
Chief Operating Officer
Group General Manager Human Resources (resigned 30
November 2009)
President International Development
President Transurban North America
Acting Group General Manager People, Legal and
Governance
Group General Manager Public Affairs
Group General Manager Strategy & Corporate Development
Chief Legal Counsel and Company Secretary
Key management personnel compensation
The remuneration amounts below represent the entire amounts paid by the Transurban Group. The full amounts have
been disclosed as a reasonable basis of apportionment is not available to reflect the Group's portion.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
30 June
2010
$
30 June
2009
$
14,083,358
312,832
110,982
268,637
3,374,589
18,150,398
14,705,962
656,016
182,876
-
1,857,574
17,402,428
Detailed remuneration disclosures are made in the directors’ report. The relevant information can be found in the
remuneration report in the directors' report.
Equity instrument disclosures relating to key management personnel
Share based payments
Details of long-term incentives provided as remuneration and shares issued, together with terms and conditions of long-
term incentives, can be found in the remuneration report in the directors' report.
-281-
281 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures (continued)
Performance Awards Plan (PAP)
The number of Performance Awards held during the financial year by each director of Transurban International Limited
and other key management personnel of the Group, including their personally related parties, are set out below.
2010
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C Lynch
483,721
617,211
Other key management personnel of the Group
85,465
B Bourke
46,512
D Cardiff
67,151
K Daley
34,884
M Fletcher
46,512
A Head
23,256
S Hogg
232,558
T Honan
145,422
M Kulper
29,070
E Mildwater
109,050
-
111,276
47,478
59,347
47,478
148,368
161,956
66,766
-
-
-
-
-
-
-
-
-
-
-
1,100,932
-
(29,749)
-
-
-
-
-
-
-
194,515
16,763
178,427
82,362
105,859
70,734
380,926
307,378
95,836
-
-
-
-
-
-
-
-
-
-
2009
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C Lynch
-
483,721
Other key management personnel of the Group
-
B Bourke
-
D Cardiff
-
K Daley
-
M Fletcher
-
A Head
-
S Hogg
-
T Honan
-
M Kulper
-
E Mildwater
85,465
46,512
67,151
34,884
46,512
23,256
232,558
145,422
29,070
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
483,721
85,465
46,512
67,151
34,884
46,512
23,256
232,558
145,422
29,070
-
-
-
-
-
-
-
-
-
-
-282-
282 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures (continued)
Executive Loan Plan
The number of Stapled Securities held under the executive loan plan during the financial year by each director of
Transurban International Limited and other key management personnel of the Group, including their personally related
parties, are set out below.
2010
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
160,000
B Bourke
35,000
D Cardiff
100,000
K Daley
15,000
M Fletcher
22,500
A Head
100,000
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
(160,000)
(35,000)
(100,000)
(15,000)
(22,500)
(100,000)
-
-
-
-
-
-
-
-
-
-
-
-
2009
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
262,000
B Bourke
63,500
D Cardiff
174,000
K Daley
15,000
M Fletcher
37,501
A Head
190,000
M Kulper
-
-
-
-
-
-
(90,005)
(25,148)
(74,000)
-
(15,001)
(90,000)
(11,995)
(3,352)
-
-
-
-
160,000
35,000
100,000
15,000
22,500
100,000
-
-
-
-
-
-
-283-
283 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures (continued)
Stapled security holdings
The number of Stapled Securities held during the financial year by each director of Transurban International Limited and
other key management personnel of the Group, including their personally-related parties, are set out below.
Stapled Securities
2010
Name
Balance at
start of the
year
Received during
the year via the
Performance
Rights Plan
Received during
the year via the
Executive Equity
Plan
Other changes
during the year
Balance at end
of the year
Directors of the Group
D J Ryan
C Lynch
60,945
233,041
Other key management personnel of the Group
460,151
B Bourke
158,477
D Cardiff
384,578
K Daley
33,491
M Fletcher
23,742
A Head
22,781
S Hogg
85,474
T Honan
103,944
M Kulper
24,640
E Mildwater
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,541
21,925
100
(158,477)
100
1,000
100
(7,265)
8,100
-
556
66,486
254,966
460,251
-
384,678
34,491
23,842
15,516
93,574
103,944
25,196
2009
Name
Balance at
start of the
year
Received during
the year via the
Performance
Rights Plan
Received during
the year via the
Executive Equity
Plan
Other changes
during the year
Balance at end
of the year
Directors of the Group
D J Ryan
C Lynch
57,300
152,800
Other key management personnel of the Group
539,661
B Bourke
167,633
D Cardiff
365,332
K Daley
15,121
M Fletcher
4,596
A Head
-
S Hogg
-
T Honan
80,000
M Kulper
4,700
E Mildwater
-
-
-
-
-
-
-
-
-
-
-
-
79,647
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
3,645
594
(98,656)
(28,302)
100
(776)
-
7,465
-
-
794
60,945
233,041
460,151
158,477
384,578
33,491
23,742
22,781
85,474
103,944
24,640
-284-
284 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures (continued)
Executive Equity Plan (EEP)
The number of Stapled Securities held under the executive loan plan during the financial year by each director of
Transurban International Limited and other key management personnel of the Group, including their personally-related
parties, are set out below.
2010
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C J Lynch
79,647
Other key management personnel of the Group
19,146
B Bourke
19,146
D Cardiff
19,146
K Daley
19,146
M Fletcher
19,146
A Head
15,316
S Hogg
85,474
T Honan
23,944
M Kulper
19,146
E Mildwater
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,647
-
(19,146)
-
-
-
-
-
-
-
19,146
-
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
2009
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Directors of the Group
C J Lynch
-
79,647
Other key management personnel of the Group
-
B Bourke
-
D Cardiff
-
K Daley
-
M Fletcher
-
A Head
-
S Hogg
-
T Honan
-
M Kulper
-
E Mildwater
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,647
19,146
19,146
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
-285-
285 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
28 Key management personnel disclosures (continued)
Performance Rights Plan (PRP)
The number of rights held under the PRP during the financial year by each director of Transurban International Limited and
other key management personnel, including their personally-related parties, are set out below.
2010
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Exercised
during the
year
Other
changes
during the
year
Balance at
end of the
year
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
92,857
B Bourke
27,428
D Cardiff
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,401)
-
-
-
-
92,857
19,027
78,571
11,142
14,857
76,778
-
-
-
-
-
-
2009
Name
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
Other key management personnel of the Group
92,857
B Bourke
27,428
D Cardiff
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,857
27,428
78,571
11,142
14,857
76,778
-
-
-
-
-
-
Other transactions with key management personnel
Jennifer Eve is an associate with Appleby. During the year the Group utilised Appleby for various legal services. These
services are based on normal commercial terms.
-286-
286 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
29 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.
Income taxes
The Group is subject to income taxes in the USA. Significant judgment is required in determining the provision for income
taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact current and deferred tax assets and liabilities in the
period in which such determination is made.
Estimated impairment of the investment of equity in DRIVe
The Group tests whether the investment of equity in DRIVe has suffered any impairment, in accordance with the
accounting policy stated in note 1(i).
30 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk),
credit risk and liquidity risk. The financial risk management function is carried out centrally by the Transurban Group
treasury team (Treasury) under policies approved by the Board. Treasury work closely with the Group's operating units to
actively identify and monitor all financial risks, and put hedging in place where appropriate. The Board are informed on a
regular basis of any material exposures to financial risks.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed primarily to foreign exchange risk arising from currency exposures to
the Australian dollar. Foreign exchange risk arises when future commercial transactions and recognised assets and
liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using cash flow
forecasting.
The Group's exposure to foreign currency risk at the end of the reporting date, expressed in Australian dollar, was as
follows:
Cash and cash equivalents
Receivables
Payables
Provisions
Net exposure
30 June
2010
AUD
$'000
30 June
2009
AUD
$'000
68
1,953
(5,229)
-
(3,208)
13
1,228
(2,226)
(4,049)
(5,034)
The above table is presented in the currency in which the exposure exists. The Australian dollar exposure exists in the US
dollar functional currency entities.
Sensitivity
Based on the financial instruments held at end of the period, had the U.S. dollar strengthened/weakened by 10 cents
against the Australian dollar with all other variables held constant, the Group’s post-tax profit for the year would have been
$131,000 higher (2009: $187,000 higher) or $155,000 lower (2009: $220,000 lower), as a result of foreign exchange
gains/losses on translation of Australian dollar denominated financial instruments as detailed in the above table.
-287-
287 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 Financial risk management (continued)
Cash flow interest rate risk
The Group's main exposure to interest rate risk arises from long-term intercompany borrowings and funds on deposit.
As at the reporting date, the Group had the following variable rate borrowings outstanding. An analysis of maturities is
provided in liquidity risk below.
Cash and cash equivalents
Net exposure to cash flow interest rate risk
30 June 2010
30 June 2009
Weighted
average
interest rate
%
-%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
(13,743)
(13,743)
-%
(400)
(400)
Sensitivity
At 30 June 2010, if interest rates had changed by +100 basis points from the year-end rates with all other variables held
constant, post-tax profit for the year would have been $84,000 higher (2009: $2,000 higher).
Credit risk
The Group has no significant concentrations of credit risk from operating activities and has policies in place to ensure that
transactions are made with commercial customers with an appropriate credit history.
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by multiple
independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to higher rated
counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only dealing with credit
worthy counterparties, limiting the exposure to any one counterparty, minimising the size of the exposure where possible
through netting offsetting exposures, diversifying exposures across counterparties, closely monitoring changes in total
credit exposures and changes in credit status, and taking mitigating action when necessary.
Liquidity risk
The Group maintains sufficient cash to maintain short-term flexibility and enable the Group to meet financial commitments
in a timely manner. Treasury assesses liquidity over the short term (up to 12 months) and medium term (1 - 5 years) by
maintaining accurate forecasts of operating expenses, committed capital expenditure and payments to security holders.
Long term liquidity requirements are reviewed as part of the annual strategic planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group's forecast
annual operating costs and certain risk exposure scenarios as maintained by the Group's strategic risk register, and is
maintained as cash. The reserve is maintained on a rolling 12 month basis. Medium term liquidity forecasting is
maintained on a 5 year horizon.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities, net and gross settled derivative financial instruments into
relevant maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal
their carrying balances as the impact of discounting is not significant.
-288-
288 Transurban annual reporT 2010
Transurban International Limited
Notes to the financial statements
30 June 2010
(continued)
30 Financial risk management (continued)
Contractual maturities of
financial liabilities
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 4 to
5 years
Over 5
years
Total
contractual
cash flows
At 30 June 2010
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest bearing
Fixed rate
Total non-derivatives
At 30 June 2009
Non-derivatives
Non-interest bearing
Fixed rate
Total non-derivatives
3,904
236,753
240,657
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,904
236,753
240,657
3,904
223,563
227,467
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 4 to
5 years
Over 5
years
Total
contractual
cash flows
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
3,291
268,728
272,019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,291
268,728
272,019
3,291
253,756
257,047
There is no liquidity risk exposure to the Group in the current or prior periods other than as shown above.
-289-
289 Transurban annual reporT 2010
In the directors' opinion:
Transurban International Limited
Directors' declaration
30 June 2010
(a)
the financial statements and notes set out on pages 241 to 289 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Group's financial position as at 30 June 2010 and of its performance for
the financial year ended on that date, and
(ii)
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
David J Ryan
Director
Christopher J Lynch
Director
Melbourne
12 August 2010
-290-
290 Transurban annual reporT 2010
PricewaterhouseCoopers
ABN 52 780 433 757
Freshwater Place
2 Southbank Boulevard
SOUTHBANK VIC 3006
GPO Box 1331L
MELBOURNE VIC 3001
DX 77
website: www.pwc.com/au
Telephone +61 3 8603 1000
Facsimile +61 3 8603 1999
Independent auditor's report to the members of
Transurban International Limited
Report on the financial report
We have audited the accompanying financial report of Transurban International Limited (the company), which comprises
the balance sheet as at 30 June 2010, and the income statement, the statement of comprehensive income, statement of
changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies,
other explanatory notes and the directors’ declaration for the Transurban International Limited Group (the consolidated
entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time
during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation
of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the
financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation
-291-
291 Transurban annual reporT 2010
Independent auditor's report to the members of
Transurban International Limited (continued)
Auditor's opinion
In our opinion:
(a)
the financial report of Transurban International Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 214 to 237 of the directors' report for the year ended 30 June 2010
The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based
on our audit conducted in accordance with Australian Auditing Standards.
Auditor's opinion
In our opinion, the remuneration report of Transurban International Limited for the year ended 30 June 2010, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John Yeoman
Partner
Melbourne
12 August 2010
-292-
292 Transurban annual reporT 2010
Annual Report
1 Corporate Governance
Financial Statements
10 Transurban Holdings Limited and Controlled Entities
129 Transurban Holding Trust and Controlled Entities
208 Transurban International Limited and Controlled Entities
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